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.

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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.

Story Continues

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.

This article first appeared on GuruFocus.

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