Good morning and thank you for holding. Welcome to Conn's, Inc. Third Conference Call to discuss earnings for the Fiscal Quarter ended October 31st, 2019. My name is Rob and I'll be your operator for today. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, you will be invited to participate in the question-and-answer session. As a reminder, this conference call is being recorded The company's earnings release dated December 10th, 2019, was distributed before market opened this morning and can be accessed via the company's Investor Relations website at ir.conns.com. During today's call, management will discuss, among other financial performance measures, adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share. Please refer to the company's earnings release that was issued today for a reconciliation of these non-GAAP measures to their most comparable GAAP measures. I must remind you that some of the 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 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; Lee Wright, the company's COO; and George Bchara, the company's CFO. I would now like to turn the conference call over to Mr. Miller. Please go ahead, sir.

Good morning and welcome to Conn's third quarter of fiscal year 2020 earnings conference call. I'll begin the call with a strategic overview, then Lee will provide additional details on the quarter, before turning the call over to George, who will complete our prepared remarks with additional comments on the financial results. Strong credit results combined with our highly profitable retail business resulted in a 13% increase in third quarter earnings per diluted share. Year-to-date, earnings have increased 26% to $1.74 per diluted share and our year-to-date adjusted EBITDA has increased nearly 8% to $156 million, producing an adjusted EBITDA margin of approximately 14%. Our strong year-to-date earnings demonstrate the power of our business model despite challenging retail sales. Almost four years ago, we communicated our long-term credit strategy aimed at producing a credit spread of approximately 1,000 basis points. I am pleased that our credit spread was above this level during the third quarter, which produced positive credit segment income for the first time in five and a half years. Our credit model is the foundation of our business and enables our unmatched value proposition for our core customer. As our credit strategy matures, we will remain disciplined in our approach to protect the overall health of the business while pursuing initiatives aimed at optimizing retail sales. We are disappointed that our third quarter same-store sales declined 8.4%, which reflects the impact of prudent underwriting adjustments and unprecedented market dynamics within our consumer electronics category. During the third quarter, we began to see deteriorating performance of certain segments of the portfolio. We made the necessary adjustments to maintain our long-term credit spread of approximately 1,000 basis points, which negatively impacted same-store sales by approximately 4% to 5%. Compounding the impact of the third quarter retail sales was a combination of significant price deflation for premium large screen television and an increase in production of large screen TVs by second and third-tier manufacturers. These market dynamics disproportionately reduced large screen TV prices and also enabled customers to use cash or existing financing options to purchase large screen TVs elsewhere, which further impacted same-store sales by approximately 3% to 4% during the quarter. Producing positive same-store sales while remaining disciplined in our credit strategy is a top priority of the leadership team. As Lee will review in his remarks, we have implemented several strategies to offset current market conditions and we are pursuing multiple retail growth initiatives. Unit expansion is an important component of our growth plan and the performance of our new showrooms remains in line with our expectation, as they contributed over 7% to retail growth during the third quarter. This year we have successfully opened 14 new showrooms and plan to open 16 to 18 new showrooms next fiscal year, including our first locations in the state of Florida. We are excited about our expansion plans as our showrooms are extremely profitable, have a quick payback and have historically produced compelling returns. The leadership team and our Board of Directors are significant shareholders of the company, and we share investors' disappointment with our sales performance during the third quarter and the pace of our retail transformation. Our focus on better/best products for the home and affordable financing options are the cornerstone of our unique value proposition for a large population of consumers across the country. In addition, our disciplined credit strategy, combined with our strong capital position and highly profitable business model, provides us with significant flexibility to successfully navigate current market condition while supporting our long-term growth plan. While the remainder of this fiscal year will be challenging, we believe we will emerge well-positioned to achieve an 8% to 10% retail growth rate during next fiscal year, and we are confident we can sustain this level of growth for many years to come. So, with this overview, let me turn the call over to Lee, who will provide more details on our third quarter operating results.

