Upbound Group, Inc. ( UPBD ) is evolving in a complicated landscape for this end of the year. I will give a hold rating to the company, challenged by a divergence between its retail andI am a dynamic finance professional with a Master’s in Banking & Finance from Université Paris 1 Panthéon-Sorbonne. My investing background mix corporate finance, M&A, and investment analysis, with a focus on real estate, renewable energy, and equity markets. I specialize in financial modelling, valuation, and qualitative ana ...

Core Insights - Upbound Group, Inc. (NASDAQ:UPBD) is identified as a strong dividend stock with a potential upside of 48% based on average price targets, and a high estimate suggesting a 144% upside [1][2] - The company reported a 9% year-over-year increase in consolidated revenues for Q3 2025, totaling $1,164.7 million, driven by the Brigit acquisition and increased rentals, fees, and merchandise sales [2] - GAAP net earnings for the same quarter were $13.2 million, a decrease from $30.9 million in the previous year [2] - Upbound refinanced its term loan, increasing it to $875 million, which enhances liquidity and extends maturity to 2032 [3] - The company ended the quarter with over $360 million in liquidity and a net debt of $1.5 billion, resulting in a net leverage ratio of 2.9x [3] - A quarterly dividend of $0.39 per share was declared, payable on January 6, 2026, to shareholders as of December 17, 2025 [4] - Upbound operates in the lease-to-own household goods market across the United States, Puerto Rico, and Mexico, with four business segments: Rent-A-Center, Acima, Mexico, and Franchising [4]

Core Viewpoint - Upbound Group, Inc. has announced a quarterly cash dividend of $0.39 for the first quarter of 2026, reflecting its commitment to providing returns to shareholders [1] Company Announcement - The dividend will be paid on January 6, 2026, to common stockholders of record as of the close of business on the specified date [1]

