Upbound Group Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 1, 2025

There are 12 speakers on the call.

Operator

Thank you for standing by. My name is Roselle, and I will be your conference operator today. At this time, I would like to welcome everyone to the quarter one twenty twenty five Upbound Earnings conference call. All lines have been placed on mute to prevent any background noise.

Operator

After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Mr. Jeff Chestnut.

Operator

Please go ahead.

Speaker 1

Good morning, and thank you all for joining us to discuss We issued our earnings release this morning before the market opened, and the release and all related materials including the link to the live webcast are available on our website at investor.upbound.com. On the call today from Upbound Group, have Mitch Bedell, our CEO and Tammy Cuddham, our CFO. As a reminder, some of the statements provided on this call are forward looking and are subject to factors that could cause actual results to differ materially and adversely from our expectations. These factors are described in our earnings release as well as in the company's SEC filings. Upbound Group undertakes no obligation to publicly update or revise any forward looking statements except as required by law.

Speaker 1

This call will also include references to non GAAP financial measures. Please refer to today's earnings release, which can be found on our website for a description of the non GAAP financial measures and the reconciliations to the most comparable GAAP financial measures. Finally, Upbound Group is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties. Please refer to our website for the only authorized webcasts. With that, I'll turn the call over to Mitch.

Speaker 2

Thank you, Jeff, and good morning, everyone. As I start my thirtieth and final earnings call as UpBound CEO, I'd like to share with you my perspective on the state of our business. When I started in this business over forty years ago, the industry was just starting to transition from a highly fragmented and localized model to a more centralized and professionally run model. And that evolution delivered a host of benefits for our customers, including a consistent experience across all of our stores as well as unlocking the benefits of our scale, which enabled lower prices and enhanced services across our growing national footprint. That's the playbook that ultimately led to our IPO and powered our success thereafter.

Speaker 2

As the world changed, our customers changed, and we responded by changing our business as well. And today, Upbound is committed to our mission of elevating financial opportunity for all with a goal of becoming the financial platform that meaningfully and seamlessly improves our customers' financial lives. And I'll start on Slide four and talk just about how we're going to deliver and how we do deliver on that mission. We acquired Asima in 2021 to grow our ability to offer leases virtually, which dramatically expanded our TAM and enabled us to become a critical sales enablement partner for what's now over 35,000 retailer locations across the country. Since then, we've provided more than 14,000,000 leases to over 6,500,000 customers who do not typically have access to the traditional financial services ecosystem.

Speaker 2

Along the way, we've developed a proprietary and differentiated view of the underserved population, and we know we can leverage that knowledge base to responsibly help those customers with new products through our growing digital channels while delivering that same superior level of customer service. And that's why we added the Bridgit business. Their team has developed an innovative set of products that help customers save money, avoid fees, learn to budget better, build credit, and with more offerings on the horizon. Those products are built upon a foundation of data elements and risk insights from banking connections and cash flow underwriting technology, ultimately, what it means is Bridget has a real time, robust view of its customers' financial needs and can continue to build new products that meet and exceed those needs to help those customers live better lives. Collectively, our brands have a wealth of consumer intelligence of unmatched quality, depth, and breadth covering the non prime segment, and it makes for a really, really powerful combination that we can harness and unify between our businesses on an underserved population that, as I mentioned, doesn't participate in the traditional credit system and is looking for options.

Speaker 2

And this all allows us to be a stronger and more holistic financial partner to them and a more indispensable partner to our merchant roster. Over my forty years in the business, I've seen every cycle the market has experienced. And our business has weathered them all and emerged stronger on the other side every single time, primarily because we kept it simple. We focus on doing what's best for our customers. And when we do that, we earn their trust, their loyalty and their future business.

Speaker 2

Because of that commitment, delivered each day by our team, Upbound is stronger today than it's ever been. And with that background, I want to move to the key highlights from the first quarter of twenty twenty five as well as a discussion on the progress we've made on our priorities for the year, And then Fammy will share a more detailed review of our financial results and, of course, of our outlook. And after that, we'll take some questions. Let's move to Slide five and discuss some of the key drivers of our performance this quarter. At Asima, we carried last year's momentum into 2025 with GMV growth of nearly 9% year over year on higher applications and funded leases in this quarter relative to the first quarter of last year.

Speaker 2

As we mentioned before, Asima's growth comes from a highly diversified lineup of merchant relationships with the top 10 merchants representing about 30% of the total GMV. Asima achieved that growth, that 9% roughly 9% year over year growth, while improving its lease charge offs by 70 basis points from last year, leading to a step up in adjusted EBITDA margin of 170 basis points. I'm going to say it another way for emphasis.

Speaker 3

And just to put it

Speaker 2

simply, the theme has been on a tear since late twenty twenty three, and it just booked its highest ever quarterly revenue figure while concurrently delivering year over year improvements in EBITDA margins and lease charge off rate. Without question, the world is changing, but we believe Asimha's growing roster of over 35,000 merchant locations is a unique differentiator that enhances its presence wherever and whenever durable good transactions are occurring. On top of that, our direct to consumer marketplace and AI powered leasability engine unlocks leasing opportunities with unintegrated retailers where we do not yet have a formal relationship. These advantages are meaningful and sustainable, and it's why we expect to see low double digit GMV growth across the balance of the year, and that's on top of 17% last year. At Rent A Center, same store sales were down 2%, mostly as a result of two adjustments we implemented in the second half of last year.

