Norm Miller – President, Chief Executive Officer Mike Poppe – Chief Operating Officer Lee Wright – Executive Vice President and Chief Financial Officer

John Baugh – Stifel Rick Nelson – Stephens David Magee – SunTrust

Ladies and gentlemen thank you for standing by and welcome to the Conn’s, Inc. Conference Call. As a reminder, this conference call is being recorded. The Company’s earnings release dated December 6, 2016, distributed before market opened this morning and slides that will be referenced during today’s conference call can be accessed via the Company’s Investor Relations website at ir.conns.com. I must remind you that some statements made in this call are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements represent the Company’s expectations, present expectations or beliefs concerning future events. The Company cautions that such statements are necessarily based on certain assumptions, which are subject to risks and uncertainties which could cause actual results to differ materially from those indicated today. Your speakers today are Norm Miller, the Company’s CEO; Mike Poppe, the Company’s COO; and Lee Wright, the Company’s CFO. Good day, ladies and gentlemen and welcome to the Conn’s Third Quarter Fiscal 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Norm Miller, President and Chief Executive Officer. Please go ahead.

Good morning and welcome to Conn’s third quarter fiscal 2017 earnings conference call. I will begin the call with an overview and then Mike Poppe will discuss our retail and credit performance for the quarter. Lee Wright will complete our prepared remarks with additional comments on the financial results. Conn’s fiscal 2017 third quarter results reflect the continued implementation of our turnaround strategies aimed at transforming our credit operation by improving underwriting and collection performance. Increasing yield on new originations and lowering the Company’s borrowing costs. These goals are aligned with our core focus on profitability while creating a sustainable business model that appropriately manages credit risk and retail growth and produces long-term shareholder value. Our progress during the quarter demonstrates that these actions are taking hold and beginning to produce the intended results. The underwriting refinements implemented in fiscal 2017 are benefiting underlying credit performance. During the fiscal 2017 third quarter Conn’s experienced reductions and early stage delinquency and first pay defaults. The rollout of our Texas direct loan program was completed ahead of schedule and successfully implemented across all 55 Texas locations by the end of October. In addition, we further reduced our cost of funds to another positive ABS transaction and sold the 2016-A Class C notes at a premium. Finally Conn’s retail operation continues to perform well despite the impact underwriting refinements have had on sales. And during the third quarter retail gross margins demonstrated further year-over-year and sequential improvements. With these highlights let me provide some additional color on our progress we're making to position Conn’s for a significant improvement to profitability next year. The tenure and experience of Conn’s management team continues to increase, which enhances our ability to execute our strategies. Nowhere it’s more apparent than in our credit operation. The new credit leadership team has been adding resources and enhancing capabilities aimed at improving performance, which include investments in systems, analytics and personnel. The team continues to proactively monitor performance and make adjustments as needed to improve results. Our credit operation is already benefiting from many of these investments as well as the fiscal 2017 underwriting refinement and enhancements to our underwriting scorecard. Adjustments were necessary to align Conn’s risk model with changes in customer behavior, the regulatory environment and the composition of our portfolio specifically associated with new customers. While these underwriting enhancements reduced retail sales as anticipated the long-term benefits of improving credit quality and performance will meaningfully increase Conn’s profitability in the future. Mike will provide a more detailed overview of our credit results and portfolio trends in his prepared remarks but let me review several examples of why I am optimistic the Company is starting to experience improving credit performance. Early performance trends for fiscal 2017 originations are encouraging. First payment default balances