Upbound (US:UPBD)2024-10-31 22:35Financial 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]