Speaker 2

And we previously mentioned that we tightened our underwriting to protect our charge off rate, knowing that it would also impact Rent A Center's gross rate since that segment doesn't see the trade down benefit as quickly as the SEMA does. In addition to tightening up the underwriting, we removed higher certain higher loss products from our lineup to optimize efficiency and margins, which created a secondary headwind to top line growth. Overall, that's what drove the slightly negative to minus 2% same store sales. And these decisions did yield the expected benefit and produced the lease charge off rate of 4.6% for the first quarter, down 10 basis points year over year and 40 basis points sequentially. In a couple of slides, I'll highlight some of the key digital initiatives that we're rolling out at Rent Center to drive even more customer engagement and activity.

Speaker 2

Now Bridget joined Upbound on January 31, and its financial wellness solutions continue to resonate with consumers as we booked mid-twenty percent growth in both subscribers and cash advances versus the year ago period. On a pro form a basis, revenue for the full three month quarter was up 38% year over year. We're very pleased with those results, especially when you think about Bridget customarily dials back its marketing spend in the first quarter due to the positive impact of tax refunds on consumer liquidity. That growth also preceded the trials of our cross sell initiatives, which we purposely started as tax season was concluding. Bridges' emphasis on sustainable growth resulted in customer acquisition costs and a net advance loss rate within our expectations.

Speaker 2

So let's go to Slide six and recap our consolidated financial results in Q1. First quarter revenue of nearly $1,200,000,000 was a 7.3% increase from a year ago period, mainly driven by strength of the CEMA plus the addition of two months of rigid. Upbound delivered $126,000,000 of adjusted EBITDA, which was a lift of almost 16% against Q1 of twenty twenty four and adjusted EBITDA margins of 10.7%, which was up 70 basis points from last year. Non GAAP diluted EPS was $1 which was about 27% higher than a year ago quarter. Upbound generated free cash flow of $127,000,000 which is nearly 4x larger than last year's first quarter result.

Speaker 3

Each

Speaker 2

of these figures, each of these really strong figures exceeds the midpoint or the high end of our guidance range that we provided on our last call. In terms of lease charge offs, we finished the quarter at 8.9% for Asema and 4.6% for Rent A Center, representing improvements both year over year and sequentially. These are really strong results, and I'm pleased that upon delivering them during a period of macro uncertainty. And our customers, as you know, are seeing the same headlines as the market, whether it's tariff escalations or sticky inflation. On the other hand, unemployment is around 4%, which is below the pre COVID ten year average, and the average tax refund has been ahead of the prior two years, slightly ahead at least, which affords our customers a boost to either their spending power or their savings cushion.

Speaker 2

Additionally, there's been a nice pullback in gas prices at the pump, which is meaningful for lower income consumers. And on balance, our consumers are confronting that volatility with deliberate shopping and spending decisions. As I've seen quite a few times in the last forty years, a tougher macro environment gives us as many tailwinds

Speaker 3

as it does headwinds. Just look at

Speaker 2

the trade down impact that the SEMA is seeing right now. We've proven over the years that our business can be more and more relevant to consumers in times like these. Durable goods categories like furniture, appliances, and tires are often necessities that need to be addressed in the moment. And our value proposition of high quality goods and low payments, no long term financial commitment and tremendous flexibility can attract even more new customers to LTO offerings during uncertain conditions. Just go back and look at our results during the Great Recession in 02/2008, where we outperformed the market, grew our business and managed losses at our normal levels.

Speaker 2

Additionally, we have new products outside of lease to own with our new instant cash advances via bridges that can help customers manage their liquidity and avoid expensive bank fees. And this is how the full spectrum of Upbound Solutions can make a meaningful difference in people's lives and the current economic climate really amplifies the value proposition we deliver for our customers: convenience, flexibility, access to name brand durable goods on the LTL side and now liquidity solutions and financial literacy, smart alerts, credit building and the like, many financial wellness tools on the Bridget side. We're well prepared to support our existing customers while welcoming these new customers to our family of brands. With our existing offerings and a pipeline of new products coming this year, which is a good segue really to Slide seven, which discusses our strategic priorities for 2025 that we outlined a few months ago. Across the first quarter, we made great progress in our digital investments towards a stronger, more efficient, more unified customer experience, and we're continuing to build new connections between our segments towards our goal of providing a seamless set of financial solutions to our customers.

Speaker 2

At Asima, we debuted an upgraded product experience. The new design was informed by the latest intelligence and customer preferences and shopping habits, resulting in a more personalized and tailored experience for Asima's user community. That personalization is unlocked by the product's ability to capture more insights about the customer, such as their shopping preferences in stores and online, their favorite categories, which the app can then feature, and their leasing history so Asima's recommendation engine can suggest related products collectively, it means we can communicate more effectively and more efficiently with our customers to have them return for the next lease more quickly and drive GMV growth. I'm also pleased to preview a new initiative for ESEMA, which is to launch a pilot in the Mexican market later this year or early next year, depending on regulatory approvals. And ESEMA's expansion in New Mexico is a natural extension of the success it has achieved here in The U.

Speaker 2

S. In a market where we already conduct business through Rent A Center with millions of target consumers who can benefit with a low payment, flexible lease product to access durable goods. The theme is leveraging expertise of the Rent A Center Mexico team for in-depth visibility in the consumer spending and payment patterns, decisioning models and account management strategies along with operational support tied to the 130 store footprint we already have down there. Asimas' scalable platform, combined with Rent A Center Mexico's local infrastructure, creates a strong foundation for cost effective accelerated growth, and we look forward to updating you on our progress across the balance of the year. At Rent A Center, we are seeing promising early returns on our digital enhancements, which are designed to boost the conversions from shoppers to customers.

