UPBOUND GROUP, INC. Q1 FY2025 earnings call

• Mitch Fadel noted it was his 30th and final earnings call as CEO, reflecting on the company's evolution from a fragmented industry to a more centralized model and the mission to elevate financial opportunity. - Acima carried over momentum into 2025 with GMV growth, improved EBITDA margin, and plans to launch a pilot in the Mexican market later this year or early next year. - Rent-A-Center made digital investments such as Google AI search functionality on the core website and a new online chatbot, and focused on enhanced collaboration with Brigit. - Brigit showed strong growth in subscribers and cash advances, with pro forma revenue up 38% year-over-year since the acquisition.

Acima: In the first quarter of 2025, Acima saw GMV growth of nearly 9% year-over-year, driven by higher applications and funded leases. Revenue grew 13.5% year-over-year, and adjusted EBITDA was up 31% from the previous year. The adjusted EBITDA margin increased by 170 basis points. The lease charge-off rate was 8.9%, which was 70 basis points lower than the year-ago period. Brigit: Since acquiring Brigit on January 31, it had over 1.2 million subscribers, a year-over-year increase of more than 26%. ARPU (average revenue per user) was $12.88 monthly in the two months following the acquisition. For the February and March ownership period, Brigit recorded $32 million in revenue and $11 million in adjusted EBITDA. Rent-A-Center: Same-store sales were down 2% due to underwriting tightening and the removal of certain lower-margin products. Revenue for the first quarter was $489 million, a 4.9% decrease from the year-ago quarter. Adjusted EBITDA was $72 million, down 14% from the first quarter of 2024. The lease charge-off rate was 4.6%, which was 10 basis points lower than the year-ago period.

• The full-year 2025 revenue guidance was revised to a range of $4.6 billion to $4.75 billion, adjusted EBITDA to $510 million to $540 million, and non-GAAP diluted EPS to $4 per share to $4.40 per share. - For Q2 2025, revenue is expected to be in the range of $1.05 billion to $1.15 billion, adjusted EBITDA $125 million to $135 million, and non-GAAP EPS $1 to $1.10. - Acima is expected to have low double-digit GMV and revenue growth with EBITDA margins slightly better than the prior year. - Rent-A-Center's revenue is expected to follow a seasonal sequential path with a mid single-digit step-back in Q2, while EBITDA margins are down slightly sequentially. - Brigit's Q2 revenue will reflect a full quarter of ownership with mid-teens EBITDA margins and a net advance loss rate similar to Q1.

• Tariff changes could impact supply chains and consumer confidence, but Rent-A-Center's direct tariff exposure is modest as much of its furniture and appliances are assembled in the US. - Macroeconomic uncertainty poses risks to consumer liquidity and spending, but the business model is resilient with trade-down potential.

Q: Regarding tariff changes, what is the exposure and what levers can be pulled?

A: Rent-A-Center's direct tariff exposure is modest. They can adjust weekly payments by $1 or $2 or add a few weeks to the term to pass on price increases. During previous periods like COVID, price increases helped same-store sales and trade-down.

Q: How is the integration of Brigit progressing and what is the road map for synergies?

A: Cross-selling efforts have begun with good response rates. Seasonality affects Brigit's margin profile, with Q1 being the highest margin. They expect to see an uptick in subscribers in Q2 and Q3 as marketing spend increases post-tax season.

Q: Can you provide details on the lower-margin products Rent-A-Center exited and why they were lower margin?

A: Rent-A-Center exited mostly mobile phones and handheld devices. These products had lower profitability due to higher lease charge-off rates. Trimming these products is expected to be EBITDA positive in the long run.

Q: What is the current state of underwriting given macro changes?

A: Underwriting is conservative. Acima has flexibility for trade-down, and both segments have seen improved loss rates and margins. They plan to remain conservative in underwriting given market uncertainty but expect to hit growth targets.