Thanks Norm. I'll begin my prepared remarks outlining our credit segment performance and the drivers affecting retail sales before reviewing the near and long-term initiatives we have developed to turn around our retail performance. Third quarter credit segment results were very strong. Our credit spread was over 1,000 basis points during the third quarter as a result of a record net yield of 22.1% and favorable charge-offs of 11.4%. And as a result, we achieved our first credit segment income in five and a half years. The continued improvements in our credit performance validates our credit strategy, supports our unique and hybrid business model, and has significantly reduced our cost of funds. In addition, as our credit model matures, we are well-positioned to pursue opportunities that reinvest our excess credit spread into strategies aimed at growing retail sales. It is paramount that we remain disciplined in our credit strategy as we pursue a growth-oriented retail plan and expand our online presence. New customers and online applicants have become the fastest-growing segments of our customer funnel, which is an encouraging trend and will help us expand our base of high quality recurring customers. However, as we have stated historically, new customers and online applicants have higher initial losses compared to existing customers, and it is important to control the proportion of new customers in our portfolio. During the third quarter, we began to see the performance deteriorate in new customer accounts and accounts from online applicants that were originated earlier this fiscal year. First payment defaults and 60-plus day delinquencies began to increase, and we made prudent underwriting adjustments to mitigate the impact of these higher risk vintages and tightened standards primarily on new customers and online applicants. We estimate these actions reduce third quarter same-store sales by approximately 4% to 5%. We expect fourth quarter same-store sales will also be impacted by these underwriting changes, which is included in our same-store sales guidance. As you can see from the credit spread this quarter, the business can support additional credit risk and our ability to achieve 1,000 basis points of credit spread was a result of the credit decisions we have made over the last three years. We understand it may be counterintuitive to tighten credit when we achieved the highest credit spread in six years. But as our financial performance demonstrates, we are focused on pursuing a conservative credit strategy, especially as our retail expansion accelerates. We continue to refine the balance between our retail and credit segments, and we will proactively adjust our underwriting standards as we did in the third quarter when portfolio trends outperform or underperform our expectations. Our disciplined credit approach will maintain the health of our overall business. We believe the proactive credit decisions we made during the third quarter, combined with the significant improvements we continue to make in our underwriting and collection capabilities, will help us quickly offset the higher amount of third quarter 60-plus day delinquencies. However, our near-term provision and allowance will be higher as we account for charge-offs associated with accounts originated prior to the third quarter. Enhanced collection and recovery capabilities will also help us offset the impact of higher new customer originations, and we continue to make improvements in our pre and post charge-off collection efforts. Year-to-date recoveries have increased 31.3% to $18.8 million, which includes recoveries of $6.2 million in the third quarter. I'm also pleased by the pricing of our recent November ABS transaction, which further validates our credit strategy. We will remain disciplined in our credit strategy as the overall health of our portfolio continues to benefit from higher yields, better underwriting and improved collections. Moving on to our retail business, in addition to the impact on sales of underwriting changes, we also experienced challenging market conditions throughout the third quarter, primarily within our consumer electronics category. Lingering impacts from lapping the rebuilding efforts associated with Hurricane Harvey and the impact on same-store sales of cannibalization from new stores. Same-store sales within our consumer electronics category declined 25.6% during the third quarter, reflecting two compounding factors. First, significant price deflation for premium large screen TVs reduced average selling prices during the quarter. According to NPD data, the average selling price of TVs during the three months ended October 31st, 2019, was $376 compared to Conn's average selling price for televisions of $1,176, which is over three times higher than the industry average and demonstrates our better/best premium product focused. More importantly, average selling prices for the entire TV category declined over 8% during this period, while average selling prices for TV screen sizes of 65 inches and above, which is the segment of the TV market we primarily focus on were down nearly 22%. Second, we also saw units decline as a lower price points of large screen TVs made cash purchases more accessible to our core customer, decreasing the need for financing. We estimate that the market dynamics in the consumer electronics category impacted same-store sales by approximately 3% to 4% during the quarter, demonstrating the impact this one category had on third quarter sales performance. A challenging market environment also exists within our gaming category as manufacturers, including Sony and Microsoft announced their next-generation consoles will be released next year, which we believe is affecting demand for current models this year. In addition, a large component of our gaming strategy is focused on attaching a gaming console with the sale of a new television. As TV sales declined during the quarter, they have also impacted our sales of gaming consoles. With the launch of new consoles, we believe sales within this category will improve later next year as consumers upgrade or purchase new models. We expect sales of TVs and gaming consoles will continue to negatively affect our consumer electronics category with an even greater impact in the fourth quarter because of the higher mix of sales from this category during the holiday season. Appliance sales helped offset the challenges we faced in other categories as same-store sales increased 5.5% during the quarter, and total sales increased 13.6% or by nearly $11 million. We remain well-positioned within the appliance market because of our large selection of brand name products, next-day delivery, and in-house service offering, and we are optimistic about our near and longer term opportunities to expand our market share. In addition, appliances are currently the largest contributor to our growth in e-commerce sales. Speaking of e-commerce, e-commerce sales increased 350% to $3 million from the prior year period, helping offset the overall decline in same-store sales. While still a smaller portion of our overall sales, we are excited by the opportunities we have to interact with our customers online. We have developed a unique and differentiated e-commerce offering because of our next-day delivery, logistic and fulfillment capabilities as well as our full spectrum of financing options. Looking at trends within our Hurricane Harvey markets, last year's rebuilding efforts continue to affect retail sales, which speaks to the severity and magnitude of the storm and the disruption to the replacement cycle within our important Southeast Texas markets. The gap between our Harvey and non-Harvey markets continues to decline and was 6.1% in the third quarter compared to 9.7% in the second quarter. For the fourth quarter, we expect our Hurricane Harvey markets will continue to be impacted by pulled forward demand, but the gap should decline further. And therefore, we will no longer breakout the impact of Hurricane Harvey in our quarterly same-store sales guidance. We are also starting to experience some cannibalization from opening new showrooms in existing markets. We estimate that the impact of cannibalization on third quarter same-store sales was approximately 1% to 2% and we expect to continue to see cannibalization impact same-store sales in the coming quarters. As a result of Tropical Storm Imelda, we closed 23 stores, our distribution and service centers and the corporate office in Southeast Texas during the third quarter of fiscal year 2020. While dangerous levels of rainfall and flooding impacted certain markets, the storm moved through quickly and did not have a material impact on retail sales during the third quarter of fiscal year 2020. However, we did provide credit relief to customers impacted by the storm, which contributed $7.3 million to the increase in re-ages for the quarter. As you can see, third quarter retail sales were impacted by several different factors. We have several initiatives underway to mitigate the near-term weaknesses we are experienced in retail sales. Overall, we are focused on positioning Conn's for long-term success and consistent retail performance by increasing our product and service offerings, promoting our leading financing options, and expanding our retail footprint. During the third quarter, we successfully piloted flooring products across our three Beaumont showrooms. And as a result, we are expanding the pilot across our Houston market, which combined, represents approximately 20% of our store base. The $15 billion residential flooring market in the U.S. supports an inventory-light business model and has strong gross margin. Flooring is expected to roll out across many of our markets in the coming quarters. Once fully implemented, we believe this segment could contribute approximately $15 million of annual retail sales, and we believe it will be accretive to our retail gross margin. Flooring is the first step in a broader strategy to expand our reach into other large ticket or professionally installed home product categories. A process is underway to identify and evaluate additional categories that complement our merchandising strategy of selling aspirational home goods that typically require financing. Over 92% of our retail sales continue to be financed by one of our three financing options, demonstrating the unique value of our business model, and we continue to make progress expanding our relationships with our third-party financing partners. The balance of sales through our partnership with Synchrony Financial increased nearly 300 basis points from the same period a year ago to 18.5% of total retail sales in the third quarter. However, we are disappointed with the penetration of lease-to-own sales because we believe sales through this financing option should be at least 10% of total retail sales, given our credit waterfall compared to our actual result of 7% in the third quarter. Internal initiatives are underway to improve our execution, and we are also working with our lease-to-own partner to achieve this goal. Looking at our geographic expansion strategy, new showrooms are performing in line with our expectations. We successfully opened 14 new showrooms in existing states during the current fiscal year compared to seven last fiscal year. We expect new showrooms will contribute to same-store sales growth in future quarters as they mature and benefit from recurring customer sales. Next year, we plan to open 16 to 18 new stores, including approximately eight new locations in Central Florida. We believe once fully penetrated, Florida will become our second largest state with approximately 40 showrooms. As you can see, we are actively pursuing a methodical expansion strategy focused on becoming a national retailer and investments in our physical and digital platforms are required to support this growth. Our third quarter retail gross margin of 39.2% remains strong, but was below our expected rate of at least 40%, primarily due to the decline in same-store sales and higher than expected onetime expenses associated with the Houston distribution center relocation. The year-over-year decline in retail gross margin was due primarily to the benefit of increases in appliance retail pricing related to tariff adjustments and the associated forward buys of inventory during the third quarter of fiscal year 2019, coupled with increased logistics costs to help support future growth. Our new state-of-the-art Houston distribution center opened during the third quarter and we will start incurring additional expenses in the coming quarters associated with the development of our new Florida distribution center. To conclude my prepared remarks, despite the near-term market impacts to our business, we are focused on pursuing our long-term growth opportunities while remaining disciplined in our credit strategy. Underlying business trends and new store performance continue to support our model aimed at achieving total annual retail sales growth of 8% to 10% and annual credit spread of approximately 1,000 basis points and annual retail gross margin of at least 40%. We believe we will achieve these results during next fiscal year, and we are focused on producing consistent, sustainable, and highly profitable financial results for many years to come. With this overview, let me turn the call over to George to review our financial results in more detail.

