Earnings call transcript Q4 2022

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Operator

Good day and thank you for standing by. Welcome to the Upbound Group formerly Rent-A-Center’s Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Brendan Metrano, Vice President of Investor Relations.

Brendon Metrano

Good morning and thank you all for joining us to discuss the company’s performance for the fourth quarter and full year of 2022, the outlook for 2023 and our new parent company name an enterprise brand, Upbound Group, Inc. releases before press market two issued this the morning opened. We

a second, regarding and quarter including investor.rentacenter.com. live Upbound website first on our are all to available webcast, and materials, releases The at press the fourth our the Both earnings related link release.

Fadel, call the Mitch Upbound and Fahmi Rent-A-Center, we Group, On CEO; formerly Karam, from have today our our CFO.

as subject materially actual of the by factors in call SEC our and in no revise are publicly undertakes this required results These statements are cause obligation the Group could differ on some update or law. to provided reminder, forward-looking are that a any our except from as As expectations. earnings company’s to factors well to Upbound forward-looking described filings. release as statements,

financial a also refer the measures the earnings release, and will include Please GAAP financial fourth and on non-GAAP found description the reconciliations for be measures. to to references our full measures. quarter call website of which year most our comparable to financial This non-GAAP can

I will turn Mitch. that, over call to the With

Mitch Fadel

to Thank on Brendan, morning everyone good and the call you, today.

our take full We release I results plans will of with a in name XXXX handing we financial morning. Chief corporate financial for and to the this Group, more year some XXXX of start of Inc., off highlights Financial our course, our Officer, we to a will outlook. before questions. announced review our Fahmi Karam, detailed review Upbound Then which for conclusion, will some At change discussion press and

think size for Holdings of journey. expanded solutions, This in changed its a in company is we financial corporate Since the new next a company’s identity under really made our company’s organizations and strategy and Inc. its stage become together Upbound, for to presence and to elevate a of XXXX, is continue to who it’s opportunity doubled positioned Group, to to Today, mentioned, acquiring evolve us That financial just the come the we and to marking lot and today, define and name I development. the We exciting mission. the almost progress is two important integration grow February now Acima have essentially As all. an point-of-sale identity company on which mission in important milestone unifying the Upbound reach. are announced

that will this more effectively platform achieve As aspirations needs that inclusive with resources of and changing that brand that the objectives. is we across omni-channel help enterprise consumers. strategies range of company Upbound, to solutions define capabilities and offers we an an can mission and our will flexible so unify can a address financial Upbound the achieve and

the Our years. over under customer-facing will brands loyal well-established businesses operate same a many continue following built have that to

targeted strategic a different be transition enhance can existing credit will our new company as Upbound focus applying will operating to benefit and as loan solutions, represents merchants and structure and with on better should customers leveraged Upbound and they solutions and greater to other innovating the provide enterprise the planning technology functions enhance to develop also within services. that such that ability organization shared point-of-sale products. a

that’s few an units. opportunities realize as for shared the business Note organization Upbound types operating just illustration, services certainly a X, we across Upbound drive the for efficiency shared a optimizing the an us efficiencies. of provide On there be other example responsible are can operating but holding umbrella that of that structure. show we is Slide functions company to to high-level better and performance for

broader capabilities customers our share have to potential history amount set to the we of own and on hope this them with front solutions, more data analytics the of of this aspect course have in over year. noteworthy opportunity financial we the relationships and millions a of Upbound of to our illustrated apply Another vast is the and chart to to payment offer

Rent-A-Center both range at account execute sales The leaders unit X, relevant of finance, accomplished are that have Acima. with Looking at feel experience growth Slide right overall industry the and successfully roles Upbound’s to in we experience functional Business technology, with leaders shared mission. enterprise and their all deep specialty a service strategy industry confident and have several leadership of includes team management. that years we

have Roughly have tenure. half and with a We good industry more knowledge. have company a leaders for us been of mix decade of our deep than and

years couple and fresh joined the have from of The us the half ideas outside in insights bring other and last company.

engineering updates Additionally, has and over really and Executive Tyler to compliance underwriting company roles legal oversee years, leadership. a me. significant and Tyler appointed business Acima played segment product, development Acima’s directly Montrone in we functions. Acima’s for most reporting Vice role at senior development President has to the within including that been will and recently excited I’m several has responsible the Tyler have announce been the and

the in announce work like leadership pleased Pratt an track digital and Gautam advisory technology Sudeep’s am important to continue the Packard. company joined will and has believe company that Allred, Founder, Chief Aaron Whitney digital and be Sudeep also And expertise has I factor role. also Technology Sudeep say, an I’m as an evolution. with with in will record Officer. Digital our Acima’s & of impressive we transformations to pleased leading Hewlett companies to

to York Upbound Karam; months, Investor mission In Corporate our learn about have our New CFO, Mike Day we say the on I as within announced, more in previously Investor including coming as past company Development, vision our in our the joined an City. the of our XX visit and and on have months. to Relations and updated interim, May for websites. the Bagull Upbound future Fahmi Business X the plans Head Also, will more and

results payment EPS executing of than better our quarter of line our on and So in customer moving on million, revenue we adjusted progress our that $XXX of are financial top outlook, results, $X.XX. were business, to well fourth fourth adjusted EBITDA and the $XXX we delivering and including quarter by saw million encouraged objectives

pro Portfolio XXXX Looking macro XX% down the on consolidated significant a Rent-A-Center combined business. disproportionately their decrease households. throughout for with performance, X was revenues previous and year-over-year a an our less it’s inflation. under through Many effect in the to recession forma pro cash went forma forward This, headwind at year to pressure of rampant consider affluent $X.XX and faced important Acima demand balances how translating conditions Rent-A-Center the own in about with them impacted effectively with and full declining for were values XX% of pull years, Acima year, to billion X% down both basis.

