Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Upbound Group Inc (UPBD, Financial) reported a 6% increase in fourth-quarter revenue, driven by the strength of Acima.
- The company achieved a 17% top-line growth for Acima, with revenue ending at approximately $2.3 billion.
- Upbound Group Inc (UPBD) successfully onboarded nearly a million new customers and thousands of new merchants in 2024.
- The company completed two transformative acquisitions, AEA and Bridget, establishing itself as a technology-driven growth company.
- Adjusted EBITDA for the year was over $473 million, up 3.8% from the prior year, indicating strong financial performance.
Negative Points
- The Rent-A-Center segment faced challenges due to economic uncertainty, impacting demand and payment behavior.
- Consolidated lease charge-offs for the year increased slightly to 7.3% from 7.1% in 2023.
- Rent-A-Center's revenue was down approximately $15 million year over year, partly due to store consolidations.
- The company expects Rent-A-Center's revenue to decline in the low single-digit range in 2025.
- Acima's EBITDA margins were down 90 basis points from Q4 of 2023, indicating pressure on profitability.
Q & A Highlights
Q: Can you discuss your view of the core customer and how you're managing risk heading into 2025?
A: Mitchell Fadel, CEO, explained that while both Acima and Rent-A-Center had to tighten underwriting, Acima benefited from trade-down, which helped offset tightening at the bottom. Rent-A-Center, however, did not benefit as directly from trade-down, resulting in flat same-store sales in Q4. Overall, the core customer remains under pressure, but trade-down is helping mitigate this.
Q: What are the strategic priorities for improving margins at Acima in 2025?
A: Fahmi Karam, CFO, stated that gross profit is expected to be relatively flat year-over-year, with improvements anticipated in loss rates and operating leverage on expenses. The focus will be on maintaining underwriting discipline and achieving scale efficiencies.
Q: How is the integration of Bridget progressing, and what are the plans for cross-selling?
A: Fahmi Karam noted that the integration is in early stages, with a focus on cross-marketing due to customer overlap. The underwriting teams are exploring ways to leverage Bridget's cash flow underwriting, which is expected to enhance understanding of consumer payment behavior.
Q: Can you provide an update on the CFPB lawsuits and their potential impact?
A: Mitchell Fadel mentioned that while there is uncertainty at the CFPB, Upbound feels confident about its position in the lawsuits. A similar lawsuit against a competitor was largely dismissed, which is seen as a positive indicator for Upbound's case.
Q: How is the Acima marketplace performing, and what are the growth expectations?
A: Fahmi Karam reported that the Acima marketplace grew by 60% in Q4, albeit from a small base. It currently contributes a low single-digit percentage to GMV, with expectations to reach mid-single digits in 2025 and potentially double digits in the coming years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