Thanks Lee. On a consolidated basis, revenues increased 1% to $377.7 million for the third quarter of this fiscal year from $373.8 million for the same period last fiscal year, despite the 8.4% decline in same-store sales, as the contribution to revenue from new stores and increases in finance charges and other revenue more than offset the same-store sales decline. Total revenue growth helped drive an increase in GAAP net income of 3.5% to $15.1 million from $14.6 million for the same period last fiscal year. GAAP net income per diluted share increased 13.3% to $0.51 for the third quarter of fiscal year 2020. On a non-GAAP basis, adjusting for certain charges and credits, net income for the third quarter of fiscal year 2020 was $0.61 per diluted share compared to $0.59 per diluted share for the same period last fiscal year. Adjusted EBITDA was $51.8 million or 13.7% of total revenue for the third quarter compared to $51.8 million or 13.9% of total revenue for the same period last fiscal year. Reconciliations of GAAP to non-GAAP financial measures are available on our third quarter earnings press release that was issued this morning. Looking at our retail segment in more detail, total retail revenues for the third quarter decreased 1.3% to $280.3 million from the same period last fiscal year. As it relates to ongoing trade negotiations and tariffs, we continue to believe existing and currently planned tariffs will not have a material impact on our retail performance. Retail SG&A expense was $87.1 million, an increase of $6.2 million from the same quarter in the prior fiscal year. While retail SG&A expense as a percentage of retail revenue deleveraged 260 basis points to 31.1%, primarily due to increased cost for new stores as well as other investments we are making to support our growth. As we continue to accelerate the pace of new store openings, we will deleverage from an SG&A standpoint. I also want to mention that we have successfully implemented our new loan management system, which follows the successful upgrade of our core finance and HR platforms. The investments we are making to our back-office systems are part of a broader technology-focused transformation to support not only our footprint expansion, but also e-commerce growth. It's important to note that investments associated with new distribution centers accelerated new store growth, Florida expansion, and technology investments will continue to weigh on profitability throughout next year. While these investments will temporarily impact our overall level of profitability this and next fiscal year, they are necessary as we execute the next phase of our business strategy focused on retail growth. Turning to the credit segment, finance charges and other revenues were a quarterly record of $97.4 million, up 8.5% from the same period last fiscal year. The increase versus the third quarter of fiscal year 2019 was primarily due to a 40 basis point increase in the portfolio yield to 22.1% as well as higher retrospective insurance income compared to the prior fiscal year period. Third quarter net annualized charge-offs as a percent of the average outstanding balance were 11.4%, a 90 basis point improvement over the prior fiscal year period, and the lowest level of quarterly charge-offs in five years. Provision for bad debts in the credit segment was $42.1 million for the third quarter of fiscal year 2020, a decrease of approximately $5.2 million from the same period last fiscal year, primarily due to strong portfolio performance. The allowance for bad debt and uncollectible interest as a percent of the total portfolio was 13.3% at October 31st, 2019, which was down approximately 30 basis points from the prior fiscal year period. SG&A expense in the credit segment for the third quarter on an annualized basis as a percentage of the average customer portfolio balance was 9.8% compared to 9.9% in the same quarter last fiscal year. Interest expense for the third quarter was $15.1 million, which was down slightly from the same period last fiscal year. For the third quarter, annualized interest expense as a percentage of the average portfolio balance was 3.8% compared to 4% for the same period last fiscal year. Average net debt as a percentage of the average portfolio balance was approximately 61% compared to approximately 60% for the same period last fiscal year. Looking at our ABS program, we closed our 2019-B transaction in November, the second transaction of the year, and I am extremely pleased with the pricing and structure we were able to achieve as a result of portfolio performance and strong transaction execution. The ABS transaction was $486 million, with an all-in cost of funds of approximately 4.46%, representing an 80 basis point reduction from our 2019-A transaction completed earlier this year, and the lowest all-in cost of funds we have achieved since the company reentered the ABS market in September of 2015. We also changed the agent bank on our $650 million revolver from Bank of America to JPMorgan and backfilled Bank of America's commitment in November. The agent bank on our revolver is an important business partner and we made this voluntary change to ensure we have strategic partnerships with our banks that are committed to our industry over the long-term. We are pleased to see the level of commitments from both existing and new banks during this process. Through Friday, December 6th, we have repurchased approximately 3.5 million shares of our common stock at an average price of $19 per share for a total of $66.2 million, which has reduced the amount of our shares outstanding by nearly 11%. With a strong balance sheet in place and diverse sources of capital, we are well-positioned to continue to organically grow and navigate near-term challenges. Finally, I want to provide an update on the upcoming current expected credit loss accounting standard, which is commonly referred to as CECL that we are required to adopt on February 1st, 2020. The new accounting standard changes the method of accounting for our allowance for bad debt from an incurred loss to an expected loss model, which will generally require that we increase the reserve on our customer receivables from one year of incurred losses to lifetime expected losses. We currently estimate that adopting CECL will increase our total allowance for bad debt by 40% to 60% based on the portfolio composition and economic outlook as of October 31st, 2019. The ultimate amount that we will -- that will be recorded on February 1st, 2020, will be dependent on our portfolio composition and economic outlook at that time. As a final note, CECL is simply an accounting change and does not affect the cash flow or fundamental economics of our business. With this overview, Norm, Lee, and I are happy to take your questions. Operator, please open the call up to questions.