renewal was rates increased to Customer resulted basis loss which payment points under the lower for for above and XX.X% expectations. XXX to behavior also rates rates our and year. Acima loss Skip/stolen to XXX X.X%, long-term Rent-A-Center higher compared both pressure, increased basis year-over-year in prior points lease

the and we for Although and contraction basis a revenues took of steps earnings to adjusted points over share to of compared higher per and led combined XXXX costs of drove effect XXXX. losses to full XXX efficiency, control and $X.XX adjusted $X.XX year improve lower EBITDA margin

million the $XXX running portfolio those flow off despite of of from strong, the Now higher beginning free still benefiting was balances cash headwinds, quite year. from

sustainable conditions Now has The prompted excess economy. We forward. getting and years pulled us when of positioned company last underwriting note, from actions appropriately well gained that businesses, and of positive of better moving with have fiscal pressure past started adapting importance growth. the on dynamic risk insights the out a discipline the understanding and the a analytics, few of our nimbler data fundamentals reveal on after a It also balancing reinforced organization automation the year. management, to become monetary

a operating experience of technology and with philosophy to and importance investing differentiate our adopting the merchant reconfirmed to technology-centric customer improve and it Lastly, partners. ourselves in embracing the

store lease digging XXXX. Rent-A-Center more on still into speaks Similarly, stability sales the On XX.X%. X-year historical X.X% held growth above with a customers. peak the year-over-year, was relatively that operating X, Revenues year, was and considering proposition which our well our but for and with external basis, full segments down normal in expectations, compared first Page were backdrop, XXXX its levels XXXX X-year growth up levels. but down remain to revenues same-store and demand stack line to revenue to And XX.X% were original key value stimulus down healthy X.X% stack of XX% from revenues

compared continue progress XX% make – to with in mid-single E-commerce representing XX% lease We just store XX% XXXX. XXXX approximately year, increased revenues for to on good progress the the digital digits revenues of total platform. RAC and approximately for

the end around was basis, franchise was on on CAGR. a Overall, XXXX attributable portfolio XXXX source, adjusting a portfolio after revenues down the primarily X% translates the normalized finishing to the XX% with in up a approximately from decrease year-over-year it the to about But X%. portfolio more for of pressure

to digits including friction XXXX. down portfolio Looking budgets XXXX. brands engine at portfolio match retain new to renewal components, extended with and impacted compared macro and points year-over-year, help advanced to access in through charge-offs peak single service. customers, XXX and X.X% lease down better levels payments deliveries Returns the our in negatively checkout, rates We and basis for the rates are to and online were initiatives a reducing retention attract that several launching launched low expanding with most products environment aisle loss up where

expectations. for rate second the of loss year X.X% Now our the XXXX half increased above to the

in decrease see early expect third due have based increases we reacted with past in swiftly the loss and mitigate third gradually started to throughout the in adjustments implemented, in which further the fourth quarter improve are management XXXX. indicator rates, to of We changes quarter. to account to And stabilized rates to rates enhancements on and any we quarter underwriting an

the you and business down. XXXX in programs focus strategic recall high Acima, to leadership marketplace profitability. stimulus in underwriting, made on after and may more on changes rates In the moving execution to late pandemic early loss XXXX, that conservative we and wind delinquencies initiatives Now reprioritize experienced

points of half to first EBITDA first that XXX increase the fourth adjusted the percentage reduced margin. the the contributing underwriting we by rates adjustments quarter, made from to point in XX.X basis During year, loss a numerous

Importantly, our management risk has enhanced moving forward. business should and benefit capabilities, which this underwriting process the

adding on active to XX.X% year in XX% share believe merchants, merchant merchant forma with strategic partner for full the retail XXXX, accounts volume and based made and XXXX customer Average year stores own of Outfitters. full traffic underwriting. Sleep tighter including feedback decreased we merchant a and progress merchant our lower retail regional and industry GMV Furniture the and locations of portfolio We for combination a strong pro due increased holding CITY we’re several across basis on our locations compared data. to

increasingly formed I’m capabilities, additional that account we in Our developments and confident should XXXX. newly enterprise elevated have team our has positive

how the big cycle. compared has will with year. to some consumer uncertainty Based is our included on recent significant has outlook. job projecting while XXXX, circumstances in forecast market Rent-A-Center down our a inflow view of been outperformance not cycle to a credit begin consensus like cycles. given it LTO down another on loss be Acima this year nontraditional really We but as macro did down tightens. part unfavorable chance at customers see credit businesses dropping economic is that was not sometime previous strong trends, into Moving looks XXXX Historically, different will there indications base of the better see ample. we yet in when least recessions We we’ve trade during this recession of XXXX like in tested the a case arise and or to economists trade in of was that LTO outperformed believe

are Given look initiatives margins XXXX With now XXXX, for for risk-adjusted high-level strategic us more initiatives with priorities to we and in macro opportunities return backdrop, control and similar maintain the discipline continue will to flow. and support give XXXX, external to to in underwriting add Upbound-related good costs believe aligned focus that well revenues to and beyond. cash growth conditions, should underwriting including XXXX operating

to database customer financial as the to and this leverage in underserved early come the customer eventually our in offer options also on stages year. solutions reach. opportunities expertise and the exploring specifically, market progress our are consumer mentioned to as we our broaden would there existing I earlier, into more additional market can that of expand be We And

back those and our to customer improving retain through the engagement our towards Rent-A-center by X% are Rent-A-Center enterprise, base, base. continue and SMB experience the extended priorities omnichannel are invest and technology digital up includes We This for expanding management direct-to-consumer on rates to to We’ll merchant brands optimize aisle is numerous loss grow of fronts. assess getting Acima conditions and in this Top capabilities. the plan do include products journey top enhancing our our and and of offering, we’ll recovery priority. account priorities, And also to the for enhance And other among consumers. customer our and Top continuing business. priorities market and the supportive. technology underwriting our growing for leveraging ramping the solutions channel expertise to improvements, solutions also as business both

next the we flexible for journey can effort with achieve consumer future. In are and shareholders. progress Upbound, and to start evolving And made for the compelling tremendous I I’ve this deliver I play doing believe and the want I company’s role more over team really we continued of stage last for positioned the an the entire we been in growth significant important and As value inclusive see believe our employees very impressed as opportunity our their solutions. financial dedication. so, year, in well thank we I partners, market to merchant customers, and

with the to And over that, I’ll Fahmi. turn call

Fahmi Karam

Thank full take financial year questions. you, a guidance, performance morning, quarterly and start review with after today good we I’ll Mitch, quarter which of fourth everyone. will the and then and

start like table company’s metric commentary release and on efficiently more my quarter the the would key the performance. in this X Page investors press assess of a added note we that I’ll presentation help to new to

disclose a disclosed that prominently we’ve in forward. the new also the that segment past have going of will We highlighted level at metrics couple more

