Revenue Segments - Acima segment accounted for approximately 52% of consolidated revenues for the year ended December 31, 2024[35]. - Rent-A-Center segment comprised approximately 43% of consolidated revenues for the year ended December 31, 2024[36]. - The Franchising segment includes 448 stores across 29 states, generating royalties of 3.0% to 6.0% of franchisees' monthly gross revenue[39]. Store Operations - As of December 31, 2024, the company operated 1,728 company-owned stores in the United States and Puerto Rico[36]. - The company operated 132 stores in Mexico as of December 31, 2024[37]. - The company operates 21 Home Choice stores in Minnesota, 30 Get It Now stores in Wisconsin, and 18 Rent-A-Center stores in New Jersey, adapting to local regulations[64][66]. Customer Experience and Technology - The company plans to leverage data analytics to attract new customers and mitigate risk across business segments[30]. - The company aims to accelerate the shift to e-commerce and improve the omni-channel customer experience[30]. - The company utilizes a proprietary automated process for lease purchase agreement approvals, benefiting both retailers and consumers[33]. - The company emphasizes flexible lease-to-own options, allowing customers to obtain ownership through various payment plans[24]. Lease Purchase Agreements - In the Rent-A-Center segment, ownership is attained in approximately 38% of lease purchase agreements, with an average product life of about 16 months[46]. - The majority of lease purchase agreements have renewal terms that are weekly, bi-weekly, semi-monthly, or monthly, with daily monitoring of past due payments[47]. - The lease-to-own industry serves approximately 25% of the U.S. population classified as "subprime" (credit scores below 650) and 31% of consumers with incomes below $50,000[56]. Financial Performance and Trends - Revenue is moderately seasonal, with the first quarter typically generating higher merchandise sales due to federal income tax refunds[58]. - The company has experienced negative trends in customer behavior since late 2021, leading to a tightening of underwriting policies and a reduction in active leases, which has decreased lease revenue and operating cash flows[79]. - The company reported a significant impact from macroeconomic trends, including wage inflation and global supply chain disruptions, resulting in reduced product availability and rising product costs[80]. Risks and Challenges - The company faces risks related to its acquisition of Brigit, including the potential inability to realize anticipated benefits and incurring substantial expenses, which could adversely affect its financial condition and results of operations[78]. - The company is subject to various legal and regulatory risks, including investigations into Acima's business practices, which could result in significant costs and operational changes[78]. - The company’s operations are affected by competitive pressures in the lease-to-own industry, which could impede its ability to maintain lease volumes and pricing[76]. - The company has significant indebtedness, which could materially affect its financial condition and operational flexibility[78]. Cybersecurity and Information Management - The company relies heavily on information systems for operations and is continuously improving its cybersecurity measures to mitigate risks[196]. - The Cybersecurity and Privacy team reports to the Chief Technology and Digital Officer, who directly reports to the CEO, ensuring high-level oversight of cybersecurity initiatives[197]. - The company has a layered cybersecurity strategy that includes identification, protection, detection, and recovery to manage risks effectively[198]. Regulatory Environment - The company is exposed to increased regulatory scrutiny and potential new regulations that could impact its virtual lease-to-own operations[99]. - The company must comply with evolving environmental regulations, which may lead to increased expenses and operational challenges[121]. - Federal and state regulatory authorities are increasingly scrutinizing the lease-to-own industry, which may result in higher compliance costs and operational changes due to new or reinterpreted regulations[148]. Acquisitions and Strategic Growth - The company completed the acquisition of Brigit on January 31, 2025, enhancing its financial health technology offerings[18]. - The recent acquisition of Brigit expands the company's strategic focus into technology-driven financial health solutions, such as earned wage access and credit building products[88]. - The company expects to realize potential revenue and cost synergies from the Brigit acquisition, but there are risks associated with achieving these synergies[192]. Employee and Operational Management - As of December 31, 2024, the company employed a total of 11,970 coworkers, with 10,110 in U.S. operations, including Puerto Rico[61]. - The company is subject to high employee turnover rates, which could increase training and retention costs, adversely affecting operations[115]. - The company must effectively manage its inventory to reflect customer demand; failure to do so could lead to significant revenue declines and lower profitability[86].

