UPBOUND GROUP, INC. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Growth Strategies: Focus on digital transformation and serving financially underserved consumers with new products like earned wage access.
• Acima Highlights: GMV growth, new website launch, in-store virtual lease card pilot, merchant growth with a 5-year agreement extension.
• Brigit Highlights: Strong revenue growth, subscriber base expansion, new product pilot (line of credit), focus on new acquisition channels and product innovation.
• Rent-A-Center Highlights: Targeting sales enablement efforts, piloting AI for sales coaching, national launch of Refer a Friend program, efforts to stabilize deliveries and return to growth.

Segment Performance

• Acima: Q2 2025 GMV grew 16% year-over-year, revenue increased 12%, adjusted EBITDA up 15%. GMV balance equaled Acima's Q2 2021 high watermark. Lease charge-off rate improved 30 basis points.
• Brigit: Revenue grew nearly 40% year-over-year, subscribers up over 20% year-over-year. Net advance loss rate was 2.6%. Adjusted EBITDA margin was nearly 28%. Subscriptions made up 70% of Q2 revenue.
• Rent-A-Center: Revenue was $467 million, down 7.1% year-over-year. Same-store sales down 4%. Adjusted EBITDA was $68 million, down 17% year-over-year. Lease charge-off rate was 4.7%, up 50 basis points year-over-year.

Guidance

• Adjusted EBITDA guidance tightened to $515M - $535M, non-GAAP diluted EPS guidance tightened to $4.05 - $4.40 per share.
• Q3 revenue expected $1.05B - $1.15B, adjusted EBITDA $120M - $130M, non-GAAP EPS $0.95 - $1.05.
• Acima expected low double-digit GMV and revenue growth, EBITDA margins better than prior year. Brigit Q3 revenue slightly up, low teens EBITDA margins, net advanced loss rate in 3% area.

Risks

• Impact of tariffs and trade policy on merchandise prices and consumer behavior.
• Legal and regulatory matters, including Multi-State AG matter and class action settlements, with ongoing accruals.
• Macro environment uncertainties affecting financially underserved consumers, such as resumption of student loan payments, changes in governmental assistance programs.

Question and Answer

• Q: Vincent Caintic on Rent-A-Center adjustments and long-term growth A: Discussed underwriting tightening impact, initiatives to drive deliveries, and long-term goal to return to growth with omnichannel approach.
• Q: Bobby Griffin on core customer stability A: Core customer stable but under pressure from high prices, unemployment low, some wage growth and tax policy positives.
• Q: Brad Thomas on Brigit outlook A: Brigit on track, exceeding expectations, cross-collaboration with other segments promising.
• Q: Hoang Nguyen on Brigit growth reacceleration and leverage A: Brigit growth strong, free cash flow improved, target to reach 2x leverage over next couple of years.
• Q: John Rowan on tax policy impact and legal matters A: Tax policy affects meaningful percentage of consumers, legal matters including Multi-State AG and McBurnie settlement, ongoing accruals.
• Q: Bill Reuter on Acima growth and acquisitions A: Acima growth not impacted by retail store closures, focus on internal growth and deleveraging before considering acquisitions.
• Q: Anthony Chukumba on Rent-A-Center lease charge-off rate and Brigit decisioning engine migration A: Rent-A-Center charge-off rate within acceptable range, Brigit decisioning engine migration prioritized but not immediate.