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Thank you. And our first question is coming from the line of Rick Nelson with Stephens. Please proceed with your question.

Thanks. Good morning. So, Norm, you reiterated your plan for 8% to 10% long-term revenue growth and that's inclusive of fiscal 2020. And I'd like to know what your same-store sales assumptions are that go into that for fiscal 2020?

For fiscal 2021.

For fiscal 2021, excuse me.

Fiscal 2020 is the year we're in now. As you know, Rick, our fiscal year starts on February 1st. You're talking about next year?

Yes, exactly.

Okay. Yes. So, still believe strongly that, that 8% to 10% total retail sales growth is achievable. In fact, from a new store growth standpoint, we're at 7% range as we sit here today. Inclusive in there would be low single-digit same-store sales would be -- would -- continues to be my expectation of 1% to 2% same-store sales with that new store growth gets us to that 8% to 10% range.

Thank you. And I guess, what are the big swing factors? It sounds like you've tightened up on underwriting and these TV challenges would appear that they would linger into the New Year. What are the offsets, I guess?

Okay. So, first, from an electronic standpoint, as we shared in our prepared comments, the electronics impact was 3% to 4% in the third quarter. The difference between the same-store sales, where we finished in the third quarter and what our guidance -- the midpoint in our guidance in the fourth quarter is almost predominantly all driven by the increase in consumer electronics mix in the fourth quarter. The other drivers from an underwriting and a lease-to-own standpoint and a cannibalization standpoint stay similar from third to fourth quarter. So, as we look forward to next year, we will continue to have some headwinds from an electronic standpoint into the first and second quarter. But as a mix, it becomes much smaller. So, the impact to it will be significantly less than up to 6% to 7% hit here in the fourth quarter that it's causing. From an underwriting standpoint, it's combination of two things going on there with that 4% to 5% impact that we talked about in the prepared comments. First, we tightened about 100 to 200 basis points the middle part of the quarter. But we -- because we saw FPDs in 60-day plus get higher than where we were comfortable with, but at the same time, as the quarter evolved, we saw that new and existing customer mix shift even greater, at least in the third quarter that got -- that caused that underwriting impact to be up to 4% to 5% for the full quarter because as we underwrite for new customers, both online and in-store, they are always at a tightened underwriting as compared to our existing customer base. We don't anticipate that underwriting impact to continue throughout next year. We've already seen existing customer mix come back stronger. So, we will have some underwriting hit or impact in the first quarter, but we expect, especially with a new underwriting model that we've put in place and as our spread is above that 1,000 basis points, it gives us opportunities, and we still have more opportunity from a spread standpoint from where we're at today, we expect to be able to mitigate those underwriting changes that we took in the third quarter to get back to flat from that perspective. We also have the e-commerce, the new products; we expect them to contribute 1% to 3% in themselves. Those two items from a same-store sales standpoint this coming fiscal year.

