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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C.  20549 
FORM 10-Q
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended July 31, 2021
 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from to .
Commission File Number 001-34956
CONN’S, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1672840
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2445 Technology Forest Blvd., Suite 800,
The Woodlands, TX
77381
(Address of principal executive offices)
(Zip Code)
 Registrant’s telephone number, including area code:  (936) 230-5899
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareCONNNASDAQ Global Select Market
Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 23, 2021: 
Class Outstanding
Common stock, $0.01 par value per share 29,483,140


Table of Contents
CONN’S, INC. AND SUBSIDIARIES

FORM 10-Q
FOR THE FISCAL QUARTER ENDED JULY 31, 2021

TABLE OF CONTENTS
Page No.
PART I.FINANCIAL INFORMATION 
Item 1.Financial Statements 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II.OTHER INFORMATION 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
This Quarterly Report on Form 10-Q includes our trademarks such as “Conn’s,” “Conn’s HomePlus,” “YE$ YOU’RE APPROVED,” “YES Money,” “YE$ Money,” “YES Lease,” “YE$ Lease,” and our logos, which are protected under applicable intellectual property laws and are the property of Conn’s, Inc.  This report also contains trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners.  Solely for convenience, trademarks and trade names referred to in this Quarterly Report may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names.
References to “we,” “our,” “us,” “the Company,” “Conn’s” or “CONN” refer to Conn’s, Inc. and, as apparent from the context, its consolidated bankruptcy-remote variable-interest entities (“VIEs”), and its wholly-owned subsidiaries.


Table of Contents
PART I.    FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and dollars in thousands, except per share amounts)
July 31,
2021
January 31,
2021
Assets
Current assets:
Cash and cash equivalents$8,736 $9,703 
Restricted cash (includes VIE balances of $28,911 and $48,622, respectively)
30,961 50,557 
Customer accounts receivable, net of allowances (includes VIE balances of $159,338 and $259,811, respectively)
461,491 478,734 
Other accounts receivable55,260 61,716 
Inventories223,662 196,463 
Income taxes receivable32,223 38,059 
Prepaid expenses and other current assets20,725 8,831 
Total current assets833,058 844,063 
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $70,927 and $184,304, respectively)
415,208 430,749 
Property and equipment, net186,072 190,962 
Operating lease right-of-use assets258,702 265,798 
Deferred income taxes 9,448 
Other assets15,907 14,064 
Total assets$1,708,947 $1,755,084 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Current finance lease obligations$1,371 $934 
Accounts payable89,001 69,367 
Accrued compensation and related expenses27,366 24,944 
Accrued expenses71,712 58,046 
Operating lease liability - current54,800 44,011 
Income taxes payable2,233 1,447 
Deferred revenues and other credits14,937 13,007 
Total current liabilities261,420 211,756 
Operating lease liability - non current338,289 354,598 
Long-term debt and finance lease obligations (includes VIE balances of $214,562 and $411,551, respectively)
438,242 608,635 
Deferred tax liability7,803  
Other long-term liabilities20,743 22,940 
Total liabilities1,066,497 1,197,929 
Commitments and contingencies
Stockholders’ equity:  
Preferred stock ($0.01 par value, 1,000,000 shares authorized; none issued or outstanding)
  
Common stock ($0.01 par value, 100,000,000 shares authorized; 32,967,808 and 32,711,623 shares issued, respectively)
329 327 
Treasury stock (at cost; 3,485,441 shares and 3,485,441 shares, respectively)
(66,290)(66,290)
Additional paid-in capital134,999 132,108 
Retained earnings573,412 491,010 
Total stockholders’ equity642,450 557,155 
Total liabilities and stockholders’ equity
$1,708,947 $1,755,084 
See notes to condensed consolidated financial statements.

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Table of Contents
CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and dollars in thousands, except per share amounts)
Three Months Ended
July 31,
Six Months Ended
July 31,
 2021202020212020
Revenues:
Product sales$320,245 $256,142 $589,456 $463,340 
Repair service agreement commissions23,700 20,164 42,831 40,265 
Service revenues2,840 3,430 5,794 6,461 
Total net sales346,785 279,736 638,081 510,066 
Finance charges and other revenues71,598 87,180 144,004 174,010 
Total revenues418,383 366,916 782,085 684,076 
Costs and expenses:
Cost of goods sold216,042 176,623 400,921 323,637 
Selling, general and administrative expense137,870 115,278 263,919 228,285 
Provision for bad debts10,262 32,045 (6,874)149,371 
Charges and credits 1,534  3,589 
Total costs and expenses364,174 325,480 657,966 704,882 
Operating income (loss)54,209 41,436 124,119 (20,806)
Interest expense6,088 13,222 15,292 28,215 
Loss on extinguishment of debt  1,218  
Income (loss) before income taxes48,121 28,214 107,609 (49,021)
Provision (benefit) for income taxes11,117 7,694 25,207 (13,339)
Net income (loss)$37,004 $20,520 $82,402 $(35,682)
Income (loss) per share:
Basic$1.26 $0.71 $2.80 $(1.23)
Diluted$1.22 $0.70 $2.74 $(1.23)
Weighted average common shares outstanding:
Basic29,438,605 29,070,607 29,382,162 28,948,216 
Diluted30,212,448 29,140,546 30,072,401 28,948,216 
See notes to condensed consolidated financial statements.

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CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited and in thousands, except for number of shares)
Additional Paid-in Capital
Common StockRetained EarningsTreasury Stock
SharesAmountSharesAmountTotal
Balance January 31, 202132,711,623 $327 $132,108 $491,010 (3,485,441)$(66,290)$557,155 
Exercise of options and vesting of restricted stock, net of withholding tax115,159 1 (999)— — — (998)
Issuance of common stock under Employee Stock Purchase Plan18,240  180 — — — 180 
Stock-based compensation— — 2,039 — — — 2,039 
Net income— — — 45,398 — — 45,398 
Balance April 30, 202132,845,022 $328 $133,328 $536,408 (3,485,441)$(66,290)$603,774 
Exercise of options and vesting of restricted stock, net of withholding tax112,223 1 (229)— — — (228)
Issuance of common stock under Employee Stock Purchase Plan10,563 — 187 — — — 187 
Stock-based compensation— — 1,713 — — — 1,713 
Net income— — — 37,004 — — 37,004 
Balance July 31, 202132,967,808 $329 $134,999 $573,412 (3,485,441)$(66,290)$642,450 
Additional Paid-in Capital
Common StockRetained EarningsTreasury Stock
SharesAmountSharesAmountTotal
Balance January 31, 202032,125,055 $321 $122,513 $570,636 (3,485,441)$(66,290)$627,180 
Adoption of ASU 2016-13— — — (76,490)— — (76,490)
Exercise of options and vesting of restricted stock, net of withholding tax321,468 3 (1,288)— — — (1,285)
Issuance of common stock under Employee Stock Purchase Plan47,450 1 176 — — — 177 
Stock-based compensation— — 2,430 — — — 2,430 
Net loss— — — (56,202)— — (56,202)
Balance April 30, 202032,493,973 $325 $123,831 $437,944 (3,485,441)$(66,290)$495,810 
Exercise of options and vesting of restricted stock, net of withholding tax70,271 1 (159)— — — (158)
Issuance of common stock under Employee Stock Purchase Plan51,643 — 160 — — — 160 
Stock-based compensation— — 2,254 — — — 2,254 
Net income— — — 20,520 — — 20,520 
Balance July 31, 202032,615,887 $326 $126,086 $458,464 (3,485,441)$(66,290)$518,586 
See notes to condensed consolidated financial statements.

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CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Six Months Ended July 31,
 20212020
Cash flows from operating activities:
Net income (loss)$82,402 $(35,682)
Adjustments to reconcile net income (loss) to net cash from operating activities:  
Depreciation22,836 19,929 
Change in right-of-use asset17,005 15,328 
Amortization of debt issuance costs3,254 4,237 
Provision for bad debts and uncollectible interest8,071 181,286 
Stock-based compensation expense3,752 4,683 
Charges, net of credits 3,589 
Deferred income taxes17,251 (2,472)
Loss on extinguishment of debt1,218  
Loss on disposal of property and equipment104  
Tenant improvement allowances received from landlords10,864 10,277 
Change in operating assets and liabilities:  
Customer accounts receivable24,873 63,745 
Other accounts receivables6,296 13,068 
Inventories(27,199)38,863 
Other assets(11,390)690 
Accounts payable19,633 13,442 
Accrued expenses17,907 2,485 
Operating leases(26,293)(20,086)
Income taxes5,622 (9,578)
Deferred revenues and other credits733 1,921 
Net cash provided by operating activities176,939 305,725 
Cash flows from investing activities:  
Purchases of property and equipment(19,162)(32,459)
Net cash used in investing activities(19,162)(32,459)
Cash flows from financing activities:  
Proceeds from issuance of asset-backed notes62,900  
Payments on asset-backed notes(261,356)(315,225)
Borrowings under revolving credit facility740,850 835,717 
Payments on revolving credit facility(573,850)(800,917)
Payments of debt issuance costs and amendment fees(4,231)(2,055)
Proceeds from stock issued under employee benefit plans367 338 
Tax payments associated with equity-based compensation transactions(1,227)(1,444)
Payment for extinguishment of debt(141,279) 
Other(514)(314)
Net cash used in financing activities(178,340)(283,900)
Net change in cash, cash equivalents and restricted cash(20,563)(10,634)
Cash, cash equivalents and restricted cash, beginning of period60,260 80,855 
Cash, cash equivalents and restricted cash, end of period$39,697 $70,221 
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new finance lease liabilities$493 $1,045 
Right-of-use assets obtained in exchange for new operating lease liabilities$12,415 $47,950 
Property and equipment purchases not yet paid$5,962 $11,662 
Supplemental cash flow data:
Cash interest paid$10,931 $23,976 
Cash income taxes paid (refunded), net$2,334 $(1,026)
See notes to condensed consolidated financial statements.

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Table of Contents
CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.     Summary of Significant Accounting Policies 
Business. Conn’s, Inc., a Delaware corporation, is a holding company with no independent assets or operations other than its investments in its subsidiaries. References to “we,” “our,” “us,” “the Company,” “Conn’s” or “CONN” refer to Conn’s, Inc. and, as apparent from the context, its subsidiaries. Conn’s is a leading specialty retailer that offers a broad selection of quality, branded durable consumer goods and related services in addition to proprietary credit solutions for its core credit-constrained consumers. We operate an integrated and scalable business through our retail stores and website. Our complementary product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit offering provides financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives.
We operate two reportable segments: retail and credit. Our retail stores bear the “Conn’s HomePlus” name with all of our stores providing the same products and services to a common customer group. Our stores follow the same procedures and methods in managing their operations. Our retail business and credit business are operated independently from each other. The credit segment is dedicated to providing short- and medium-term financing to our retail customers. The retail segment is not involved in credit approval decisions or collection efforts. Our management evaluates performance and allocates resources based on the operating results of the retail and credit segments.
Basis of Presentation. The accompanying unaudited Condensed Consolidated Financial Statements of Conn’s, Inc. and its wholly-owned subsidiaries, including its Variable Interest Entities (“VIEs”), have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) and prevailing industry practice for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the results that may be expected in future periods. The balance sheet at January 31, 2021 has been derived from the audited financial statements at that date. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021 (the “2021 Form 10-K”) filed with the United States Securities and Exchange Commission (the “SEC”) on March 31, 2021.
Fiscal Year. Our fiscal year ends on January 31. References to a fiscal year refer to the calendar year in which the fiscal year ends.
Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of Conn’s, Inc. and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. 
Variable Interest Entities. VIEs are consolidated if the Company is the primary beneficiary. The primary beneficiary of a VIE is the party that has (i) the power to direct the activities that most significantly impact the performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
We securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. We retain the servicing of the securitized portfolio and have a variable interest in each corresponding VIE by holding the residual equity. We have determined that we are the primary beneficiary of each respective VIE because (i) our servicing responsibilities for the securitized portfolio give us the power to direct the activities that most significantly impact the performance of the VIE and (ii) our variable interest in the VIE gives us the obligation to absorb losses and the right to receive residual returns that potentially could be significant. As a result, we consolidate the respective VIEs within our Condensed Consolidated Financial Statements.
Refer to Note 4, Debt and Financing Lease Obligations, and Note 6, Variable Interest Entities, for additional information.
Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ, even significantly, from these estimates. Management evaluates its estimates and related assumptions regularly, including those related to the allowance for doubtful accounts and allowances for no-interest option credit programs, which are particularly sensitive given the size of our customer portfolio balance.
Cash and Cash Equivalents. As of July 31, 2021 and January 31, 2021, cash and cash equivalents included cash and credit card deposits in transit. Credit card deposits in transit included in cash and cash equivalents were $6.8 million and $7.9 million as of July 31, 2021 and January 31, 2021, respectively. 