related to accounts originated since April are 10% lower than in the prior year period with new customer originations showing the largest improvement. This is contributing to improvements in the 1 to 60 day delinquency rate, which at October 31 was at its lowest point since the end of tax season in April. In addition the percentage of repeat customers continues to increase and was up 430 basis points in the third quarter compared to the prior year period. Losses in the portfolio are expected to decline as a result of accelerating run-off and improving static pool delinquency trends. As we have stated previously fiscal 2014 originations are expected to experience cumulative losses of approximately 14%. Fiscal 2015 is expected to be in the low 14% range, fiscal 2016 is expected to be in the upper 13% range, while fiscal 2017 is expected to show even further improvements. We continue to believe our credit model can produce long-term static loss rates at or below 12%. And as you can see we're making progress towards achieving this goal. Increasing the yield on our portfolio is the next component of our credit turnaround strategy. Our Texas direct loan program was implemented ahead of schedule across all 55 Texas locations before the end of October. The implementation was complex and impacted nearly every aspect of both our retail and credit operation. I'm extremely pleased with our team's ability to successfully rollout this program before the holiday season. Implementing strategies to improve losses and increase yields before the holiday season was important and are expected to help accelerate our turnaround. November and December typically historically represent about 22% of full year originations. A 100% of November and December originations will be under our current underwriting model and approximately 80% of originations are expected to be at APR’s approaching 30%. Fiscal 2018’s performance is expected to benefit as this pool of seasons and the portfolio continues to benefit from improved underwriting and higher yield. As a reminder, the state of Texas represents approximately 70% of our recent originations, which under our previous offering had a maximum interest rate to the customer of approximately 21%, compared to an interest rate of up to 30% under our new direct loan program, which also allows us to charge an administration fee at origination. Early observations of the direct loan program in Texas are encouraging. Conn’s in-house credit offering provides customers affordable payment option to purchase quality products for their homes especially compared to other options. In addition, our extensive retail assortment and valuable customer service is unlike many retailers serving this customer base. As expected we have not seen a material impact to retail sales from charging a higher rate to customers in Texas. While our yield on Texas originations has improved. All Texas sales finance to Conn’s in-house credit offering in the month of November benefited from the new direct loan program. From September to November the Company's APR on loans originated during these months increased over 500 basis points as a result of our Texas direct loan program and other strategies recently implemented to enhance the Company’s yield. With the success of our Texas direct loan program, we are working to raise our interest rates as well in Louisiana, Oklahoma, Tennessee and North Carolina. These four states represent an additional 14% of our originations and we expect to have new lending programs implemented by the end of fiscal 2018. In states where regulations do not generally limit the interest rate charge. We have already increased our rates to 29.99%. Earlier this fiscal year, we implemented changes to our no interest program to improve portfolio yield and returns on capital. As of early February long-term no interest programs are offered predominantly through Synchrony and sales underwritten by Synchrony represented approximately 16% of Conn’s fiscal 2017 third quarter retail sales compared to nearly 10% in last year's third quarter. This change is not expected to have a significant impact on long-term profitability. But it will improve returns on capital as we recapture the capital invested in similar accounts on our books today. Additionally, we remove no interest eligibility for certain higher risk customers under Conn’s in-house no interest programs. We are not anticipating a meaningful and negative impact on sales, as a result of these changes. The benefits from our new direct loan program, the planned