And would you expect online applications are going to continue to grow? And if that's the case, would -- wouldn't you assume you'd have to do more tightening as we push forward?

It's a good question, Rick. You have to separate online applicants versus our online business, e-commerce. I mean, they're both coming online. But we are already very tight from a full underwriting standpoint and full business standpoint. So, the growth you're seeing is already -- we've already got a very, very tight underwriting standard with the e-commerce that you've seen to this point. The issue has become, if you look when I came to the company four and a half years ago, 70% of our applications were conducted -- were completed in-store, 30% online. As we sit here today, that has flipped 180 degrees, 70% of our applications are online, 30% of them are in-store approximately. So, that's where the impact is from an underwriting standpoint where you -- where we saw the impact in the third quarter. We can still grow the e-commerce business with tight underwriting, we think, significantly from where we're at today.

Hey Rick and its Lee. One thing on e-commerce that's important to know, is that we are seeing from the FPD and delinquency, it's actually better from the e-commerce perspective in the overall company, which, again, is such an important channel for us that we'll continue to push forward as we go into the future here.

And the reason it's better is we're tighter underwrite -- number one, we're tighter from an underwriting standpoint and a significant number of the customers that are doing business with us completely online are appliance customers, are those categories that are better credit categories for us as well.

Are you still planning $6 million to $7 million first year sales volume for the new stores? Or is it something less because of that tightening?

As we sit here today, it's still in that range. It varies. I would say it's somewhere between $5 million and $8 million depending on if it's in an existing state or a brand-new state, but we haven't done anything dramatically. Obviously, as we tighten with new, be it online or in-store, there are ramifications there that may get it towards the lower end. But again, everything we're opening, as you know, Rick, we're profitable at $3.5 million to $4 million in revenue with our stores. And even if we're tighter -- a little bit tighter coming out of the gate with the new stores, as we -- now we only have a couple of them here that -- out of the pipeline. But as they mature, we expect that revenue and we get some recurring customers in that store base. We expect that growth ultimately to mature to the $8 million to $10 million in revenue on a per-store basis. It just may take us a little longer to get there, but that's been the case as we've been tightened underwriting even before the third quarter, that's been the case for the past year.

Okay, fair enough. Thanks and good luck.

Thanks Rick.

Our next question comes from the line of John Baugh with Stifel. Please proceed with your question.

Thank you and good morning. So, maybe you could clarify what buckets or was it across the whole customer profile, where you changed underwriting and how much you changed? And it sounds like there was an initial change during the quarter and then you increase it during the quarter. So, just a little more color around that, please.

Sure John. It's all around new customers, almost -- and new retail as well as predominantly new web. And when I say web, I don't mean necessarily e-commerce. I mean web applicant. We segment the customer base into a variety of different segments. But four primary segments are retail new, retail existing, web new, web existing and that is one of the major layers that we look at across the entire portfolio. And in the third quarter, the underwriting change we did predominantly web new was in the range of 100 to 200 basis points. But as we saw that mix change, the impact of that 100 to 200 basis points became greater, not because we took a second -- we took a second bite at the apple, it's just because of the mix shift from both retail to new continued to increase or was higher than we modeled or forecasted and projected. So, that's what resulted ultimately in that 4% to 5% impact from an underwriting standpoint for the quarter.

Okay. And is there a way to look at or assess for, I don't know, your existing customers, I guess, or non-new, what first payment defaults or 60-day delinquency you did? I'm trying to get a sense of how extracting new, how the book or portfolio performed?

Yes, I mean, we -- absolutely. We don't share that, John, the FPD and the 60-day. But we absolutely -- that's how we take actions and part of on Lee's prepared comments, I mean, on the surface, it sounds contrary that we've had the best credit performance in six years, yet we've done some underwriting tightening. It sounds contrary on the surface, but it's because the spread and the credit performance that we're seeing today is it's a lagging indicator. The leading indicator, as you know, is FPDs and 60-day delinquencies. And we see that typically in 60 to 120 days from an underwriting standpoint. We start to see those vintages come in, we take action and we do it regularly, but we saw more of a softening on the new side of the house, new web, especially. We're getting an abundance of customers there. Frankly, if you saw the number in the reporting that we issued out or that we will issue the number of applicants are up significantly, which is a good thing for the business. There is demand for it, for our products. It's just they're predominantly in -- there's a significant number of them in that web new arena that we have to be very prudent. And we're being -- look, I'm being very conservative from an underwriting and a credit standpoint. I'd rather have short-term pain and certainly we feel that here today to ensure the stability of the portfolio. I'm very, very comfortable going forward on where that's at.

Two. So, I don't always expect a number, Norm, but are you saying that the existing portfolio is or has not changed in terms of performance?

No, it's not changed. It's -- the performance is very -- it's not a macro issue from an existing customer standpoint at all.

Okay. And then quickly on the consumer electronics. I understand the gaming comment. But I don't cover the category and there's significant deflation at big screen TV. I would presume that, A, it continues. And B, we're going to -- there's just no new product cycle like big screens that are going to drive CE in the next year or two. So, I assume that, that will get worse, albeit just on a smaller base, and therefore, less impactful. Is that the way you guys are looking at it?