Financial Data and Key Metrics Changes - Fourth quarter revenue reached nearly $1.1 billion, a 6% increase year-over-year, primarily driven by Assima's performance [23] - Adjusted EBITDA for the fourth quarter was $123 million, reflecting a 14% year-over-year increase, with adjusted EBITDA margins at 11.4%, up 80 basis points from the previous year [23] - For the full year, revenue grew 8.2% to over $4.3 billion, marking the second highest on record for Upbound [25] - Adjusted EBITDA for the year was over $473 million, up 3.8% from the prior year, with non-GAAP diluted EPS increasing by 8% to $3.83 [26] Business Line Data and Key Metrics Changes - Assima's revenue grew over 17% for the year, ending at approximately $2.3 billion, with top-line growth driven by new customer acquisitions and productivity gains [15][28] - Rent-A-Center's revenue decreased by approximately $15 million year-over-year, primarily due to store franchising and consolidation, but adjusted EBITDA increased by over $8 million due to reduced operating expenses [56] - Assima recorded Q4 GMV growth of 15.3% year-over-year, with the highest number of applications in a quarter, up 19% year-over-year [50] Market Data and Key Metrics Changes - Assima's top ten retailers represent approximately 30% of GMV, indicating a diverse merchant roster that mitigates concentration risk [14] - Rent-A-Center's same-store sales were relatively flat in the fourth quarter, with furniture and appliances making up nearly 70% of the product mix [55] - The overall lease charge-off rate for the fourth quarter was 7.3%, slightly better than the previous year's rate of 7.5% [24] Company Strategy and Development Direction - The company aims to shift towards a digital-first platform, with Assima and Bridgion leading in virtual and mobile solutions [22] - Strategic priorities for 2025 include expanding core LTO offerings across key verticals and enhancing customer experience through technology [30][32] - The integration of Bridgion is expected to amplify growth across Rent-A-Center and Assima, leveraging new digital products to improve customer financial health [20][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience amid economic and regulatory uncertainties, highlighting the ability to adapt to changing consumer behaviors [17][18] - The outlook for 2025 anticipates continued growth for Assima, with revenue expected to rise in the high single digits to low double digits, while Rent-A-Center's revenue is projected to decline in the low single-digit range [64][66] - Management emphasized a cautious approach to underwriting, reflecting the current consumer environment and macroeconomic conditions [89] Other Important Information - Mitch Fadel announced his retirement as CEO, with Fahmi Karam appointed as the new CEO effective June 1, 2025, following a thoughtful succession planning process [8][9] - The company plans to maintain a strong dividend yield while focusing on capital allocation priorities, including reinvestment in the business and strategic M&A opportunities [60][62] Q&A Session Summary Question: Can you talk about your view of your core customer and how they are positioned heading into 2025? - Management noted that while the core customer remains under pressure, trade-down dynamics are helping to offset challenges, particularly for Assima, which is experiencing growth despite tightening [81][84] Question: What are the strategic priorities for improving margins in the Assima business? - Management highlighted that improvements in margins will come from better loss management and operational leverage, with expectations for gross profit margins to improve in 2025 [91][94] Question: How much have you tightened underwriting and what are the trends in different product categories? - Management indicated that while applications are up, approval rates have remained relatively flat, with furniture showing strength in approval rates, while other categories like electronics have seen declines [104][115]

™ Fourth Quarter & Full Year 2024 Earnings Review February 20, 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 the closing of our acquisition of Bridge IT, Inc. ("Brigit") on January 31, 2025. Such fo ...