changes in the four additional states and the changes to our no interest programs are expected to increase our yield in total by 600 to 900 basis points on new originations by the end of fiscal 2018. Lowering the Company’s cost of capital is the final piece of the strategy to help improve the profitability of the credit operation. We continue to believe the ABS market provides the Company with an attractive source of financing. And since 2015 we have issued three ABS transactions. The performance of each ABS transaction is in line with our internal projections. As our ABS notes have performed as anticipated and investors experience with our receivables has increased. We have successfully lowered the cost of transaction with our latest transaction in October 2016 having a blended all-in cost of funds for our A and B note of 6.9%. In addition, we also sold our 2016-A Class C notes at a premium further demonstrating increasing demand for Conn’s securitized notes. As we reduce losses and increase yield we are optimistic further reductions to our ABS cost of funds is achievable even in a potentially rising rate environment. In addition, with slower growth and improved cash flow we expect to finance more of our receivables with cash from operating activities and our ABL facility further reducing our blended cost of capital. We are executing our strategy to reduce losses, increase yield and lowering borrowing costs with the overall goal of significantly improving the profit contribution of our credit business. While it will take time to fully realize all the benefits of these strategies Conn’s made meaningful progress on all three fronts during the fiscal 2017 third quarter. I’m pleased with the direction our credit operation is headed. While we ensure our retail business is operating at a high level. Total retail sales reflect the impact of our credit turnaround strategies and we're down 4.5% for the third quarter. The first year-over-year decline in total retail sales since the fiscal 2012 second quarter. We opened one new store during the quarter compared to six in the same period last year. In addition, same-store sales declined 10.1% primarily due to the implementation of this year's underwriting refinements, which impacted same-store sales by approximately 1000 basis points. Since underwriting adjustments primarily focused on improving new customer credit performance it is important to look at same-store sales across our three store categories including core stores, single stores in new markets and new stores in new markets. Core stores represent about 60% of our store base. Single stores in new markets represent about 20% of the same-store base. The remaining 20% of our same-store base represents new stores and new markets with existing locations resulting in the cannibalization of sales in these locations. For the third quarter, we saw same-store sales of our core stores down 5.4%. Single stores in new markets were down 10.1%, while new stores in cannibalized markets were down 25.3%. All markets were impacted by underwriting refinements but a greater proportion of the 1000 basis total endpoint impact was in new markets. Despite the headwinds underwriting refinements are having on retail sales, I'm pleased with our retail performance. And Conn’s experienced favorable retail trends across many categories including furniture and mattress, appliances and consumer electronics. In addition third quarter, retail gross margin increased 40 basis points both sequentially and year-over-year, as a result of improving product assortment and warehousing and delivery efficiencies. SG&A expenses in our retail business continue to delever in fiscal 2017 third quarter, as a result of lower sales but disciplined expense management and recent cost mitigation initiatives reduced retail SG&A by 2.1% over the same period last year and 6% from fiscal 2017 second quarter. We remain focused on carefully managing retail SG&A to align with expected sales volumes. For November, same-store sales were down approximately 8%, while total sales were down approximately 5%. Despite headwinds from stricter underwriting, total sales during the six day surrounding Black Friday were up 1.5%. The implementation of Conn’s direct loan program in Texas did not have a meaningful impact to November's retail sales while the APR in Texas originations increased. Our transformation is well underway and I'm encouraged by the progress we are making. I remain confident Conn’s is headed in the right direction. Now I will turn the call over to Mike.