Speaker 2

These include the new Google AI search functionality on the core website, which is now returning search results more tightly aligned with our shoppers' intent. We also rolled out a new online chatbot to more intelligently guide customers through the shopping journey towards the right leasable item. And for when they're ready to apply for a lease, they will really appreciate our streamlined application flow, which is designed to deliver a more frictionless experience and minimize abandon. From an account management standpoint, we recently embedded Cash App payment capabilities, and we know Rent A Center customers will appreciate more ways to pay, especially considering it's already high penetration with our customer base. So really happy about adding Cash App payment capabilities.

Speaker 2

In addition to our continuing digital investments, enhanced collaboration is a paramount priority for this year, especially with the addition of Bridget. A key differentiator for BridgeT is its cash flow underwriting platform, which Rent A Center and Asima will test into over time. We believe that real time data will produce more approvals and fewer losses across the business. And right now, we're focused on introducing our Rent A Center and Ascima customers to Bridge It offerings through digital messaging and marketing collateral in our stores. We're just ramping up that effort, but over time, we believe we can deliver new customers to Bridge It at essentially no incremental cost, which will lower Bridget's customer acquisition costs and drive further growth.

Speaker 2

As always, our teams will continue to develop collaborative approaches to support our customers and reinforce transaction volumes. And before Tammy takes you through our segment results in a little more detail, I'd like to acknowledge how talented and dedicated our team is, and they continue to turn our aspirations into reality. And every day, our team's relentless focus on our customer helps bring our mission to life. And their commitment and motivation is second to none, and I'm really humbled each day to be a part of such a special group. I know I'm going to miss being part of this group.

Speaker 2

They're doing such a great job, and I sure appreciate each and every one of them. And with that, I'll hand it over to Tammy.

Speaker 3

Thank you, Mitch, and good morning, everyone. Let's now turn to the segment results and then discuss our outlook for the balance of 2025, after which we will take questions. Assema recorded Q1 GMV growth of 8.8% year over year, in line with our expectations and an impressive print given we are comping nearly 20% growth in the same quarter of 2024, resulting in approximately 29% GMV growth on a stacked two year basis. Ascima's GMV this quarter was the highest it's been in the first quarter since the pull forward in 2021, and it was driven by increase in applications of more than 10% year over year. The quarter started off slowly with a delayed tax season, but picked up meaningfully in March with double digit growth year over year, which continued into April.

Speaker 3

In the first quarter, the GMV growth was sourced from new merchants added during the quarter and also an impressive increase of nearly 80% year over year from our direct to consumer marketplace channel. Our sales team's success in onboarding new merchants reinforces our diversified lineup and minimizes concentration risk. And this quarter, our top 10 retailers represented just over 30% of GMV. Our largest product category, furniture, only represented approximately 40% of GMV in the first quarter compared to approximately 45 last year. Assema revenues grew 13.5% year over year, which was the fifth consecutive quarter of double digit growth.

Speaker 3

And adjusted EBITDA was up 31% from a year ago. Adjusted EBITDA margins were up 170 basis points from Q1 of twenty twenty four, driven by three main factors. First is the multi quarter run of strong GMV growth that is now producing higher returns as more of those customers are staying on rent longer and driving a larger portfolio. Second is that a seamless loss rate of 8.9% for the first quarter declined 70 basis points year over year and 10 basis points sequentially, which aligns with our expectations as trade down has given us the ability to tighten underwriting in certain high risk segments. And the third element also ties back to the elevated trade down levels that SEMA saw across 2024 and into 2025.

Speaker 3

We have highlighted that while those customers more often elect the earliest purchase option, which is a lower margin result for a SEMA, they also often come back for a second or third lease. And those repeat leases are more profitable than the first lease even if the customer elects the ninety day early purchase option each time. Despite that short term impact to gross margins, we were able to expand our EBITDA margins again this quarter consistent with our guide for the year. On Page nine, let's discuss our first quarter with Bridget. Since closing the deal on January 31, the Bridget team has maintained their momentum and ended the first quarter with over 1,200,000 subscribers, which is up more than 26% year over year and up over 2% sequentially, consistent with our expectations given the seasonal impacts of tax refund receipts, which reduced the need for liquidity solutions in Q1.

Speaker 3

ARPU or average revenue per user was $12.88 on a monthly basis during the two months following the acquisition, up nearly 6% from the corresponding period a year ago from a combination of user mix shift between Bridges Plus and Premium plans, improved revenue collection models and the contribution from expedited transfer fees. The subscription income made up about three quarters of Bridget's revenue, with the balance coming from the expedited transfer fees in the marketplace through which Bridget receives affiliate income. At quarter end, Bridgegate finished with approximately $49,000,000 of cash advance volume on the balance sheet after making over $335,000,000 in advances from the start of the year, a 27% increase from Q1 of twenty twenty four. The shorter duration advances result in capital efficiency, while enabling the team to quickly adjust underwriting and turn over the book within two or three weeks rather than months or quarters to manage risk in response to changing market conditions. For the two months following the acquisition, cash advance loss rate was 2.4%, defined as cash advance losses divided by total originations in the period.

Speaker 3

In terms of financial metrics, Bridget recorded $32,000,000 of revenue and $11,000,000 of adjusted EBITDA for the February and March ownership period, with top line results representing an increase of about 35% against Bridge's performance from the corresponding period a year ago. Let's move to the Rent A Center results starting on Page 10. Beginning this quarter, we combined our Rent A Center segment and the Franchising segment to align with our organizational structure and how this segment will be managed. Their results will be presented on a combined basis going forward. From a mapping standpoint, franchise merchandise sales will now be reflected in merchandise sales and royalty income will now be presented in other revenues.

Speaker 3

There was no change to the bulk of Rent A Center's revenue, which is rentals and fees. With that context, Rent A Center delivered revenue of $489,000,000 down 4.9% from the year ago quarter due to 110 fewer company owned stores after the consolidation and franchising efforts in the second half of twenty twenty four. This outcome was consistent with the mid single digit setback we highlighted on our last call. Same store sales were down 2% year over year, reflecting fewer deliveries in the first quarter relative to the prior year period, due primarily to our decision to exit certain product categories and tighten underwriting. Streamlining our lineup of lower profitability items will impact demand in the near term, but protect our margins in the longer term.