Yes, I mean, it will linger. I -- it won't be at this level and as we lap these numbers, I mean, the dynamics of what we saw this quarter because we saw some softening on the CE in -- at the end of the first quarter and the second quarter from a price standpoint. But it was really post Labor Day, the Labor Day event and post-Labor Day, when we saw the ASPs, as we talked about in his prepared comments, on 65-inch and above is down over 20%, 22%, three times the rate of ASPs in general from an NPD standpoint, TV-wise. Now, ASPs and TVs have been coming down for multiple years. It was the magnitude that they came down, and specifically in the category that we primarily focus on from a better/best standpoint

John, it's Lee. The -- as you look forward, one of the things that's coming through, and you're seeing it, the 8K, that's the new technology development for consumer certainly has some great screen technology. So, there are differentiating factors that will allow us to keep playing in that bigger screen size, better technology, aspirational products that we talk about. But obviously, in this third quarter and fourth quarter, we've obviously taken a hit with the influx of second and third-tier products at that 65-inch screen size, et cetera, that you saw.

We don't anticipate it to be a growth category for us here for -- with the current technology, but we don't expect to see as we -- especially as we lap into next year and we'll see some softness as we saw in the first and second quarter, but not nearly to the magnitude we believe that we're seeing today.

Okay. Thanks. Good luck.

Thanks.

The next question is from the line of Brian Nagel with Oppenheimer. Please proceed with your question.

Hi good morning. Thanks for taking my question.

Good morning.

So, Norm, you may have just touched on this, but I want to ask it again. As we look at the, I guess, the credit issues in the quarter and the commentary that you and your team made regarding tightening, did that reflect -- do you think what you saw there and what you react, did you reflect it's more of a Conn's issue? Or is there something that's starting to crack that you're seeing in the credit overall from a macro standpoint?

Yes, I really think it's our issue, Brian. I don't think it's -- we're not seeing it on a macro. We're not seeing it from a collection standpoint. That's typically where we're very -- our antenna is up because as we start to -- if we were to start to see something from a macro standpoint and a recession standpoint, that's typically where you would see it on the delinquency side there. And it is predominantly on the new side of the house. You would see it on the existing side as well and we are not seeing that on the existing customer base. It's been fairly stable there. It's purely the mix of new to new web and new retail versus existing. And frankly, part of it is our learning curve as we've, over the past four years, invested significantly within the credit business and the underwriting team and we accelerate retail growth. So, we're inherently getting more new customers into our mix from the start and then that consumer behavior mix of moving from retail to web standpoint. We're -- for us, we're still learning through that process of being able to underwrite as effectively to maximize the sales potential there and not jeopardize the credit portfolio. And as I said before, being fairly conservative as we go through this to make sure that we get that right mix because we have more than enough customers both coming online and in the store, submitting applications that we just have to underwrite them effectively and that's why we highlighted the lease-to-own at 7%. That's strategically just a huge, huge opportunity, communicated many times; the 10% is the number. And to me, that's not the ceiling. That's the floor of where we should be at. We should be a minimum of 10% lease-to-own based on the credit quality customers that we see that's there from an opportunity standpoint.

Hey Brian, it's Lee. Just to come back to your original question on the consumer and the health of consumers. I said in my prepared remarks, they are feeling relatively flush. And that's what we're seeing from the consumer electronics, where you've got the price points, these large screen TVs coming down to a level where they truly can buy them with cash. You don't have to finance them. So, to your question, it really, and as Norm answered, it's more of our phenomenon than a consumer health issue.

Okay, that's very helpful. Then -- so the second question I had on the consumer electronics, particularly this dynamic that we're seeing in televisions. So, I think, Norm, as you mentioned, its price deflation of TVs is by no means a new phenomenon. It seems like it accelerated here. Is there anything given the Conn's business model, the customer you serve, the products you have in your stores. Is there anything you can do from a merchandising standpoint to contend with this lower price alternative at other venues? Or is it just a matter of having to wait through this with -- on the TV category?

I mean it's very difficult, Brian, because, I mean, we've been more aggressive. We have some opening price points to use them to get customers into the showroom. The issue is the deflation is so great. If it was on the margin, we can mitigate. And frankly, we saw that in -- earlier in this past fiscal year at the magnitude that we're seeing at 20%, 25% down. And frankly, it's not just the price deflation. It is a number of second and third-tier manufacturers that were doing no business a year ago in the 70 and 75-inch and above, even 65-inch, very limited. As they've entered into the market because the price points are there for them to be able to compete, you're seeing a lot of those. Our customers are -- we know we've got survey and information from our customers saying, I don't have to finance for a 65-inch. I mean, there were 65 -- 55 and 65-inch TVs for 300 -- under $300, under $400 through Black Friday and our customers at that price point don't need to finance and have the cash to be able to buy that outright.

Hey Brian, this is George. I would just add that, obviously, we're continuing to focus on additional products that we could add to our floor. Lee mentioned in his prepared remarks, flooring and what we think that can be from an opportunity standpoint as well as some of the complementary categories in that space. So, we certainly recognize the challenges in the CE space, and specifically, the television market and are focused on introducing new categories and new products to offset those sales.

But as you know, Brian, you've been covering retail for a long time. I mean, it is not a new phenomenon from a TV cycle standpoint. TVs even in our lower quarters, there's still 23% to 25% of the mix of our products. They're not going away. It's -- you go through these cycles, and it's happened before, where until some new technology comes in, you see it leveling off, but we don't expect that category to go away, which is -- we don't see it as being a growth category. 8K may mitigate to some degree, but it's still an important driver from a traffic standpoint and an important element from an overall category that like to minimize or mitigate the size it is with some of the home services and other products that we're going into to make it less painful when there are these downturns. But it is a part of the evolutionary process with TVs through the years.