Thank you, Norm. Starting with our retail performance, we continue to be pleased with the performance of our retail operations. Favorable product mix and improved efficiency for warehouse, delivery and transportation costs helped retail gross margins improve 40 basis points from both the fiscal 2016 third quarter and the fiscal 2017 second quarter. From a sales standpoint, as we show on Slide 4 total retail sales for the third quarter were down 4.5% compared to the same period last fiscal year. Sales trends were impacted largely by underwriting changes made during fiscal 2017. Same-store sales for fiscal 2017 third quarter were down 10.1%. Furniture and home office categories were the primary drivers of the lower third quarter sales, while home appliance sales were down less than 1% driven by higher unit volume. Furniture sales in new markets were impacted significantly by fiscal 2017’s underwriting changes. It's also important to highlight the increase in home appliance sales as they have a lower rate of delinquency and losses than the other categories. During the third quarter we opened one new store in North Carolina with no additional openings planned for the remainder of the year. For fiscal 2018 we have committed to only three new locations. Moving on to our credit segments, Slide 5 is the annual and quarterly breakout of the average FICO score of originations and the portfolio. The FICO score of all originations in Q3 of fiscal 2017 was 610 compared with 613 in Q3 of the prior year and 611 in the fiscal 2017 second quarter. The year-over-year change was driven largely by our decision to use our program with Synchrony to offer long-term no-interest financing promotions. We have continually refined our underwriting model to reduce credit risk largely related to new customers. Additionally earlier this year, we implemented our new origination scorecard and strategy as well as move to a new decision platform. These changes combined with the refinements we’ve made in the fourth quarter last year included modifying our credit limits, downpayments and cash option eligibility to reduce risk for some customers while declining other unprofitable customers. Enhancements to our origination scorecard improvements to our credit analytics and increased customer segmentations have offset some of these headwinds to sales and helped us identify profitable segments of customers that we have started approving. The performance of recent originations reflects the benefits of the investments we have made to our credit infrastructure and the adjustments we have made to our underwriting strategy. Originations since the late March 2016 underwriting changes account for approximately 44% of the portfolio as of October. Our primary emphasis of our underwriting refinements has been to reduce the amount of first pay defaults and their impact on charge-offs. As Norm stated first payment default balances related to accounts originated beginning in April are 10% lower than in the comparable prior year period with new customer originations showing the largest improvement. This is contributing to improvements in the 1 to 60 day delinquency rate which at October 31 was added to lowest point this year since the end of tax season in April. As we have slowed sales and adjusted underwriting standards, we have experienced a meaningful increase in the number of repeat customers as shown on Slide 6. This is important because existing customers historically have had meaningfully lower loss rates than new customers. Customer originations with more than 5 months since their first credit transaction at Conn’s, were nearly 55% of total originations during the recently completed quarter. This is the highest percentage of repeat customers since fiscal 2013. On Slide 7 you can see the increase in existing customers as a percentage of originations for the company overall, for Houston, our legacy market and Phoenix, a newer market. The Phoenix trend shows the impact of our underwriting changes have had on new markets with a sequential increase of 300 basis points for repeat customers on top of the 520 basis points sequential increase in the second quarter. The underwriting changes and reduced store opening pace have resulted in the portfolio contracting $53.6 million or 3.4% since January 31, 2016. While slower growth and changes to our credit strategy are benefiting the underlying performance of the portfolio. They continue to have a negative effect on the portfolio metrics including delinquency, provision and charge-offs rates. For example slower portfolio growth combined with the decision to ship long-term, no interest programs to Synchrony impacted the reported 11% 60-day delinquency rate for the quarter. The 60-day delinquency rate at the end of the fiscal 2017 third quarter adjusted for these items was 10.9% of the total outstanding loan balance compared to 10.8% for the same period last fiscal year. Seasonality and a cohort of late-stage delinquency from originations prior to our underwriting changes are expected to challenge credit results in the fourth quarter, resulting in elevated provision expense. As these legacy accounts charge-off, the portfolio should benefit from a greater volume of new accounts originated under our refined standards. Slide 8 shows the static pool delinquency rate for fiscals 2014, 2015 and 2016. As you can see fiscal 2016's originations are demonstrating improving delinquency trends compared to prior years. As the fiscal 2016 fourth quarter vintage seasons, we expect delinquency for this period will show year-over-year improvement similar to the prior quarters’ that year. As shown on Slide 9 our static pool losses for the last 12 quarters. As you can see, we have experienced higher initial loss rates in recent vintages but the trend is flattening sooner. The improving static pool delinquency trends and accelerating portfolio runoff shown on Slide 10 are the basis for our static pool loss expectations. We are expecting a static pool loss rate of approximately 14% for fiscal 2014, which have less than 1% of the original balance remaining. The fiscal 2015 loss rate is expected to be in the low 14% range. There's only 8.5% of this vintage remaining compared with 9% for the fiscal 2014 vintage of the same point in its life. The expected loss rate for fiscal 2016 is in the upper 13% range compared to fiscal 2015 there's 50 basis points less of the balance remaining. And the static pool delinquency trends we looked out on Slide 8 indicate less future potential loss remaining. Lastly, with this significant underwriting changes, we have implemented this year we still expect fiscal 2017 to be better than fiscal 2016. While the 60-plus delinquency rate has not improved on a year-over-year basis yet, we believe losses are headed in the right direction as a result of our underwriting refinements, better static pool delinquency trends and accelerating portfolio runoff. Our turnaround efforts are well underway and we are seeing the signs of improving credit performance. In addition the performance of new originations is encouraging and are expected to benefit next year’s credit results. Now I will turn the call over to Lee Wright. Lee?