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Cash. The restricted cash balance as of July 31, 2021 and January 31, 2021 includes $24.1 million and $41.6 million, respectively, of cash we collected as servicer on the securitized receivables that was subsequently remitted to the VIEs and $4.8 million and $7.0 million, respectively, of cash held by the VIEs as additional collateral for the asset-backed notes.
Customer Accounts Receivable. Customer accounts receivable reported in the Condensed Consolidated Balance Sheet includes total receivables managed, including both those transferred to the VIEs and those not transferred to the VIEs. Customer accounts receivable are recognized at the time the customer takes possession of the product. Expected lifetime losses on customer accounts receivable are recognized upon origination through an allowance for credit losses account that is deducted from the customer account receivable balance and presented net. Customer accounts receivable include the net of unamortized deferred fees charged to customers and origination costs. Customer receivables are considered delinquent if a payment has not been received on the scheduled due date. Accounts that are delinquent more than 209 days as of the end of a month are charged-off against the allowance for doubtful accounts along with interest accrued subsequent to the last payment.
In an effort to mitigate losses on our accounts receivable, we may make loan modifications to a borrower experiencing financial difficulty. The loan modifications are intended to maximize net cash flow after expenses and avoid the need to exercise legal remedies available to us. We may extend or “re-age” a portion of our customer accounts, which involves modifying the payment terms to defer a portion of the cash payments due. Our re-aging of customer accounts does not change the interest rate or the total principal amount due from the customer and typically does not reduce the monthly contractual payments. To a much lesser extent, we may provide the customer the ability to refinance their account, which typically does not change the interest rate or the total principal amount due from the customer but does reduce the monthly contractual payments and extend the term. We consider accounts that have been re-aged in excess of three months or refinanced as Troubled Debt Restructurings (“TDR” or “Restructured Accounts”).
On March 27, 2020 the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law to address the economic impact of the COVID-19 pandemic. Under the CARES Act, modifications deemed to be COVID-19 related are not considered a TDR if the loan was current (not more than 30 days past due as of March 31, 2020) and the deferral was executed between April 1, 2020 and the earlier of 60 days after the termination of the COVID-19 national emergency or December 31, 2020. In response to the CARES Act, the Company implemented short-term deferral programs for our customers. The carrying value of the customer receivables on accounts which were current prior to receiving a COVID-19 related deferment was $33.5 million and $65.2 million as of July 31, 2021 and January 31, 2021, respectively. All COVID-19 specific deferral programs ended during the third quarter of fiscal year 2021.
Interest Income on Customer Accounts Receivable. Interest income, which includes interest income and amortization of deferred fees and origination costs, is recorded using the interest method and is reflected in finance charges and other revenues. Typically, interest income is recorded until the customer account is paid off or charged-off and we provide an allowance for estimated uncollectible interest. We reserve for interest that is more than 60 days past due. Any contractual interest income received from customers in excess of the interest income calculated using the interest method is recorded as deferred revenue on our balance sheets. At July 31, 2021 and January 31, 2021, there was $8.4 million and $8.9 million, respectively, of deferred interest included in deferred revenues and other credits and other long-term liabilities. The deferred interest will ultimately be brought into income as the accounts pay off or charge-off.
We offer a 12-month no-interest option program. If the customer is delinquent in making a scheduled monthly payment or does not repay the principal in full by the end of the no-interest option program period (grace periods are provided), the account does not qualify for the no-interest provision and none of the interest earned is waived. Interest income is recognized based on estimated accrued interest earned to date on all no-interest option finance programs with an offsetting reserve for those customers expected to satisfy the requirements of the program based on our historical experience.
We recognize interest income on TDR accounts using the interest income method, which requires reporting interest income equal to the increase in the net carrying amount of the loan attributable to the passage of time. Cash proceeds and other adjustments are applied to the net carrying amount such that it equals the present value of expected future cash flows.
We place accounts in non-accrual status when legally required. Payments received on non-accrual loans are applied to principal and reduce the balance of the loan. At July 31, 2021 and January 31, 2021, the carrying value of customer accounts receivable in non-accrual status was $7.0 million and $8.5 million, respectively. At July 31, 2021 and January 31, 2021, the carrying value of customer accounts receivable that were past due 90 days or more and still accruing interest totaled $55.2 million and $111.5 million, respectively. At July 31, 2021 and January 31, 2021, the carrying value of customer accounts receivable in a bankruptcy status that were less than 60 days past due of $6.4 million and $5.2 million, respectively, were included within the customer receivables balance carried in non-accrual status.
Allowance for Doubtful Accounts. The determination of the amount of the allowance for credit losses is, by nature, highly complex and subjective. Future events that are inherently uncertain could result in material changes to the level of the allowance for credit losses. General economic conditions, changes to state or federal regulations and a variety of other factors

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

that affect the ability of borrowers to service their debts or our ability to collect will impact the future performance of the portfolio.
We establish an allowance for credit losses, including estimated uncollectible interest, to cover expected credit losses on our customer accounts receivable resulting from the failure of customers to make contractual payments. Our customer accounts receivable portfolio balance consists of a large number of relatively small, homogeneous accounts. None of our accounts are large enough to warrant individual evaluation for impairment. The allowance for credit losses is measured on a collective (pool) basis where similar risk characteristics exist. The allowance for credit losses is determined for each pool and added to the pool’s carrying amount to establish a new amortized cost basis.
We use a risk-based, pool-level segmentation framework to calculate the expected loss rate. This framework is based on our historical gross charge-off history. In addition to adjusted historical gross charge-off rates, estimates of post-charge-off recoveries, including cash payments from customers, sales tax recoveries from taxing jurisdictions, and payments received under credit insurance and repair service agreement (“RSA”) policies are also considered. We also consider forward-looking economic forecasts based on a statistical analysis of economic factors (specifically, forecast of unemployment rates over the reasonable and supportable forecasting period). To the extent that situations and trends arise which are not captured in our model, management will layer on additional qualitative adjustments.
Pursuant to ASC 326 requirements, the Company uses a 24-month reasonable and supportable forecast period for the customer accounts receivable portfolio. We estimate losses beyond the 24-month forecast period based on historic loss rates experienced over the life of our historic loan portfolio by loan pool type. We revisit our measurement methodology and assumption annually, or more frequently if circumstances warrant.
As of July 31, 2021 and January 31, 2021, the balance of allowance for doubtful accounts and uncollectible interest for non-TDR customer receivables was $150.7 million and $219.7 million, respectively. As of July 31, 2021 and January 31, 2021, the amount included in the allowance for doubtful accounts associated with principal and interest on TDR accounts was $51.4 million and $78.3 million, respectively.
Debt Issuance Costs. Costs that are direct and incremental to debt issuance are deferred and amortized to interest expense using the effective interest method over the expected life of the debt. All other costs related to debt issuance are expensed as incurred. We present debt issuance costs associated with long-term debt as a reduction of the carrying amount of the debt. Unamortized costs related to the Revolving Credit Facility, as defined in Note 4, Debt and Financing Lease Obligations, are included in other assets on our Condensed Consolidated Balance Sheet and were $5.9 million and $3.5 million as of July 31, 2021 and January 31, 2021, respectively.
Loss on Extinguishment. During the six months ended July 31, 2021, we incurred a loss of $1.0 million related to the retirement of the remaining $141.2 million aggregate principal amount of our 7.25% Senior Notes due 2022 (“Senior Notes”) and a loss of $0.2 million related to the amendment of our Fifth Amended and Restated Loan and Security Agreement.
Income Taxes. For the six months ended July 31, 2021 and 2020, we utilized the estimated annual effective tax rate based on our estimated fiscal year 2022 and 2021 pre-tax income, respectively, in determining income tax expense.
Provision for income taxes for interim periods is based on an estimated annual income tax rate, adjusted for discrete tax items. As a result, our interim effective tax rates may vary significantly from the statutory tax rate and the annual effective tax rate.
For the six months ended July 31, 2021 and 2020, the effective tax rate was 23.4% and 27.2%, respectively. The primary factor affecting the decrease in our effective tax rate for the six months ended July 31, 2021 was the impact of the tax loss carryback provisions of the CARES Act that was reflected in the prior period.
Stock-based Compensation. During the six months ended July 31, 2021, the Company granted performance stock awards (“PSUs”) and restricted stock awards (“RSUs”). The awards had a combined aggregate grant date fair value of $9.3 million. The PSUs will vest in fiscal year 2025, if at all, upon certification by the Compensation Committee of the Board of Directors of satisfaction of certain total stockholder return performance conditions over the three fiscal years commencing with fiscal year 2022. The RSUs will vest ratably, over periods of three years to four years from the date of grant.
Stock-based compensation expense is recorded, net of actual forfeitures, for share-based compensation awards over the requisite service period using the straight-line method. For equity-classified share-based compensation awards, expense is recognized based on the grant-date fair value. For stock option grants, we use the Black-Scholes model to determine fair value. For grants of restricted stock units, the fair value of the grant is the market value of our stock at the date of issuance. For grants of performance-based restricted stock units, the fair value is the market value of our stock at the date of issuance adjusted for the market condition using a Monte Carlo model.

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the RSUs and PSUs granted during the three and six months ended July 31, 2021 and 2020: 
Three Months Ended
July 31,
Six Months Ended
July 31,
2021202020212020
RSUs (1)
41,087 101,774 381,731 622,195 
PSUs (2)
  152,349 270,828 
Total stock awards granted41,087 101,774 534,080 893,023 
Aggregate grant date fair value (in thousands)$960 $750 $9,250 $7,957 
(1)The RSUs issued during the six months ended July 31, 2021 and 2020 are scheduled to vest ratably over periods of three years to four years from the date of grant.
(2)The weighted-average assumptions used in the Monte Carlo model for the PSUs granted during the six months ended July 31, 2021 included expected volatility of 83.0%, an expected term of 3 years and risk-free interest rate of 0.17%.  No dividend yield was included in the weighted-average assumptions for the PSUs granted during the six months ended July 31, 2021. The weighted-average assumptions used in the Monte Carlo model for the PSUs granted during the six months ended July 31, 2020 included expected volatility of 60.0%, an expected term of 3 years and risk-free interest rate of 1.42%. No dividend yield was included in the weighted average assumptions for the PSUs granted during the six months ended July 31, 2020.
For the three months ended July 31, 2021 and 2020, stock-based compensation expense was $1.7 million and $2.3 million, respectively. For the six months ended July 31, 2021 and 2020, stock-based compensation expense was $3.8 million and $4.7 million, respectively.
Earnings (loss) per Share. Basic earnings (loss) per share for a particular period is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effects of any stock options, RSUs and PSUs, which are calculated using the treasury-stock method. The following table sets forth the shares outstanding for the earnings per share calculations: 
 Three Months Ended
July 31,
Six Months Ended
July 31,
2021202020212020
Weighted-average common shares outstanding - Basic29,438,605 29,070,607 29,382,162 28,948,216 
Dilutive effect of stock options, PSUs and RSUs773,843 69,939 690,239  
Weighted-average common shares outstanding - Diluted30,212,448 29,140,546 30,072,401 28,948,216 
For the three months ended July 31, 2021 and 2020, the weighted average number of stock options, RSUs and PSUs not included in the calculation due to their anti-dilutive effect, was 656,987 and 1,116,730, respectively. For the six months ended July 31, 2021 and 2020, the weighted average number of stock options, RSUs and PSUs not included in the calculation due to their anti-dilutive effect, was 731,647 and 1,479,599, respectively
Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to subjectivity associated with the inputs to fair value measurements as follows:  
Level 1 – Inputs represent unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (for example, quoted market prices for similar assets or liabilities in active markets or quoted market prices for identical assets or liabilities in markets not considered to be active, inputs other than quoted prices that are observable for the asset or liability, or market-corroborated inputs).
Level 3 – Inputs that are not observable from objective sources such as our internally developed assumptions used in pricing an asset or liability (for example, an estimate of future cash flows used in our internally developed present value of future cash flows model that underlies the fair-value measurement).
In determining fair value, we use observable market data when available, or models that incorporate observable market data. When we are required to measure fair value and there is not a market-observable price for the asset or liability or for a similar asset or liability, we use the cost or income approach depending on the quality of information available to support management’s assumptions. The cost approach is based on management’s best estimate of the current asset replacement cost.

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The income approach is based on management’s best assumptions regarding expectations of future net cash flows and discounts the expected cash flows using a commensurate risk-adjusted discount rate. Such evaluations involve significant judgment, and the results are based on expected future events or conditions such as sales prices, economic and regulatory climates, and other factors, most of which are often outside of management’s control. However, we believe assumptions used reflect a market participant’s view of long-term prices, costs, and other factors and are consistent with assumptions used in our business plans and investment decisions.
In arriving at fair-value estimates, we use relevant observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement is characterized based on the lowest level of input that is significant to the fair-value measurement.
The fair value of cash and cash equivalents, restricted cash and accounts payable approximate their carrying amounts because of the short maturity of these instruments. The fair value of customer accounts receivable, determined using a Level 3 discounted cash flow analysis, approximates their carrying value, net of the allowance for doubtful accounts. The fair value of our Revolving Credit Facility approximates carrying value based on the current borrowing rate for similar types of borrowing arrangements. At July 31, 2021, the fair value of the asset backed notes was $216.9 million as compared to the carrying value of $215.5 million and was determined using Level 2 inputs based on inactive trading activity.
Deferred Revenue. Deferred revenue related to contracts with customers consists of deferred customer deposits and deferred RSA administration fees. During the six months ended July 31, 2021, we recognized $4.7 million of revenue for customer deposits deferred as of January 31, 2021. During the six months ended July 31, 2021, we recognized $1.9 million of revenue for RSA administrative fees deferred as of January 31, 2021.
Recent Accounting Pronouncements Adopted.
Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, an update intended to simplify various aspects related to accounting for income taxes. This guidance removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This accounting standards update became effective for us in the first quarter of fiscal year 2022. The adoption did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements Yet to Be Adopted.
Reference Rate Reform on Financial Reporting. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, an update that provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope, to clarify the scope of the guidance and reduce potential diversity in practice. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. These accounting standard updates were effective upon issuance, with adoption permitted through December 31, 2022. We expect to adopt ASC 2020-04 and ASC 2021-01 upon transition from LIBOR, prior to December 31, 2022. We do not expect the adoption to have a material impact on our consolidated financial statements.

