UPBOUND GROUP, INC. Q3 FY2026 earnings call

• Leadership & Strategy: Welcomed new COO Scott Young and Head of Bridges Dave Chakraborty to strengthen execution and FinTech scaling. Focus is on shared data capabilities across brands to create a connected customer ecosystem.
• AI Integration: AI and advanced analytics are being deployed in underwriting, communications, and collections. Approximately half of engineer code changes now involve AI assistance; Rent-A-Center has launched an AI shopping assistant.
• Acima Performance: Despite lower GMV due to disciplined underwriting and macro headwinds, credit performance improved significantly. Lease charge-offs dropped to 8.7% (lowest since 2021), driving margin expansion.
• Strategic Partnership: Finalized integration with Boost Mobile for its 5,000 stores, embedding Acima’s lease-to-own solution into their POS platform to expand reach in the wireless category.
• Bridget Growth: Strong user growth (+27%) and ARPU increase (+4.7%) driven by premium tier adoption. Multi-year partnership with Experian for earned wage access is progressing well with thousands of sign-ups.
• Rent-A-Center Resilience: Achieved fourth consecutive quarter of same-store sales growth (1.8%). Sequential EBITDA improvement indicates stabilization. Amazon pickup/drop-off partnership drives incremental foot traffic (~50 visits/store/week) in corporate-owned locations.
• Capital Discipline: Prioritized portfolio quality over volume. Generated $121 million in free cash flow (double prior year), reducing net leverage to 2.4x.

Bridget: Revenue was $79 million, up 37% year-over-year. Adjusted EBITDA grew 59% to $15 million (margin 18.7%). Bridget represented approximately 6.9% of consolidated revenue ($1.15 billion). Paying users reached 1.84 million (+27% YoY).

Acima (ASEMA): Revenue was $585 million, down 6.5% year-over-year. GMV was $431 million, down 11%. Adjusted EBITDA grew 15% to $86 million, with margin expanding ~270 basis points to 14.7%. Acima represented approximately 50.9% of consolidated revenue.

Rent-A-Center: Revenue was $459 million, essentially flat year-over-year. Adjusted EBITDA was $66 million, up 4.9% sequentially from Q2 but down 11.3% year-over-year. Margin was 14.4%. Rent-A-Center represented approximately 39.9% of consolidated revenue.

• Q4 2026 Outlook: Consolidated revenue expected at $1.15–$1.25 billion; Adjusted EBITDA at $125–$135 million; Non-GAAP diluted EPS at $1.00–$1.10.
• Full-Year 2026 Update: Revenue range narrowed to $4.68–$4.78 billion. Adjusted EBITDA range narrowed to $510–$525 million. Non-GAAP EPS midpoint increased to $4.15–$4.30. Free cash flow guidance maintained at ≥$250 million.
• Segment Specifics:
  • Acima: Expects GMV to be relatively flat in Q4 vs. prior year; Adjusted EBITDA margin expected to finish the year up relative to 2025.
  • Bridget: Raised outlook. Annualized revenue growth ~35%; Full-year revenue normalized to $290–$300 million; Adjusted EBITDA $55–$65 million.
  • Rent-A-Center: Full-year revenue expected flat to down single digits due to store consolidation; Adjusted EBITDA margin expected at ~14%.
• Loss Rates: Q4 lease charge-offs expected to remain in line with Q3 levels (Bridget mid-4%, Acima ≤9%, Rent-A-Center low 5%).

• Macroeconomic Pressure: Elevated costs in essentials (groceries, rent, utilities) and high gas prices are pressuring consumer wallet share for discretionary durable goods like furniture and appliances.
• Underwriting Trade-offs: Disciplined underwriting has reduced GMV and top-line revenue, though it improves portfolio health and margins.
• Consumer Behavior: Consumers are selectively spending and pulling back on large-ticket items or downsizing lease sizes, impacting demand.
• Legal Liabilities: Ongoing multi-state attorney general investigation involves potential legal settlement payments that will impact cash flow and working capital in Q4.
• Portfolio Quality: While improving, loss rates remain a key variable, particularly for Bridget where net advance loss rates have ticked above 4% due to macro pressures and new origination volumes.

Q: Analyst asked about the drivers behind Acima's GMV decline and the trajectory for Q4. / A: CEO Fahmi Karam attributed the GMV drop to a mix of underwriting tightening (approx. 55-60% of the decrease) and macro factors (40-45%). Underwriting included lower approval rates (-300 bps YoY) and added friction to reduce fraud. Macro factors involved fewer applications and consumers acting rationally regarding affordability. He noted sequential monthly improvement within Q3 and October, expecting GMV to be flat in Q4 assuming a normal holiday season.

Q: Analyst questioned how management balances Bridget's robust user growth with a net advance loss ratio exceeding 4%, asking if this level is acceptable or if they aim to return to 3%. / A: CFO Hal Khouri stated comfort with the current posture, noting that while losses peak on new originations, the economics remain healthy with a ~4:1 revenue-to-loss ratio and >20% EBITDA margin. CEO Karam added that they accept slightly higher near-term losses to test new products and cohorts, supported by a 250 bps EBITDA margin expansion despite an 18% increase in marketing spend.

Q: Analyst asked if the Boost Mobile partnership with Acima could become a top-tier account given the 5,000 store locations. / A: Karam expressed excitement about entering the wireless category via this integration, which embeds Acima into Boost’s POS system. While avoiding specific financial projections per account, he highlighted the strategic value of onboarding such a large network and aimed to launch before Black Friday. He emphasized that the partnership helps offset top-line pressure through expanded merchant reach.

Q: Analyst inquired about the future size of the Acima portfolio given declining GMV and whether EBITDA would face pressure. / A: Karam explained that while the portfolio balance is smaller due to prudent underwriting, this is offset by significant margin expansion (270 bps). He viewed the current environment as requiring prudence over chasing volume. The addition of merchants like Boost provides confidence for stable Q4 GMV and potential growth into 2027, ensuring profitability remains strong despite a smaller top line.

Q: Analyst asked if the Amazon partnership at Rent-A-Center has shown benefits beyond awareness, specifically regarding conversion. / A: Karam confirmed operational benefits, noting a consistent increase of ~50 incremental visits per store per week across 1,500 corporate locations. While precise conversion tagging is still being refined, the primary value lies in introducing new customers to the brand and converting them into Net customers, leveraging the traffic generated by Amazon pickups and drops.