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 total number of store locations across all segments decreased from 2,410 in 2023 to 2,308 in 2024[40]. Store Operations - As of December 31, 2024, the company operated 1,728 Rent-A-Center stores in the United States and Puerto Rico[36]. - The company operates 132 stores in Mexico as of December 31, 2024[37]. - The company operates 21 Home Choice stores in Minnesota, 84 lease-to-own stores, and 13 Acima staffed locations in North Carolina as of December 31, 2024[64][65]. Acquisitions and Strategic Focus - The company completed the acquisition of Brigit on January 31, 2025, enhancing its financial health technology offerings[17]. - 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[90]. - The company has accelerated its virtual growth strategy through acquisitions, including Merchants Preferred and Acima Holdings, focusing on large market opportunities with third-party retailers[90]. Customer Behavior and Market Trends - 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, resulting in decreased lease revenue and operating cash flows[81]. - The company reported significant pressure on discretionary income levels of consumers due to the expiration of government stimulus programs and a rise in the U.S. consumer price index[81]. - Revenue is moderately seasonal, with the first quarter typically seeing higher merchandise sales due to federal income tax refunds[58]. Financial Health and Indebtedness - The company has significant indebtedness, which could materially affect its financial condition and operational flexibility[80]. - As of December 31, 2024, the company's total indebtedness was approximately $1.3 billion, with undrawn commitments of $428.3 million under the ABL Credit Facility[175]. - The annual cash interest payments on the company's indebtedness are approximately $109 million, which may fluctuate with changes in interest rates[181]. Regulatory and Compliance Risks - The company is subject to increasing regulatory scrutiny in the lease-to-own industry, which could lead to additional compliance costs and operational burdens[80]. - The company has incurred substantial costs related to compliance with evolving federal and state laws, and may continue to face expenses from government investigations and enforcement actions[153]. - The regulatory environment regarding information security and data privacy is becoming more stringent, potentially leading to increased compliance costs and operational challenges for the company[155]. Competition and Market Position - The company faces intense competition in the lease-to-own industry, which could impede its ability to maintain lease volumes and pricing, adversely affecting operating results[112]. - The recently acquired Brigit business faces significant competition from other providers of financial health technology, which may impact its growth objectives[116]. - The company must compete effectively in the growing e-commerce sector, which has intensified due to COVID-19, to maintain market share and profitability[104]. Technology and Innovation - The company utilizes a proprietary automated decision engine for lease purchase agreement approvals, benefiting both retailers and consumers[33]. - The company’s strategy to grow its third-party retailer business relies on developing robust virtual lease-to-own technology and decisioning programs[103]. - The integration of artificial intelligence in the company's operations presents risks that could adversely affect its business and reputation[77]. Labor and Operational Challenges - The company is facing challenges from a tight labor market and wage inflation, which could further strain its financial performance[82]. - The company must effectively manage inventory to meet customer demand; failure to do so could lead to significant revenue declines and excess inventory markdowns[88]. - Acts of nature and climate change can disrupt operations and adversely impact business continuity, particularly in specific geographic locations[119]. Legal and Litigation Risks - The company is involved in various legal proceedings that could materially impact its financial condition and operations, with ongoing monitoring and assessment of reserves[211]. - Ongoing legal proceedings with the CFPB may result in significant penalties or operational changes that could materially impact the company's financial condition[143]. - Acima is facing ongoing legal challenges, including a multi-state attorneys' general matter and litigation from the New York Attorney General, which could lead to significant financial liabilities and operational changes[150]. Cybersecurity and Data Privacy - The company has a comprehensive cybersecurity program aimed at protecting information systems and mitigating risks, with regular assessments and training for employees[201][203]. - The company is subject to significant risks from cyberattacks, which could disrupt operations and lead to loss of confidential information, potentially harming its financial condition[108]. - The use of AI applications may lead to cybersecurity incidents, potentially harming the company's reputation and operational results[131]. Franchise Operations - The company has 448 franchised stores across 29 states, generating royalties of 3.0% to 6.0% of franchisees' monthly gross revenue[39]. - Franchise agreements require stores to exclusively offer approved brands and maintain an adequate inventory mix as dictated by Franchising policy manuals[52]. - The Franchising segment's success relies on independent third-party franchisees, which poses risks to growth and revenue due to limited control over their operations[126].
RENT-A-CENTER(RCII) - 2024 Q4 - Annual Report