Speaker 3

In terms of the product mix, Furniture and Appliances represented approximately 66% of revenue, which was consistent with the year ago and sequential periods. Rent A Center's adjusted EBITDA was $72,000,000 down 14% from the first quarter of twenty twenty four due to less rental income, as I mentioned. As our digital efforts continue to transform our service model, we expect to operate more efficiently and over time reduce the fixed cost infrastructure. For the first quarter, e commerce represented approximately 27% of total lease to own revenue, up slightly from both a year ago period and sequentially. Rent A Center's loss rate finished at 4.6% for the first quarter, an improvement of 10 basis points year over year and 40 basis points sequentially.

Speaker 3

Our targeted tightening in the back half of twenty twenty four is benefiting the health of the portfolio, but in contrast to Asima, it has a bigger impact to the size of Rentacenter's portfolio. A CEMA benefits from trade down in real time at the point of sale, whereas Rent A Center has not realized this benefit yet. If the macro backdrop does deteriorate, Rent A Center could also see a trade down impact and an uptick in demand. Let's cover our liquidity and capital allocation policies on Slide 11. When the market is characterized by heightened volatility and uncertainty, it is reassuring to have a durable business model, strong balance sheet, reliable access to funding and bedrock principles for allocating capital.

Speaker 3

Coming off the holiday shopping season and supported by tax refund payments, our business generated over $127,000,000 of free cash flow in the first quarter, up substantially from $34,000,000 in the prior year. We are committed to investing for the future, but we are reassured that if we choose to moderate our growth, the business can generate meaningful cash flow. We finished the first quarter with $312,000,000 in liquidity between cash on hand and our revolver availability. Despite the expectation for continued growth at Asima and Bridget, we expect liquidity to improve across the course of the year, thanks to the cash generated from the Rent A Center segment. And while it is not expected to be needed in the near term, Bridge's Instant Cash Advance Receivable balance can deleverage opportunistically in the future to potentially upsize the company's revolver capacity.

Speaker 3

With the profile of our existing balance sheet, we are confident that Upbound can support our capital allocation priorities, which continue to focus on investments in the business, supporting the dividend and delevering. As for leverage, our net leverage ratio was approximately 2.9 times on March 31, up slightly from 2.7 times at year end, reflecting the closure of the Bridget transaction. Let's shift to our financial outlook beginning with the potential impacts of tariff changes. The introduction of the new tariff schedule did not directly impact our first quarter results. The turbulence associated with the implementation and the response by other countries has impacted market expectations and consumer confidence with potential implications for lower investment, limited hiring and higher inflation in the broader economy.

Speaker 3

In response, many of Rent A Center suppliers, which are the same for Asima's merchants, have diversified or are diversifying their global supply lines by shifting manufacturing to low cost, low tariff regions or even nearshoring their operations to Central America so they are better prepared for however the final trade deal is land. We are also assessing alternative suppliers who may be less impacted by potential tariffs based on their manufacturing and sourcing footprint. Overall, we believe Rent A Center's direct tariff exposure is modest. Furniture and appliances, our two largest categories at Rent A Center, over 70% of the expected twenty twenty five purchase volume is assembled in The U. S, with much of the balance sourced from Vietnam, Taiwan, India and Mexico.

Speaker 3

Our direct from China exposure is less than 20% of the year to date orders, and that volume is nearly all computers and gaming consoles where certain exemptions currently apply. Rent A Center's top suppliers in those categories are actively adjusting their supply chains in response to the targeted tariffs, which we expect will help offset any exposure to possible pricing actions. Let's spend a moment on the unique element of Rent A Center's model and how we are different than a traditional retailer. In this environment, inventory is critical, and Rent A Center has a natural buffer to potential tariff impacts to the floor inventory and any merchandise that is returned to be re rented. It allows us to meet demand and manage our margins without raising prices on most items.

Speaker 3

From a consumer behavior standpoint, Rent A Center's customers have historically returned rented merchandise at a higher rate in difficult times, mainly to protect the relationship they have with the brand. Rent A Center expects that will be a key factor towards mitigating its charge off rate while also maintaining inventory levels and creating new opportunities for re rentals. On the go to market side, we have two primary levers when originating a lease to own agreement, which are the weekly payment and the term to achieve full ownership. Each of these can be adjusted on the margin, meaning by $1 or $2 per week or by adding an extra few weeks at the end of the term to preserve the affordable access and price points that our customers prioritize while passing on any price increases. We believe these efforts will limit any potential pricing shocks and minimize the impact on consumer demand, while also still supporting our sales enablement efforts at our merchants during such an uncertain time.

Speaker 3

Our team has seen a version of this environment before, during the post COVID supply chain bottlenecks in 2021. Because of that experience and our long time relationships with our vendors, we are reacting with speed and precision to protect our customers, our merchants and our business during this period. Beyond our operational levers, we're also sensitive to potential changes in consumer behavior. We have not seen any slowdown in purchasing or payment behavior yet. The momentum we experienced in March continued in April with another strong GMV month.

Speaker 3

We will continue to monitor the environment, and we will carefully adapt our value proposition, our sourcing strategies and our underwriting accordingly. Just to be clear, we see this as an opportunity in the months ahead. If the trade policies result in real or perceived pressure on non and near prime household liquidity, which causes the lenders above us to tighten further, we expect to benefit from further trade down. Our Bridget business, which should also benefit from more consumers looking for liquidity or looking for ways to save money and or for budgeting insights. In terms of how it affects our guidance, these currents and countercurrents mean less visibility into the quarterly cadence of our results for the year.