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.    Customer Accounts Receivable
Customer accounts receivable consisted of the following:
(in thousands)July 31,
2021
January 31,
2021
Customer accounts receivable (1)
$1,105,713 $1,233,717 
Deferred fees and origination costs, net(13,265)(14,212)
Allowance for no-interest option credit programs(13,650)(11,985)
Allowance for uncollectible interest(11,868)(21,427)
Carrying value of customer accounts receivable1,066,930 1,186,093 
Allowance for credit losses (2)
(190,231)(276,610)
Carrying value of customer accounts receivable, net of allowance for credit losses876,699 909,483 
  Short-term portion of customer accounts receivable, net(461,491)(478,734)
Long-term customer accounts receivable, net$415,208 $430,749 
Carrying Value
(in thousands)July 31,
2021
January 31,
2021
Customer accounts receivable 60+ days past due (3)
$76,293 $146,820 
Re-aged customer accounts receivable (4)
218,086 306,845 
Restructured customer accounts receivable (5)
130,725 178,374 
(1)As of July 31, 2021 and January 31, 2021, the customer accounts receivable balance included $20.1 million and $31.1 million, respectively, in interest receivable. Net of the allowance for uncollectible interest, interest receivable outstanding as of July 31, 2021 and January 31, 2021 was $8.2 million and $9.7 million, respectively.
(2)Our current methodology to estimate expected credit losses utilized macroeconomic forecasts as of July 31, 2021 and January 31, 2021, which incorporated the continued estimated impact of the global COVID-19 outbreak on the U.S. economy. Our forecast utilized economic projections from a major rating service reflecting a decrease in unemployment rates.
(3)As of July 31, 2021 and January 31, 2021, the carrying value of customer accounts receivable past due one day or greater was $234.6 million and $340.8 million, respectively. These amounts include the 60+ days past due balances shown above.
(4)The re-aged carrying value as of July 31, 2021 and January 31, 2021 includes $42.4 million and $88.0 million, respectively, in carrying value that are both 60+ days past due and re-aged.
(5)The restructured carrying value as of July 31, 2021 and January 31, 2021 includes $26.7 million and $57.1 million, respectively, in carrying value that are both 60+ days past due and restructured.
The allowance for credit losses included in the current and long-term portion of customer accounts receivable, net as shown in the Condensed Consolidated Balance Sheet were as follows:
(in thousands)July 31, 2021January 31, 2021
Customer accounts receivable - current$575,231 $643,903 
Allowance for credit losses for customer accounts receivable - current(113,740)(165,169)
Customer accounts receivable, net of allowances461,491 478,734 
Customer accounts receivable - non current503,567 563,617 
Allowance for credit losses for customer accounts receivable - non current(88,359)(132,868)
Long-term portion of customer accounts receivable, net of allowances415,208 430,749 
Total customer accounts receivable, net$876,699 $909,483 

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following presents the activity in our allowance for credit losses and uncollectible interest for customer receivables: 
 Six Months Ended July 31, 2021Six Months Ended July 31, 2020
(in thousands)Customer
Accounts
Receivable
 
Restructured
Accounts
 
 
Total
Customer
Accounts
Receivable
 
Restructured
Accounts
 
 
Total
Allowance at beginning of period, prior to adoption of ASC 326$219,740 $78,297 $298,037 $145,680 $88,123 $233,803 
Impact of adoption ASC 326   95,136 3,526 98,662 
Provision for (benefit from) credit losses (1)
(5,422)13,333 7,911 138,395 42,541 180,936 
Principal charge-offs (2)
(61,323)(38,709)(100,032)(101,746)(47,301)(149,047)
Interest charge-offs(16,997)(10,729)(27,726)(29,135)(13,545)(42,680)
Recoveries (3)
14,657 9,252 23,909 10,269 4,773 15,042 
Allowance at end of period$150,655 $51,444 $202,099 $258,599 $78,117 $336,716 
Average total customer portfolio balance$982,186 $159,894 $1,142,080 $1,271,225 $222,025 $1,493,250 
(1)Includes provision for uncollectible interest, which is included in finance charges and other revenues, and changes in expected future recoveries.
(2)Charge-offs include the principal amount of losses (excluding accrued and unpaid interest). Recoveries include the principal amount collected during the period for previously charged-off balances. Net charge-offs are calculated as the net of principal charge-offs and recoveries.
(3)Recoveries include the principal amount collected during the period for previously charged-off balances.
We manage our customer accounts receivable portfolio using delinquency as a key credit quality indicator. The following table presents the delinquency distribution of the carrying value of customer accounts receivable by year of origination. The information is presented as of July 31, 2021:
(in thousands)
Delinquency Bucket2021202020192018PriorTotal% of Total
Current$358,052 $291,693 $150,885 $27,872 $3,813 $832,315 78.0 %
1-3027,833 44,758 36,874 11,070 1,755 122,290 11.5 %
31-607,311 12,236 11,779 4,034 672 36,032 3.4 %
61-903,700 7,390 6,720 2,438 478 20,726 1.9 %
91+5,077 21,727 19,429 7,503 1,831 55,567 5.2 %
Total$401,973 $377,804 $225,687 $52,917 $8,549 $1,066,930 100.0 %

3.     Finance Charges and Other Revenues 
Finance charges and other revenues consisted of the following:
Three Months Ended
July 31,
Six Months Ended
July 31,
(in thousands)2021202020212020
Interest income and fees$65,003 $83,599 $132,682 $165,442 
Insurance income6,371 3,385 10,889 8,137 
Other revenues224 196 433 431 
Total finance charges and other revenues$71,598 $87,180 $144,004 $174,010 
Interest income and fees and insurance income are derived from the credit segment operations, whereas other revenues are derived from the retail segment operations. Insurance income is comprised of sales commissions from third-party insurance companies that are recognized when coverage is sold and retrospective income paid by the insurance carrier if insurance claims are less than earned premiums.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended July 31, 2021 and 2020, interest income and fees reflected provisions for uncollectible interest of $7.4 million and $11.8 million, respectively. The amounts included in interest income and fees related to TDR accounts for the three months ended July 31, 2021 and 2020 were $6.7 million and $10.1 million, respectively. During the six months ended July 31, 2021 and 2020, interest income and fees reflected provisions for uncollectible interest of $14.9 million and $31.9 million, respectively. The amounts included in interest income and fees related to TDR accounts for the six months ended July 31, 2021 and 2020 were $14.2 million and $19.6 million, respectively.

4.     Debt and Financing Lease Obligations 
Debt and financing lease obligations consisted of the following:
(in thousands)July 31,
2021
January 31,
2021
Revolving Credit Facility$219,000 $52,000 
Senior Notes 141,172 
2019-A VIE Asset-backed Class A Notes 19,521 
2019-A VIE Asset-backed Class B Notes 25,069 
2019-A VIE Asset-backed Class C Notes 24,202 
2019-B VIE Asset-backed Class A Notes 17,860 
2019-B VIE Asset-backed Class B Notes19,078 85,540 
2019-B VIE Asset-backed Class C Notes83,270 83,270 
2020-A VIE Asset-backed Class A Notes22,986 93,326 
2020-A VIE Asset-backed Class B Notes45,909 65,200 
2020-A VIE Asset-backed Class C Notes44,290  
Financing lease obligations6,051 6,072 
Total debt and financing lease obligations440,584 613,232 
Less:
Discount on debt (524)
Deferred debt issuance costs(971)(3,139)
Current maturities of long-term debt and financing lease obligations(1,371)(934)
Long-term debt and financing lease obligations$438,242 $608,635 
Senior Notes. On July 1, 2014, we issued an aggregate principal amount of $250.0 million in unsecured 7.25% Senior Notes due 2022 (the “Senior Notes”) pursuant to an indenture dated July 1, 2014 (as amended, the “Indenture”), among Conn’s, Inc., its subsidiary guarantors (the “Guarantors”) and U.S. Bank National Association, as trustee. On April 15, 2021 we completed the redemption of all of our outstanding Senior Notes in an aggregate principal amount of $141.2 million.
Asset-backed Notes. From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. In turn, the VIEs issue asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by the VIEs.
Under the terms of the securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of issued notes, and then to us as the holder of non-issued notes, if any, and residual equity. We retain the servicing of the securitized portfolios and receive a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized receivables. In addition, we, rather than the VIEs, retain all credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which are reflected as a reduction to net charge-offs on a consolidated basis.
The asset-backed notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act of 1933. If an event of default were to occur under the indenture that governs the respective asset-backed notes, the payment of the outstanding amounts may be accelerated, in which event the cash proceeds of the receivables that otherwise might be released to the residual equity holder would instead be directed entirely toward repayment of the asset-backed notes, or if the receivables are liquidated, all liquidation proceeds could be directed solely to repayment of the asset-backed notes as governed by the respective terms of the asset-backed notes. The holders of the asset-backed notes have no recourse to assets outside of the VIEs. Events of default include, but are not limited to, failure to make required payments on the asset-backed notes or specified bankruptcy-related events.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The asset-backed notes outstanding as of July 31, 2021 consisted of the following:
(dollars in thousands)
Asset-Backed NotesOriginal Principal Amount
Original Net Proceeds (1)
Current Principal AmountIssuance DateMaturity DateContractual Interest Rate
Effective Interest Rate (2)
2019-B Class B Notes$85,540 $84,916 $19,078 11/26/20196/17/20243.62%4.58%
2019-B Class C Notes83,270 82,456 83,270 11/26/20196/17/20244.60%5.19%
2020-A Class A Notes174,900 173,716 22,986 10/16/20206/16/20251.71%4.56%
2020-A Class B Notes65,200 64,754 45,909 10/16/20206/16/20254.27%5.54%
2020-A Class C Notes62,900 62,535 44,290 2/24/20216/16/20254.20%5.75%
Total$471,810 $468,377 $215,533 
(1)After giving effect to debt issuance costs.
(2)For the six months ended July 31, 2021, and inclusive of the impact of changes in timing of actual and expected cash flows.
On February 24, 2021, the Company completed the sale of $62.9 million aggregate principal amount of 4.20% Asset Backed Notes, Class C, Series 2020-A, 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, which resulted in net proceeds to us of $62.5 million, net of debt issuance costs. Net proceeds from the sale were used to repay amounts outstanding under the Company’s Revolving Credit Facility.
On May 12, 2021, the Company completed the redemption of the 2019-A Asset Backed Notes at an aggregate redemption price of $41.1 million (which was equal to the entire outstanding principal balance plus accrued interest). We funded the redemption with cash on hand and borrowings under our Revolving Credit Facility.
Revolving Credit Facility. On March 29, 2021, Conn’s, Inc. and certain of its subsidiaries (the “Borrowers”) entered into the Fifth Amended and Restated Loan and Security Agreement (the “Fifth Amended and Restated Loan Agreement”), with certain lenders, which provides for a $650.0 million asset-based revolving credit facility (as amended, the “Revolving Credit Facility”) under which credit availability is subject to a borrowing base and a maturity date of March 29, 2025.
The Fifth Amended and Restated Loan Agreement, among other things, permits borrowings under the Letter of Credit Subline (as defined in the Fifth Amended and Restated Loan Agreement) that exceed the cap of $40 million to $100 million, solely at the discretion of the lenders for such amounts in excess of $40 million. The obligations under the Revolving Credit Facility are secured by substantially all assets of the Company, excluding the assets of the VIEs. As of July 31, 2021, we had immediately available borrowing capacity of $362.9 million under our Revolving Credit Facility, net of standby letters of credit issued of $22.5 million. We also had $45.6 million that may become available under our Revolving Credit Facility were we to grow the balance of eligible customer receivables and total eligible inventory balances.
Loans under the Revolving Credit Facility bear interest, at our option, at a rate of LIBOR plus a margin ranging from 2.50% to 3.25% per annum (depending on a pricing grid determined by our total leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% per annum (depending on a pricing grid determined by our total leverage ratio). We also pay an unused fee on the portion of the commitments that is available for future borrowings or letters of credit at a rate ranging from 0.25% to 0.50% per annum, depending on the average outstanding balance and letters of credit of the Revolving Credit Facility in the immediately preceding quarter. The weighted-average interest rate on borrowings outstanding and including unused line fees under the Revolving Credit Facility was 4.9% for the six months ended July 31, 2021.
The Revolving Credit Facility places restrictions on our ability to incur additional indebtedness, grant liens on assets, make distributions on equity interests, dispose of assets, make loans, pay other indebtedness, engage in mergers, and other matters. The Revolving Credit Facility restricts our ability to make dividends and distributions unless no event of default exists and a liquidity test is satisfied. Subsidiaries of the Company may pay dividends and make distributions to the Company and other obligors under the Revolving Credit Facility without restriction. As of July 31, 2021, we were restricted from making distributions in excess of $217.6 million as a result of the Revolving Credit Facility distribution and payment restrictions. The Revolving Credit Facility contains customary default provisions, which, if triggered, could result in acceleration of all amounts outstanding under the Revolving Credit Facility.