Just one more question and I appreciate all the color. One more question. I know we've had this discussion in the past. But you clearly have done -- it's an absolute phenomenal job in repairing the credit business. And here we saw it in the quarter, profitability and then tracking above that 1,000 point spread. But just when you -- as a team and you're talking, I mean, does the topic of maybe being too tight on credit come up that we may be pushing this too far? Does credit really need to be -- I know there's quarter-to-quarter fluctuations, but does credit need to be a profitable business? Or could you loosen up on credit in order to drive better retail results?

No, that's a good question, Brian. We do have very robust conversations around that. Part of it, as I mentioned, I will acknowledge, having lived through the struggles we had when the credit business brought the company to precipice four and a half, five years ago, very conscious of that and pushing JD and the credit team all the time to find ways to where we can say, yes, we -- Lee talked about the yield, record yield. We still have more opportunity there. We think there's another 100 to 150 basis points that we'll season from a yield standpoint. You heard on the recoveries, there's opportunity from a charge-off standpoint. So not only do we have opportunity with the spread we're at, but we still see that spread, that opportunities to rise, to increase on both ends of that spread. Having said that, in the short term where I'm being fairly conservative until I'm certain that the things we're doing, it doesn't do us any good to be in a position today that a year from now that we're in a better position retail wise, but we pay for that nine months, 12 months, 15 months down the road. So, it is a balancing act. And I will tell you, the team is very conscious. It's not an easy thing to do. It's not the easiest business model, but I am completely confident we have the right people and the right strategies to do it. And look, we went through some bumps, four, four and a half years ago as we were getting the credit business into a stable place as we work through the strategy there, and we're going through some bumps here on the retail side. But I'm as confident and as bullish today as I ever have been that we can grow this business low single-digit same-store sales, 8% to 10% topline and maintain that credit business in a stable place.

Very good. Well, I appreciate again. I appreciate all the color. Thanks.

Thanks Brian.

Our next question is from the line of Kyle Joseph with Jefferies. Please proceed with your question.

Hey good morning. Thanks for taking my questions. Most of them have been covered. I just wanted to talk about the financing mix of the portfolio and the trends you're seeing there. Obviously, you've seen good growth in the Synchrony channel where it sounds like the lease-to-own channels kind of come down or underperforming your expectations. Can you just discuss what's going on there? How much you guys control? How much of that is a macro factor? And how much of that is specific to underwriting by those respective partners?

Yes. So, I'll start with the Synchrony piece. You're right. I mean, we've seen our Synchrony business in the past year go up by almost 300 basis points. And it speaks to the demand across the entire credit spectrum of our products. We now have about -- including cash customers about 25% or one in four of our customers are our prime or cash customers. We've worked very closely with Synchrony to integrate them on our website and it's the benefits of having an in-house credit team because we can talk directly with their credit team, a lot of the retailers that both Progressive on the lease-to-own and Synchrony on the prime side of the house, they're not typically interacting with retailers that have a credit and an underwriting team and can work with them to be able to drive the performance. So, pleased with where we're at with Synchrony. I still think there's some upside there, but a very solid performance. It's been disappointing on the lease-to-own side. And I would tell you, I don't think it's a macro issue at all, Kyle. I think it's an execution issue. And half the issue is on our side and execution in the showroom of converting those customers we decline and then some of it rests with our partners as well that we talk with them on literally almost a daily basis of where we need to go. There's a number of initiatives that they have in the hopper that they're working on to move the needle and there's a number of things we're working on as well. But I will tell you, at the end of the day, it is truly an execution issue on the lease-to-own. There's nothing macro we see going on there.

Got it. Thank you. That's it from me.

Thanks Kyle.

Our next question is from the line of Bill Ryan with Compass Point. Please proceed with your question.

Thanks and good morning. It's obviously very good that you caught the credit inflection point relatively early. But I was wondering, if you could give us a little bit more granular color on the specific underwriting changes that you made. Did you tighten up on down payment terms, debt-to-income ratios, whatever it may be? And the second part of that question, why are the new customers of today performing somewhat worse than, let's just call it, the new customers of yesterday that prompted the tightening? Because obviously, there's been some change in behavior. Thanks.

Sure, Bill. So, first, on the actions that we took, it was kind of yes and yes, on a number of the things that you talked about. I mean, when we tighten, we tighten by increasing down payment, we tighten from a lever standpoint, we tighten by just declining outright.

And lowering credit limit.

And lowering credit limits. All three of those are actions that we take to impact the credit availability that we provide. And ultimately, that will reduce from a sales standpoint. And new customers, and Bill, you understand the subprime customer fairly well. New customers have historically, and we've communicated that many times, and this isn't a Conn's phenomenon, this is a subprime phenomenon. They defaulted twice the rate of existing customers. Part of the challenge that my predecessor had and the business had four or five years ago was they grew the new customer mix between comps and new stores at a rate that we saw new customer mix get up into the 60-plus-percent of the total mix versus it's in -- the last 12 months, it's in the 49% range for us right now, but it was down in the 30s when -- before we started growing -- before we started accelerating new store openings. And the key is keeping it at that mix from both the new customers coming in as well as what's changed, Bill, is the consumer behavior. Customers that used to come into our store to fill out an application, more of them are going online. And frankly, we've made it easy for them because they can fill out an application, not hit their credit score. Then we can do a soft pull, and they can see exactly what they qualify for. So, there's a bit of self-selection that occurs there because if a customer before that was coming into the showroom in order to get that information because it's only been about a year and a little over a year that we've been doing that, where we could do a soft pull and they could see what they qualified for now they can go online. In the past, they would come in the store; we could convert them to a lease-to-own and have a better chance when we could see that customer face-to-face. As that mix has moved online, it creates more challenges for us. From an execution standpoint, if that customers decline or they're approved with a down payment, how do we get them into the store to be able to try to convert them to Progressive or even the Conn's with the down payment.