Speaker 3

However, Asimha's momentum reinforces the resilience of our model and gives us the confidence that Upbound is well positioned to achieve the guidance for 2025 that we shared on our prior call. We had a very strong first quarter and are confident in our ability to successfully manage through uncertain economic times as we have demonstrated over the years. As a result, we are pleased to tighten our ranges and raise the midpoint of our full year 2025 targets for revenue, adjusted EBITDA and non GAAP diluted EPS. As we build towards the full year, we are sharing our initial view on the second quarter with revenues ranging from $1,050,000,000 to $1,150,000,000 adjusted EBITDA of $125,000,000 to 135,000,000 and non GAAP EPS from $1 to $1.1 for the quarter. At the segment level, we expect Ascima to deliver low double digit GMV and revenue growth with EBITDA margins slightly better than the year ago period.

Speaker 3

These charge offs are expected to remain stable sequentially. Rent A Center's revenue should follow the same seasonal sequential path as 2024 with a mid single digit step back in Q2 compared to Q1 with EBITDA margins down slightly sequentially despite an improvement in loss rates. Bridget's Q2 revenue will reflect a full quarter of ownership with expected mid teens EBITDA margins and a net advance loss rate similar to Q1. For Bridget, let me highlight a classification item. Their administrative costs will be reported in Upbound's corporate segment, which elevates Bridget's segment reported EBITDA results compared to the original guide, which at the time represented the business results on a stand alone basis.

Speaker 3

We implemented this reporting element for consistency with our other business segments, but these expenses will be counted as a deduction to Bridge's results when calculating the 2026 performance based earn out. Upbound original guide for Bridges this year was 25,000,000 to $30,000,000 of EBITDA. But with the reclass of certain expenses to corporate, the segment results should be 35,000,000 to $40,000,000 Again, this change is net neutral on a consolidated basis. As a result, our corporate costs will be slightly higher in 2025 than 2024 in the mid to high single digit area. Also at the corporate level, we are modeling one interest rate reduction in September.

Speaker 3

We expect the tax rate to be consistent with 2024 at approximately 26% and steady across the quarters, with an average diluted share count for the year of approximately 58,900,000.0 shares, which includes the shares issued for the Bridget acquisition. For the year, we are revising revenues up to be in the 4,600,000,000 to $4,750,000,000 range, adjusted EBITDA to be $510,000,000 to $540,000,000 and we're tightening our full year guide of non GAAP EPS to a range of $4 per share to $4.4 per share. The midpoint of our revised guidance compared to 2024 represents an increase in revenue of more than 8%, an increase in adjusted EBITDA of nearly 11% and an increase in non GAAP EPS of about 10% with no share repurchases assumed. We feel very well positioned today given our experienced team, our resilient business model, our underwriting expertise, diversified product offerings, a strong balance sheet and long experience serving the non prime consumer. Let's wrap up with some key takeaways.

Speaker 3

For our stakeholders, it is critical to recognize that this was a milestone quarter for our business. On the operational and strategic growth side, we closed on the Bridget acquisition and welcomed their team to the Upbound family. We added a sixth quarter to Astima's run of strong GMV growth, and we took targeted actions to spur Rent A Center's growth while delivering P and L results ahead of our guidance. At the outbound level, as previously disclosed, we successfully resolved the CFPB matter after their voluntary dismissal with Prejudice. This was a long standing regulatory matter involving Assema that we are pleased is behind us with no changes to our business or financial penalty.

Speaker 3

As I shift into the CEO role next month, I want to emphasize that our team is committed to staying on our strategic course, which is to be the holistic financial platform dedicated to the underserved consumer that seamlessly improves our users' financial lives and reduces their financial stress. Our fundamental priorities will remain hyper focused on delivering consolidated top line growth through combining our broad set of capabilities with our unwavering commitment to our customers and our merchants. We will also elevate our operational performance and our collaboration across segments to drive innovation and efficiencies in our products and processes. And finally, we will deploy capital effectively towards those goals and towards shareholder returns. Together, we believe we are well positioned to achieve sustainable value creation for all of our stakeholders.

Speaker 3

Thank you all for your time this morning. Operator, you may now open the line for questions.

Operator

At this time, I would like to remind everyone, in order to ask a question, press star then the number one in your telephone keypad. You will pause for just a moment to compile the Q and A roster. Your first question comes from the line of Brad Thomas with T Bank Capital Markets. Please go ahead.

Speaker 4

Hi. Good morning. And, Mitch, thanks for all the help. It's been a pleasure working with you all the years. And Tommy, congratulations on the new opportunity for you.

Speaker 2

Thanks, Brad. Thank you, Brad.

Speaker 4

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 suppliers to the Rent A Sensor stores and what you're expecting going forward?

Speaker 3

Good morning, Brad. Thanks for the question. So, a lot of uncertainty right now and a lot headlines around tariffs. And to date, we have not encountered any price changes at all across the board. And in certain segments or certain categories, TVs and even in certain appliances, we've actually seen a reduction of who we're buying today versus the same time last year.

Speaker 3

So to date, no price increases. Of course, that can change relatively quickly. But as of this morning, no changes to any of our prices. But I think also and just as important, we mentioned it in the prepared remarks is our ability and demonstrated track record of being able to adjust our pricing by the weekly payment $1 or $2 a week or even adding just a few weeks to the end of the term can make up for any price increases that we've seen in the past and we're confident we can pass that on again if need be. And also want to keep in mind that if it does happen and inflation does tick up, the benefits of our of the business model itself and some of the upside we'll see from more folks choosing lease to own, whether it's through RAC or Asima, as we said, we view it as potential upside to the story and to the guide this year.