Thanks Mike. I’m pleased to present that we were able to increase our retail gross margin both sequentially and from the prior year. In addition, our proactive management of expenses has allowed us to maintain our retail operating margin from the second quarter. Despite lower revenues as well as improve our credit operating margins sequentially. Finally, I was very pleased with the overall execution of our most recent ABS transaction. With that, let me get into the numbers. Conn's reported a loss for the fiscal 2017 third quarter of $0.12 per share compared to a net loss of $0.07 per share for the prior year quarter. On a non-GAAP basis, adjusted for certain charges and adjustments, diluted loss for the quarter was $0.08 per share compared to adjusted earnings for the prior year quarter of $0.02 per diluted share. For the retail segment of the business, total revenues for the third quarter of fiscal 2017 were $308.4 million, which decreased $14.7 million or 4.5% versus the same quarter a year ago. Despite reduced retail sales, retail gross margins increased by 40 basis points versus the prior year to 37.5%. And we're also up 40 basis points sequentially. As shown on Slide 11. This is the second highest retail margin in the last seven quarters. We continue to believe that we can enhance our retail gross margin, as a result of increasing the mix of sales of furniture and mattresses which have a higher margin, decreasing the share of revenues from lower margin home office products and improving warehouse and distribution utilization and optimizing our transportation and delivery expenses. Compared to the prior year period, we reduced retail SG&A expenses in the third quarter by approximately 2% to $79.8 million despite having an additional 12 stores. As shown on Slide 12, even with a 120 basis point increase in occupancy expense, as a result of these new stores, SG&A as a percent of retail sales in the quarter only increased 70 basis points year-over-year to 25.9%. Taking a look at the credit segment, finance charges and other revenues were $68.4 million for the third quarter of fiscal 2017, down 5.2% versus the same period last year. The decrease in credit revenue was the result of lower credit insurance commissions due to higher claim volumes in Louisiana after the floods and lower average rates in new states, as well as the yield rate of 15%, 80 basis points lower than a year ago, partially offset by growth in the average balance of the customer receivable portfolio of 3.9%. SG&A expense in the credit segment for the quarter grew 7.8% versus the same period last year. This increase was driven by additional collections personnel needed to service the year-over-year increase in the average customer portfolio balance as well as the investments we are making to improve the performance of our credit business. Credit SG&A as a percentage of the average total customer portfolio balance delevered by 30 basis points versus last year and improved 10 basis points from the fiscal 2017 second quarter. Provision for bad debts in the credit segment was $51.3 million for the fiscal 2017 third quarter, a decrease of $6.8 million from the prior year period. The decrease in provision for bad debts was primarily the result of smaller growth in the allowance. As a result the provision as a percent of the average portfolio balance was 13.3% for the fiscal 2017 third quarter compared to 15.6% in the third quarter of last year. Looking at our liquidity on Slide 13, as of October 31, 2016, we had $59.1 million in cash and approximately $146 million of immediately available borrowing capacity under our $810 million revolving credit facility, with an additional $659 million that could become available upon increases in eligible inventory and customer receivable balances under the borrowing base. For the fiscal 2017 third quarter, interest expense increased by $3.8 million year-over-year to $23.5 million, driven largely by our re-entry into the ABS market. However interest expense in the third quarter was the lowest quarterly amount since the prior year period reflecting reduced borrowing costs and slower growth. For the quarter, annualized interest expense as a percentage of the average portfolio balance was 6.1%, with average net debt as a percent of the average portfolio balance of approximately 77%. Since the beginning of the year, we have made significant progress improving our payable to inventory rate. Accounts payable as a percent of inventory was approximately 57% at October 31, 2016, compared to 43% at January 31, 2016. We are focused on improving our working capital requirements, liquidity position and operating cash flows. Our 2015 and 2016 ABS notes are performing in-line with our expectations. On October 07, 2016, we announced the closing of a $700 million securitization transaction, our third ABS transaction in the last 14 months. The face amount of Class A and Class B notes issued in the securitization was approximately $504 million with an aggregate advance rate of approximately 72% and all-in cost of funds of approximately 6.9%. This compares favorably to the prior two securitizations which had all-in cost of funds of the Class A and Class B notes of approximately 9.2% and 7.8% respectively. In addition, in October 2016 we sold our 2016-A Class C notes at a premium, which provided approximately $71.5 million at net proceeds. We are encouraged by this transaction as it enhances our liquidity position and demonstrates investor demand for the subordinated tranches of our ABS transactions. At October 31, 2016 approximately 23% is remaining of our total 2015-A Class A and B notes and approximately 51% is remaining of total 2016-A, B, and C notes. We remained focused on completing two to three ABS transactions a year, which is important as we continue to build a track record not only with investors but also with the rating agencies. However as the time between ABS transactions has increased, we are able to warehouse more receivables through our lower cost ABL facility. This should enable us to lower our blended cost of funds. We are pleased with the reduction of our ABS funding costs and expect further reductions will occur as prior deals performed in line with expectations and investors experience with our receivables increases. Furthermore as we improve the spread of our portfolio by increasing the yield on our originations and lowering our losses we expect to continue to reduce our cost of funds from our ABS transactions even in a rising rate environment. Our turnaround strategies are well underway and we're making progress towards our near-term focus of returning to profitability. I'll now turn the call back over to Norm.

