Upbound Group Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brad Thomas - KeyBanc Capital Markets - Analyst : Mitch, thanks for all the help. It's been a pleasure working with you all the years. And Fahmi, congratulations on the new opportunity for you. I wanted to start with a tariff question and was -- you gave some very helpful commentary there about your exposure and some levers that you can pull. But I was wondering if you could just give us a little bit more color in terms of what, if anything, you're seeing in terms of price increases from

Question: Brad Thomas - KeyBanc Capital Markets - Analyst : That's very helpful. For my follow-up question, I wanted to ask about Brigit. It seems like it has a very exciting outlook just on a stand-alone basis, and again, lots to be excited about there. How are you thinking about the road map for potentially integrating it more across the business and synergies that you might be able to have from owning it and the timeline for that?

Question: Brad Thomas - KeyBanc Capital Markets - Analyst : Very helpful. Thank you so much.

Question: Bobby Griffin - Raymond James - Analyst : Congrats on a good start to the year. I guess, firstly, I wanted to go back to Brigit. It looks like the business, as you guys were talking about, is off to a great start. Can you help us understand a little bit of the seasonality of this business? You mentioned tax refunds, needless liquidity, but the EBITDA for two months was pretty good. Just kind of asking in the context if we take this two-month rate and even look at it at the changes in guide to account for the accounting differences, it still looks like the business is off to a very good start. So is there some seasonality we need to keep in mind as tax refunds roll off or different things like that?

Question: Bobby Griffin - Raymond James - Analyst : Okay. That's helpful. I appreciate that. And then, maybe secondly, kind of a different topic, but just the call-out of the test or the expansion of Acima in Mexico. Can you unpack that aspect a little bit more, just kind of how you go about that, balancing the upside scenarios, obviously, but with the risk of -- from the loss ratios or kind of going into a new market with a new product? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 1:00PM, UPBD.OQ - Q1 2025 Upbound Group Inc Earnings Call

Question: Bobby Griffin - Raymond James - Analyst : Very good. And I'll add my congrats, Mitch. Best of luck in retirement. It's been great working with you, going all the way back to my research associate days. And Fahmi, look forward to continue to work with you in your new role.

Question: Hoang Nguyen - TD Cowen - Analyst : Best of luck to your retirement, Mitch, and congrats on the new role, Fahmi. I just want to touch a little bit on Brigit. So it looks like revenue growth in 1Q was about 35%. I think in the original plan that you guys laid out, that calls for acceleration in revenue growth maybe towards the later part of this year and next year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 1:00PM, UPBD.OQ - Q1 2025 Upbound Group Inc Earnings Call Now that you have had two months of looking into this, I mean, can you give us a little bit more color on the plan and how you guys are going to accelerate growth in Brigit going forward?

Question: Hoang Nguyen - TD Cowen - Analyst : Got it. And I mean, as you guys cross-sell more between Brigit and, I guess, the lease-to-own business, I mean, is there an argument to be made that it's going to, I guess, reduce the cyclicality of your overall business? And can you give us some of the timeline of that cross-selling efforts that you guys are going to roll out?

Question: Hoang Nguyen - TD Cowen - Analyst : Got it. Thank you. And best of luck to you both.

Question: Anthony Chukumba - Loop Capital - Analyst : Good morning and Mitch, thanks for all your help over the years. It's been great working with you through good times and bad. And Fahmi, congrats on the promotion and look forward to continuing to work with you. And also congrats on the strong start to the year. So my question -- so first question, you mentioned in the Rent-A-Center business, sort of exiting or cutting back on some lower-margin products. What specifically were those products and why were they lower margin? I'm assuming it's like just higher lease charge-off rates, but if you could just give a little bit of color on that?

Question: Anthony Chukumba - Loop Capital - Analyst : Got it. And just to confirm, so essentially, what you're saying is because that Acima customer is generally a higher income customer, then if they're approved for a mobile phone, there's probably going to be a lower lease charge-off rate because they are a more well hosted customer. Is that the right way to kind of think about it at a high level? I don't mean to belabor the point.

Question: Anthony Chukumba - Loop Capital - Analyst : Well, for whatever it's worth, I'm sticking with my iPhone 14, but thanks for that.

Question: Anthony Chukumba - Loop Capital - Analyst : Got it. Thank you.

Question: John Rowan - Janney Montgomery Scott LLC - Analyst : Mitch, I'll offer my congratulations on a good career. It's certainly been quite a long time, and it's been a lot of fun.

Question: John Rowan - Janney Montgomery Scott LLC - Analyst : So just one -- I guess, one housekeeping question first. Just looking at kind of the non-GAAP table and what goes back into it, where should we expect things to change going forward? I'm assuming, with the CFPB matter settled and obviously the Brigit transaction behind us, those two line items are significantly reduced or kind of go away entirely. It's one of the bigger chunks out of the special items that were called out.

Question: John Rowan - Janney Montgomery Scott LLC - Analyst : Okay. And then, just maybe one other kind of slight angle change on the tariff question. I've been around long enough to know that there has always been a waterline where an item requires financing, right? It used to be $300, right, where anything below $300 was really more of a cash purchase for your customer. Above that really required some type of financing. Is there any possibility that tariffs, whether or not they cause price inflation of goods can bring customers back into the fold because they require financing now? And maybe $300 number is a really old number. Is there kind of an updated number where that cash purchase line change -- that cash purchase line is for the consumer?

Question: Bill Reuter - Bank of America - Analyst : Hi, good morning. Two hopefully quick ones. The first, the 70% to 75% of products assembled in the US, I was wondering if that was specific to Rent-A-Center or if that was across the industry. And I was kind of wondering whether you had talked to your customers on the Acima side and knew whether some of them were manufacturing more in China and may have indicated that they will be pushing through price increases.

Question: Bill Reuter - Bank of America - Analyst : All great to hear. And then, secondly, given the integration of Brigit, would you say that you're currently kind of in a period where you're not looking at much M&A as you kind of move towards that 2 times target? And that's all for me.

Question: Bill Reuter - Bank of America - Analyst : Great. Thanks again.

Question: Carla Casella - JPMorgan - Analyst : Hi, thanks for taking the question. I'm sorry if you answered this. I had to jump on a few minutes late. But my question is related to the early buyout, the trend in Q1 versus last year. And as we're kind of starting to near the end of the tax refund season, any color you can give us on what you're seeing?

Question: Carla Casella - JPMorgan - Analyst : Okay. Great. And then, just any additional consumer trends either pre-tariff, or are you seeing any major differences between your stores and your partner stores in terms of just traffic?

Question: Carla Casella - JPMorgan - Analyst : Okay. That's great. And if I could just have one follow-up from Bill's question, maybe it sounds like you've got a lot of internal opportunities, collaboration for growth. Any new wins or losses we should be watching for potential for '25, '26 on the Acima side in terms of customer wins or losses?

Question: Carla Casella - JPMorgan - Analyst : Great. Thank you.

Question: Kyle Joseph - Stephens - Analyst : Hey, good morning, guys. Most have been answered. But just want to get your thoughts on underwriting. I know you addressed, on the Rent-A-Center side, some tightening last year or maybe end of '23 that seems to be having its desired effects. I know on Acima, I think you guys tightened all the way back to, was it '22? But just give us a sense for where you are on underwriting, given kind of some of the macro changes we've seen.

Question: Kyle Joseph - Stephens - Analyst : Got it. Thanks for fitting me in, Mitch. Enjoy your retirement and finally look forward to working together still.