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Debt Covenants. We were in compliance with our debt covenants at July 31, 2021. A summary of the significant financial covenants that govern our Revolving Credit Facility compared to our actual compliance status at July 31, 2021 is presented below: 
 ActualRequired Minimum/ Maximum
Interest Coverage Ratio for the quarter must equal or exceed minimum14.37:1.001.00:1.00
Interest Coverage Ratio for the trailing two quarters must equal or exceed minimum12.77:1.001.50:1.00
Leverage Ratio must not exceed maximum1.20:1.004.50:1.00
ABS Excluded Leverage Ratio must not exceed maximum0.91:1.002.50:1.00
Capital Expenditures, net, must not exceed maximum$20.8 million$100.0 million

All capitalized terms in the above table are defined in the Revolving Credit Facility and may or may not match directly to the financial statement captions in this document. The covenants are calculated quarterly, except for capital expenditures, which is calculated for a period of four consecutive fiscal quarters, as of the end of each fiscal quarter.

5.    Contingencies
Securities Litigation. On May 15, 2020, a putative securities class action lawsuit was filed against us and two of our executive officers in the United States District Court for the Southern District of Texas, captioned Uddin v. Conn’s, Inc., et al., No. 4:20-1705 (“Uddin Action”). On November 16, 2020, the lead plaintiff voluntarily dismissed the action without prejudice. The court entered an order recognizing the dismissal on November 17, 2020.
On April 2, 2018, MicroCapital Fund, LP, MicroCapital Fund, Ltd., and MicroCapital LLC (collectively, “MicroCapital”) filed a lawsuit against us and certain of our former executive officers in the U.S. District Court for the Southern District of Texas, Cause No. 4:18-CV-01020 (the “MicroCapital Action”). The plaintiffs in this action allege that the defendants made false and misleading statements or failed to disclose material facts about our credit and underwriting practices, accounting and internal controls. Plaintiffs allege violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, Texas and Connecticut common law fraud, and Texas common law negligent misrepresentation against all defendants; as well as violations of section 20A of the Securities Exchange Act of 1934; and Connecticut common law negligent misrepresentation against certain defendants arising from plaintiffs’ purchase of Conn’s, Inc. securities between April 3, 2013 and February 20, 2014. The complaint does not specify the amount of damages sought.
The Court previously stayed the MicroCapital Action pending resolution of other outstanding litigation (In re Conn’s Inc. Sec. Litig., Cause No. 14-CV-00548 (S.D. Tex.) (the “Consolidated Securities Action”)), which was settled in October 2018. After that settlement, the stay was lifted, and the defendants filed a motion to dismiss plaintiff’s complaint in the MicroCapital Action on November 6, 2018. On July 26, 2019, the magistrate judge issued a report recommending that defendants’ motion to dismiss the complaint be granted in part and denied in part. On September 25, 2019, the district court adopted the magistrate judge’s report, which permitted MicroCapital to file an amended complaint, which MicroCapital filed on October 30, 2019. Defendants filed their answer to the amended complaint on November 27, 2019.
We intend to vigorously defend our interests in the MicroCapital Action. It is not possible at this time to predict the timing or outcome of this litigation, and we cannot reasonably estimate the possible loss or range of possible loss from these claims.
Derivative Litigation. On December 1, 2014, an alleged shareholder, purportedly on behalf of the Company, filed a derivative shareholder lawsuit against us and certain of our current and former directors and former executive officers captioned as Robert Hack, derivatively on behalf of Conn’s, Inc., v. Theodore M. Wright (former executive officer and former director), Bob L. Martin, Jon E.M. Jacoby (former director), Kelly M. Malson, Douglas H. Martin, David Schofman, Scott L. Thompson (former director), Brian Taylor (former executive officer) and Michael J. Poppe (former executive officer) and Conn’s, Inc., Case No. 4:14-cv-03442 (S.D. Tex.) (the “Original Derivative Action”). The complaint asserts claims for breach of fiduciary duty, unjust enrichment, gross mismanagement, and insider trading based on substantially similar factual allegations as those asserted in the Consolidated Securities Action. The plaintiff seeks unspecified damages against these persons and does not request any damages from Conn’s. Setting forth substantially similar claims against the same defendants, on February 25, 2015, an additional federal derivative action, captioned 95250 Canada LTEE, derivatively on Behalf of Conn’s, Inc. v. Wright et al., Cause No. 4:15-cv-00521 (S.D. Tex.), which was consolidated with the Original Derivative Action.
The Court previously approved a stipulation among the parties to stay the Original Derivative Action pending resolution of the Consolidated Securities Action. The stay was lifted on November 1, 2018, and the defendants filed a motion to dismiss plaintiff’s complaint. Briefing on the motion to dismiss was completed December 3, 2018. On May 29, 2019, the magistrate

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

judge issued a report, recommending that defendants’ motion to dismiss the complaint be granted, but recommended that the plaintiff be permitted to replead his claims. The district court adopted the recommendation on July 5, 2019.
On July 19, 2019, plaintiff filed an amended complaint. On November 1, 2019, the magistrate judge heard argument on the motion to dismiss and postponed certain deadlines. Adopting the report and recommendation issued by the magistrate judge on July 22, 2020, the district court entered an order on September 25, 2020 denying defendant’s motion on the breach of fiduciary duty claims and granting defendants’ motion on the insider trading claims. The district court also allowed plaintiff leave to amend to add 95250 Canada LTEE, which had been omitted from the amended complaint, as a party to the case. Plaintiffs filed a corrected amended complaint on October 21, 2020 in accordance with the district court’s order.
Another derivative action was filed on January 27, 2015, captioned as Richard A. Dohn v. Wright, et al., Cause No. 2015-04405, in the 281st Judicial District Court, Harris County, Texas. This action makes substantially similar allegations to the Original Derivative Action against the same defendants. This case is stayed until at least April 29, 2022.
Prior to filing a lawsuit, an alleged shareholder, Robert J. Casey II (“Casey”), submitted a demand under Delaware law, which our Board of Directors refused. On May 19, 2016, Casey, purportedly on behalf of the Company, filed a lawsuit against us and certain of our current and former directors and former executive officers in the 55th Judicial District Court, Harris County, Texas, captioned as Casey, derivatively on behalf of Conn’s, Inc., v. Theodore M. Wright (former executive officer and former director), Michael J. Poppe (former executive officer), Brian Taylor (former executive officer), Bob L. Martin, Jon E.M. Jacoby (former director), Kelly M. Malson (former director), Douglas H. Martin, David Schofman, Scott L. Thompson (former director) and William E. Saunders Jr., and Conn’s, Inc., Cause No. 2016-33135. The complaint asserts claims for breach of fiduciary duties and unjust enrichment based on substantially similar factual allegations as those asserted in the Original Derivative Action. The complaint does not specify the amount of damages sought. Since April 2018, this case has been abated pending the resolution of related cases. In July 2021, the parties requested that the court extend the abatement pending further developments in the Original Derivative Action.
Other than Casey, none of the plaintiffs in the other derivative actions made a demand on our Board of Directors prior to filing their respective lawsuits. The defendants in the derivative actions intend to vigorously defend against these claims. It is not possible at this time to predict the timing or outcome of any of this litigation, and we cannot reasonably estimate the possible loss or range of possible loss from these claims.
We are involved in other routine litigation and claims, incidental to our business from time to time which, individually or in the aggregate, are not expected to have a material adverse effect on us. As required, we accrue estimates of the probable costs for the resolution of these matters. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. However, the results of these proceedings cannot be predicted with certainty, and changes in facts and circumstances could impact our estimate of reserves for litigation. The Company believes that any probable and reasonably estimable loss associated with the foregoing has been adequately reflected in the accompanying financial statements.

6.     Variable Interest Entities
From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. Under the terms of the respective securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of the asset-backed notes, and then to the residual equity holder. We retain the servicing of the securitized portfolio and receive a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized receivables, and we currently hold all of the residual equity. In addition, we, rather than the VIEs, will retain certain credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which will continue to be reflected as a reduction of net charge-offs on a consolidated basis for as long as we consolidate the VIEs.
We consolidate VIEs when we determine that we are the primary beneficiary of these VIEs, we have the power to direct the activities that most significantly impact the performance of the VIEs and our obligation to absorb losses and the right to receive residual returns are significant.

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the assets and liabilities held by the VIEs (for legal purposes, the assets and liabilities of the VIEs will remain distinct from Conn’s, Inc.):
(in thousands)July 31,
2021
January 31,
2021
Assets:
Restricted cash$28,911 $48,622 
Due from Conn’s, Inc., net(10,367)(5,661)
Customer accounts receivable:
Customer accounts receivable225,602 509,574 
Restructured accounts81,179 105,395 
Allowance for uncollectible accounts(73,655)(159,849)
Allowance for no-interest option credit programs(475)(5,502)
Deferred fees and origination costs(2,386)(5,503)
Total customer accounts receivable, net230,265 444,115 
Total assets$248,809 $487,076 
Liabilities:
Accrued expenses$1,871 $3,707 
Other liabilities2,279 4,459 
Long-term debt:
2019-A Class A Notes 19,521 
2019-A Class B Notes 25,069 
2019-A Class C Notes 24,202 
2019-B Class A Notes 17,860 
2019-B Class B Notes19,078 85,540 
2019-B Class C Notes83,270 83,270 
2020-A Class A Notes22,986 93,326 
2020-A Class B Notes45,909 65,200 
2020-A Class C Notes44,290  
215,533 413,988 
Less: deferred debt issuance costs(971)(2,437)
Total debt$214,562 $411,551 
Total liabilities$218,712 $419,717 
The assets of the VIEs serve as collateral for the obligations of the VIEs. The holders of asset-backed notes have no recourse to assets outside of the respective VIEs.

7.     Segment Information 
Operating segments are defined as components of an enterprise that engage in business activities and for which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources and assess performance. We are a leading specialty retailer and offer a broad selection of quality, branded durable consumer goods and related services in addition to a proprietary credit solution for our core credit-constrained consumers. We have two operating segments: (i) retail and (ii) credit. Our operating segments complement one another. The retail segment operates primarily through our stores and website. Our retail segment product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit segment offers affordable financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives. Our operating segments provide customers the opportunity to comparison shop across brands with confidence in our competitive prices as well as affordable monthly payment options, next day delivery and installation in the majority of our markets, and product repair service. The operating segments follow the same accounting policies used in our Condensed Consolidated Financial Statements.

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We evaluate a segment’s performance based upon operating income before taxes. Selling, general and administrative expenses (“SG&A”) includes the direct expenses of the retail and credit operations, allocated overhead expenses, and a charge to the credit segment to reimburse the retail segment for expenses it incurs related to occupancy, personnel, advertising and other direct costs of the retail segment, which benefit the credit operations by sourcing credit customers and collecting payments. The reimbursement received by the retail segment from the credit segment is calculated using an annual rate of 2.5% times the average outstanding portfolio balance for each applicable period.
As of July 31, 2021, we operated retail stores in 15 states with no operations outside of the United States. No single customer accounts for more than 10% of our total revenues.
Financial information by segment is presented in the following tables:
 Three Months Ended July 31, 2021Three Months Ended July 31, 2020
(in thousands)RetailCreditTotalRetailCreditTotal
Revenues:
Furniture and mattress$109,259 $ $109,259 $80,984 $ $80,984 
Home appliance135,444  135,444 107,682  107,682 
Consumer electronics48,413  48,413 47,384  47,384 
Home office17,986  17,986 14,979  14,979 
Other9,143  9,143 5,113  5,113 
Product sales320,245  320,245 256,142  256,142 
Repair service agreement commissions23,700  23,700 20,164  20,164 
Service revenues2,840  2,840 3,430  3,430 
Total net sales346,785  346,785 279,736  279,736 
Finance charges and other revenues224 71,374 71,598 196 86,984 87,180 
Total revenues347,009 71,374 418,383 279,932 86,984 366,916 
Costs and expenses:
Cost of goods sold216,042  216,042 176,623  176,623 
Selling, general and administrative expense (1)
102,157 35,713 137,870 78,584 36,694 115,278 
Provision for bad debts142 10,120 10,262 182 31,863 32,045 
Charges and credits   1,355 179 1,534 
Total costs and expenses318,341 45,833 364,174 256,744 68,736 325,480 
Operating income28,668 25,541 54,209 23,188 18,248 41,436 
Interest expense 6,088 6,088  13,222 13,222 
Income before income taxes$28,668 $19,453 $48,121 $23,188 $5,026 $28,214 

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended July 31, 2021Six Months Ended July 31, 2020
(in thousands)RetailCreditTotalRetailCreditTotal
Revenues:
Furniture and mattress$203,750 $ $203,750 $149,877 $ $149,877 
Home appliance248,705  248,705 188,967  188,967 
Consumer electronics86,451  86,451 83,160  83,160 
Home office32,507  32,507 32,345  32,345 
Other18,043  18,043 8,991  8,991 
Product sales589,456  589,456 463,340  463,340 
Repair service agreement commissions42,831  42,831 40,265  40,265 
Service revenues5,794  5,794 6,461  6,461 
Total net sales638,081  638,081 510,066  510,066 
Finance charges and other revenues433 143,571 144,004 431 173,579 174,010 
Total revenues638,514 143,571 782,085 510,497 173,579 684,076 
Costs and expenses:
Cost of goods sold400,921  400,921 323,637  323,637 
Selling, general and administrative expense (1)
193,050 70,869 263,919 156,758 71,527 228,285 
Provision for bad debts160 (7,034)(6,874)350 149,021 149,371 
Charges and credits   1,355 2,234 3,589 
Total costs and expenses594,131 63,835 657,966 482,100 222,782 704,882 
Operating income (loss)44,383 79,736 124,119 28,397 (49,203)(20,806)
Interest expense 15,292 15,292  28,215 28,215 
Loss on extinguishment of debt 1,218 1,218    
Income (loss) before income taxes$44,383 $63,226 $107,609 $28,397 $(77,418)$(49,021)
July 31, 2021July 31, 2020
(in thousands)RetailCreditTotalRetailCreditTotal
Total assets
$672,944 $1,036,003 $1,708,947 $726,304 $1,115,396 $1,841,700 

(1)For the three months ended July 31, 2021 and 2020, the amount of corporate overhead allocated to each segment reflected in SG&A was $9.8 million and $8.5 million, respectively. For the three months ended July 31, 2021 and 2020, the amount of reimbursement made to the retail segment by the credit segment was $6.9 million and $8.9 million, respectively. For the six months ended July 31, 2021 and 2020, the amount of corporate overhead allocated to each segment reflected in SG&A was $18.8 million and $15.7 million, respectively. For the six months ended July 31, 2021 and 2020, the amount of reimbursement made to the retail segment by the credit segment was $14.2 million and $18.7 million, respectively.