Thanks Lee. Before we open the call up for question, I wanted to reiterate my optimism in Conn's long-term potential. The strategies we’ve developed this year to improve our performance are well underway and I’m pleased with the progress we made in the third quarter. We have significantly transformed our credit business and improved its profit potential by implementing programs to reduce losses and increase yield, which are expected to also lower our borrowing costs. It will take time for these changes to complete the season into our portfolio but with every passing month better performing and higher APR originations are supplanting legacy receivables. Meanwhile, our retail business continues to perform well and increase margins despite the impact underwriting changes and slower unit growth have had on the retail sales. This is extremely encouraging and demonstrates the competitiveness of our differentiated business model. While there is still there’s a lot of work in front of us. I’m increasingly confident Conn's is headed in the right direction and we expect to achieve profitability in the coming year. With that, operator, please open the call up to questions.

Thank you. [Operator Instructions] And our first question comes from John Baugh of Stifel. Your line is now open.

Thank you for all the information and for taking my questions this morning. If you could start with the origination fee, I know it's amortized through time. So it won’t have a big impact immediately but I was wondering if you could discuss how that will impact numbers out into the future or is that separate from the 600 to 900 basis point improvement in the yield you talked about or included in that and are you finding any resistance from customers as it relates to that fee?

Hey John, This is Mike. So I’ll take the first shot at the answer and then Norm will add on. So we are starting it from a sales standpoint we're not seeing a big impact or resistance from a sales standpoint, our customers as you know are mostly payment focused. And this is still a great, purchased in monthly payment option for them to buy the goods they need. We have not seen a meaningful impact on sales. The fee is charged on every transaction it's not something that’s negotiable or waivable so we're getting it in every transaction and it is included in the 600 to 900 basis point improvement that we expect to see in the yield as all of these changes season into the portfolio and will the impact be APR 150 to 200 basis points but again all of that benefits already baked into the 600 to 900 basis points improvement that we're expecting.

Hey, John, one other comment I would make, you heard our November sales. So the November sales trend was actually better than the third quarter with similar underwriting, of the underwriting changes in place and all of November had Texas with direct loan higher APR as well as the origination fee and again to highlight the fact that for our core customer even with the higher APR in the origination fee it is still by far from a value standpoint, the best retail option and the best retail opportunity that they have in the marketplace.

Thanks for that Norm. And is Texas, was the comp in Texas similar to the 8% or there was a little worse? And I guess that’s not just relating to the origination fee in APR but maybe a commentary on Houston or the oil patch in general. I’m just curious what you are seeing specifically in Texas.

So, Norm noted in his comments the core markets what we’re talking about 3Q were down 5% and we saw a similar trend through the core markets relative to the company overall which Houston is in that core market total.

So Texas would actually out of the 8% and that down 5.4% which we shared the detail of the three breakouts down 5.4% of the 10% on core markets and all of that those are Texas markets if you will. So down 8% the core markets perform similarly so it would have been even better than that in the month of November even with the APR and the origination fee. And the challenges from an oil market standpoint that we’re seeing in the state of Texas.

That’s helpful. I know you are not providing out your guidance. But I’m curious on credit SG&A where the portfolio is essentially flatting out. Shouldn’t we get some fairly material leverage on that number in 2017 or how we thinking maybe sequentially about dollar run rate of credit SG&A?

Yes, John. We would expect to see some benefits from a leverage standpoint as the portfolio performance continues to improve and with our primary operating expense in credit being the collection staff, the staffing and labor cost relative to the balance should go down as delinquency and losses decline.

In addition to that John, with the removal of from a synchrony standpoint that portfolio out that is a huge driver of what’s causing the portfolio to be smaller in that seasons and those move off the portfolio, it absolutely will give us the opportunity to leverage, add a much greater degree our credit SG&A.

Okay, and I’ll defer to others but maybe one last quick one. The residuals, I think I added up about $35 million on the first securitization, you did $1.4 billion. I believe it was around $132 million of original value. I guess if just asking, is anything to read into that, whether the amount remaining which I think you broke out of the low 20s? Is there any thing to read through on residual values going forward? I know that was a different pool from the recent that you’ve done. Any color would be great. Thank you.

Yes. Hey, John, it’s Lee. With regards to the residuals probably nothing to read into it obviously as we have charge-offs that residual continues to decrease. But with the regards to if you are asking about potential sale there is nothing on the horizon from that perspective.

And as Norm and Lee pointed out in the prepared comments, I mean that the ABS transactions today they are still performing fairly in line with expectations, I don’t think there is anything really news worthy there.

And when you calculate the service fee that we’ve generated over the lifetime of the 2015 deal and the residual payments as well they are certainly in line with what we had projected or expected.

Great. Thanks, good luck.

Thank you.

Thanks, John.

Thank you. And our next question comes from Peter Keith with Piper Jaffray. Your line is now open.