Acima, that’s it’s our and GMV. value for Rent-A-Center, portfolio For

results, for led the for down business. decrease for the decrease Acima a and the XX.X%, to was a quarter consolidated XX.X% on Moving revenue X.X% fourth by Rent-A-Center

revenues during result decreased early year. a most and revenues electing in sales customers payout reflecting consolidated at revenue of decrease as accounted current Looking lower the businesses of the revenues, for both categories, rental fees portfolio were values XX.X% lower and options. XX.X% Merchandise fewer for

higher gross and Consolidated year-over-year points due in XX% rental a period. margin XXX merchandise basis fourth to current the compared to revenues in fees the was quarter, sales up of mix year

on decrease in by costs. X% execute skip/stolen to consolidated down a excluding the well costs, year-over-year, in continue expense quarter labor led We management with fourth losses, XX.X%

is our account and underwriting rate for As our by down in loss paying third the lowest efforts in Mitch of management basis expectations, our and X.X% but XXXX. The our the X.X%, noted, which above in are with year-over-year Acima, since quarter X.X% off, quarter target was was fourth rate XXX loss levels. evidenced line points of Rent-A-Center long-term

with continue We have seen continued trend portfolio improvement in past due rates, which suggests lower loss to turns rates created leases. should newly as

consolidated of for of Fourth was EBITDA of decrease of contraction year XXX growth flat the XX.X% XXX XX.X% at offsetting million was down with a prior Acima. quarter EBITDA points XX.X% for Rent-A-Center, margin to Acima. basis margin Adjusted with adjusted $XXX XX.X% Rent-A-Center, basis for offsetting points period, year-over-year compared expansion

the on provide segment more results detail next will the I few slides. on

to $XX.X that in to a $XX $XX.X The alone count $X.XX headwind net to approximately XXX the expense million benchmark million the on in basis million the debt. million increase tax of quarter period. period. affected compared an year. year total share quarter XX% EPS prior million points or was a in average effective our variable prior prior basis year diluted to interest due higher the the XX.X% below was was was year-over-year The The year prior rates interest XX.X% in compared line, compared expense Looking $XXX fourth non-GAAP compared non-GAAP $XX.X to in rate the

business, believe XXXX in diluted period. reflect fourth the the quarter performance compared in $X.XX share, per do $X.XX period. $X.XX for was the was adjusting $X.XX that in underlying non-GAAP prior to not special in of EPS year quarter the we compared to year After of earnings our GAAP the items fourth prior

we executed flow November quarter, the And shares X.X and October, we paid During million the in quarter repurchases previously million which call, quarterly cash additional we $XX.X year generated fourth per in during in approximately to at period. of free repurchased We share. were share. share December. disclosed per the No million of prior compared dividend $XX.XX a $XX.X third $X.XX

Drilling the impacted down rental sales sales XX.X% was a to fourth merchandise revenue fees to decrease were and X.X% on to business X.X% the segment by drove year portfolio contributed fewer revenue. XX, quarter, and lease Rent-A-Center down in a year-over-year, which early Page results value compared prior in the electing Merchandise period. options customers decrease payout

in Considering revenues that X-year mid-single trend total same-store cautious. of The it’s segment year digits and growth, the begun Total strong noting XXXX with the basis. on not digits worth consumers sales X.X% decreased in season down in same-store low first and X.X%. sales has tax continued were and has effect of revenue revenues the same-store both a part as year-over-year up sales full back lower single prior remain

next portfolio. should XXXX percentage downward that the trend of a and due manage encouraged with over basis moved the maintaining believe first losses year-over-year pressure and quarters greater segments vintages and few elevated lower by due remain in the the in inflation primarily to X.X%, this customers’ portfolio. management points while which starting positive Skip/stolen increased ability to in throughout XXX have suggests budgets line We rate We’ve weeks newer We our the to rates standards overall year. as to are loss continued our the accelerated larger expectations. was changes as higher a rates and to in few monthly account become Past certain on losses underwriting trend the made was quarter. loss third improve of tighten quarterly see

to percent loss lower to were due Those compared advertising and primarily the resulting of for headwinds other expenses, period. Adjusted operating expenses, offset points to lower a by in labor, points excluding higher quarter the basis XXX in and decreased losses prior margin basis the rates year-over-year revenue. reduction year partially the operating ratio fourth of XX.X%, year-over-year EBITDA XXX revenues as

Moving to Acima.