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ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  
Forward-Looking Statements 
This report 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; 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, 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, 2021 (the “2021 Form 10-K”) and other reports filed with the SEC. 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 report. 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.
The Company makes available in the investor relations section of its website at ir.conns.com updated monthly reports to the holders of its asset-backed notes. This information reflects the performance of the securitized portfolio only, in contrast to the financial statements contained herein, which reflect the performance of all of the Company’s outstanding receivables, including those originated subsequent to those included in the securitized portfolio.  The website and the information contained on our website is not incorporated in this Quarterly Report on Form 10-Q or any other document filed with the SEC.
Overview
We continue to monitor the evolving nature of COVID-19 and respond to its impact on our business. We have experienced and continue to experience challenges related to the pandemic. These challenges increased the complexity of our business, including with respect to supply chain and sales, and, despite our strong performance during the second quarter of fiscal year 2022, will likely continue until the effects of COVID-19 diminish. The full impact of COVID-19 remains uncertain and will depend on future developments, including the duration and spread of the pandemic, and related actions taken by federal, state and local government officials to prevent and manage disease spread and mitigate its economic impact, all of which are uncertain and unpredictable.
We encourage you to read this Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the accompanying Condensed Consolidated Financial Statements and related notes. Our fiscal year ends on January 31. References to a fiscal year refer to the calendar year in which the fiscal year ends.

Executive Summary
Total revenues were $418.4 million for the three months ended July 31, 2021 compared to $366.9 million for the three months ended July 31, 2020, an increase of $51.5 million or 14.0%. Retail revenues were $347.0 million for the three months ended July 31, 2021 compared to $279.9 million for the three months ended July 31, 2020, an increase of $67.1 million or 24.0%. The increase in retail revenue was primarily driven by an increase in same store sales of 16.4% and by new store growth. The increase in same store sales reflects an increase in demand across all of the Company’s home-related product categories. The increase also reflects the impact of prior year proactive underwriting changes and industry wide supply chain disruptions, each of which was the result of the COVID-19 pandemic. Credit revenues were $71.4 million for the three months ended July 31, 2021 compared to $87.0 million for the three months ended July 31, 2020, a decrease of $15.6 million or 17.9%. The decrease

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in credit revenue was primarily due to a 22.7% decrease in the average outstanding balance of the customer receivable portfolio. These decreases were partially offset by an increase in the yield rate, from 23.2% for the three months ended July 31, 2020 to 23.3% for the three months ended July 31, 2021 and an increase in insurance commissions.
Retail gross margin for the three months ended July 31, 2021 was 37.7%, an increase of 80 basis points from the 36.9% reported for the three months ended July 31, 2020. The year-over-year increase in retail gross margin was primarily driven by a shift in sales from lower margin products to higher margin products, a decrease in third-party credit fees and the impact of fixed logistics costs on higher sales. The increase was partially offset by a slower rate of increase in repair service agreement commissions compared to product sales year-over-year.
Selling, general and administrative expense (“SG&A”) for the three months ended July 31, 2021 was $137.9 million compared to $115.3 million for the three months ended July 31, 2020, an increase of $22.6 million or 19.6%. The SG&A increase in the retail segment was primarily due to increases in new store occupancy costs, labor costs, advertising expense and general operating costs. The retail segment increase also reflects the impact of prior year precautionary cost saving measures enacted in response to the COVID-19 pandemic. The SG&A decrease in the credit segment was primarily due to a decrease in labor costs.
Provision for bad debts was $10.3 million for the three months ended July 31, 2021 compared to $32.0 million for the three months ended July 31, 2020, a decrease of $21.7 million. The change was primarily driven by a year-over-year decrease in net charge-offs of $43.8 million, partially offset by a smaller decrease in the allowance for bad debts during the three months ended July 31, 2021 compared to the three months ended July 31, 2020. The smaller decrease was driven by a lower year-over-year decline in the customer accounts receivable portfolio balance, partially offset by a $5.0 million decrease in the economic adjustment that was driven by an improvement in the forecasted unemployment rate.
Interest expense was $6.1 million for the three months ended July 31, 2021 and $13.2 million for the three months ended July 31, 2020, a decrease of $7.1 million or 53.8%. The decrease was primarily driven by a lower average outstanding balance of debt and by a lower effective interest rate.
Net income for the three months ended July 31, 2021 was $37.0 million, or $1.22 per diluted share, compared to net income of $20.5 million, or $0.70 per diluted share, for the three months ended July 31, 2020.
How We Evaluate Our Operations
Senior management focuses on certain key indicators to monitor our performance including:
Same store sales - Our management considers same store sales, which consists of both brick and mortar and eCommerce sales, to be an important indicator of our performance because they reflect our attempts to leverage our SG&A costs, which include rent and other store expenses, and they have a direct impact on our total net sales, net income, cash and working capital. Same store sales is calculated by comparing the reported sales for all stores that were open during both comparative fiscal years, starting in the first period in which the store has been open for a full quarter. Sales from closed stores, if any, are removed from each period. Sales from relocated stores have been included in each period if each such store was relocated within the same general geographic market. Sales from expanded stores have also been included in each period.
Retail gross margin - Our management views retail gross margin as a key indicator of our performance because it reflects our pricing power relative to the prices we pay for our products. Retail gross margin is calculated by comparing retail total net sales to the cost of goods sold.
60+ Day Delinquencies - Our management views customer account delinquencies as a key indicator of our performance because it reflects the quality of our credit portfolio, drives future credit performance and credit offerings, and impacts the interest rates we pay on our asset-backed securitizations. Delinquencies are measured as the percentage of balances that are 60+ days past due.
Net yield - Our management considers yield to be a key performance metric because it drives future credit decisions and credit offerings and directly impacts our net income.  Yield reflects the amount of interest we receive from our portfolio. 
Company Initiatives
In the second quarter of fiscal year 2022, we delivered strong results driven by our store and eCommerce performance. We delivered the following financial and operational results in the second quarter of fiscal year 2022:
Net earnings increased to a second quarter record of $1.22 per diluted share, compared to $0.70 per diluted share for the same period last fiscal year;
Same store sales increased 16.4% for the second quarter of fiscal year 2022 as compared to the second quarter of fiscal year 2021 and increased 3.2% on a two-year basis;
Strong same store sales combined with the contribution of new showrooms drove a 24.0% increase in total retail sales for the second quarter;

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eCommerce sales during the second quarter of fiscal year 2022 increased 210.9% to $17.3 million, as compared to the prior fiscal year period;
Lease-to-own sales during the second quarter of fiscal year 2022 increased 70.3% to $41.6 million, as compared to the prior fiscal year period;
During the second quarter of fiscal year 2022, the Company added three new showrooms, all within the state of Florida, bringing the total number of showrooms at July 31, 2021 to 155, compared to 141 at July 31, 2020; and
At July 31, 2021, the carrying value of customer accounts receivable 60+ days past due declined 42.1% year-over-year to the lowest level in eight fiscal years, and the carrying value of re-aged accounts declined 44.5% year-over-year to the lowest level in six fiscal years.
We believe that we have laid the foundation to execute our long-term growth strategy and prudently manage financial and operational risk while maximizing shareholder value. We remain focused on the following strategic priorities for fiscal year 2022:
Increase net income by improving performance across our core operational and financial metrics: same store sales, retail margin, charge-offs and net yield;
Open 11 to 13 new stores in our current geographic footprint to leverage our existing infrastructure (inclusive of the nine new stores opened during the first half of fiscal year 2022);
Optimize our mix of quality, branded products and gain efficiencies in our warehouse, delivery and transportation operations to increase our retail gross margin;
Continue to grow our lease-to-own sales;
Continue to grow our eCommerce sales;
Maintain disciplined oversight of our SG&A;
Ensure that the Company has the leadership and human capital pipeline and capability to drive results and meet present and future business objectives as the Company continues to expand its retail store base; and
Leverage technology and shared services to drive efficient, effective and scalable processes.
Outlook
As noted in the “Overview” above, our business and industry continue to be impacted by the COVID-19 pandemic in the United States. Going forward, the full extent to which the pandemic will impact our supply chain, future business and operating results is uncertain. Government support, including the American Rescue Plan Act of 2021, 2021 Child Tax Credit Payments and Infrastructure Investment and Jobs Act, has provided our customers with additional financial means which we expect has helped, and may continue to help, our business. We feel we are well positioned to continue serving our customers and supporting our employees as we continue to monitor and respond to the pandemic.
The broad appeal of our value proposition to our geographically diverse core demographic and the unit economics of our business should provide the stability necessary to maintain and grow our business. We expect our brand recognition and long history in our core markets to give us the opportunity to further penetrate our existing footprint, particularly as we leverage existing marketing spend, logistics infrastructure, and service footprint. There are also many markets in the U.S. with demographic characteristics similar to those in our existing footprint, which provides substantial opportunities for future growth. We plan to improve our operating results by leveraging our existing infrastructure and seeking to continually optimize the efficiency of our marketing, merchandising, distribution and credit operations. As we expand in existing markets and penetrate new markets, we expect to increase our purchase volumes, achieve distribution efficiencies and strengthen our relationships with our key vendors. Over time, we also expect our increased store base and higher net sales to further leverage our existing corporate and regional infrastructure.


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Results of Operations 
The following tables present certain financial and other information, on a condensed consolidated basis: 
Consolidated:Three Months Ended
July 31,
Six Months Ended
July 31,
(in thousands)20212020Change20212020Change
Revenues:
Total net sales$346,785 $279,736 $67,049 $638,081 $510,066 $128,015 
Finance charges and other revenues71,598 87,180 (15,582)144,004 174,010 (30,006)
Total revenues418,383 366,916 51,467 782,085 684,076 98,009 
Costs and expenses: 
Cost of goods sold216,042 176,623 39,419 400,921 323,637 77,284 
Selling, general and administrative expense137,870 115,278 22,592 263,919 228,285 35,634 
Provision for bad debts10,262 32,045 (21,783)(6,874)149,371 (156,245)
Charges and credits— 1,534 (1,534)— 3,589 (3,589)
Total costs and expenses364,174 325,480 38,694 657,966 704,882 (46,916)
Operating income (loss)54,209 41,436 12,773 124,119 (20,806)144,925 
Interest expense6,088 13,222 (7,134)15,292 28,215 (12,923)
Loss on extinguishment of debt— — — 1,218 — 1,218 
Income (loss) before income taxes48,121 28,214 19,907 107,609 (49,021)156,630 
Provision (benefit) for income taxes11,117 7,694 3,423 25,207 (13,339)38,546 
Net income (loss)$37,004 $20,520 $16,484 $82,402 $(35,682)$118,084 
Supplementary Operating Segment Information
Operating segments are defined as components of an enterprise that engage in business activities and for which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources and assess performance. We are a leading specialty retailer and offer a broad selection of quality, branded durable consumer goods and related services in addition to a proprietary credit solution for our core credit-constrained consumers. We have two operating segments: (i) retail and (ii) credit. Our operating segments complement one another. The retail segment operates primarily through our stores and website and its product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit segment offers affordable financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives. Our operating segments provide customers the opportunity to comparison shop across brands with confidence in our competitive prices as well as affordable monthly payment options, next day delivery and installation in the majority of our markets, and product repair service. We believe our large, attractively merchandised retail stores and credit solutions offer a distinctive value proposition compared to other retailers that target our core customer demographic. The operating segments follow the same accounting policies used in our Condensed Consolidated Financial Statements.
We evaluate a segment’s performance based upon operating income (loss). SG&A includes the direct expenses of the retail and credit operations, allocated corporate overhead expenses, and a charge to the credit segment to reimburse the retail segment for expenses it incurs related to occupancy, personnel, advertising and other direct costs of the retail segment which benefit the credit operations by sourcing credit customers and collecting payments. The reimbursement received by the retail segment from the credit segment is calculated using an annual rate of 2.5% multiplied by the average outstanding portfolio balance for each applicable period.