Core Insights - Upbound Group (UPBD) reported quarterly earnings of $1.05 per share, exceeding the Zacks Consensus Estimate of $1.01 per share, and up from $0.81 per share a year ago [1] - The company achieved revenues of $1.08 billion for the quarter, surpassing the Zacks Consensus Estimate by 2.16% and increasing from $1.02 billion year-over-year [3] Earnings Performance - The earnings surprise for the quarter was 3.96%, following a previous quarter where the company also exceeded expectations with earnings of $0.95 per share against an estimate of $0.89 [2] - Over the last four quarters, Upbound Group has consistently surpassed consensus EPS estimates [2] Future Outlook - The company's stock performance will largely depend on management's commentary during the earnings call and the sustainability of the recent earnings figures [4] - Current consensus EPS estimate for the upcoming quarter is $1 on revenues of $1.12 billion, and for the current fiscal year, it is $4.41 on revenues of $4.47 billion [8] Industry Context - Upbound Group operates within the Zacks Financial - Leasing Companies industry, which is currently ranked in the top 36% of over 250 Zacks industries [9] - The industry’s performance can significantly influence the stock's performance, with historical data indicating that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [9]

Compensation and Benefits - The Executive's annual base salary is set at $1,100,000, with the potential for annual reviews and increases by the Board[8]. - The Executive is eligible for an annual cash bonus targeted at 150% of the base salary, payable no later than March 15 of the following year[9]. - The Executive may receive annual equity-based awards with a target grant date fair value of 450% of the base salary, amounting to $4,950,000 for 2025[10]. - In the event of termination without Cause or for Good Reason, the Executive is entitled to two times the salary and bonus, payable in equal monthly installments over 24 months[26]. - If terminated due to Disability or death, the Executive or beneficiary will receive accrued compensation and a pro-rata bonus[28]. - The Company will cover legal fees for Executive or Executive's beneficiary if the Company fails to comply with obligations after a Change in Control[64]. - The Company will pay for Benefit Continuation Coverage for up to 24 months following termination if COBRA is elected[79]. - The Pro Rata Bonus is calculated based on the number of days worked in the year of termination[82]. Employment Terms - The Executive's employment will commence on June 1, 2025, and will continue until terminated as per the agreement[5]. - The Executive's employment is at-will and can be terminated by either party at any time[36]. - A general release agreement must be executed by the Executive to receive severance payments or benefits[38]. - The Company agrees to reimburse the Executive for all reasonable expenses incurred during cooperation following termination of employment[35]. Role and Responsibilities - The Executive will serve as the Chief Executive Officer and report directly to the Board of Directors[6]. - The Executive's place of employment will be at the Company's principal office in Plano, Texas, with reasonable business travel as needed[13]. - The Company will reimburse the Executive for reasonable business expenses incurred during the performance of duties[12]. Confidentiality and Non-Compete - Confidential Information includes non-public financial forecasts, historical financial data, and other business information disclosed to the Executive[39]. - The Executive is prohibited from holding a 5% or greater equity interest in a Competitive Enterprise for two years post-termination[46]. - The definition of "Competitive Enterprise" includes any entity engaged in the rent-to-own or lease-to-own business[47]. - The Executive is restricted from soliciting clients or employees for two years after termination[49]. - The Company is entitled to injunctive relief in case of breach of confidentiality or non-compete clauses[53]. - The Executive's entitlement to payments ceases if there is a breach of specified sections[55]. Legal and Compliance - The Agreement is governed by the laws of the State of Texas, and any disputes will be subject to arbitration[65]. - Payments under the Agreement are intended to comply with Section 409A of the Internal Revenue Code to avoid tax penalties[67]. - If Executive is a "specified employee," payments may be delayed for six months after separation from service[68]. - The Agreement supersedes all prior agreements related to the subject matter, except for specific agreements mentioned[74]. - The Agreement may be executed in counterparts, and electronic signatures are considered original[84]. Miscellaneous - The Company must provide written notice for any communications related to this Agreement[60]. - The Company may assign the Agreement to any of its Affiliates or successors without Executive's consent[61]. - Executive's beneficiary can be designated in a written beneficiary designation filed with the Company[62].

