UPBOUND GROUP, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Leadership Transition: Mitch Fadel announced retirement as CEO, with Fahmi Karam to become CEO effective June 1st following a deliberate succession plan.
• 2024 Highlights: Assima added nearly a million new customers, achieved all-time highs for active locations (+10% YOY), and revenue up over 17% to ~$2.3B. Rent-A-Center navigated challenges, grew adjusted EBITDA 5.4% while investing in digital capabilities. Bridgion acquisition closed January 31st, bringing digital financial health products like earned wage access and credit building tools.
• 2025 Priorities: Assima focused on merchants, customers, and diversification across verticals; Rent-A-Center focused on e-commerce growth, website improvement, and pricing/promotions platform; Bridgion focused on extending growth, introducing products to new consumers, and testing new financial health products.

Segment Performance

• Rent-A-Center: Fourth quarter revenue down ~$15M year over year; adjusted EBITDA up over $8M due to reduced operating expenses. Full year 2024 revenue grew 8.2% to over $4.3B, adjusted EBITDA over $473M, up 3.8% from prior year. Loss rate in Q4 was 5%, up 80 basis points from 2023.
• Assima: Q4 GMV growth 15.3% year over year, revenue grew 14.4% year over year (fourth consecutive quarter of double-digit growth). Revenue ended ~$2.3B in 2024, up over 17% year over year. Loss rate 9% in Q4, down 90 basis points year over year. Furniture mix ~43% of rental revenue in Q4, diversified across categories like wheel and tire, jewelry, etc.
• Bridgion: Acquired in January 2025, revenue guidance $200M-$230M, adjusted EBITDA $25M-$30M for 2025.

Guidance

• 2025 Outlook: Revenue range $4.5B-$4.75B, adjusted EBITDA range $500M-$540M, fully diluted non-GAAP earnings per share $3.90-$4.40, free cash flow $150M-$200M. First quarter expected consolidated revenue mid-single digits YOY, with Rent-A-Center revenue mid-single digits down and Assima/Bridgion offsetting.
• Segment Guidance: Assima GMV and revenue expected high single digits to low double digits growth, adjusted EBITDA margins improving towards mid-teens. Rent-A-Center revenue low single digits down, adjusted EBITDA margins mid-teens, decreasing year over year. Bridgion revenue $200M-$230M, adjusted EBITDA $25M-$30M.

Risks

• Macro and Regulatory Uncertainty: Economic and regulatory factors could impact consumer behavior and business operations.
• CFPB Litigation: Pending legal cases with the CFPB, though a competitor's similar lawsuit was mostly dismissed, uncertainty remains.
• Consumer Delinquency: Pressure on consumer payment behavior due to inflation and economic conditions could affect lease charge-offs.

Question and Answer

• Q: View on core customer and risk management A: Assima benefits from trade-down offsetting tightening, Rent-A-Center tightened at the bottom but not getting same trade-down benefit; cautious underwriting given macro environment.
• Q: Assima margin improvement A: Gross profit expected flat, losses coming down, expense leverage; first quarter expected margin improvement despite lower gross profit margin.
• Q: Bridgion integration and cross-selling A: Early stages of integration, cross-selling to start soon after tax season, leveraging cash flow underwriting for better underwriting.
• Q: Furniture retailer bankruptcies impact A: Potential upside as closeout sales turn into opportunities for Upbound's segments.
• Q: CFPB lawsuits and late fee rules A: Uncertainty with CFPB changes, but competitor lawsuit dismissal is positive; trade-down driven by delinquency, not solely late fee rules.
• Q: M&A pipeline A: No immediate M&A plans, focus on integrating Bridgion and optimizing existing brands, but open to strategic opportunities.