Speaker 3

So we'll watch it very closely, we'll monitor it, and we'll be able to adapt as we see things kind of get finalized hopefully over the next few weeks.

Speaker 2

Yeah. Good morning, Brad. This is Mitch. I'd just add to some family's comments there. As he said in the prepared comments, you know, we expect any price increase to be pretty modest because something like 75% of the furniture and appliances we get today are made in The USA anyhow.

Speaker 2

Very little exposure really to China. That's mostly the game consoles. I think you said in your prepared comments, family game consoles and computers, which at this point are tariff exempt. And we and our suppliers are looking, you know, to put them together in The US versus getting them from China and all those kind of things. So it's pretty modest.

Speaker 2

Although on the other hand, as family mentioned, you know, keep in mind that when the dollar or 2 a week that Fammy was mentioning, we have to add a dollar a week to our rates, on average, that's a 4% price increase, and it's only a dollar to the customer, yet that covers 4%. If we had a month to our average term of about fifteen months with that seven percent one over 15. So if you had a month at 7%, you had a dollar at 4%. And also when you think about the fact that our margins on the Rent A Center side are pretty high, if you have a $100 price increase somewhere, increase in our average margin, You know, you know our pricing model, Brad, more like about two times cost is our cash price and two times cash price is our rent own amount, at least contractually for someone to take ownership. So you're talking about, if you get a hundred dollar cost, you're gonna have about $400 worth of revenue against it.

Speaker 2

So what we saw during COVID when supply chain got tight and we had to raise prices as costs went up, it actually helps same store sales and so forth. So you get trade down to Fammy's point plus actually some higher prices don't hurt and you don't eliminate people's affordability because it's adding a dollar or 2 or a month. So it's not going to affect us the way it would affect maybe traditional retail. And I guess the last point, you got to remember in this environment, our inventory, we have a lot of inventory and about half the inventory that we run on the Rent A Center site gets returned. So it's in our system about fifteen months on average.

Speaker 2

So all the inventory we have now really becomes our friend in this case and the cost is already there and it's going to be in our system about fifteen months. So our current inventory is our friend, as I said. So lots of reasons not to be near as concerned as maybe traditional retail.

Speaker 4

That's very helpful. For my follow-up question, I wanted to ask about Bridget. It seems like it has a very exciting outlook just on a standalone basis and again, lots to be excited about there. How are you thinking about the roadmap 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?

Speaker 3

Yeah, Brad, I would say, to your point, the results have been really good, better than even we expected to start off for the first couple months of ownership with revenue up over 35 percent, subscribers up 26%. And that is actually, as we said in the prepared comments, we have started email campaigns of introducing Rent A Center and Asima customers to the Bridget brand, but we kind of waited till after tax season had kind of gotten underway and almost finished up just to hopefully be more well timed as far as our our reaching out to those customers. So good progress there on track. As we said, we're gonna start with, you know, marketing collaboration. And then we've also started down path of some of the data collaboration and sharing data, especially around some of the cash flow insights that we've highlighted with Bridget and some of that proprietary modeling and just consumer transparency in their data and their information.

Speaker 3

So that's on the come. I do think you'll start seeing that maybe later in the year being something that we utilize across all of our brands to not only approve more customers, but also mitigate losses as well. So I would say we're on track from kind of the integration plan and still super excited about having them part of the outbound group.

Speaker 4

Very helpful. Thank you so much.

Speaker 2

Thanks, Brad.

Operator

Your next question comes from the line of Bobby Griffin with Raymond James. Please go ahead.

Speaker 5

Good morning, everybody. Thanks for taking my questions and congrats on a good start to the year.

Speaker 2

Thanks, Bobby.

Speaker 5

I guess, firstly, I want to go back to Bridget. 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 need less 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.

Speaker 5

So is there some seasonality we need to keep in mind as tax refunds roll off or different things like that?

Speaker 3

Yes, Bob, good morning. There is some seasonality, especially when it comes to the margin profile. Q1 is going to be the highest margin profile for the year. As we mentioned, you have a little bit less marketing spend given liquidity is pretty flush during tax season. So we pulled back a little bit on the marketing side.

Speaker 3

You also have seasonally low losses. So from a margin standpoint, the 35 percentage margins that we posted for the two months of ownership, that will come down. And we said that in the guide to call it mid teens in the second quarter. So there is some seasonality when it relates to kind of marketing spend and margins, adding subscribers as well. It's pretty flat Q4 to Q1.

Speaker 3

That's been the trend over the last few years that continued this year. But then you should start seeing it pick up post tax season. Collections are strong. And the collections have been good.

Speaker 2

In the first quarter, that

Speaker 3

helps Yes, low single digits. And so margins are good in the first quarter. We'll start spending a little bit more on the marketing side. You should see an uptick in the number of subscribers in Q2 and Q3.

Speaker 5

Okay, that's helpful. I appreciate that. And then maybe secondly, of different topic, but just the call out of the test or the expansion of the CEMA in Mexico. Can you unpack that aspect a little bit more, just kind of how you'll go about that balancing the upside scenarios, obviously, but with the risk of from the loss ratios are kind of going into a new market with the new product?

Speaker 2

Yes, good question. Bobby, we're pretty excited about taking SEMA to Mexico. I know the team is as well. The risk of going into a new market certainly would be much, much higher had we not hit Rent A Center down there since 2010. So with 130 some Rent A Center stores down there and performing well, with dollar, the currency stuff, you don't see as much EBITDA as maybe would warrant.