Core Insights - Upbound Group (UPBD) is expected to report quarterly earnings of $1.01 per share, a 24.7% increase year-over-year, with revenues projected at $1.06 billion, reflecting a 3.8% increase compared to the same period last year [1] - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analysts' projections [1] Revenue Projections - Analysts estimate 'Revenues- Franchise- Royalty income and fees' to reach $6.23 million, marking a 7.7% increase from the prior-year quarter [4] - 'Revenues- Franchise- Merchandise sales' is projected at $21.24 million, indicating a decline of 16% year-over-year [4] - Total 'Revenues- Store revenues' are expected to be $1.02 billion, reflecting a 3.8% increase from the previous year [5] - 'Revenues- Store revenues- Installment sales' is anticipated to be $14.10 million, suggesting a decrease of 23.5% year-over-year [5] - 'Revenues- Store revenues- Merchandise sales' is projected at $151.27 million, indicating a 19.6% increase year-over-year [6] - 'Revenues- Store revenues- Rentals and fees' is expected to reach $845.12 million, reflecting a slight increase of 0.5% from the prior-year quarter [6] Market Performance - Over the past month, Upbound Group shares have recorded a return of -0.3%, while the Zacks S&P 500 composite has increased by 4.7% [6] - Upbound Group holds a Zacks Rank 3 (Hold), suggesting that its performance is likely to align with the overall market in the upcoming period [6]

Group 1 - Upbound Group, Inc. (NASDAQ: UPBD) has decades of operational experience in the United States, demonstrating a well-tested business model with positive net income and free cash flow over the years [1] - The analyst expresses a preference for value investments, typically targeting companies trading at close to 10x earnings and offering dividend yields [1] - The focus of research is primarily on small-cap and mid-cap companies from the United States, Canada, South America, the UK, France, and Germany [1]

Core Insights - Upbound Group, Inc. (UPBD) reported third-quarter 2024 results that exceeded Zacks Consensus Estimates for both revenue and earnings, leading to an 8% increase in share price [1][3][11] Financial Performance - Adjusted earnings were 95 cents per share, surpassing the consensus estimate of 89 cents, and increased from 79 cents in the same quarter last year [3] - Total revenues reached $1,068.9 million, exceeding the consensus estimate of $1,047 million, marking a 9.2% year-over-year growth driven by rental and fee revenues, as well as merchandise sales [3][12] - Adjusted EBITDA was $116.9 million, up 10.3% year over year, with an adjusted EBITDA margin of 10.9%, reflecting a 10 basis point increase from the previous year [4] Segment Performance - Rent-A-Center segment revenues increased 1.1% year over year to $458.7 million, with same-store sales rising 2.6% [5][6] - Acima segment revenues rose 19.1% year over year to $566.2 million, driven by growth in rentals, fees, and merchandise sales [7][8] - The Mexico segment reported revenues of $19 million, up 7.3% on a constant-currency basis [9] 2024 Guidance - The company raised its 2024 revenue guidance to $4.20-$4.30 billion from the previous $4.10-$4.30 billion, with adjusted EBITDA expected between $470 million and $480 million [12][13] - Adjusted earnings for 2024 are projected to be $3.75-$3.90 per share, an increase from the previous estimate of $3.65-$4 [13]

Financial Data and Key Metrics Changes - The company's Q3 2024 revenue was nearly $1.1 billion, with adjusted EBITDA of approximately $117 million and non-GAAP earnings per share of $0.95, aligning with guidance and slightly above street consensus estimates [8][56] - Consolidated revenue increased by 9.2% year-over-year, with Acima up 19.1% and Rent-A-Center up 1.1% [56] - Consolidated gross margin decreased by 300 basis points year-over-year to 47.8% [58] - The consolidated lease charge-off rate was 7.4%, a 40 basis point increase from the prior year [59] Business Line Data and Key Metrics Changes - Acima's revenue grew by 19% year-over-year, with GMV growth of 13% [9][64] - Rent-A-Center achieved a same-store sales growth of 2.6% year-over-year, with total segment revenues increasing by 1.1% [24][70] - Acima's adjusted EBITDA margin decreased to 13.3%, down approximately 200 basis points year-over-year [67] - Rent-A-Center's adjusted