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The following table represents total revenues, costs and expenses, operating income (loss) and income (loss) before taxes attributable to these operating segments for the periods indicated:
Retail Segment:Three Months Ended
July 31,
Six Months Ended
July 31,
(dollars in thousands)20212020Change20212020Change
Revenues:
Product sales$320,245 $256,142 $64,103 $589,456 $463,340 $126,116 
Repair service agreement commissions23,700 20,164 3,536 42,831 40,265 2,566 
Service revenues2,840 3,430 (590)5,794 6,461 (667)
Total net sales346,785 279,736 67,049 638,081 510,066 128,015 
Finance charges and other224 196 28 433 431 
Total revenues347,009 279,932 67,077 638,514 510,497 128,017 
Costs and expenses:  
Cost of goods sold216,042 176,623 39,419 400,921 323,637 77,284 
Selling, general and administrative expense (1)
102,157 78,584 23,573 193,050 156,758 36,292 
Provision for bad debts142 182 (40)160 350 (190)
Charges and credits— 1,355 (1,355)— 1,355 (1,355)
Total costs and expenses318,341 256,744 61,597 594,131 482,100 112,031 
Operating income$28,668 $23,188 $5,480 $44,383 $28,397 $15,986 
Number of stores:
Beginning of period152 139 146 137 
Opened
End of period155 141 155 141 
Credit Segment:Three Months Ended
July 31,
Six Months Ended
July 31,
(in thousands)20212020Change20212020Change
Revenues:
Finance charges and other revenues$71,374 $86,984 $(15,610)$143,571 $173,579 $(30,008)
Costs and expenses:   
Selling, general and administrative expense (1)
35,713 36,694 (981)70,869 71,527 (658)
Provision for bad debts10,120 31,863 (21,743)(7,034)149,021 (156,055)
Charges and credits— 179 (179)— 2,234 (2,234)
Total costs and expenses45,833 68,736 (22,903)63,835 222,782 (158,947)
Operating income (loss)25,541 18,248 7,293 79,736 (49,203)128,939 
Interest expense6,088 13,222 (7,134)15,292 28,215 (12,923)
Loss on extinguishment of debt— — — 1,218 — 1,218 
Income (loss) before income taxes$19,453 $5,026 $14,427 $63,226 $(77,418)$140,644 
(1)For the three months ended July 31, 2021 and 2020, the amount of overhead allocated to each segment reflected in SG&A was $9.8 million and $8.5 million, respectively. For the three months ended July 31, 2021 and 2020, the amount of reimbursement made to the retail segment by the credit segment was $6.9 million and $8.9 million, respectively. For the six months ended July 31, 2021 and 2020, the amount of corporate overhead allocated to each segment reflected in SG&A was $18.8 million and $15.7 million, respectively. For the six months ended July 31, 2021 and 2020, the amount of reimbursement made to the retail segment by the credit segment was $14.2 million and $18.7 million, respectively.

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Three months ended July 31, 2021 compared to three months ended July 31, 2020
Revenues. The following table provides an analysis of retail net sales by product category in each period, including repair service agreement (“RSA”) commissions and service revenues, expressed both in dollar amounts and as a percent of total net sales:
 Three Months Ended July 31,%Same Store
(dollars in thousands)2021% of Total2020% of TotalChangeChange% Change
Furniture and mattress$109,259 31.5 %$80,984 29.0 %$28,275 34.9 %22.0 %
Home appliance135,444 39.1 107,682 38.5 27,762 25.8 17.8 
Consumer electronics48,413 14.0 47,384 16.9 1,029 2.2 0.1 
Home office17,986 5.2 14,979 5.4 3,007 20.1 10.4 
Other9,143 2.6 5,113 1.8 4,030 78.8 71.3 
Product sales320,245 92.4 256,142 91.6 64,103 25.0 16.7 
Repair service agreement commissions (1)
23,700 6.8 20,164 7.2 3,536 17.5 13.6 
Service revenues2,840 0.8 3,430 1.2 (590)(17.2) 
Total net sales$346,785 100.0 %$279,736 100.0 %$67,049 24.0 %16.4 %
(1) The total change in sales of RSA commissions includes retrospective commissions, which are not reflected in the change in same store sales.
The increase in product sales for the three months ended July 31, 2021 was primarily driven by an increase in same store sales of 16.4% and by new store growth. The increase in same store sales reflects an increase in demand across all of the Company’s home-related product categories. The increase also reflects the impact of prior year proactive underwriting changes and industry wide supply chain disruptions, each of which was the result of the COVID-19 pandemic.
The following table provides the change of the components of finance charges and other revenues:
Three Months Ended
July 31,
(in thousands)20212020Change
Interest income and fees$65,003 $83,599 $(18,596)
Insurance income6,371 3,385 2,986 
Other revenues224 196 28 
Finance charges and other revenues$71,598 $87,180 $(15,582)
The decrease in finance charges and other revenues was primarily due to a decrease of 22.7% in the average outstanding balance of the customer accounts receivable portfolio. The decrease was offset by an increase in the yield rate, from 23.2% for the three months ended July 31, 2020 to 23.3% during the three months ended July 31, 2021 and an increase in insurance commissions.
The following table provides key portfolio performance information: 
Three Months Ended
July 31,
(dollars in thousands)20212020Change
Interest income and fees$65,003 $83,599 $(18,596)
Net charge-offs(31,184)(75,118)43,934 
Interest expense(6,088)(13,222)7,134 
Net portfolio income$27,731 $(4,741)$32,472 
Average outstanding portfolio balance$1,105,936 $1,429,991 $(324,055)
Interest income and fee yield (annualized)23.3 %23.2 %
Net charge-off % (annualized)11.3 %21.0 %

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Retail Gross Margin
Three Months Ended
July 31,
(dollars in thousands)20212020Change
Retail total net sales$346,785 $279,736 $67,049 
Cost of goods sold216,042 176,623 39,419 
Retail gross margin$130,743 $103,113 $27,630 
Retail gross margin percentage37.7 %36.9 %
The year-over-year increase in retail gross margin was primarily driven by a shift in sales from lower margin products to higher margin products, a decrease in third-party credit fees and the impact of fixed logistics costs on higher sales. The increase was partially offset by a slower rate of increase in repair service agreement commissions compared to product sales year-over-year.
Selling, General and Administrative Expense
Three Months Ended
July 31,
(dollars in thousands)20212020Change
Retail segment$102,157 $78,584 $23,573 
Credit segment35,713 36,694 (981)
Selling, general and administrative expense - Consolidated$137,870 $115,278 $22,592 
Selling, general and administrative expense as a percent of total revenues33.0 %31.4 % 
The SG&A increase in the retail segment was primarily due to increases in new store occupancy costs, labor costs, advertising expense and general operating costs. The retail segment increase also reflects the impact of prior year precautionary cost saving measures enacted in response to the COVID-19 pandemic. The SG&A decrease in the credit segment was primarily due to a decrease in labor costs.
As a percent of average total customer portfolio balance (annualized), SG&A for the credit segment was 12.9% for the three months ended July 31, 2021 as compared to 10.3% for the three months ended July 31, 2020.
Provision for Bad Debts
Three Months Ended
July 31,
(dollars in thousands)20212020Change
Retail segment$142 $182 $(40)
Credit segment10,120 31,863 (21,743)
Provision for bad debts - Consolidated$10,262 $32,045 $(21,783)
Provision for bad debts - Credit segment, as a percent of average outstanding portfolio balance (annualized)3.7 %8.9 % 

The provision for bad debts was $10.3 million for the three months ended July 31, 2021 compared to $32.0 million for the three months ended July 31, 2020, a decrease of $21.7 million. The change was primarily driven by a year-over-year decrease in net charge-offs of $43.8 million, partially offset by a smaller decrease in the allowance for bad debts during the three months ended July 31, 2021 compared to the three months ended July 31, 2020. The smaller decrease was driven by a lower year-over-year decline in the customer accounts receivable portfolio balance, partially offset by a $5.0 million decrease in the economic adjustment that was driven by an improvement in the forecasted unemployment rate.
Charges and Credits
During the three months ended July 31, 2020, we recognized $1.5 million in professional fees associated with non-recurring expenses.
Interest Expense
Interest expense was $6.1 million for the three months ended July 31, 2021 and $13.2 million for the three months ended July 31, 2020, a decrease of $7.1 million or 53.8%. The decrease was driven by a lower average outstanding balance of debt and by a lower effective interest rate.

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Provision for Income Taxes
Three Months Ended
July 31,
(dollars in thousands)20212020Change
Provision for income taxes$11,117 $7,694 $3,423 
Effective tax rate23.1 %27.3 % 
The increase in income tax expense for the three months ended July 31, 2021 compared to the three months ended July 31, 2020 was driven by a $19.9 million increase in pre-tax earnings at the statutory rate of 21%.
Six months ended July 31, 2021 compared to six months ended July 31, 2020
Revenues. The following table provides an analysis of retail net sales by product category in each period, including RSA commissions and service revenues, expressed both in dollar amounts and as a percent of total net sales:
 Six Months Ended July 31,%Same Store
(dollars in thousands)2021% of Total2020% of TotalChangeChange% Change
Furniture and mattress$203,750 31.9 %$149,877 29.4 %$53,873 35.9 %24.3 %
Home appliance248,705 39.0 188,967 37.0 59,738 31.6 23.9 
Consumer electronics86,451 13.5 83,160 16.3 3,291 4.0 1.7 
Home office32,507 5.1 32,345 6.3 162 0.5 (5.5)
Other18,043 2.8 8,991 1.8 9,052 100.7 90.9 
Product sales589,456 92.3 463,340 90.8 126,116 27.2 19.4 
Repair service agreement commissions (1)
42,831 6.7 40,265 7.9 2,566 6.4 3.1 
Service revenues5,794 1.0 6,461 1.3 (667)(10.3)
Total net sales$638,081 100.0 %$510,066 100.0 %$128,015 25.1 %17.8 %
(1) The total change in sales of RSA commissions includes retrospective commissions, which are not reflected in the change in same store sales.
The increase in total net sales for the six months ended July 31, 2021 was primarily driven by an increase in same store sales of 17.8% and new store growth. The increase in same store sales reflects an increase in demand across most of the Company’s home-related product categories. The increase also reflects the impact of prior year proactive underwriting changes, industry wide supply chain disruptions, reductions in store hours and state mandated stay-at-home orders, each of which was the result of the COVID-19 pandemic.
The following table provides the change of the components of finance charges and other revenues:
Six Months Ended
July 31,
(in thousands)20212020Change
Interest income and fees$132,682 $165,442 $(32,760)
Insurance income10,889 8,137 2,752 
Other revenues433 431 
Finance charges and other revenues$144,004 $174,010 $(30,006)

The decrease in finance charges and other revenues was primarily due to a decrease of 23.5% in the average outstanding balance of the customer accounts receivable portfolio. The decrease was offset by an increase in the yield rate, from 22.2% for the six months ended July 31, 2020 to 23.4% for the six months ended July 31, 2021 and an increase in insurance commissions.

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The following table provides key portfolio performance information: 
Six Months Ended
July 31,
(dollars in thousands)20212020Change
Interest income and fees$132,682 $165,442 $(32,760)
Net charge-offs(76,123)(134,006)57,883 
Interest expense(15,292)(28,215)12,923 
Net portfolio income$41,267 $3,221 $38,046 
Average outstanding portfolio balance$1,142,080 $1,493,250 $(351,170)
Interest income and fee yield (annualized)23.4 %22.2 %
Net charge-off % (annualized)13.3 %17.9 %
Retail Gross Margin
Six Months Ended
July 31,
(dollars in thousands)20212020Change
Retail total net sales$638,081 $510,066 $128,015 
Cost of goods sold400,921 323,637 77,284 
Retail gross margin$237,160 $186,429 $50,731 
Retail gross margin percentage37.2 %36.5 %
The year-over-year increase in retail gross margin was primarily driven by a shift in sales from lower margin products to higher margin products, a decrease in third-party credit fees and the impact of fixed logistics costs on higher sales. The increase was partially offset by a slower rate of increase in repair service agreement commissions compared to product sales year-over-year.
Selling, General and Administrative Expense
Six Months Ended
July 31,
(dollars in thousands)20212020Change
Retail segment$193,050 $156,758 $36,292 
Credit segment70,869 71,527 (658)
Selling, general and administrative expense - Consolidated$263,919 $228,285 $35,634 
Selling, general and administrative expense as a percent of total revenues33.7 %33.4 % 
The SG&A increase in the retail segment was primarily due to increases in new store occupancy costs, labor costs, advertising expense and general operating costs. The retail segment increase also reflects the impact of prior year precautionary cost saving measures enacted in response to the COVID-19 pandemic. The SG&A decrease in the credit segment was primarily due to a decrease in labor costs.
As a percent of average total customer portfolio balance (annualized), SG&A for the credit segment was 12.4% for the six months ended July 31, 2021, as compared to 9.6% for the six months ended July 31, 2020. The increase was driven by a year-over-year decrease in the portfolio balance.
Provision for Bad Debts
Six Months Ended
July 31,
(dollars in thousands)20212020Change
Retail segment$160 $350 $(190)
Credit segment(7,034)149,021 (156,055)
Provision for bad debts - Consolidated$(6,874)$149,371 $(156,245)
Provision for bad debts - Credit segment, as a percent of average outstanding portfolio balance (annualized)(1.2)%20.0 % 

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The provision for bad debts was $(6.9) million for the six months ended July 31, 2021 compared to $149.4 million for the six months ended July 31, 2020, a decrease of $156.3 million. The year-over-year decrease was primarily driven by a decrease in the allowance for bad debts during the six months ended July 31, 2021, compared to an increase during the six months ended July 31, 2020, and by a year-over-year decrease in net charge-offs of $57.9 million. The decrease in the allowance for bad debts for the six months ended July 31, 2021 was primarily driven by an improvement in the forecasted unemployment rate that drove a $25.0 million decrease in the economic adjustment and a decline in the estimated loss rates driven by a decline in delinquencies. During the six months ended July 31, 2020, the increase in the allowance for bad debts was primarily due to a $65.5 million increase in the economic adjustment driven by an increase in forecasted unemployment rates stemming from the COVID-19 pandemic.
Charges and Credits
During the six months ended July 31, 2020, we recognized $3.6 million in professional fees associated with non-recurring expenses.
Interest Expense
Interest expense was $15.3 million for the six months ended July 31, 2021 and $28.2 million for the six months ended July 31, 2020, a decrease of $12.9 million or 45.7%. The decrease was driven by a lower average outstanding balance of debt, partially offset and by a higher effective interest rate.
Provision for Income Taxes
Six Months Ended
July 31,
(dollars in thousands)20212020Change
Provision (benefit) for income taxes$25,207 $(13,339)$38,546 
Effective tax rate23.4 %27.2 % 

The increase in income tax expense for the six months ended July 31, 2021 compared to the six months ended July 31, 2020 was driven by a $156.6 million increase in pre-tax earnings at the statutory rate of 21%. An additional $4.3 million benefit was also recognized as a result of net operating loss provisions within the CARES Act that provides for a five year carryback of losses starting in the prior year.