And Bill, it's Lee. Look, it truly is a balance and we're trying to navigate that balance very carefully. As you bring in new customers, you've got to bring in new customers. You're never truly going to know even with the best underwriting models until you get them onboard. You're going to suffer some losses, that is kind of a customer acquisition cost in a sense that you suffer through, but you can't let in so many and suffer those losses that destabilize the portfolio. So, that's the balance. We're constantly trying to weigh here as we go forward.

Okay. Thank you.

Our next question comes from the line of Brad Thomas with KeyBanc. Please proceed with your question.

Yes, hi. Good morning. Thanks for taking my question. I want to first ask about the outlook for retail gross margin, and I was hoping you all could talk a little bit about how you're thinking about that in the fourth quarter and what drivers or headwinds that we're seeing here now, how much that may continue into 2020 as we refine our models?

Yes. So, -- sure, Brad. So for the fourth quarter, we guided to 39.5%, I think, is the center point of the guidance, which is a little under what our long-term expectation is at the 40%. There's really two things predominantly driving that. One is, from a logistics standpoint as we opened, and we talked about in the prepared comments, the Houston, DC in transition. We're also opening a Louisiana, DC and it won't be the fourth quarter, it will be more the first half of next year, the Florida, DC. Those will all weigh short-term on the margin a bit. I think it was about 60 basis points this past quarter is what the impact was from a logistics standpoint. And then the other element that's driving it, frankly, is the lower sales. From a same-store sales standpoint, delevered that some and that -- those two are the primary drivers. There's nothing systemic that's occurred from a product standpoint or a pricing standpoint that would reflect that decline in margin.

Got you. That's helpful, Norm. And a question that we've been getting with respect to the rent-to-own business is has the growth of Progressive and other retailers affected you? And I was curious if you had a chance to try to do the analysis on a state-by-state basis as the Best Buy has rolled out as Lowe's started to roll out, are you seeing any impact from them now offering Progressive on your business?

To sit here and say there's no impact, I don't think we can say that. I do think as more retailers, not only Best Buy, but others out there. And frankly, I believe, ultimately, almost every retailer will have a lease-to-own partnership or virtual lease-to-own process. So, I think there's been some that certainly has made it more challenging. But having said that, if you go to the investor deck on page seven and you look at the number of applications we get, we get one point -- in fiscal 2019, we got 1.2 million applications. It's actually a little more than that from a run rate standpoint that our applications are up. We're declining somewhere in the neighborhood of 600,000 to 650,000 people on an annual basis. So, there's more than enough fish and opportunity for us to be able to get to that 10% lease-to-own, even with some of the macro things happening with other retailers from our perspective.

Got you. And Norm if I understand you correctly, it feels like we can kind of compartmentalize a couple of issues here that seems to be of the more transitory nature with adjusting your approvals on online customers and the headwinds in the consumer electronics industry. But as you've talked about in the Q&A here, it does feel like those -- some of those will continue here through 2020. I guess, my question would be, as you guys plan for calendar 2020 for next year, are there any adjustments that you're looking at making at this point in how you go-to-market, the timing of store openings, et cetera? Anything you're looking at changing because of how the back half is playing out here?

That's a good question, Brad. That's why we communicated we're still opening more stores. We haven't changed that at all, that 16% to 18% is what we're targeting for next year above the 14% we opened this year, moving forward with Florida. When you look at the macro categories, I mean, lease-to-own, there's clearly several hundred basis points of opportunity there, minimum from our standpoint. The underwriting, we will see that in the fourth quarter. And there will be some probably in the first -- in the early part of the year. Frankly, I don't expect that underwriting impact to last throughout next year with the spread that we continue to see increasing and the opportunities we have there, I think we will be able to mitigate that as the second quarter and the rest of the year unfolds. The electronics category, we did see some of that this past year, in the first and the second quarter. I think there'll still be a little bit there that will have some headwinds, but not nearly to the degree you've seen in the third and the fourth quarter. And then you add on to that, in addition to the lease-to-own opportunity, the opportunities we have with the new products, the opportunities from an e-commerce standpoint, I feel very comfortable that next year, we will still -- during the year, we will be at that low single-digit same-store sales towards the back half of the year as the year unfolds and have that 8% to 10% total retail growth.

Got you, that's helpful. Thank you so much and good luck for the rest of the holiday season.

Thank you. We have reached the end of the question-and-answer session. And I'll turn the call over to Norm Miller for closing remarks.

Thank you. I want to say, first of all, thank you to our 5,000 associates around the company that worked very hard to deliver performance for our customers and meet expectations every day. We appreciate the work they do. And we also appreciate your interest in the company and look forward to talking with you at the end of the fourth quarter. This concludes the call.

Thank you. You may now disconnect your lines at this time. Thank you for your participation.