Financial Performance - Consolidated revenues increased by approximately $257.3 million, or 7.9%, to $3.5 billion for the nine months ended September 30, 2025, compared to the same period in 2024 [165]. - Total revenues for the three months ended September 30, 2025, increased by $95.8 million, or 9.0%, to $1.164 billion, driven by the Acima and Brigit segments [175]. - Total revenue increased by $257.3 million, or 7.9%, to $3,498.6 million for the nine months ended September 30, 2025, from $3,241.3 million for the same period in 2024 [186]. - Gross profit increased by $112.9 million, or 7.2%, to $1.7 billion for the nine months ended September 30, 2025 [165]. - Operating profit decreased by approximately $46.4 million, or 21.8%, to $166.1 million for the nine months ended September 30, 2025, compared to $212.5 million for the same period in 2024 [194]. - Operating profit margin for the Rent-A-Center segment decreased to 12.2% for the three months ended September 30, 2025, down from 15.1% in the same period of 2024, due to increased other gains and charges [202]. Segment Performance - The Acima segment revenues rose by approximately $201.2 million, driven by an increase in rentals and fees revenues of $150.5 million and merchandise sales of $50.7 million, primarily due to higher GMV [166]. - Revenues for the Rent-A-Center segment decreased by 4.7% to $461.1 million for the three months ended September 30, 2025, and by 5.6% to $1.42 billion for the nine months ended September 30, 2025, primarily due to a 3.6% decline in same store sales [200]. - The Brigit segment generated revenues of $141.4 million and an operating profit of $23.9 million since its acquisition [169]. - Acima segment revenues increased by $59.1 million, or 10.4%, to $625.3 million for the three months ended September 30, 2025, compared to $566.2 million for the same period in 2024 [197]. - Brigit segment revenues reached $57.7 million for the three months ended September 30, 2025, with gross profit at $51.0 million, resulting in a gross profit margin of 88.5% [203][204]. Cash Flow and Investments - Cash flow from operations was $264.0 million for the nine months ended September 30, 2025, with cash and cash equivalents of $107.0 million and outstanding indebtedness of $1.6 billion [171]. - Operating cash flow generated was $264.0 million for the nine months ended September 30, 2025, an increase of $97.3 million from the prior year [211]. - Cash used in investing activities surged to $374.9 million for the nine months ended September 30, 2025, primarily due to the acquisition of Brigit for $275.9 million [212]. - Capital expenditures increased to $49.3 million for the nine months ended September 30, 2025, compared to $44.2 million in 2024, reflecting a 11.52% increase primarily due to higher investment in software development [216]. Debt and Financing - The company entered into a Fourth Amendment to the Term Loan Facility on August 19, 2025, extending the maturity date to August 19, 2032, and providing approximately $77 million of incremental commitments [148]. - As of October 23, 2025, the company had outstanding borrowings of $875 million under the Term Loan Facility and $239 million under the ABL Credit Facility [223][237]. - The interest rate on the Term Loan Facility was 6.88% as of October 23, 2025, while the ABL Credit Facility bore interest at 6.23% [221][237]. - The total remaining obligation for existing store lease contracts was approximately $338 million as of September 30, 2025 [226]. Operational Changes and Strategy - The company aims to leverage data analytics to attract new customers and mitigate risk across business segments [145]. - The company is focused on enhancing its competitive position through the execution of market opportunities in both traditional and virtual lease-to-own solutions [145]. - The company plans to accelerate the shift to e-commerce and improve the omni-channel customer experience at Rent-A-Center [154]. - The company is committed to retaining revenue from acquired lease-to-own customer accounts and enhancing the performance of acquired stores [144]. - Executive management changes include the appointment of Mr. Hal Khouri as Chief Financial Officer and Ms. Rebecca Wooters as Chief Growth Officer, effective November 10, 2025, and September 18, 2025, respectively [155]. Market Conditions - Macroeconomic conditions have significantly impacted business trends, including changes in consumer payment behaviors and rising product costs [150]. - A hypothetical 1.0% increase in market interest rates would result in an additional $11.1 million annualized pre-tax charge or credit to the company's financial statements [237]. - The company is currently assessing the impact of recently issued accounting standards, including ASU 2024-03 and ASU 2025-05, which will be effective in the coming years [231][232]. Merchandise Losses - Total merchandise losses for the nine months ended September 30, 2025, were $268.995 million, an increase from $260.303 million in the same period of 2024, representing a 2.65% increase [216]. - Merchandise losses in Acima locations due to LCOs were approximately 9.7% and 9.3% for the three and nine months ended September 30, 2025, respectively, compared to 9.2% and 9.5% for the same periods in 2024 [199].

Core Viewpoint - UPBD's MSCI ESG rating has been downgraded from AA to A as of October 30, 2025, indicating a decline in the company's environmental, social, and governance performance [1] Group 1 - The downgrade reflects a significant change in UPBD's ESG performance metrics [1]

Core Insights - Upbound Group, Inc. (UPBD) reported strong third-quarter 2025 results, with revenues and earnings exceeding the Zacks Consensus Estimate, showing year-over-year growth [1][3][10] Financial Performance - Adjusted earnings per share (EPS) were $1.00, surpassing the consensus estimate of 98 cents, and increased from 95 cents in the prior year [3] - Total revenues reached $1,164.7 million, exceeding the consensus estimate of $1,144 million, marking a 9% year-over-year increase driven by higher rentals, fees, and merchandise sales [3] - Adjusted EBITDA totaled $123.6 million, up 5.7% from the previous year, with an adjusted EBITDA margin of 10.6%, down 30 basis points year-over-year [4] Segment Performance - Rent-A-Center segment revenues declined 4.7% year-over-year to $461.1 million, attributed to a reduced number of company-owned stores and a smaller portfolio [5] - Acima segment revenues increased 10.4% year-over-year to $625.3 million, with applications growing approximately 13% and Gross Merchandise Volume (GMV) advancing 11% to $484 million [7] - Brigit reported total revenues of $57.7 million, representing over 40% year-over-year growth, with average monthly revenue per user rising 11.4% [9] Guidance and Outlook - The company has revised its fiscal 2025 adjusted EBITDA and EPS guidance downward due to margin compression in Acima and weaker Rent-A-Center performance [2] - Expected revenues for 2025 are projected to be between $4.60 billion and $4.75 billion, with adjusted EBITDA anticipated between $500 million and $510 million [15]