Customer Accounts Receivable Portfolio
We provide in-house financing to individual consumers on a short- and medium-term basis (contractual terms generally range from 12 to 36 months) for the purchase of durable products for the home. A significant portion of our customer credit portfolio is due from customers that are considered higher-risk, subprime borrowers. Our financing is executed using contracts that require fixed monthly payments over fixed terms. We maintain a secured interest in the product financed. If a payment is delayed, missed or paid only in part, the account becomes delinquent. Our collection personnel attempt to contact a customer once their account becomes delinquent. Our loan contracts generally reflect an interest rate of between 18% and 36%. We have implemented our direct consumer loan program across all Texas, Louisiana, Tennessee and Oklahoma locations. The states of Texas, Louisiana, Tennessee and Oklahoma represented approximately 71% of our originations during the six months ended July 31, 2021, with maximum equivalent interest rates of up to 27% in Oklahoma, up to 30% in Texas and Tennessee, and up to 36% in Louisiana. In states where regulations do not generally limit the interest rate charged, our loan contracts generally reflect an interest rate between 29.99% and 35.99%. These states represented 16% of our originations during the six months ended July 31, 2021.
We offer qualified customers a 12-month no-interest option finance program. If the customer is delinquent in making a scheduled monthly payment or does not repay the principal in full by the end of the no-interest option program period (grace periods are provided), the account does not qualify for the no-interest provision and none of the interest earned is waived.
We regularly extend or “re-age” a portion of our delinquent customer accounts as a part of our normal collection procedures to protect our investment. Generally, extensions are granted to customers who have experienced a financial difficulty (such as the temporary loss of employment), which is subsequently resolved, and when the customer indicates a willingness and ability to resume making monthly payments. These re-ages involve modifying the payment terms to defer a portion of the cash payments currently required of the debtor to help the debtor improve his or her financial condition and eventually be able to pay the account balance. Our re-aging of customer accounts does not change the interest rate or the total principal amount due from the customer and typically does not reduce the monthly contractual payments. We may also charge the customer an extension fee, which approximates the interest owed for the time period the contract was past due. Our re-age programs consist of extensions and two payment updates, which include unilateral extensions to customers who make two full payments in three calendar months in certain states. Re-ages are not granted to debtors who demonstrate a lack of intent or ability to service the obligation

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or have reached our limits for account re-aging. To a much lesser extent, we may provide the customer the ability to re-age their obligation by refinancing the account, which typically does not change the interest rate or the total principal amount due from the customer but does reduce the monthly contractual payments and extends the term. Under these options, as with extensions, the customer must resolve the reason for delinquency and show a willingness and ability to resume making contractual monthly payments.
On March 27, 2020 the Coronavirus Aid, Relief Economic Security Act (“CARES Act”) was signed into law to address the economic impact of the COVID-19 pandemic. Under the CARES Act, modifications deemed to be COVID-19 related are not considered a TDR if the loan was current (not more than 30 days past due as of March 31, 2020) and the deferral was executed between April 1, 2020 and the earlier of 60 days after the termination of the COVID-19 national emergency or December 31, 2020. In response to the CARES Act, the Company implemented short-term deferral programs for our customers. The carrying value of the customer receivables on accounts which were current prior to receiving a COVID-19 related deferment was $33.5 million as of July 31, 2021. All COVID-19 specific deferral programs ended during the third quarter of fiscal year 2021.
The following tables present, for comparison purposes, information about our managed portfolio (information reflects on a combined basis the securitized receivables transferred to the VIEs and receivables not transferred to the VIEs): 
As of July 31,
20212020
Weighted average credit score of outstanding balances (1)
608 596 
Average outstanding customer balance$2,414 $2,589 
Balances 60+ days past due as a percentage of total customer portfolio carrying value (2)(3)(4)
7.2 %10.0 %
Re-aged balance as a percentage of total customer portfolio carrying value (2)(3)(5)
20.4 %29.9 %
Carrying value of account balances re-aged more than six months (in thousands) (3)
$70,058 $103,220 
Allowance for bad debts and uncollectible interest as a percentage of total customer accounts receivable portfolio balance18.3 %24.8 %
Percent of total customer accounts receivable portfolio balance represented by no-interest option receivables
29.8 %18.3 %
Three Months Ended
July 31,
Six Months Ended
July 31,
2021202020212020
Total applications processed 336,438 326,958 634,344 622,509 
Weighted average origination credit score of sales financed (1)
614 617 615 613 
Percent of total applications approved and utilized22.5 %20.0 %22.2 %21.1 %
Average income of credit customer at origination$47,700 $46,300 $48,100 $46,300 
Percent of retail sales paid for by:  
In-house financing, including down payments received50.9 %48.5 %49.9 %55.1 %
Third-party financing17.5 %23.9 %17.2 %20.8 %
Third-party lease-to-own option11.5 %8.4 %11.9 %8.4 %
79.9 %80.8 %79.0 %84.3 %
(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)Decrease was primarily due to an increase in cash collections and the tightening of underwriting standards that occurred in fiscal year 2021.
(5)Decrease was primarily due to an increase in cash collections, 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.
Our customer portfolio balance and related allowance for uncollectible accounts are segregated between customer accounts receivable and restructured accounts. Customer accounts receivable include all accounts for which the payment term has not

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been cumulatively extended over three months or refinanced. Restructured accounts include all accounts for which payment term has been re-aged in excess of three months or refinanced.
For customer accounts receivable (excluding restructured accounts), the allowance for uncollectible accounts as a percentage of the total customer accounts receivable portfolio balance decreased to 15.5% as of July 31, 2021 from 22.5% as of July 31, 2020. The decrease in our allowance for uncollectible accounts was primarily related to a decline in the non-TDR re-age balance, improvements in 60+ day delinquencies and a decrease in the economic adjustment due to an improved macroeconomic outlook.
The percentage of the carrying value of non-restructured accounts greater than 60 days past due decreased 310 basis points over the prior year period to 5.3% as of July 31, 2021 from 8.4% as of July 31, 2020. The decrease was primarily due to higher payment rates, continued focus on cash collections and the tightening of underwriting standards that occurred in fiscal year 2021.
For restructured accounts, the allowance for uncollectible accounts as a percentage of the portfolio balance was 37.8% as of July 31, 2021 as compared to 37.5% as of July 31, 2020.
The percent of bad debt charge-offs, net of recoveries, to average outstanding portfolio balance was 11.3% for the three months ended July 31, 2021 compared to 21.0% for the three months ended July 31, 2020. The decrease in bad debt charge-offs, net of recoveries, was primarily due to an increase in existing customer mix and the tightening of underwriting standards that occurred in fiscal year 2021.
As of July 31, 2021 and 2020, balances under no-interest programs included within customer receivables were $329.6 million and $248.2 million, respectively.

Liquidity and Capital Resources 
We require liquidity and capital resources to finance our operations and future growth as we add new stores to our operations, which in turn requires additional working capital for increased customer receivables and inventory. We generally finance our operations through a combination of cash flow generated from operations, the use of our Revolving Credit Facility, and through periodic securitizations of originated customer receivables. We plan to execute periodic securitizations of future originated customer receivables.
We believe, based on our current projections, that we have sufficient sources of liquidity to fund our operations, store expansion and renovation activities, and capital expenditures for at least the next 12 months.
Operating cash flows.  For the six months ended July 31, 2021, net cash provided by operating activities was $176.9 million compared to $305.7 million for the six months ended July 31, 2020. The decrease in net cash provided by operating activities was primarily driven by an increase in inventory in comparison to the prior year period when we were preserving liquidity in the midst of the COVID-19 pandemic. The decrease was also driven by higher prior year collections due to a higher customer accounts receivable balance compared to the current year period.
Investing cash flows.  For the six months ended July 31, 2021, net cash used in investing activities was $19.2 million compared to $32.5 million for the six months ended July 31, 2020. The cash used during the six months ended July 31, 2021 was primarily for investments in new and existing stores and technology investments. The cash used during the six months ended July 31, 2020 was primarily for capital expenditures related to our two new distribution centers to support long-term growth.
Financing cash flows.  For the six months ended July 31, 2021, net cash used in financing activities was $178.3 million compared to net cash used in financing activities of $283.9 million for the six months ended July 31, 2020. During the six months ended July 31, 2021, we issued 2020-A Class C VIE asset backed notes resulting in net proceeds to us of approximately $62.5 million, net of transaction costs. The proceeds from the 2020-A VIE asset-backed notes were used to partially pay down the balance of the Company's Revolving Credit Facility. Cash collections from the securitized receivables were used to make payments on asset-backed notes of approximately $261.4 million during the six months ended July 31, 2021 compared to approximately $315.2 million in the comparable prior year period. During the period ended July 31, 2021, net borrowings under our Revolving Credit Facility were $167.0 million as compared to net borrowings of $34.8 million during the period ended July 31, 2020. The net borrowings during the six months ended July 31, 2020 included $275.0 million borrowed to preserve financial flexibility in the midst of the COVID-19 pandemic. During the six months ended July 31, 2021, we retired the remaining $141.2 million aggregate principal amount of our Senior Notes outstanding.
Senior Notes. On July 1, 2014, we issued an aggregate principal amount of $250.0 million in unsecured 7.25% Senior Notes due 2022, (the “Senior Notes”) pursuant to an indenture dated July 1, 2014 (as amended, the “Indenture”), among Conn’s, Inc., its subsidiary guarantors (the “Guarantors”) and U.S. Bank National Association, as trustee. On April 15, 2021 we completed the redemption of all of our outstanding Senior Notes in an aggregate principal amount of $141.2 million.

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Asset-backed Notes. From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. In turn, the VIEs issue asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by the VIEs.
Under the terms of the securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of issued notes, and then to us as the holder of non-issued notes, if any, and residual equity. We retain the servicing of the securitized portfolios and receive a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized receivables. In addition, we, rather than the VIEs, retain all credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which are reflected as a reduction to net charge-offs on a consolidated basis.
The asset-backed notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act of 1933. If an event of default were to occur under the indenture that governs the respective asset-backed notes, the payment of the outstanding amounts may be accelerated, in which event the cash proceeds of the receivables that otherwise might be released to the residual equity holder would instead be directed entirely toward repayment of the asset-backed notes, or if the receivables are liquidated, all liquidation proceeds could be directed solely to repayment of the asset-backed notes as governed by the respective terms of the asset-backed notes. The holders of the asset-backed notes have no recourse to assets outside of the VIEs. Events of default include, but are not limited to, failure to make required payments on the asset-backed notes or specified bankruptcy-related events.
The asset-backed notes outstanding as of July 31, 2021 consisted of the following:
(dollars in thousands)
Asset-Backed NotesOriginal Principal Amount
Original Net Proceeds (1)
Current Principal AmountIssuance DateMaturity DateContractual Interest Rate
Effective Interest Rate (2)
2019-B Class B Notes$85,540 $84,916 $19,078 11/26/20196/17/20243.62%4.58%
2019-B Class C Notes83,270 82,456 83,270 11/26/20196/17/20244.60%5.19%
2020-A Class A Notes174,900 173,716 22,986 10/16/20206/16/20251.71%4.56%
2020-A Class B Notes65,200 64,754 45,909 10/16/20206/16/20254.27%5.54%
2020-A Class C Notes62,900 62,535 44,290 2/24/20216/16/20254.20%5.75%
Total$471,810 $468,377 $215,533 
(1)After giving effect to debt issuance costs.
(2)For the six months ended July 31, 2021, and inclusive of the impact of changes in timing of actual and expected cash flows.
On February 24, 2021, the Company completed the sale of $62.9 million aggregate principal amount of 4.20% Asset Backed Notes, Class C, Series 2020-A, 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, which resulted in net proceeds to us of $62.5 million, net of debt issuance costs. Net proceeds from the sale were used to repay amounts outstanding under the Company’s Revolving Credit Facility.
On May 12, 2021, the Company completed the redemption of the 2019-A Asset Backed Notes at an aggregate redemption price of $41.1 million (which was equal to the entire outstanding principal balance plus accrued interest). We funded the redemption with cash on hand and borrowings under our Revolving Credit Facility.
Revolving Credit Facility. On March 29, 2021, Conn’s, Inc. and certain of its subsidiaries (the “Borrowers”) entered into the Fifth Amended and Restated Loan and Security Agreement (the “Fifth Amended and Restated Loan Agreement”), with certain lenders, which provides for a $650.0 million asset-based revolving credit facility (as amended, the “Revolving Credit Facility”) under which credit availability is subject to a borrowing base and a maturity date of March 29, 2025.
The Fifth Amended and Restated Loan Agreement, among other things, permits borrowings under the Letter of Credit Subline (as defined in the Fifth Amended and Restated Loan Agreement) that exceed the cap of $40 million to $100 million, solely at the discretion of the lenders for such amounts in excess of $40 million. The obligations under the Revolving Credit Facility are secured by substantially all assets of the Company, excluding the assets of the VIEs. As of July 31, 2021, we had immediately available borrowing capacity of $362.9 million under our Revolving Credit Facility, net of standby letters of credit issued of $22.5 million. We also had $45.6 million that may become available under our Revolving Credit Facility were we to grow the balance of eligible customer receivables and total eligible inventory balances.
Loans under the Revolving Credit Facility bear interest, at our option, at a rate of LIBOR plus a margin ranging from 2.50% to 3.25% per annum (depending on a pricing grid determined by our total leverage ratio) or the alternate base rate plus a margin