quarter, year-over-year, caused trend decreased the consumers and primarily the to first had quarter volumes drop also up XX.X% pull-forward of of compared effect fourth partners. to merchant year for in application the XXXX. weeks lower period. fourth the locations GMV in This traffic, digits due a that During were in mid-single Offsetting stimulus prior pressure on macroeconomic the few merchant continued

made to over year-over-year the compared Skip/stolen Underwriting running XX% down for open revenues merchandise to X% This segments of lease XXXX. year since benefit GMV down rental earlier monitoring down end, drove loss staffed year-over-year worth better highs continued the legacy to risk rates in expectation but the half part high of quarters, were XX.X% the in at period. the was changes the points our a XX.X% With X%, in virtual revenues for outlook. X% few the with basis XX.X%. Also teens XXX prior business. decrease than business, in revenues, the was that quarter past continuous within seen down excluding our slightly sales has noting our high year our first in count and higher of losses and business, losses our that which decreased X.X%, to the

reported was million the revenue as and forma on a decreased Adjusted $XXX split up and lower increased $XX.X on Adjusted of was pro XX% XXXX down costs, revenue decrease The were losses basis, by basis XXX evenly in rental sequentially. consolidated lower points approximately February sales revenue. and points XX.X% XX.X% X.X% XXXX. operating basis, year basis full and fees by both EBITDA basis between merchandise and year-over-year from of a EBITDA XXX acquisition a revenue million On offset of driven margin reflecting year-over-year, Acima. reported revenue

a fees sales Adjusted year-over-year Consolidated on Rent-A-Center due of compared The period. The gross down down mix XX.X%, rental a and accounted revenues basis cost decrease that the million with almost drove factors X% and Operating of a XX% in to forma and decrease pro on approximately accounted up to business basis and loss revenue decreased Acima $XXX.X XX merchandise in XX.X% EBITDA the efforts. costs, year G&A was for excluding for reported EBITDA basis. a year-over-year approximately forma were decreased higher X% rates. primary pro X%, of on lower higher one-third. and our points current costs margin year-over-year basis losses labor reflecting management two-thirds the

rates. tax The compared year Full The year period. effective was $XX year variable compared to XX.X% for compared non-GAAP XXXX. to was expense million due XX.X% $X.XX The interest year. expense a $XX.X EPS on rate the interest share average diluted prior headwind in the higher million million to prior million the year was net $XX.X to for basis was $XX.X non-GAAP in higher to prior compared count a benchmark the

shares of flow $XXX.X cash XX, on million share from flow has we cash an of For the XXXX. repurchased cash $XXX.X $X.XX dividend We generated annual year company and repurchase per XXXX, operations flow, operations of and free $XX from its flow $XXX.X million free million in current million per up ended from approximately at million share cash approximately of paid $XXX.X December $XXX $X.X of million share. remaining The authorization. and

year-end, at of of leverage million, $XXX a we debt and cash liquidity X.Xx addition, balance million. billion, of available $X.X In gross of $XXX approximately net had

unless XXXX the to financial decreases or generally year-over-year changes to to outlook. stated. that Note otherwise growth refer references Shifting

to revenue $X $XXX adjusted stock-based million. generate billion, EBITDA million, year, to For of the approximately compensation expect $XX which to of billion $X.X $XXX we full excludes million of

share We be Fully repurchases expected $X, per lower of share $XX.X with are diluted throughout largely revenues assumes fully count year. projecting adjusted by to to margin contraction share be no lower is offset diluted as expenses. the earnings operating will $X.XX modest a average and million which losses

$XXX million XX.X% the of For an we million expense rate Net $XXX effective to of million to cash tax XX.X%. to year, free and $XXX expect million of interest $XXX flow.

a backdrop increase inflation persistent Our a conditions, macroeconomic forecast existing slight unemployment. assumes and consistent in with

we some remain and trends to effect. in the fourth start and impact will year-over-year but volumes quarter year the mid-single macroeconomic year do growth of with low expected by pull to full off sales under the improve pressure prevailing forward. GMV of XXXX from the year-over-year similar expect initiatives volume merchant to we digits that GMV year-over-year headwinds get Acima, down quarter, improve applications to as and the is the the will For conditions fourth and targeted back throughout partner as experienced we remaining XXXX be take for merchant expect that third

expect full We year to throughout down revenues be Adjusted half Acima with down the double as X% the teens and second to is digits. down be margin will around digits remain year the half double-digit in expected the of range. loss range consistent low should mid-single year EBITDA in high first the in the rates stay low relatively X.X%

range, For Adjusted driven be the range. to throughout rates. the in year and first rates return to ending continued demand we and Rent-A-Center lower the business improving higher segment, due lease margin expected be year the elevated range in with sales low mid-single-digit EBITDA the is throughout XXXX revenues portfolio X.X% and a mid-teens down loss the the to to by expect same-store mainly in quarter in losses with XXXX, lower

We businesses XXXX organization. as well Franchising in similar technology and to and single across performance-based executive several to expect costs as Mexico Corporate late in compensation XXXX. expected increase XXXX mid early high are lower-than-normal the leadership will new generate results digits, additions the reflecting to investments XXXX higher and

tax and rate be revenue will to XXXX. consolidated count quarter, first should XX% EBITDA share fourth in Interest the expense, quarter total of mid-teens to down the in margins the the year-over-year, adjusted be range. with similar X.X% For

to be payments reduction. top and dividend continue the allocation, priorities capital Regarding debt

a size relatively a Given debt paying and on priority. the is portfolio pressure down to the top ratio flat leverage revenues, maintain

corporate Group Starting Mitch on be earlier, Over the yesterday. Touching long-term, ratio. we to quickly UPBD. changed target new the as to under effective the a Upbound will February shares Monday, our NASDAQ change, X.Xx continue mentioned ticker, on on a name XX, became debt-to-EBITDA listed

was In as our summary, our results. a for as customers year financial XXXX challenging well

those lower in our the impact practices, the and have delinquencies in seen our We and losses with risk account adjustments underwriting our of demonstrated portfolio and identify ability both adjusting throughout segments, to year. we’ve management

a and strong have cash flows. balance strong We sheet generate

a our uncertain We and core unified remain have synergies. to cross-brand support practices consumers. will macro in opportunity especially The realizing leveraging an XXXX, direction, best with and further operational businesses environment for our strategic

deliver However, disciplined resilient we a a growth. that we approach believe long-term can sustainable business with have

for your morning. time Thank you this

We your will questions. now turn the call over for

Operator

Griffin Instructions] first Bobby comes James. from the question Our with Raymond [Operator line of

