Upbound Group, Inc. (UPBD) Earnings

Management highlights

### Strategic Focus & Portfolio Strategy - Core priority is redefining customer lifetime value via a unified, data-driven approach, with enterprise-wide personalization and cross-brand engagement to drive cross-sells, upsells, loyalty, and sustainable profitable growth - Diversified complementary portfolio strategy prioritizes disciplined balance sheet management, deleveraging, and selective reinvestment for long-term value ### Bridget Segment Updates - The line of credit pilot is progressing, with a broader rollout planned that prioritizes unit economics, customer outcomes, and long-term value - A multi-year partnership with Experian was launched in May 2026 to offer Bridget's earned wage access product to Experian Money Plus members, expanding Bridget beyond direct-to-consumer into embedded financial infrastructure and opening a new revenue channel - Cross-selling opportunities across Upbound's other segments are gaining traction, driving incremental customer growth ### ASEMA Segment Updates - The fully deployed Wayfair checkout integration is live, and a strong pipeline of new merchant partnerships is expected to drive GMV growth by Q4 2026 - Underwriting tightening actions implemented over the past year have successfully improved portfolio quality and loss performance, validating Upbound's data-driven risk management approach ### Rent-A-Center Segment Updates - A company-wide store footprint optimization effort was launched to right-size the store network, improve operational efficiency, and boost long-term margins; 69 underperforming stores were closed in Q2, with customer accounts merged into nearby locations - The Amazon partnership for in-store Amazon order pickup and returns is fully deployed across ~1,500 corporate-owned locations, driving higher foot traffic and improved brand awareness - Management is testing customized operating models by market, including shared logistics, adjusted store sizes, and varying labor structures to improve efficiency ### Consolidated Financial & Capital Allocation Highlights - Consolidated Q2 revenue was $1.2 billion (modest YoY growth), adjusted EBITDA was $127 million (YoY decline driven by timing of Bridget marketing spend and higher Rent-A-Center fixed costs), non-GAAP diluted EPS was $1.07 (4% YoY decline) - Cash generation was very strong: net operating cash flow was $123 million ($97 million YoY increase), free cash flow was $84 million (up from negative $10 million YoY) - Capital allocation priorities: maintain the quarterly dividend of $0.39 per share (7.5% yield), prioritize disciplined deleveraging targeting a long-term leverage ratio of 2x, and selectively reinvest in technology modernization, data platforms, and digital capabilities to improve underwriting, personalization, and operating efficiency

Guidance

- Full-year 2026 consolidated revenue guidance is narrowed to $4.7 to $4.85 billion; adjusted EBITDA guidance ($500 to $535 million) and non-GAAP diluted EPS guidance ($4.00 to $4.35) are reaffirmed - Full-year 2026 free cash flow guidance is raised from $200 million to $250 million, driven by stronger-than-expected working capital performance and credit results - Bridget full-year 2026 guidance is unchanged: revenue of $265 to $285 million (over 30% annualized growth), adjusted EBITDA of $50 to $60 million, with net advance loss rate holding around current 3.6% levels - ASEMA full-year 2026 guidance revised: GMV and revenue expected to be flat to low negative single digits YoY; full-year lease charge-offs now expected to stabilize below 9% (below prior guidance of ~9.5%), and adjusted EBITDA margin is expected to improve YoY versus 2025 (up from prior outlook) - Rent-A-Center full-year 2026 guidance revised: revenue expected to be flat to down low single digits YoY; adjusted EBITDA margin expected to remain relatively flat versus 2025 - Q3 2026 consolidated guidance: revenue of $1.05 to $1.15 billion, adjusted EBITDA of $105 to $115 million, non-GAAP diluted EPS of $0.85 to $0.95 - GMV growth expected to improve sequentially in Q3, declining low to mid single digits YoY, before returning to YoY growth in Q4 2026 across segments