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ranging from 1.50% to 2.25% per annum (depending on a pricing grid determined by our total leverage ratio). We also pay an unused fee on the portion of the commitments that is available for future borrowings or letters of credit at a rate ranging from 0.25% to 0.50% per annum, depending on the average outstanding balance and letters of credit of the Revolving Credit Facility in the immediately preceding quarter. The weighted-average interest rate on borrowings outstanding and including unused line fees under the Revolving Credit Facility was 4.9% for the six months ended July 31, 2021.
The Revolving Credit Facility places restrictions on our ability to incur additional indebtedness, grant liens on assets, make distributions on equity interests, dispose of assets, make loans, pay other indebtedness, engage in mergers, and other matters. The Revolving Credit Facility restricts our ability to make dividends and distributions unless no event of default exists and a liquidity test is satisfied. Subsidiaries of the Company may pay dividends and make distributions to the Company and other obligors under the Revolving Credit Facility without restriction. As of July 31, 2021, we were restricted from making distributions in excess of $217.6 million as a result of the Revolving Credit Facility distribution and payment restrictions. The Revolving Credit Facility contains customary default provisions, which, if triggered, could result in acceleration of all amounts outstanding under the Revolving Credit Facility.
Debt Covenants. We were in compliance with our debt covenants at July 31, 2021. A summary of the significant financial covenants that govern our Revolving Credit Facility compared to our actual compliance status at July 31, 2021 is presented below: 
 ActualRequired Minimum/ Maximum
Interest Coverage Ratio for the quarter must equal or exceed minimum14.37:1.001.00:1.00
Interest Coverage Ratio for the trailing two quarters must equal or exceed minimum12.77:1.001.50:1.00
Leverage Ratio must not exceed maximum1.20:1.004.50:1.00
ABS Excluded Leverage Ratio must not exceed maximum0.91:1.002.50:1.00
Capital Expenditures, net, must not exceed maximum$20.8 million$100.0 million
All capitalized terms in the above table are defined by the Revolving Credit Facility and may or may not match directly to the financial statement captions in this document. The covenants are calculated quarterly, except for capital expenditures, which is calculated for a period of four consecutive fiscal quarters, as of the end of each fiscal quarter.
Capital Expenditures.  We lease the majority of our stores under operating leases and our plans for future store locations anticipate operating leases, but do not exclude store ownership. Our capital expenditures for future new store projects should primarily be for our tenant improvements to the property leased (including any new distribution centers and cross-dock facilities), the cost of which is estimated to be between $1.7 million and $2.5 million per store (before tenant improvement allowances), and for our existing store remodels, estimated to range between $0.3 million and $0.9 million per store remodel (before tenant improvement allowances), depending on store size. In the event we purchase existing properties, our capital expenditures will depend on the particular property and whether it is improved when purchased. We are continuously reviewing new relationships and funding sources and alternatives for new stores, which may include “sale-leaseback” or direct “purchase-lease” programs, as well as other funding sources for our purchase and construction of those projects. If we do not purchase the real property for new stores, our direct cash needs should include only our capital expenditures for tenant improvements to leased properties and our remodel programs for existing stores. We opened nine new stores during the six months ended July 31, 2021 and currently plan to open a total of 11 to 13 new stores during fiscal year 2022. Our anticipated capital expenditures for the remainder of fiscal year 2021 are between $25.0 million and $35.0 million, which includes expenditures for new stores we plan to open in fiscal year 2022.
Cash Flow
We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of inventory levels, expansion plans, debt service requirements and other operating cash needs. To meet our short- and long-term liquidity requirements, including payment of operating expenses, funding of capital expenditures and repayment of debt, we rely primarily on cash from operations. As of July 31, 2021, beyond cash generated from operations, we had (i) immediately available borrowing capacity of $362.9 million under our Revolving Credit Facility and (ii) $8.7 million of cash on hand. However, we have, in the past, sought to raise additional capital.
We expect that, for the next 12 months, cash generated from operations, proceeds from potential accounts receivable securitizations and our Revolving Credit Facility will be sufficient to provide us the ability to fund our operations, provide the increased working capital necessary to support our strategy and fund planned capital expenditures discussed above in Capital Expenditures.

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We may repurchase or otherwise retire our debt and take other steps to reduce our debt or otherwise improve our financial position. These actions could include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, the Company’s cash position, compliance with debt covenants and restrictions and other considerations.
Off-Balance Sheet Liabilities and Other Contractual Obligations
We do not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K. The following table presents a summary of our minimum contractual commitments and obligations as of July 31, 2021: 
  Payments due by period
(in thousands)TotalLess Than 1
Year
1-3
Years
3-5
Years
More Than
5 Years
Debt, including estimated interest payments (1):
     
Revolving Credit Facility (1)
$240,059 $5,749 $11,498 $222,812 $— 
2019-B Class B Notes (2)
21,068 691 20,377 — — 
2019-B Class C Notes (2)
94,310 3,830 90,480 — — 
2020-A Class A Notes (2)
24,511 393 786 23,332 — 
2020-A Class B Notes (2)
53,514 1,960 3,921 47,633 — 
2020-A Class C Notes (2)
51,505 1,860 3,720 45,925 — 
Financing lease obligations7,890 1,208 2,189 1,426 3,067 
Operating leases:     
Real estate519,682 84,539 161,508 119,783 153,852 
Equipment222 169 37 16 — 
Contractual commitments (3)
131,957 122,445 9,236 276 — 
Total$1,144,718 $222,844 $303,752 $461,203 $156,919 
(1)Estimated interest payments are based on the outstanding balance as of July 31, 2021 and the interest rate in effect at that time.
(2)The payments due by period for the asset-backed notes were based on their respective maturity dates at their respective fixed annual interest rate. Actual principal and interest payments on the asset-backed notes will reflect actual proceeds from the securitized customer accounts receivables.
(3)Contractual commitments primarily include commitments to purchase inventory of $105.3 million.


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Issuer and Guarantor Subsidiary Summarized Financial Information
Conn’s, Inc. is a holding company with no independent assets or operations other than its investments in its subsidiaries. As of July 31, 2021 and January 31, 2020, the direct or indirect subsidiaries of Conn’s, Inc. that were not Guarantors (the “Non-Guarantor Subsidiaries”) were the VIEs and minor subsidiaries.
The following tables present on a combined basis for the Issuer and the Guarantor Subsidiaries, a summarized Balance Sheet as of July 31, 2021 and January 31, 2021, and a summarized Statement of Operations on a consolidated basis for the six months ended July 31, 2021. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. Investments in subsidiaries are accounted for by the parent company using the equity method for purposes of this presentation. Amounts provided do not represent our total consolidated amounts, as of July 31, 2021 and January 31, 2021, and for the six months ended July 31, 2021:
(in thousands)July 31,
2021
January 31,
2021
Assets
Cash, cash equivalents and restricted cash$10,786 $11,638 
Customer accounts receivable302,153 218,923 
Inventories223,662 196,463 
Net due from non-guarantor subsidiary11,766 8,571 
Other current assets108,208 108,606 
Total current assets656,575 544,201 
Long-term portion of customer accounts receivable344,281 246,445 
Property and equipment, net186,072 190,962 
Right of use assets, net258,702 265,798 
Other assets15,907 23,512 
Total assets$1,461,537 $1,270,918 
Liabilities
Current portion of debt$1,371 $934 
Lease liability operating - current54,800 44,011 
Other liabilities203,388 163,429 
Total current liabilities259,559 208,374 
Lease liability operating - non current338,289 354,598 
Long-term debt223,680 197,084 
Other long-term liabilities27,656 21,068 
Total liabilities$849,184 $781,124 
    
(in thousands)Six Months Ended
July 31, 2021
Revenues:
Net sales and finances charges$728,102 
Servicing fee revenue from non-guarantor subsidiary10,457 
Total revenues738,559 
Total costs and expenses694,280 
Net income$44,279 



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Table of Contents
Critical Accounting Policies and Estimates 
The preparation of financial statements and related disclosures in conformity with GAAP requires us to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Certain accounting policies are considered “critical accounting policies” because they are particularly dependent on estimates made by us about matters that are inherently uncertain and could have a material impact to our Condensed Consolidated Financial Statements. We base our estimates on historical experience and on other assumptions that we believe are reasonable. As a result, actual results could differ because of the use of estimates. Other than with respect to the additional policy below, the description of critical accounting policies is included in our 2021 Form 10-K, filed with the SEC on March 31, 2021.
Recent Accounting Pronouncements
The information related to recent accounting pronouncements as set forth in Note 1, Summary of Significant Accounting Policies, of the Condensed Consolidated Financial Statements in Part I, Item 1, of this quarterly report on Form 10-Q is incorporated herein by reference.

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in our financial instruments represents the potential loss arising from adverse changes in interest rates. We have not been materially impacted by fluctuations in foreign currency exchange rates, as substantially all of our business is transacted in, and is expected to continue to be transacted in, U.S. dollars or U.S. dollar-based currencies. Our asset-backed notes bear interest at a fixed rate and would not be affected by interest rate changes.
During the three months ended July 31, 2021, loans under the Revolving Credit Facility bore interest, at our option, at a rate equal to LIBOR plus a margin ranging from 2.50% to 3.25% per annum (depending on a pricing grid determined by our total leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% per annum (depending on a pricing grid determined by our total leverage ratio). Accordingly, changes in our quarterly total leverage ratio and LIBOR or the alternate base rate will affect the interest rate on, and therefore our costs under, the Revolving Credit Facility. As of July 31, 2021, the balance outstanding under our Revolving Credit Facility was $219.0 million. A 100 basis point increase in interest rates on the Revolving Credit Facility would increase our borrowing costs by $2.2 million over a 12-month period, based on the outstanding balance at July 31, 2021.

ITEM 4.      CONTROLS AND PROCEDURES 
Based on management’s evaluation (with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
For the quarter ended July 31, 2021, there have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II.     OTHER INFORMATION 

ITEM 1.      LEGAL PROCEEDINGS 
The information set forth in Note 5, Contingencies, of the Condensed Consolidated Financial Statements in Part I, Item 1, of this quarterly report on Form 10-Q is incorporated herein by reference. 

ITEM 1A.    RISK FACTORS 
As of the date of the filing, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A, of our 2021 Form 10-K.

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None. 

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES 
None. 


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Table of Contents
ITEM 4.     MINE SAFETY DISCLOSURE 
Not applicable.

ITEM 5.      OTHER INFORMATION
None.

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Table of Contents
ITEM 6.     EXHIBITS 
The exhibits filed as part of this report are as follows (exhibits incorporated by reference are set forth with the name of the registrant, the type of report and registration number or last date of the period for which it was filed, and the exhibit number in such filing):

 
Exhibit
Number
Description of Document
3.1
3.1.1
3.1.2
3.1.3
3.1.4
3.2
10.1†
10.2†
10.3†
31.1
31.2
32.1
101*The following financial information from our Quarterly Report on Form 10-Q for the second quarter of fiscal year 2022, filed with the SEC on September 1, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Balance Sheets at July 31, 2021 and January 31, 2021, (ii) the Condensed Consolidated Statements of Operations for the three and six months ended July 31, 2021 and 2020, (iii) the Condensed Consolidated Statements of Shareholders Equity for the periods ended July 31, 2021 and 2020, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 2021 and 2020 and (v) the notes to the Condensed Consolidated Financial Statements.
104*Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101)
*Filed herewith
† Management contract or compensatory plan or arrangement

37


SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
 CONN’S, INC. 
Date:September 1, 2021
    
 By:/s/ George L. Bchara 
  George L. Bchara 
  Executive Vice President and Chief Financial Officer 
  
(Principal Financial Officer and duly authorized to sign this report on behalf of the registrant)
 

38
Document
EXHIBIT 31.1
CERTIFICATION
 
I, Chandra R. Holt, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Conn’s, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 /s/ Chandra R. Holt 
 Chandra R. Holt 
 Chief Executive Officer and President 
(Principal Executive Officer)

Date: September 1, 2021


Document
EXHIBIT 31.2

CERTIFICATION
 
I, George L. Bchara, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Conn’s, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 /s/ George L. Bchara 
 George L. Bchara 
 
Executive Vice President and Chief Financial Officer
 
(Principal Financial Officer)
 
Date: September 1, 2021


Document
EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Conn’s, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Chandra R. Holt, Chief Executive Officer and President of the Company, and George L. Bchara, Executive Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 /s/ Chandra R. Holt 
 Chandra R. Holt 
 Chief Executive Officer and President 
(Principal Executive Officer)
 /s/ George L. Bchara 
 George L. Bchara 
 
Executive Vice President and Chief Financial Officer
 
(Principal Financial Officer)

Date: September 1, 2021


A signed original of this written statement required by Section 906 has been provided to Conn’s, Inc. and will be retained by Conn’s, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.  The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.