Bobby Griffin

questions. comments Thank want on Acima I XQ. the around to Good first follow-up morning, my everybody. taking you for

correctly, to think the heard get easier, down guess, I starts I in it, you to trends, low The similar so comparison GMV call it’s XQ XQ. XXs. I though

curious given down, but why mean we’re shouldn’t to I of still maybe less least sequential So just some recovery, see at type throughout minus that down, growth we starting XXXX? GMV lap XX%

Fahmi Karam

to Yes, low or in Hey, I the Thanks morning. really for mid-XXs. be was trends the Fahmi. similar question. the Bob. Good This going comment is to is there be the to it fourth quarter. don’t expect

some down, you’re in quarter it first started of despite changes the at the But first of that of quarter, changes making we mid-teens underwriting but quarter last I’ll full year-over-year year-over-year. in take be We XXXX. made of the It the in first it effect year. So part some right. it, will the be call the beginning down didn’t will

Mitch Fadel

Yes.

good some here. you So have – Mitch morning, Bobby.

the those comps You to start – some change. have of

still it when down, we through in So go mentioned down think, be in the as of quarters fourth would his And will be we it the Fahmi territory. less, back but the being as positive comment. third year, comments prepared a I see was and also then point

quarter, little and better yes, fourth bit by in positive quarter like the set a along a way, then of mid-teens and each that we’re kind it it’s gets So a we in territory. the negative – third the quarter first

Bobby Griffin

the if they sourcing guess, priced the inflation started needed to break given of that categories where in And kind you lower of that see had in your of in kind the these have you rental And consumer durable Mitch, target on this seen of a products, inflation massive see basically actually consumer, kind durable starting a secondly, that Okay, even you pass Are demand across I to certain Because that’s we’ve is level of some helpful. you view that move to sourcing products, of to products. some I where breaks just starting customers? prices through happened? the all base, cost? out have can

Mitch Fadel

Yes.

absolutely, think has. I it

We’re back lot. a up to went course, of – they

it electronics. have years. We’re for times to when back to so deflationary Electronics many deflationary been comes

So newest with day from come they out starts X. deflating some

during furniture course, than in down Really, changed sure. now that for severe a for dropping categories but to pricing appliances honestly, much and have back some others. not to drop quite so reductions, furniture, things years in of Of some all We’ve but we’re had pandemic, yet, more couple seen electronics electronics. even the

seeing So some we’re that yes, I that deflation business of XXXX. help in our will think

Bobby Griffin

Okay. if I the turned would off decision leverage excess share Or the that? things. look at think you’re target? kind XXXX. you until like there of about we for I get a me, it for kind closer know But multiyear any target of on still we you And guess, what should is even plan basis, above to if or is of just on cash lastly understand the then, game repurchases side just

Mitch Fadel

are opportunistic Yes. nature. are going be say in to turned they I wouldn’t off. They

the debt leverage flow slightly able maintain maintaining the focus given to mentioned, our free paid be will EBITDA. I around just ended of flat level the cash given to of don’t ratio that million And year. in XXXX, drop on, But over we up that leverage We ratio We’re where year pressure very in think year-over-year. we is to get XXXX. to on to focused kind $XXX our as I in this

So still paying debt priority. top that down a is

Bobby Griffin

all Best you. year. the detail. I of luck Thank appreciate this

Mitch Fadel

Bobby. Thanks,

Operator

Haas comes question of from next Jason Bank Our the America. with of line

Jason Haas

thanks and my questions. morning, good taking Hey, for

the back case, acceleration? what get anything think looking the gives the by on through don’t of be sure if confidence multiyear I’m to if don’t just is much aware eased basis, a year. we on that that like or think get if I see Just that of else see that some is that, you they you’re will follow-up Because should second compare not that I the you at that’s GMV, X-year will an the we there to to basis. year? and a acceleration the positive on Acima on half confidence the least wanted

Mitch Fadel

Yes.

XXXX But comps over years, that XXXX I and things other right, underwriting the of year, going multiple tightening the fourth quarter though different see flat. standpoint. out. certainly from seasonality in you when kind of years, the But think course, up we’re because pretty so a times at you’re even look you’ll flattened had was of the trend of we’re

be numbers to in huge and you digits Jason. So based but end not there, we comps conservatively but and years. they it multiple out, – see be third We come do it the on some we what still put up fourth trend we with low The we GMV, will the years are positive to multiple we mid-single our could quarter, way going in trend positive is believe.

Jason Haas

Got segment if about was I it. That’s a And Acima benefit it from as – yet. when curious, will benefit great. you might That expect more? I’m sounds when the follow-up, happen? Mitch, do the not you makes could segment credit Rent-A-Center seeing that, sense. like that do you you’re talk then it see tightening really much curious more or And think we

Mitch Fadel

retail little the to goes pay pay retail fees interest partner. on have in we because look a on depends lenders more little rates strong, is our – past seen not haven’t it willing rate the fees not said as been remaining willing at almost And things to where downturns like We’ve merchant seen depends cycles I we of that. some we and us seen partner that immediate. was bit it in they’ll unemployment of yet, we hasn’t think the Yes, recent the to question. it. larger comments because up how significant and But to much. or the ones, good certainly like trends, above – We’ve it’s a When just so it

we – nothing little, So but are seeing a large certainly, yet.

or vintage X, are means of bit are a a top which scores little little XX% all rates Like Our like haven’t point increase. at the coming approval different of coming up Acima, at scores we our underwriting showing in, a customers loosened in. especially our an and

forecast a year. we’re of it We in So our have for seeing little. don’t any this

all for that’s XXXX. us in upside So

part get significant And Acima your in noticeably, it level the it will XXXX. see yes, of to presuming does second question, think I a more

not people business like is it’s They the when anyhow. waterfall It’s I mean, Rent-A-Center don’t directly Acima volatility a have just Just rent because does. with pretty portfolio go consistent lenders not in And a their that in – aligned to above center. us.