EBITDA margin increased by 130 basis points year-over-year to 16.3% [73] Market Data and Key Metrics Changes - Acima's active merchant locations increased by approximately 10% year-over-year, contributing to GMV growth [64] - Rent-A-Center's e-commerce activity represented over 26% of revenue in Q3, up from approximately 25% in the prior year [25] Company Strategy and Development Direction - The company is focusing on customer retention and streamlining leasing processes for returning customers [30] - Acima is expanding its marketplace capabilities and adding new retail partnerships to enhance growth [31][34] - Rent-A-Center is leveraging technology and partnerships, including a collaboration with Google to enhance customer experience [46][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year guidance despite a challenging consumer environment [12][29] - The company anticipates a stable macro backdrop and expects to achieve revenue in the range of $4.2 billion to $4.3 billion for the full year [76] - Management noted that trade-down activity is expected to continue impacting gross margins in the near term but will benefit loss rates in the long run [81] Other Important Information - The company completed a franchise sale of 55 stores in the New York City metro area, which is expected to be EBITDA accretive [39][41] - The company ended Q3 with a net leverage ratio of approximately 2.6x and liquidity approaching $600 million [87] Q&A Session Summary Question: Acima's trade down activity and its impact on gross margins - Management indicated that trade down activity typically comes at a lower margin but allows for maintaining GMV and being selective in underwriting [92][93] Question: Managing Rent-A-Center with higher loss content but improved profitability - Management acknowledged the balance between losses and EBITDA margins, expressing comfort with current margins and the ability to tighten decisioning as needed [98][100] Question: Acima segment EBITDA flow through and timing - Management noted that some gross margin pressure is timing-related, with expectations for normalization in 2025 [109][110]

Revenue Growth - Consolidated revenues increased by approximately $267.0 million for the nine months ended September 30, 2024, compared to the same period in 2023[69]. - Total revenue increased by $267.0 million, or 9.0%, to $3,241.3 million for the nine months ended September 30, 2024, compared to $2,974.3 million for the same period in 2023[75]. - Total revenues increased by $89.8 million, or 9.2%, to $1,068.9 million for the three months ended September 30, 2024, compared to $979.1 million for the same period in 2023[73]. - Revenues for the three months ended September 30, 2024, increased by $5.1 million (1.1%) to $458.7 million compared to the same period in 2023, driven by higher rentals and fees revenues of $67.3 million[80]. Segment Performance - Acima segment revenues increased by approximately $256.9 million, attributed to higher rentals and fees revenues of $193.9 million and merchandise sales of $62.6 million[69]. - Revenues in the Rent-A-Center segment increased approximately $14.6 million for the nine months ended September 30, 2024, driven by a 1.9% increase in same store sales[70]. - The Mexico segment revenues increased by 8.9% for the nine months ended September 30, 2024, contributing to a gross profit increase of 10.2%, or $4.0 million[70]. - Acima segment revenues increased by $90.967 million, or 19.1%, to $566.183 million for the three months ended September 30, 2024, compared to $475.216 million for the same period in 2023[77]. - Revenues in the Mexico segment decreased by $612,000 (-3.1%) to $19.0 million for the three months ended September 30, 2024, while revenues for the nine months increased by $4.9 million (8.9%) to $60.5 million[81]. - Revenues in the Franchising segment decreased by $5.7 million (-18.6%) to $24.9 million for the three months ended September 30, 2024, primarily due to decreases in merchandise purchases by franchisees[83]. Profitability - Gross profit rose by approximately $62.5 million during the same period, primarily driven by the Acima segment's performance[69]. - Operating profit increased by approximately $105.5 million, mainly due to a decrease in other gains and charges of $104.5 million[69]. - Operating profit for the three months ended September 