Upbound (US:UPBD)2022-02-24 21:37Financial Data and Key Metrics Changes - The company reported revenues of approximately $4.6 billion, an increase of 17% on a pro forma basis, driven by strong organic growth from both the Rent-A-Center Business Segment and the Acima business [9] - Non-GAAP EPS rose to $5.57 from $3.53 in 2020, and a dividend of approximately $1.24 per share was paid out [9] - Fourth quarter revenues reached $1.2 billion, a 63.5% increase year-over-year on a reported basis and a 10.5% increase on a pro forma basis [48] - Adjusted EBITDA for the fourth quarter was $124 million, a 28.2% increase on a reported basis but a 22.5% decrease on a pro forma basis [48] Business Line Data and Key Metrics Changes - The Rent-A-Center segment experienced a revenue growth of 10% with same-store sales growth of 15.4% and a lease portfolio increase of 10.5% [39] - E-commerce revenue grew by 17.9% year-over-year, accounting for 23% of total revenue in the fourth quarter [43] - The Acima segment saw GMV growth of 23% and revenue growth of 22% on a pro forma basis in 2021, but faced challenges in the fourth quarter with GMV growth of only 5% year-over-year [27][31] Market Data and Key Metrics Changes - The macro environment shifted from a tailwind in the first half of 2021 to a headwind in the latter half, impacting consumer spending and payment behavior [12][13] - The company anticipates that macro headwinds will persist through much of 2022, affecting the ability of core customers to access durable goods [18][60] Company Strategy and Development Direction - The company aims to evolve into a leasing and payment solutions platform, focusing on digital growth and enhancing omnichannel capabilities [16][40] - A more measured approach to growth initiatives is being adopted in response to the unfavorable external environment, with a focus on underwriting for yield and loss improvements [19][36] - The company plans to continue investing in technology and talent to support growth initiatives while managing capital allocation prudently [58] Management's Comments on Operating Environment and Future Outlook - Management noted that the external environment has created significant challenges, particularly in the latter part of 2021, leading to higher delinquencies and loss rates [14][15] - The company expects revenue for 2022 to be between $4.450 billion and $4.6 billion, with adjusted EBITDA of $515 million to $565 million [21] - There is uncertainty regarding the macroeconomic environment's impact on business performance, with expectations that the first half of 2022 will be particularly challenging [60] Other Important Information - The company has approximately $360 million remaining on its current share repurchase authorization and a cash balance of $108.3 million [52] - The effective tax rate on a non-GAAP basis was 23.4%, and the diluted share count was 65 million [50] Q&A Session Summary Question: Why didn't the company pre-announce the underperformance? - Management indicated that visibility into the underperformance became clearer only in the weeks leading up to the call, which influenced the decision not to pre-announce [66] Question: What accounts for the divergence in performance between Rent-A-Center and Acima? - The difference is attributed to the underwriting practices at Acima, which did not tighten quickly enough in response to changing macro conditions, leading to higher delinquencies [70][72] Question: What is the average duration of Acima leases and the expected impact on performance? - The average duration of Acima leases is approximately six to eight months, with expectations that the first half of the year will be under pressure due to previous underwriting practices [77] Question: How does the company view the impact of inflation on its business? - Management believes inflation will eventually push more customers into lease-to-own transactions, but currently, the stress on core customers is evident [90] Question: What is the outlook for GMV in the Acima segment? - The company expects mid-single digit declines in GMV due to tighter underwriting practices, but application volumes and new merchant openings remain strong [101][104]