see think yes, Rent-A-Center. more would I Acima than it So of

Jason Haas

you. furniture I or the guess, other performing consumer better anything versus mattresses Acima than one could is Thank categories, you if squeeze others look and both was and worse And if Great. electronics by curious more question. I Rent-A-Center and in like I category, there by noticeably business? if

Mitch Fadel

Yes.

laptop, at the things, more items, – things to replace ‘XX items much, pull in working pull in replace really there whey big other Jason, forward not a the they of forward wasn’t are was appliances the break, from as ‘XX think the space. certainly in and a I really pull people least comes forward for computers their appliances, were as because it our home. they I think, down furniture That’s then customer. people more. just start But home Other

pull forward furniture. was in real the So

some at And there weakness a that other compared look seeing bigger forward. furniture. where wasn’t wheel Acima’s categories You not tyre like pull we’re and in to where

really So when – stands comes comes pull-forward it it’s to a furniture in furniture stands it comment, business alone. by itself when really our

Fahmi Karam

has And do. our that product we we comment shifted, throughout gives that the going to categories to grow years mix shift earlier that at confidence kind of can the back ability Acima our the us is also

and you Mitch electronics about talked X% those if XX%. Acima as auto, we are jewelry look on a from year-over-year. GMV So standpoint, down at only being But and mentioned, down

helps. So the mix also shift

Jason Haas

That makes Thank it. you. sense. Got

Mitch Fadel

Jason. Thanks,

Operator

from Vincent the comes with of Caintic Stephens. question line next Our

Vincent Caintic

questions. taking for Thanks my morning. Good

So look nice name the brand Investor to changed forward and Day.

that, if the touch might name in just you strategic shifts on maybe or any there Thank addition that to that? is you. as changed, any, changes to of So brand wanted be part seeing

Mitch Fadel

bit. morning. a And competition loan about a new this We it’s loan with you out the product we things. talking lease products go product mentioned away a I new to say products, there to paves few products the we’re already on a kind think strategic up has move little our standpoint. Sure. when that from Vincent, along of Good know some of

So we certainly the at point products of the credit loan and at move kind of in as of sale. products part looking those we’re That’s the up strategy.

of model, certainly of stages bunch that’s in not of whole We’re like and way shared looking where segments we’re part the a segment I big the best early create in that. third road lending both the we and a strategy. down But a moving shared practices here the deckchairs at The that can sharing add the adding – the people services some in around where mentioned. service again, shared for just model service products

marketing underwriting shared that an really on it’s the sharing products, an impact really but – of lot data a services, helping a and collections collect Rent-A-Center more as well, make those So can that and the Acima from pick the front. standpoint, up

kind there Upbound would way. able practices the best gotten along each we where the the excited services, and of a other – in products. to about a us route – financial best forecast, strategy it’s the just holding was right the to to which we the are as at some synergies, and do some some anyhow, for it’s, things level, I and build some we getting together. off are those as bit said, And new look we but think integration it of feed and model, in our taking be of in those are – road be So this. is really this shared our into company time synergies matter the been companies the practices really Nothing of well to at like quite starting set year synergies work last certainly advantage down there the really thought be And we do

Fahmi Karam

a to I Yes. will bit. Vincent, that Maybe, little add

of – assessing in it’s the are update Day. opportunity it, part especially stages to are evaluating timing, strategy, know more around us. will our of you still We and we Investor and early for we approach as an and the able We be on

we We we journey. customer database help that customers kind of so with, the and monetize have payment of have have ability financial millions upward history with, our kind to that move their of in dealt them

have able to customers core typical are, some about who our no get or us, think they either bad those typically for you have we and actually credit are products. But with history of If them. not lending credit

think And payment as stickier to to the traction the of of then incremental It history, products. behind the potentially merchant second with the piece, And Mitch will side a the that. on medium-sized have be able honestly, makes data lot sales. as on especially well. and partners, offer small and We said, We our with it get us them them businesses it have we LTO really point-of-sale. types those drives

for So, an definitely feel it’s like opportunity us.

for We you will as have we through more progress year. the

Vincent Caintic

GMV of your Acima Thank Thank year? GMV there you that. the Just need what example, or if side, following about or for sort improves is thinking And you second, comps, on just needs happen? that the to for approval engagement That’s throughout discussion, is just Great. wondering merchant Okay. more rates the you. I it helpful. as are assuming very GMV improvement, just if up the am changes for to on happen other

Mitch Fadel

question. good Yes,

to an to answer will back team enterprise are we always direct Bagull accounts, get Mike assuming as large have building your built months not is that, out, We although team. out as not us about I any opportunity ago that that’s a certainly joined that but six question,

are starting level that We standpoint. at conversations from an much to see better highest enterprise

are about year mean a merchants had do did excited in are going than the ago. grown we So, where has Acima we core active with we – But business, we way more now always that. the we have I

mentioned – from are growing can that ones Tyler charge better from get We to a out merchants, but more we that of standpoint. targeted lot GMV that things. of forth, we giving we we [ph] more merchants target in be a strategic merchants the already of adding approach, we Montrone kind than ones approach I have, of certain target to the not think of like just are Acima, how GMV believes now that more and we do ones so those So, target a us the now can standpoint. out are and won’t

targeted a strategy the of more it’s SMB. on So,

I momentum Of a it’s merchants. But the got It’s targeted also. we like standpoint. course, we that a not have think from mentioned. standpoint sales I from strategy, And enterprise strategy have lost have

minus are merchant base, our in for sitting GMV base our XX at merchant XXXX, So, though even grew. we

Of course, grow to pull merchant still a of growing. lot it’s is but that under furniture, the with all base GMV, actually pressure in forward

the probably part that’s biggest So, growing. still answer, of merchant is the Vincent, is base the

Vincent Caintic

change makes that there? rates And the any sense. Okay, there to any Thank or kind you. of is just approval assumptions

Mitch Fadel

of the as – just No, as same far I more mean more the customer.

