Upbound Group Inc Investor Call Transcript

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

Question: Taylor Zick - KeyBanc Capital Markets - Analyst : It's Taylor Zick on for Brad Thomas this morning. Maybe just to start on the revenue, expected to go pretty quickly this year, 40% to 50%, presumably will grow pretty quickly in '25 and '26 given the revenue dollar forecast. So can you help us think about how much of that revenue is core Brigit business versus how much is revenue synergies? And I guess, secondly, related to that, same thing for the adjusted EBITDA, the forecast calls for pretty significant margin expansion in '25 to '26. Again, how much is it related to the core business versus assumed synergies?

Question: Taylor Zick - KeyBanc Capital Markets - Analyst : Understood. That's super helpful. And then maybe just to zoom out, if I can. Mitch, you noted that there was pretty little overlap between Upbound and Brigit's customers, but the demographics are still relatively close. I guess my question is just what historically had led the Brigit customer not to go to Upbound services and I guess vice versa?

Question: Taylor Zick - KeyBanc Capital Markets - Analyst : Great. Yes, it sounds like a great opportunity. All of it there.

Question: Vincent Caintic - BTIG - Analyst : Congratulations on this acquisition. So first question, so very impressive revenue acceleration anticipation for 2026 at 70%. I was wondering how if you can give us a sense of your comfort level of getting to that and perhaps even achieving that, what makes you comfortable in that growth? And then maybe a broader aspect of that is going back to your 2023 Investor Day where you gave guidance for 2026, when we think about Brigit and then the Rent-A-Center and Acima should we be thinking about your guidance for 2025 and 2026 of Brigit as being on top of the guidance that you provided for the other two businesses for Legacy Upbound from the 2023 Investor Day? Or are there moving parts to that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 13, 2024 / 2:00PM, UPBD.OQ - Upbound Group Inc Investor Call

Question: Vincent Caintic - BTIG - Analyst : Okay. Great. Very helpful detail. And maybe a last follow-up question for Mitch. If you could talk about strategic vision. So when we thought about Upbound in the past, then the lease on segments, this certainly adds a lot of new capabilities. And I'm wondering what other new or interesting directions. When you think about Upbound, where would you like to be in terms of your different product sets, if we're now expanding beyond lease-to-own, where would you like to be? Where could you go from here beyond?.

Question: Vincent Caintic - BTIG - Analyst : Okay. Great, very helpful. Congratulations again.

Question: Kyle Joseph - Stephens - Analyst : Congrats on the acquisition. I guess just starting off, I just to want to understand the revenue model a little bit better for Brigit and obviously, subscription based, but is there also a an incremental, I don't know, call it, fear, whatever, for each transaction or each of the instant cash transactions? And then from a higher level, if you guys could compare it to some of the other kind of, call it, fintechs out there, the days of the world, just to give us a sense for how it compares?

Question: Kyle Joseph - Stephens - Analyst : Got it. Very helpful. And then just one follow-up for me. Just talk about the cash flow profile of Brigit and expectations for getting back towards that target leverage you guys talked about?

Question: Hoang Nguyen - TD Cowen - Analyst : Congratulations on the deal. Maybe I mean from a strategic standpoint, I think you guys have been expanding to more products to reach the consumer. I mean with [Concura] partnerships. I mean can you talk about what are the criteria for maybe partnership versus buy versus build? And I have a follow-up.

Question: Hoang Nguyen - TD Cowen - Analyst : And maybe I think earlier this year, the [CFP]put out a proposed remaking on earned wage access. So maybe can you talk about how Brigit subscription model positions the company in better light to the regulators versus maybe the other (inaudible) model that relies more on maybe tips.

Question: John Rowan - Janney Montgomery Scott LLC - Analyst : Just to say with the regulatory stuff for a second. Aside from the earned wage access rule, I like there's a lot of cross sections here regarding various proposals. Can you maybe discuss good, bad and different, how recent proposals for cutting overdraft fees or the personal financial rights data rule could affect Brigit and obviously Upbound down the line?