Segment performance

1. Bridget: Q2 2026 revenue of $71 million, 37% YoY growth, contributing ~5.9% of total consolidated revenue. Adjusted EBITDA was $11.8 million, with an EBITDA margin of ~16.6%. Paying users reached 1.7 million (30% YoY growth), monthly ARPU increased 6.3% YoY to $14.30, and net advance loss rate held steady at 3.6% within expectations. 2. ASEMA: Q2 2026 revenue of $604 million, a 2.5% YoY decline, contributing ~50.3% of total consolidated revenue. GMV was $466 million, an 11% YoY drop. Adjusted EBITDA was $98 million (5% YoY growth), with adjusted EBITDA margin of 16.2% (117 bps YoY improvement). Lease charge-offs improved 50 bps YoY to 8.8%. 3. Rent-A-Center: Q2 2026 revenue of $466 million, contributing ~38.8% of total consolidated revenue. Achieved 1.6% YoY same-store sales growth (third consecutive quarter of growth). Average portfolio value per store increased 3.5% YoY. Lease charge-offs were 5% (30 bps YoY increase, within target range). Adjusted EBITDA was $63 million, an 8% YoY decline.

Risks & headwinds

- A cybersecurity incident in Q2 resulted in unauthorized access to non-sensitive customer information, which was used to facilitate fraudulent lease-to-own agreements, causing $13 million in additional fraudulent losses in the ASEMA segment; the investigation is ongoing, though management does not expect a material long-term impact - Persistent inflation and elevated costs for essential consumer goods (groceries, rent, utilities, energy) continue to pressure non-prime consumers, reducing and delaying discretionary spending on large-ticket durable goods such as furniture and appliances - Credit conditions remain tight, and the uncertain macro environment could require additional underwriting tightening that would further pressure near-term GMV and revenue growth - Competitive pressure for high-quality consumer loans has intensified amid tighter overall credit and liquidity conditions across the industry - Store optimization efforts at Rent-A-Center could result in modest near-term revenue headwinds, even as they are expected to boost long-term margins

Analyst Q&A

• Q: What is the ROI target and expected payback period for Bridget's current marketing investments, and is there potential to increase marketing spend later this year? /

  A: Bridget's Q2 2026 EBITDA margin came in at the upper end of management's guided low-to-mid teens range, so performance and ROI are already in line with expectations. Management notes Q2 2025 was an anomaly when marketing spend was pulled back, so this year's higher spend is intentional to grow subscriber count and capture long-term customer lifetime value. Demand for Bridget's products remains strong, exceeding expectations, so management may ramp up marketing investment in the second half of 2026 if current performance trends hold.

• Q: What drives the expected Q4 2026 inflection back to positive GMV and EBITDA growth, especially at ASEMA? /

  A: Normal seasonal fourth quarter strength in consumer spending is a core driver of the inflection, which is more pronounced this year following the deliberate underwriting tightening implemented in the first half of 2026. Margin expansion from improved loss performance, disciplined operating expense management, and timing of marketing investments also contribute to the expected EBITDA rebound in Q4. Management is confident in the inflection back to growth heading into 2027.

• Q: How is Upbound managing macro consumer headwinds and what additional underwriting tightening could be needed if pressures persist in the second half? /

  A: Upbound's current guidance already incorporates a conservative underwriting posture and a tough consumer demand environment consistent with Q2 2026 trends. Portfolio health is currently very strong, with 50 bps of loss improvement at ASEMA and stable delinquencies across all three segments. Management will continue to monitor customer behavior closely and adjust underwriting as needed, and is currently trading margin for volume to preserve portfolio quality, which is reflected in stronger cash flow performance. The strong Q2 operating cash flow and free cash flow confirm that customers are continuing to make scheduled payments despite macro pressures.

• Q: What are the early results from Rent-A-Center's fully deployed Amazon partnership for in-store order pickup/returns, and what upside is expected? /

  A: The full deployment across ~1,500 corporate-owned stores has proceeded very smoothly, and early foot traffic results have exceeded pilot levels. The partnership is currently driving more than 50 additional foot visits per week per store, which is expected to drive long-term conversion growth as first-time visitors return for repeat visits. In-store customers have historically had better conversion rates, lower loss rates, and higher satisfaction, so the incremental foot traffic from the partnership is a long-term tailwind for Rent-A-Center profitability.