Core Insights - Upbound Group (UPBD) reported $1.16 billion in revenue for Q3 2025, a 9% year-over-year increase, with an EPS of $1.00 compared to $0.95 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $1.14 billion, resulting in a surprise of +1.82%, while the EPS also surpassed the consensus estimate of $0.98 by +2.04% [1] Revenue Breakdown - Subscriptions and fees generated $57.66 million, slightly above the estimated $56.88 million, reflecting a year-over-year increase [4] - Revenues from Brigit were reported at $57.66 million, again exceeding the two-analyst average estimate of $56.88 million [4] - Other revenues amounted to $7.62 million, below the average estimate of $8.18 million, but showing a significant year-over-year change of +322.7% [4] - Store revenues from merchandise sales reached $198.1 million, surpassing the estimated $191.8 million, marking a +31.4% change compared to the previous year [4] - Store revenues from rentals and fees totaled $901.34 million, exceeding the average estimate of $889.89 million, with a year-over-year change of +2.7% [4] Stock Performance - Over the past month, shares of Upbound Group have returned +1.3%, while the Zacks S&P 500 composite has changed by +3.6% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - The company has strengthened its executive team with the appointment of Hal Koury as Chief Financial Officer and Rebecca Wooters as Chief Growth Officer, both bringing extensive experience in financial services and digital transformation [1][5][51] - The company reported strong financial results for the quarter, with revenue increasing by 9% year-over-year to $1.16 billion and adjusted EBITDA rising by 5.7% to $123.6 million [6][20] - Asima achieved its eighth consecutive quarter of GMV growth, up 11% year-over-year, while Bridget experienced significant growth with a 40% increase in revenue and a 27% rise in subscribers [6][17][31] Executive Appointments - Hal Koury, previously CFO at Goeasy, brings relevant experience in non-prime lending and retail banking [1] - Rebecca Wooters, former Chief Digital Officer at Signet Jewelers, has a track record of transforming businesses into digital omnichannel retailers [1][5] Financial Performance - Revenue for the quarter reached $1.16 billion, a 9% increase from the previous year, driven by growth in Asima and the addition of Bridget [20] - Adjusted EBITDA was $123.6 million, reflecting a 5.7% year-over-year increase, with an adjusted EBITDA margin of 10.6% [20] - Non-GAAP diluted EPS was $1, up 5.3% from the year-ago quarter [20] Segment Performance - Asima's GMV grew by 11% year-over-year, with a focus on adding new merchants and enhancing customer experience [31][32] - Bridget's revenue increased by 40% year-over-year, with a significant rise in active subscribers and a strong average revenue per user (ARPU) [35][37] - Rent-A-Center reported a revenue of $461 million, down 4.7% year-over-year, but showed improvement in same-store sales, which were down 3.6% [39][40] Market Dynamics - The consumer environment is characterized by economic uncertainty, impacting spending priorities and payment behavior [8][59] - The company anticipates that these conditions may lead to increased demand for low weekly payments for durable goods [9] - Asima's underwriting has tightened in response to macroeconomic pressures, which may impact GMV growth in the near term [10][47] Strategic Initiatives - Asima activated its 100,000th merchant location, enhancing its merchant portfolio and customer experience [22] - Bridget is testing new financial products and marketing strategies to drive subscriber growth and improve customer acquisition [25][66] - Rent-A-Center has implemented operational improvements and promotional strategies to enhance customer engagement and sales performance [27][29] Future Outlook - The company expects revenue for the full year to be in the range of $4.6 billion to $4.075 billion, with adjusted EBITDA projected between $500 million and $510 million [47][49] - Asima is projected to achieve mid-single-digit GMV growth in the fourth quarter, while Bridget is expected to see high single-digit revenue growth [48][49] - The company remains focused on leveraging digital transformation and AI to enhance customer experiences and operational efficiency [51][70]