Great, thanks guys. This is actually John on for Peter today. So first off, we’ve seen several stories in the news recently of subprime auto delinquencies continue to be on the rise and at their highest levels and going back to the housing boom. Are you concerned that this is going to start impacting your existing portfolio further in the coming quarters and then also do you feel like your recent tightening will helpful you maybe avoid some of these higher delinquency risk.

Hey, John, it’s Norm. Yes, part of the reason that’s we did the significant underwriting changes that we did earlier in 2017 was exactly for the some of the reasons that you are articulating. As we saw even back then, even before we see in the subprime auto and some of the delinquencies rising we were looking at the availability of credit that was being put out there within the subprime market and that was a concern to us and contributed along our efforts to tighten as strongly as we have. And that’s certainly playing out with what we’re seeing from a delinquency standpoint with the subprime auto market. But it’s something we continue to monitor obviously we can’t predict what will happen in the future, we feel confident that what we’ve done now and what we’re seeing in early buckets and first pay defaults that we’ve taken the appropriate steps. But I will say with our enhanced credit team and the sophistication that we have from an analytics and a modeling standpoint we look at it literally on a daily basis and are constantly on the watch so that if we have to do something else to ensure that we don’t have issues down the road, we’re prepared to do that.

Okay, great. And then is there any change in thinking on where you guys are thinking your fiscal year 2016 vintage static loss charge-off rate will eventually settle?

No, John. And in fact in the call slides on page 10, we give the estimated range and for fiscal 2016 we’re still expecting it be in the upper 13% range and that’s based on what we’re seeing from a static pool delinquency trend as well as how fast the portfolio is paying down and the fact that there is only about a third of that portfolio remaining.

And one thing that’s important about that is we gave a little bit tighter guidance of where we thought the 2016 was going to come in at. But if you go back to the pervious several earnings calls we have not changed our position on where we expect the fiscal 2014, 2015, and 2016 static loss pools to come out at and part of the reason we gave some additional color on early delinquency trends and static loss delinquency trends as well as first pay default is to give better clarity of why we have a confidence level of where we think – continue to think the static pool loss rates are going to come in similar to what we’ve communicated in the past.

Okay, thanks. And then just one last quick one. Just as far as kind of some of the weakness I guess in the furniture and mattress category in Q3, I know that’s been an outperformer for a very long time but it’s a little weaker this quarter. Is that a result of just some of the tightening you’ve done that customer tends to be a little bit higher default customer than the rest of your business or was there something else going on you’d like to call out in Q3?

Yes, John. First of all there is nothing underlying we believe with what’s going on with the furniture and mattress business at all. They are not a higher – it’s not – from a delinquency standpoint, they’re not a higher credit risk customer. In fact they’re not our best from an appliance standpoint, but they’re not that far behind from an appliance standpoint. But what has driven the softening there is completely the underwriting changes. If you recall the majority of our underwriting changes were focused, number one, on new markets, and our new markets have a much higher percentage of furniture penetration and mix than our core markets do. And then number two, we also impacted credit limits to mitigate delinquencies there and the higher credit limits typically skew towards the furniture and mattress purchase versus appliances and electronics. So it’s really those two drivers. One of the things I will say at the same time even with – and I wanted to reiterate is the profitability of our retail business continues to be extremely strong. Although we’re experiencing the tightening of our sales that we’ve self-inflicted in the reduced store growth to assist our efforts to turn around the credit business, our retail stores on average even with the reduction of the 4.5% in total sales are extremely profitable. And put it in context, our retail stores would still be very profitable force with 50% less revenue as we sit here today. So although we don’t like that, in long-term that’s certainly not what our expectations are. In the short-term while we get the credit business performing where it needs to be, it’s necessary for us to see that tightening, but it doesn’t shake at all the underlying profitability and strength of our retail business.

And I’d add just one comment. It also doesn’t change our long-term expectation for the potential for revenues in the stores either and we don’t think this is a continuous decline, this is a – we need to take this – make this change to get credit right. And then the retail stores, especially in the new markets we think the long-term potential is still where we originally thought.

Great, thanks a lot guys. Good luck in the fourth quarter.

Thank you.

Thank you. And our next question comes from Rick Nelson of Stephens. Your line is now open.

Thanks. Good morning. Like to ask you about the guidance for 4Q, calls for a pretty steep increase in the provision, if you could provide some color around that. And how we should think of the provision rate for the next fiscal year?

