UPBOUND GROUP, INC. Q3 FY2024 earnings call

Key highlights: Third quarter revenue nearly $1.1B, adjusted EBITDA ~$117M, non-GAAP EPS $0.95. Acima saw 19% revenue growth, GMV up 13%, lease charge-offs at 9.2%. Rent-A-Center had same-store sales growth of 2.6%, e-commerce at over 26% of revenue. Strategic initiatives: Acima reimagining customer processes, adding retail nameplates, enhancing marketplace digital capabilities; Rent-A-Center optimizing store count, leveraging technology for customer experience, and executing a franchise sale of 55 NYC stores.

Third quarter revenue was nearly $1.1 billion. Adjusted EBITDA was approximately $117 million and non-GAAP earnings per share was $0.95. Acima led revenue growth with a 19% year-over-year increase, having adjusted EBITDA of $75.3 million and a margin of 13.3%. Rent-A-Center had revenue growth of 1.1%, with an adjusted EBITDA margin of 16.3%. Consolidated revenue was up 9.2%, adjusted EBITDA was $116.9 million. Acima's GMV grew 13% year-over-year with a lease charge-off rate of 9.2%, while Rent-A-Center's same-store sales grew 2.6% and had a lease charge-off rate of 4.9%.

Full-year guidance: Revenue expected in the range of $4.2 billion to $4.3 billion, adjusted EBITDA in the $470 million to $480 million range, and non-GAAP EPS in the range of $3.75 to $3.90. For Q4, Acima expected low double-digits GMV growth, Rent-A-Center revenue expected low single-digits down due to franchise sale, Acima adjusted EBITDA margin slightly higher, Rent-A-Center lease charge-offs and margin similar to Q3.

Estimated settlement expenses of $7.5 million for legal matters with CFPB, New York AG, and Multistate AG, with the accrual based on probable and estimable accounting.

Q: On Acima's trade down activity, how about gross margins and losses?

A: Trade down brings lower margin but higher GMV. 90-day purchase activity is lower margin, but repeat business and marketplace can improve margins later.

Q: On Rent-A-Center's margins with higher losses, how managed?

A: Balancing losses with volume to maintain EBITDA margins. Losses expected to level off, delinquency rates similar to last year.

Q: On Acima's EBITDA margin outlook, timing of improvement?

A: Near-term gross profit headwinds, but losses expected to improve in a couple of quarters. Repeat business on marketplace also boosts margins.

Q: On Mexico business and Acima expansion there?

A: Mexico Rent-A-Center losses under control, paving way for Acima expansion. Acima's marketplace growth and AI leasability engine driving future growth.

Q: On legal settlement estimate?

A: Accrual based on probable and estimable accounting for open litigations.

Q: On holiday season and consumer trade down effect?

A: No big shift expected, trade down activity likely to continue but no major change in mix.

Q: On presidential election and shopping days impact?

A: Factored in guidance, but shopping days impact less significant as November leading up to Thanksgiving is strong.