Question: John Rowan - Janney Montgomery Scott LLC - Analyst : So what about the personal financial data rights rule that was proposed? Obviously, you're not using bureau data. So I assume you might actually be able to improve the data you collect, if that rule were to be finalized. Am I correct in that?

Question: John Rowan - Janney Montgomery Scott LLC - Analyst : Okay. And then just lastly, you gave a number regarding the amount of consumers that are a sub-600 bureau score. And I guess I'm just trying to conceptually understand do Brigit customers graduate to a lease-to-own product or does lease-to-own product customers graduate to a Brigit type product? I'm just trying to figure out where they fit in a typical cohort of consumers.

Question: Anthony Chukumba - Loop Capita' - Analyst : I guess my first question is on the timing in terms of integrating some of, I guess, Brigit's tools into Acima credit underwriting, assuming that the deal closes in the first quarter of next year as you're hoping? What where the timing beyond that?

Question: Anthony Chukumba - Loop Capita' - Analyst : Got it. And then just a quick follow-up. So you bought Acima a few years ago and there was a rocky period there, right, just in terms of integrating that and some issues that you had there. Maybe it wasn't integration, maybe it's just our performance. But I guess what lessons can you take from the Acima experience to make sure you don't have any similar speed bumps with Brigit?

Question: Carla Casella - JPMorgan - Analyst : Most of my questions have been answered. But just on the LTM leverage, you said it will be 3.3 times using bright fiscal '20. Is that using brights -- Brigit sorry, Brigit's 25% EBITDA and $243 million of the cash payment at close?

Question: Carla Casella - JPMorgan - Analyst : Okay. Did you disclose their LTM EBITDA?

Question: Carla Casella - JPMorgan - Analyst : Okay. And but it's using just that cash portion of the purchase, the $243 million up front? Okay. Great. And then when you talk about the $70 million to $80 million for 2026 and the earnout at that level of EBITDA, will they trigger some of the earn-out? Or I guess, how does that earn-out work or the time frame of the earn-out?

Question: Carla Casella - JPMorgan - Analyst : Okay. Great. And then you mentioned they have the 2 million monthly active users. Have you been able to go into the base and see is there any overlap there with your existing customer base? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 13, 2024 / 2:00PM, UPBD.OQ - Upbound Group Inc Investor Call

Question: Carla Casella - JPMorgan - Analyst : Yes, that's great. And thank for clarifying that. I wasn't sure that's what you're referring to, the 10% earlier. Just two quick other questions. Have you talked to the rating agencies? Have any thoughts about whether there's a ratings risk here given the slight uptick in leverage temporarily?

Question: Carla Casella - JPMorgan - Analyst : Okay. And Brigit, the customer numbers you gave and the growth are impressive. Is there any -- do they have enough track record to say what's the average annual churn of a customer? Or the --

Question: Bobby Griffin - Raymond James - Analyst : I guess one follow-up question for me. I just wanted to talk a little bit about the cash analytics data analytics side of their business. How unique is that technology to Brigit? Is there anything else out there in the market on the lease-to-own side that's using that today. So I'm just trying to dive into what may be advantage of adding that into your approval process could get you on more of a reverse city-type aspect? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 13, 2024 / 2:00PM, UPBD.OQ - Upbound Group Inc Investor Call

Question: Bobby Griffin - Raymond James - Analyst : Okay. That's helpful. And just a quick follow-up. I mean, I know you guys do your business. We call it the unbanked consumer, too, it's one of the advantages of the model. But just collectively overall, what portion of the current business has the bank accounts where you would actually be able to integrate that cash analytics underwriting aspect into your GMV and your decision?

Question: Bobby Griffin - Raymond James - Analyst : Absolutely. That's very helpful. I appreciate the details and best of luck on getting this closed. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 13, 2024 / 2:00PM, UPBD.OQ - Upbound Group Inc Investor Call