So as far as the fourth quarter goes with, we see a cohort of charge-offs coming through from originations prior to this year’s underwriting changes. So they’ll have a – the underwriting changes will be have a bigger benefit next year, they’re not really benefiting as yet this year. So we’re seeing that that lag come through in higher charge-offs in the fourth quarter, along with this is typically when we see growth in the portfolio, which will also puts upward pressure on the provision in our higher growing period for the portfolio. And that’s what’s really driving the guidance for Q4 for the provision. We haven’t given specific guidance for FY 2018 for provision yet other than just to say we would expect to start seeing the benefit of the underwriting changes in next year’s losses in provision.

Got you. Same-store sales decline for November down 8%, you’re guiding to a 10% decline for the full quarter. I’m curios if you’re seeing a downdraft in same-store sales here in December, just what is leading to you that 10% at this point or just to desire to be a conservative?

Yes, Rick, it’s – we’re not seeing any fundamental difference yet in December very, very early, obviously, with only four days or five days. And frankly, the story in December will be written in the two weeks of the month, frankly so, when everything is set and done. I would say our guidance is approximately 10%. From a conservative standpoint, we’re taking a little bit more conservative approach. We are certainly do everything we can within our control from a retail execution standpoint, but we haven’t changed anything underwriting as a result, but just in an effort to be more transparent and a little more conservative is where we – why we put the guidance where it is.

And finally if I could ask you about the timeline to raise the APRs in those four states. The two called out represent 14% of the originations.

We are targeting to have all done by the end of next year, but they will come in in stages as we’ll knock off the higher potential states earlier in the year and work our way through each of the four states.

And even though we’ve been through a one so in that sense from a retail execution standpoint, we feel very comfortable with it. The issue is it affects so many things from a back of the house standpoint and a resource standpoint and a compliance standpoint. That’s why we have to do it in a staggered manner to ensure that we can do it appropriately and without risk. So by the end of fiscal year 2018, we would expect to have all four states enrolled then.

Okay, fair enough. Thanks a lot and good luck.

Thanks, Rick.

Thanks, Rick.

Thank you. And our next question comes from David Magee of SunTrust. Your line is now open.

Yes, hi, good morning and congrats on these stabilized numbers.

Thank you.

I had a question on the higher underwriting hurdles now. If a customer is not able to complete the transaction in the store, I guess I’m surprised I’m not seeing more RTO transactions take place as a result of that, are you not seeing the transfer as efficiently as it could be in that regard?

What I would say is that’s a good catch, something we’re very, very focused on, because we – even before the changes frankly we recognize that’s an area that we have – we believe significant opportunity down the road. And with the significantly increased number of declines that opportunity has only grown. We did see – we have seen improvement over the last 90-day. But at the end of the day where we ultimately think it can be is significantly higher than where it is and it’s an area strategically that we think provide us an opportunity for some material retail sales growth going forward into the future and we’re very focused on it.

Okay. Thank you. Secondly, how would you characterize the promotional environment around you thus far in the holiday season?

I would say similar to a product last year. We’re not seeing – it’s typically a very, very high promotion timeframe and we’re certainly seeing that from a category standpoint, but as you heard our over Black Friday, our total sales were actually up on the six days that from basically Wednesday to Cyber Monday that we calculate. So even in a comparatively competitive environment we were able to certainly have a better performance than what our trend rate has been.

Right. Good. And then with regard to the residuals on the ABS transactions, it sounds like to me that you guys are choosing to retain those just because of the economics involved as opposed to a lack of buyers perhaps, is that fair?

Yes, David, it’s Lee, now that’s fair, and we’re definitely choosing to retain those from an economic perspective that makes more sense for the company to hold on at this point.

Okay. And then lastly, when do you start to lap on the comp side just in terms of having a similar underwriting hurdle year-over-year? And some of that headwind may dissipate in that regard.

Late first quarter.

May recall the first big changes were made at the end of March have started in April to some extent; certainly second quarter will happen to see the first big impact.

Great. Thanks and good luck.

Thank you, David.

Thank you, David.

Thank you. And I’m showing no further questions at this time. I’d like to turn conference back over to Mr. Miller for closing remarks.

Thank you. We appreciate everybody’s participation and support of the company. We look forward to speaking with you again in the fourth quarter. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Have a great day everyone.