Financial Data and Key Metrics Changes - Upbound Group reported Q3 2025 revenue of $1.16 billion, a 9% increase year-over-year, and adjusted EBITDA of $123.6 million, up 5.7% year-over-year [7][22][47] - The adjusted EBITDA margin was 10.6%, down 30 basis points from the previous year [22] - Non-GAAP diluted EPS was $1, reflecting a 5.3% increase compared to the same quarter last year [22] Business Line Data and Key Metrics Changes - Rent-A-Center's revenue was $461 million, down 4.7% year-over-year, with same-store sales improving sequentially from a negative 4% to 3.6% [41][20] - Acima achieved 11% GMV growth in Q3, marking its eighth consecutive quarter of growth, with revenue growth of 10.4% and an EBITDA margin of 12% [13][36] - Brigit experienced a 40% revenue growth and a 27% increase in subscribers year-over-year, contributing $9.3 million in adjusted EBITDA with a margin of over 16% [19][40] Market Data and Key Metrics Changes - The macroeconomic environment remains challenging, with inflation impacting consumer confidence and spending behavior [11][62] - Job growth is slowing, and price levels are affecting the core customer base, which is primarily cash-strapped [11][62] - Acima's focus on the jewelry category has led to a shift in customer behavior, impacting gross margins [15][36] Company Strategy and Development Direction - The company aims to elevate financial opportunities for all, adapting to changing consumer needs and accelerating innovation [5][6] - New leadership appointments, including a Chief Financial Officer and a Chief Growth Officer, are expected to enhance customer experience and drive growth [6][7] - Strategic initiatives include enhancing the merchant portfolio and customer experience at Acima, as well as expanding Brigit's product offerings [23][27] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the holiday season, noting that while macro conditions are uncertain, there are opportunities for growth [46][47] - The company anticipates GMV growth in the mid-single digits for Acima in Q4, with a long-term outlook of high single digits to low double digits growth [47][58] - Rent-A-Center is expected to approach flat to positive same-store sales in Q4, driven by improved execution and inventory management [20][70] Other Important Information - Upbound generated over $50 million in free cash flow in Q3, totaling $167 million year-to-date [22][45] - The company has a net leverage ratio of approximately 2.9 times and has refinanced its Term Loan B to enhance liquidity [44][45] - The adjusted tax rate for the quarter was 24.5%, lower than the recent run rate due to a one-time item [22] Q&A Session Summary Question: What is the impact of underwriting changes at Acima on growth? - Management acknowledged that underwriting changes will impact GMV growth in Q4, guiding for mid-single-digit growth, but expects to return to high single digits in 2026 [56][58] Question: How is the consumer environment affecting different segments? - Management characterized the consumer as stressed, with inflation impacting disposable income, but noted differences between Rent-A-Center and Acima consumers [62][64] Question: What is driving the positive outlook for Rent-A-Center? - The positive outlook is attributed to improved execution, strategic initiatives, and a strong inventory position heading into the holiday season [70][100] Question: How is Brigit performing in the current environment? - Brigit is expected to lean into the current environment, with increased demand for liquidity tools and a focus on subscriber growth [94][96]

™ Third Quarter Earnings Review October 30, 2025 Disclosures Forward-Looking Statements This communication contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including, among others, statements regarding our goals, plans and projections with respect to our operations, financial position and business strategy, including those related to our acquisition of Bridge IT, Inc. ("Brigit") on January 31, 2025. Such forward-looking statements generally ...