Speaker 2

But in pesos, they continue to grow their profit year over year and some of it gets lost in that currency translation like I said. But we're doing very well down there in the Rent A Center store. So we've learned a lot from a decisioning standpoint, collection standpoint and all those kind of things that it seems is going to piggyback. So I don't think there's the normal risk of going into a new market the way there would be if we hadn't already been down there with Rent A Center. And obviously, it's some a lot of the Rent A Center infrastructure is going to support the ACMA team as they expand down there.

Speaker 2

So we're excited about it. There's millions and millions of customers down there as you probably realize. And it just seems like a great extension, great growth vehicle for Asimo without a lot of risk because we already know the market with our Rent Center stores down there.

Speaker 3

Without a lot of capital spend either.

Speaker 2

Yeah. Without without building store. We can't we just can't grow Rent Center fast down there really. Who wants to open another 500 brick and mortar stores today, whether it's in The US or Mexico for that matter and the capital expense. And you'd wonder about the investment.

Speaker 2

It's a market that from a US standpoint makes 7,000,000 or $8,000,000 of EBITDA and how much you're going to put into it by opening a whole lot more rental centers to take advantage of all the demand. But a CEMA, with a low capital model obviously, is the way we believe we should grow down there.

Speaker 5

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 Fammy look forward to continue to work with you in your new role.

Speaker 2

Thanks a lot, Bobby. Appreciate it.

Operator

Your next question comes from the line of Hong Wen with Edo Cohen. Please go ahead.

Speaker 6

Hi, guys. And, yeah, best of luck to your retirement, Mitch, and congrats on the new role, Tammy. I just want to touch a little bit on Bridget. 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.

Speaker 6

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, how you guys are going to accelerate growth in Bridget going forward?

Speaker 3

Yeah, Hung, I would say the what we've experienced over the last two months, three months since we announced the deal has been pretty much in line with what we expected. And we're on track to hit the numbers that we outlined in the initial guide for 2025 and on track to hit what we predicted for 2026. So nothing really has surprised us. Nothing has really changed. I think the macro backdrop is very conducive for people to need liquidity and need the products that Bridget offers, not just the instant cash, but the credit building and all the financial literacy tools.

Speaker 3

So we're just as excited and feel like the growth is on track based on everything that we're seeing. The pipeline of new products that we're piloting now that will also add more to the bundle and actually have new bundles on the way. All of those things are going to contribute to the revenue growth as well as the EBITDA expansion that we expect from 2025 to 2026. So I would say everything that we expected is on track. Nothing has slowed us down.

Speaker 3

If anything, we're more positive on the story and the integration possibilities between the three brands.

Speaker 2

Yeah. The cross selling is really, you know, even though we waited till the tax season was winding down, they're putting a lot of good stuff together. The marketing teams are working great together, very collaboratively on the cross selling start, I mentioned, and working with Zubin, Hamill, Farrah, Arvind and those folks at Bridget has gone really smoothly with our marketing folks here to that cross selling going. So, yeah, if anything, we're more excited than we were a few months ago when we closed it.

Speaker 6

Got it. And, I mean, as you guys cross sell more between Bridget 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?

Speaker 3

Well, the cross selling efforts have already begun and we've seen some good response rates from some of the email campaigns that we've done for both Rent A Center and Asima customers, but again still very early stages. As far as the business itself, I mean I think both of our, all of our businesses today are conducive to being recession proof or counter cyclical, meaning when times get tough, the demand for those products should go up. If you think about the lease to own product, whether it offers from a low payment, low entry point, to the flexibility with no financial commitment going forward, again, the low payment and flexibility really should drive demand in tough times. And with Bridget, thinking about liquidity solutions, getting up to $250 in between paychecks, helping you understand how to save your money and maybe earn more along the way, All of those things will help keep the business resilient and counter cyclical.

Speaker 6

Got it. Thank you and best of luck to you both.

Speaker 2

Thanks, Hong. Thanks,

Operator

Your next question comes from the line of Anthony Chukumba with Loop Capital. Please go ahead.

Speaker 7

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 Famy, congrats on the promotion and look forward to continuing to work with you. And also congrats on the strong start to the year.

Speaker 7

So my question Thanks, Anthony. Yeah. 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?

Speaker 7

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.

Speaker 3

Sure, Anthony. Good morning. So on the Rent A Center side, those products mostly were mobile phones, handheld devices, but mostly mobile phones. Yeah, to your point, we just weren't seeing the loss performance, the profitability wasn't there. A lot of demand for those types of products obviously, but we just have to filter that demand into hopefully furniture and appliances, which have better losses and better profitability.

Speaker 3

So we thought it was good use of trimming the product line. It does have a little bit of a near term headwind as far as deliveries go and maybe gross profit. But longer term, we think it will be EBITDA positive for us to eliminate those kind of low profitability type products.

Speaker 2

Yeah, think the other thing I'd add to that is it was an easier decision too Anthony. When you think about the two kind of self induced reasons we've gone from slightly positive to slightly you know, slightly negative same store sales around center at minus two. Underwrite tightening the underwriting and then the products as you tighten the underwriting, we're gonna approve a whole lot less of those phones anyhow because they're at a high loss rate. So they kind of go together tightening the underwriting and getting rid of those. And the other thing that made it easier was that mobile phones and mobile devices are really an important product for a CEMA and they do well with them.

Speaker 2

They don't have that loss problem. You need that difference in the customer. The Rent A Center customer is a step below income level wise and even credit score wise than the SEMA customer. Right? So you need that step up.

Speaker 2

So basically, we're putting that business over in a CEMA. At this point, when someone at Rent A Center wants a mobile phone, we're trying to get them over to a CEMA to get their mobile phone, where they're used to underwriting for that particular product. And not many of the Rent A Center customers will get approved for mobile phones through the SEMA, but a few will. But we really need that customer to be a little higher up. I guess my point is it's not like you can't lease mobile devices, you can at the SEMA level.

