Revenue Segments - The Acima segment accounted for approximately 50% of the consolidated net revenues for the year ended December 31, 2022[42]. - The Rent-A-Center Business segment comprised approximately 46% of the consolidated net revenues for the year ended December 31, 2022[43]. - The Rent-A-Center Business segment generated approximately 46% of consolidated revenues for the year ended December 31, 2022, indicating its continued importance despite the growth of the Acima segment[108]. - The Acima segment revenues decreased approximately $217.8 million, primarily due to inflationary pressures on consumer discretionary income and the wind-down of stimulus programs[220]. - Revenues in the Rent-A-Center Business segment decreased approximately $88.0 million, with a 4.5% decrease in same store sales attributed to lower demand for consumer durable goods[219]. - Franchising segment revenues decreased by $35.8 million for the twelve months ended December 31, 2022, primarily due to a decrease in inventory purchases by franchisees[222]. Store Operations - As of December 31, 2022, the company operated 1,851 company-owned stores in the United States and Puerto Rico[43]. - The company franchised 447 stores across 31 states as of December 31, 2022, generating royalties of 2.0% to 6.0% of franchisees' monthly gross revenue[46]. - As of December 31, 2022, the company operated 19 Home Choice stores in Minnesota, 86 lease-to-own stores, and 35 Acima staffed locations in North Carolina[75][76]. Customer Behavior and Trends - The company experienced negative trends in customer behavior since late 2021, attributed to the expiration of government fiscal and monetary stimulus, leading to lower payment and higher loss activity[94]. - The first quarter of each fiscal year generally sees higher merchandise sales due to customers exercising early purchase options, primarily linked to federal income tax refunds[68]. - The company implemented tighter underwriting policies in response to negative customer behavioral trends, impacting active leases and lease revenue[207]. Technology and Innovation - The company aims to enhance technology platforms to improve consumer experience and streamline transaction processes[37]. - The company is investing in new information management technology and systems to enhance operational efficiency and data management[114]. - The company has accelerated its virtual growth strategy through acquisitions and aims to expand its product verticals and e-commerce platform to enhance customer experience[101]. - The company plans to significantly expand its virtual lease-to-own offerings, which requires investment in information and technology capabilities[102]. - The company is focused on developing robust virtual lease-to-own technology to support its retail partner business growth strategy[112]. Financial Position and Debt - As of December 31, 2022, the company's total indebtedness was approximately $1.4 billion, with undrawn commitments available for borrowings of an additional $395.6 million under the ABL Credit Facility[155]. - The annual cash interest payments on the company's indebtedness are approximately $71 million, which may fluctuate depending on changes in interest rates[161]. - Approximately $950 million of the company's indebtedness was variable rate indebtedness as of December 31, 2022, with each quarter-point (0.25%) change in interest rates resulting in an additional $2.4 million annualized pretax charge or credit[168]. - The company is dependent on cash flow generated by its subsidiaries to meet obligations under the ABL Credit Facility, Term Loan Facility, and the Notes, which could be adversely affected if subsidiaries cannot pay dividends[179]. - If the company cannot make scheduled payments on its debt, it may face default, leading to severe financial consequences, including potential bankruptcy[162]. Regulatory and Legal Risks - The lease-to-own industry is facing increased scrutiny from federal and state regulatory authorities, which could lead to significant compliance costs and operational changes[141]. - Currently, 46 states and the District of Columbia have laws regulating rental purchase transactions, which require substantial compliance efforts and expose the company to regulatory actions[142]. - The regulatory environment regarding information security and data privacy is evolving, with laws like the California Consumer Privacy Act (CCPA) imposing new compliance obligations[145]. - The company is subject to various federal and state consumer protection statutes that provide remedies for violations, which could lead to disputes and regulatory scrutiny[144]. - Increased attention from regulators may result in more stringent laws and regulations that could materially affect the company's operations and financial condition[141]. Competition and Market Challenges - The company operates in a highly competitive environment, with competitors potentially having greater financial resources and aggressive pricing strategies that could impact sales and margins[121]. - The company faces significant competition from the growing e-commerce sector, which may impact its market share and profitability[113]. - Acima's business relies heavily on retail partner relationships, and increased competition could limit growth and profitability[123]. Operational Challenges - Disruptions in the supply chain have resulted in delays and increased costs, adversely impacting the company's ability to meet customer expectations and stock stores[95]. - The company must effectively manage its inventory to reflect customer demand; failure to do so could lead to significant revenue decline and lower profit margins[99]. - Collection efforts are enhanced by personal relationships between employees and customers, with a focus on recovering rental items promptly[56]. - The company faces challenges in attracting and retaining key employees, which is essential for sustaining and growing operations[124]. Miscellaneous - The company has paid quarterly cash dividends on its common stock since 2019, but there is no guarantee of future dividends due to potential restrictions from debt agreements[181]. - The corporate name changed to Upbound Group, Inc., with trading under the ticker "UPBD" beginning February 27, 2023[203]. - The company repurchased 3,536,799 shares for approximately $75.1 million under the December 2021 stock repurchase program[194].
RENT-A-CENTER(RCII) - 2022 Q4 - Annual Report