30, 2024, was $70.1 million, an increase of 20.7% compared to $58.1 million for the same period in 2023[72]. - Net earnings for the three months ended September 30, 2024, were $30.9 million, a significant increase of 607.3% compared to $4.4 million for the same period in 2023[72]. - Gross profit increased by $62.5 million, or 4.1%, to $1,572.1 million for the nine months ended September 30, 2024, with gross profit as a percentage of total revenue decreasing to 48.5% from 50.8%[76]. - Operating profit increased by $105.5 million to $212.5 million for the nine months ended September 30, 2024, with operating profit as a percentage of total revenue rising to 6.6% from 3.6%[76]. Expenses and Costs - Cost of rentals and fees increased by $45.6 million, or 15.4%, to $342.4 million for the three months ended September 30, 2024[73]. - Cost of merchandise sold increased by $36.0 million, or 23.0%, to $191.9 million for the three months ended September 30, 2024[73]. - Cost of rentals and fees increased by $122.4 million, or 13.8%, to $1,008.1 million for the nine months ended September 30, 2024, with the cost expressed as a percentage of rentals and fees revenue increasing to 38.2%[76]. - Non-labor operating expenses increased by $44.5 million, or 7.8%, to $613.8 million for the nine months ended September 30, 2024, with expenses as a percentage of total revenue decreasing to 19.4% from 19.7%[76]. - General and administrative expenses increased by $9.8 million, or 6.5%, to $160.2 million for the nine months ended September 30, 2024, with expenses as a percentage of total revenue at 4.9%[76]. - Lease charge-offs increased to $78.966 million for the three months ended September 30, 2024, compared to $68.925 million for the same period in 2023, representing a 15.4% increase[85]. - Total merchandise losses rose to $86.373 million for the three months ended September 30, 2024, compared to $75.278 million for the same period in 2023, marking a 14.6% increase[85]. Cash Flow and Financial Position - Cash flow from operations was $166.7 million for the nine months ended September 30, 2024[70]. - The company held $85.1 million of cash and cash equivalents and had outstanding indebtedness of $1.3 billion as of September 30, 2024[70]. - The company generated $166.7 million in operating cash flow for the nine months ended September 30, 2024, while using $291.6 million for debt repayments[84]. - The company ended the third quarter of 2024 with $85.1 million in cash and cash equivalents and outstanding indebtedness of $1.3 billion[84]. - Cash provided by operating activities decreased by $53.2 million to $166.7 million for the nine months ended September 30, 2024, from $219.9 million for the same period in 2023, primarily due to increased inventory purchases[86]. - Capital expenditures increased to $44.2 million for the nine months ended September 30, 2024, compared to $36.2 million for the same period in 2023, reflecting an increase of $8.0 million[86]. - The company had approximately $53.1 million in cash on hand and $474.4 million available under the ABL Credit Facility as of October 24, 2024[86]. - Outstanding borrowings under the Term Loan Facility amounted to $804.5 million as of October 24, 2024, with an interest rate indexed to the Term SOFR rate[88]. - A hypothetical 1.0% increase in market interest rates would result in an additional $8.0 million annualized pre-tax charge to the company's financial statements[91]. - The company recorded $0.5 million in uncertain tax positions as of September 30, 2024, indicating potential future cash liabilities[88]. - The company anticipates that cash flow generated from operations and availability under the ABL Credit Facility will be sufficient to fund operations during the next twelve months[86]. Strategic Initiatives - The company aims to enhance its competitive position by leveraging data analytics to attract new customers and mitigate risks across business segments[62]. - The company plans to accelerate the shift to e-commerce and improve the omni-channel customer experience at Rent-A-Center[62]. - The company is focused on expanding its direct-to-consumer channels and building partnerships with new national and regional third-party retailers[62]. - The company opened 3 new locations during the nine-month period ended September 30, 2024, bringing total locations to 2,320[87].