have assuming changes are able the will improve of not just to higher last trade that loosen the be But that mentioned at no, to of underwriting, point rates are be things had without slightly starting up be months, I see we where a would But percentage a we able Obviously, approval couple we will that’s We in changing little that’s tailwind. assuming not bit or a tighten are XXXX. but down. ticked least to we that the so better a that customer assuming where probably we we behavior headwind get really more. if are not to

Fahmi Karam

decision by the really better into high our understand year optimize kind had it’s at rates we the first to whether product our channel data really dig or done losses really even level, rates. our level as year. look part at of engine, it to the approval conversion granular or and the our have a at try to We of in over lot, Vincent, merchant We had a very by category to

look merchants so and as penetrate continuously good we we And and those going try to get are tweak to those much to can. as GMV

because hard So, XX,XXX rates approval XX,XXX, merchants. strategy across just the at look it’s changes to

Mitch Fadel

side, And way due the of come gotten how those as brought But obviously, charts and don’t loss in past at are that lost really now looked had guys, three front of team, numbers basically, impressive as the and by lowest the fast at have the had the it’s since losses gentleman down – did. in we Vincent, work Acima Aaron not. him Tyler XXXX as mid-XXXX. on if they back know due name quickly and if it’s and past third, the presentation, I those a got When late they presentation, fast numbers you or in Aaron bad Stewart, early look as Yes. – on well Allred, we you XXXX, as and the those you as those and how

presentation, coming. down proved season anything past side certainly already, it and below those underwriting So, due at the back the team, tax a already with Fahmi jumped as – can Rent-A-Center numbers the we we down it on we now do during learned lot look in that soon back as you got July July, and are as course, and of

proved we we So, learned – lot. a

both We that than happened before are segments. better to in today us

So, that’s the brightness future. of the

Vincent Caintic

Very helpful. Thanks so much.

Mitch Fadel

Thanks Vincent.

Operator

Our next Markets. question Brad comes from Capital KeyBanc of line with Thomas the

Brad Thomas

I to morning. the you more for a the just topic Can think targeting are follow-up talk segments? expectations and full the you little bit skip/stolen. about I of the the ranges Hi. the last year that two larger losses, on, here want Good for

Fahmi Karam

Sure.

Acima’s So we almost about coming year-over-year. points XXX talked obviously, just basis down

range side our The into for So, it’s of business but virtual the at kind end, within business. high of the the that’s range. that at back quarter, for X% our

we was our down. consistent would quarter levels, higher fourth higher it year, like on we side, where than combined Rent-A-Center very the And to X% guiding we to segment we much be. Throughout to target where X.X% the our to in expect the And fourth with the expect so a that Acima range, X.X% It’s ended the quarter on that similar forecast. is see. in but to what obviously, than then trend

will elevated, will kind guidance quarter in and we Rent-A-Center sequentially, maybe we still and be X.X% bit it gets little things can be be if elevated the a first the a year bit go side. historical trends macro gets But further well gave to a better range. the on bit then will X.X%. better, little the the end but X.X% still than little it drive compared that of it And to So,

Brad Thomas

of as might forward, going three running to perhaps tougher going ask and really can right profitability revenues segment have. question most you then Really talk for good store think coming business. store how a But and and just what a I Mitch, helpful. that to of, is would to maybe, number you And invest stores bit The think wanted face revenue Thanks I Rent-A-Center evolve at still and you is years you off little outlook in portfolio want Fahmi. portfolio kill about about forward? the retailers the the a that

Mitch Fadel

Yes. Good question, Brad.

We opportunities count the are we comfortable some very think today. store are down think is where road. I there the

center we mentioned, cover lot We smaller think for range. in the still business, we footprint. have of the that. are XX% country e-com fulfillment the in from some But our mentioned the calls, and are are as cover past can We stores a the testing coming we

are the have could we now we with So, in it less average. square on do account probably footage comfortable

testing versus we that of categories technology some So, are space having have so in to as using search the to stores much showroom and forth.

going able bring itself to of be count X the the to, next down So, believe. we I But years, store will the about are same. estate, the cost real over stay

even finish above or XXXX this than sold XXXX when are basis higher in we to some per – XX% California where a sold we you But we basically we XX% large so. we can running overall year franchisee, store – think basis still an back of now. the growth, to are are on we on or out a portfolio stores We levels at

– the off Rent-A-Center. EBITDA Acima’s year XXXX for really go matter, but that to the go here we at lower XXXXs, and Acima course doesn’t lower see won’t a Rent-A-Center especially but although trough as we year So, for be for year, trough it and from in see a much of overall,

So, from low few we numbers, going will next opportunities whole But we you going to think believe footage Again, believe get as the I are square year-end forward, this getting a about we so overall an it as store coming it’s lot. don’t won’t But a We think at when change standpoint. have and least some count portfolio and get. maintain from lower and to finish XX% that back, this we weeks year we with therefore lose months growth levels, we it the fourth where standpoint, income year with over portfolio the XXXX flat into quarter. build some started tax go as expect pre-pandemic refunds, we then levels. especially

Brad Thomas

Great.

of kind season, it refund about talked have in We of questions. comes couple a tax

kind are from tax season for digits the particular I and average think your on that a view suggest the any refunds perhaps data business? year of double early how play out implications ago, would down will

Mitch Fadel

think a Yes. they I some you get Those done – yes, Brad, related wrapped this time. too necessarily in don’t I have know of up out I to that are our numbers consumer. long those come because not

consumer the at or XX% numbers. I that $XX,XXX the know are don’t not. overall XX% lower having to income I range So, those refunds is the $XX,XXX know that to

soon will We enough. know

know business. will are we when next in it seeing the of couple comes We in weeks the to what

we better So, is there, money, actually maintains portfolio yes, might Brad, the less less there news if will there is The payouts. good be – maintain than anticipate.

on lot a have business is other the there too. a good I hand, new put when season, tax On books, we mean the income

side, season, they it’s We go the payouts, down. does and – is go portfolio So, good to but on those. It don’t goes at down still to Rent-A-Center especially tend new enough well, still tax up. balance during on They not do the the for good all. margins business money don’t the the portfolio down we make

for payouts, a good if few less So, portfolio. there will is the that be

worried we on Rent-A-Center really less good where a difference there we because I we up if Acima could early especially for make don’t be to but lower, lower, not. I going really be end are payouts are a little on are those built they the are and about they at in whether of those side, how – little not lot a they don’t are wholesale it’s a see for there positive where don’t payouts. negative when early it, heck – that lower is a the we we if or a of will that’s So, unlike much where okay between Acima thing know payouts would us us. It a resale got

payouts – don’t think matter not, there a I not few the whole or a we the So, going at end it’s lot are of and day. less is whether to

Brad Thomas

Mitch. Thanks

Mitch Fadel

Thanks. Okay.

