• Revenue: Fourth quarter revenue of nearly $1.1 billion, a 6% increase year-over-year; full-year revenue grew 8.2% to over $4.3 billion.
• Adjusted EBITDA: Fourth quarter adjusted EBITDA of $123 million, up over 14% year-over-year; full-year adjusted EBITDA over $473 million, up 3.8% from the prior year.
• Adjusted EBITDA Margin: Fourth quarter margin of 11.4%, up 80 basis points from last year.
• Non-GAAP Diluted EPS: Fourth quarter EPS of $1.05, nearly 30% higher year-over-year; full-year EPS of $3.83, an 8% improvement from 2023.
• Lease Charge-Offs: Fourth quarter rate of 7.3%, 20 basis points better than the previous year; full-year rate of 7.3%, slightly up from 7.1% in 2023.
• Acima Revenue: Fourth quarter revenue grew 14.4% year-over-year; full-year revenue growth of over 17% to approximately $2.3 billion.
• Rent-A-Center Revenue: Revenue down approximately $15 million year-over-year due to store franchising and consolidation.
• Same-Store Sales: Rent-A-Center's same-store sales were relatively flat in the fourth quarter.
• Store Locations: Rent-A-Center finished the quarter with 111 fewer locations than year-end 2023.
• Free Cash Flow: Approximately $50 million in 2024, down from nearly $150 million in 2023.
• Liquidity: $489 million at year-end, including cash on hand and revolver availability.
• Net Leverage Ratio: Approximately 2.7 times at year-end, moving to about 3 times post-Brigit acquisition.

• Warning! GuruFocus has detected 5 Warning Signs with UPBD.

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 (NASDAQ:UPBD) 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 (NASDAQ: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.