Fahmi Karam

Brad. Thanks

Operator

from of Chukumba Capital. Our line Loop the next comes Anthony question with

Anthony Chukumba

morning. taking questions. Thank Good so my you much for

was I retail of credit So, perspective, you but tightening it pretty GMV about a parse least as as you a demand last that it’s to at at like, had good your a out, bit in of probably Acima XX% the decline guys you sort the opposed proactively sounds year. think because to know year, in much difficult pullback doors how partners, from

about So, sort that? how think do you of

Mitch Fadel

pullback forward Even auto have a even I doors or Fahmi where wasn’t year pretty will did start chime talking about and there space, much wasn’t ‘XX Fahmi, you in furniture the good especially standpoint, where like was from a Yes. locations. a there was the count or of a can pull less but on in. each space We location ‘XX. the productive, jewelry

far the partner traffic We the side retail as you say it’s range XX-XX at underwriting, far versus half as mid down underwriting. But to are there and little more somewhere it as – you that’s reasons still high-single a based are on for just Maybe the underwriting. somewhere the if on is is it. half as digits than the traffic in in

Fahmi Karam

add in is would average ticket also also calculation. our the part size I of And product mix Yes. to that, it’s GMV

trended average year, ticket sizes throughout especially So, have year-over-year. the down

Mitch Fadel

mix… Because the of

Fahmi Karam

mix the has down. And also trended

It’s tough think top the said. I as Anthony, the at rank probably traffic those to it’s of if all three do parse combination you out, kind list. it, had But a is So, things. we of of to

Anthony Chukumba

you it. thinking perspective, it more have that? of from credit you Are I a just mean you am stabilized I of all? then at kind Got one sort all? underwriting losing sequentially. And Like are follow-up, tightening quick

Mitch Fadel

say, I above, yes, Anthony. would all the of

then continuously EBITDA higher ultimately are get to to better and number. a optimize of We better kind yield, drive and trying performance

So, it depends. of kind

very where have quickly Your we segments, There bottomed to risk so at the going. the in were the of lot tighten. now indications see have become conflicting lose much adjust It of depends a recession. will that ability if we feel early We level, we we losses, pretty to have signals your we is question do if is a how view question on on good of we granular around certain good GMV out.

rate period more in have just overall we that fact it’s than a to portfolio of given it the loss time. demand, been the short able size So, around such is decrease

Fahmi Karam

the of mentioned, had that Anthony, significant not a but are think any it. little to – I see down And starting we we seeing trade yet,

on gone Acima at a actually there bit is but hair the without side into underwriting, which mix. loosening customer – actually are rates approval have least a up Our means coming little different the

So, the are least we and our top in scores we mentioned I are, earlier, seeing they at the at score. look vintage XX% differences

moves not if I the approval us customer underwriting. some you help trade approval then a better should say, see into So, a without up that the creditworthy even can helps I for the And naturally coming with us down, – funnel, because rates a customer, think the changing coming little – of that that that bit into more funnel. rate can –

Anthony Chukumba

you. helpful. Thank That’s it. Got

Mitch Fadel

Thanks Anthony.

Operator

Craig-Hallum. with line from next comes of the Our Alex question Fuhrman

Alex Fuhrman

my computers some taking some and to Hey demand much driver It big furniture extent, the for of question. now tough guys. and like comparisons. in Thanks is really laptop creating very were XXXX sounds

As to you trough that lead be resume it’s appliances or trough being going going reaccelerate, weighted this other be categories do you at think demand likely you think you do really year, category think look towards helps is as drive year? Do is the out to growth? to what to the that to or more of you you furniture

Mitch Fadel

all think the Personally, will be it I categories. across

I year there that new games the Rent-A-Center There furniture, on have – systems get with last we forward every farther think wasn’t great laptops came on now side I pull helping mentioned. away the there same on, the that but quarter, some that is. from availability that is helpful, of the with it’s are out game we now

So, electronics will help us.

Christmas I pretty of obviously, and well is and furniture it is I really think business, spotty, I them, I it wheel But Acima a be in the across will in doing because tyre XXXX. the it Day Valentine’s be category will mean widespread. It’s – jewelry, just forth. specifically, all hit and timing. depending think think on so auto the bottom

categories. the be growth all end out, think our of I So, growth XXXX the exit on coming especially will velocity at

Alex Fuhrman

really helpful. Mitch. Thanks That’s Okay.

Mitch Fadel

Thanks Alex.

Operator

question-and-answer Fadel, today’s for session. I’d Mitch That closing like concludes to turn call back the remarks. CEO, to

Mitch Fadel

and appreciate company, us and thank in joining interest Thank you the opportunities. all future today. forward the to Liz We for exciting you, in more your look our we the developments, you talking with about

the will Of exciting City. calendar, Rent-A-Center. in forward on May you York formerly developments course, known to on call, we that Investor New on Upbound, our And here your but XXth, see talking we an earnings put the – updating and mentioned opportunities you we look we as before and Day, at be to that

have day, everyone. So, great a

Operator

you conference today’s concludes for call. participating. This Thank

may disconnect. You now

Upbound (UPBD) 23 Feb 232022 Q4 Earnings call transcript