Speaker 2

But what we found is that the rental center level is not the best product. And for those few customers at the rental center level that should get approved, we're trying to get them over to a CEMA. So that's that whole strategy.

Speaker 7

Got it. Just to confirm, so essentially what you're saying is because that CEMA customer is generally a higher income customer than if they're approved for a mobile phone, there's probably going be a lower lease charge off rate because they are a more well host customer. Is that the right way to kind of think about it at a high level? I don't mean to belabor the point.

Speaker 2

Yes. No, you're right. Our mobile phone category phone category at a SEMA performs. So you can rent them. You just need you just need to be a little higher income level than the Rent A Center customer.

Speaker 3

The approval rates that we have on at the SEMA for for mobile devices is gonna be pretty low. Yeah. Because of that risk. But but for those that we do approve and book, it performs in line with our expectations and we can make some money.

Speaker 2

Of course, on a phone, can have a low approval rate and still do a lot of business. Right. Because everybody has everybody always wants a new phone where it's, you know, unlike furniture and, you know, a refrigerator, can do so much more with phones. You can have a low approval rate. You can really filter through and still do a lot of business.

Speaker 2

But it's just a better business for a SEMA than it is for Rent A Center.

Speaker 8

Well, for whatever it's worth,

Speaker 7

I'm sticking with my iPhone 14, But thanks for that. I

Speaker 2

would have too, Anthony, if mine didn't end up in the pool last year. So I would have stuck with my iPhone 10.

Speaker 7

Got it. Thanks, guys.

Speaker 2

Thanks, Anthony.

Operator

Next question comes from the line of John Rowan with Janney. Please go ahead.

Speaker 2

Good morning. Good morning, John.

Speaker 8

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.

Speaker 2

Thank you. It's been a lot of fun for me for So

Speaker 8

just 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 Bridget 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.

Speaker 3

Yeah, John, legal matters line item that you're referring to in the table covers more than the CFPB matter. So you'll still see it there as we work through some of the other cases And yeah, we're kind of winding down some of the adjustments related to the Asima acquisition just to ramp up some of the adjustments for the Bridget acquisition in that reconciliation. So that will take some time for us to work through. But as far as legal matters go, we still are dealing with a couple other cases and so you should see that accrual move as we progress on those claims.

Speaker 8

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,

Speaker 3

right? It used to

Speaker 8

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? Maybe $300 number is a really old number. Is there kind of an update number where that cash purchase line is for the consumer?

Speaker 2

No, that's a good question, John. And $300 is still above the ballpark of where we do business at $300 and above. So you're still spot on with that. And I think you're spot on with the point that, especially on electronics, the deflation we've seen in TVs since they well, we've always seen a lot of deflation in TVs, right? Then they went up with COVID supply chain problems and now they've kind of cratered again on deflation.

Speaker 2

So any increases there, I dare say would help us. And to rent more, again, you go back to we can add a dollar or 2, we can add a month or two and easily still make it affordable for the consumer. So I think a tailwind. And people hesitate to believe our recession resilient story. You know, think eyes roll when we talk about it.

Speaker 2

But we have a forty year track record or maybe I have a forty year track record. But Rent A Center has a fifty year track record through different economic times. I mentioned in my prepared look at 02/2008. I mean, this is a business that's not only resilient, but outperforms in tough times. Would and you're seeing it would trade down right now.

Speaker 2

It has seen a family mentioned we expect the first quarter got stronger as it went on as the economy weakened and he talked about low double digit growth as the quarter ended and then April performed the same. So we're looking at low double digit growth, which is actually an acceleration from the beginning of the year to CEMA. So on Rent A Center being minus 2% is more self induced than underwriting in those products we took out like I mentioned. So this is in so many ways, this is a recession resilient story and there's a lot more with all the things out there right now, including the uncertainty, there's a lot more tailwind there for us than headwinds. That even the uncertainty is a tailwind in that if the consumer is uncertain, why would you go take on debt?

Speaker 2

Why wouldn't you just lease it and see what happens? And that's what we've seen in the past. And I believe that's what we'll see again and we're already seeing it. So I think your question is a good one. Could benefit us a whole lot more than it could ever be a headwind.

Speaker 3

Great. Thank you, Mitch.

Speaker 2

Thanks, John.

Operator

Your next question comes from the line of Bill Reuter with Bank of America. Please go ahead.

Speaker 9

Hi. Good morning. 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 Asema side and knew whether some of them were manufacturing more in China and may have indicated that they will be pushing through price increases.

Speaker 2

The number I was referring to was a Rent A Center number of what we buy versus knowing everything that our partners buy. But I can tell you talking to some of our bigger partners at the Asimba side that there's not a lot of people have gotten out of China over the last few years anyhow. Know, Vietnam has become the bigger place for getting furniture kits made or different furniture. So I think, I think, you know, it's going to be similar numbers without a lot of risk to tariffs, but the numbers I was quoting was rent. So maybe a and we think it's modest at CEMA as well.

Speaker 2

And we're not hearing anything yet from any of our larger partners about any big scare on tariffs. Certainly not the furniture guys. Just met with one of our well, we've met with two of our larger furniture partners in the last couple of weeks and not a not a whole lot of concern on their end that prices are gonna spike.

Speaker 9

All great to hear. And then secondly, given the integration of Bridget, would you say that you're currently kind of in a period where you're not looking at much M and A as you kind of move towards that two times target? And that's all for me and thanks for fitting me in with the questions.

Speaker 3

Sure, Bill. Think that's a fair way of looking at it. Think we've got a lot of room to go between integrating Bridgit, cross collaborating with Rent A Center and Asima, a lot of different initiatives that we have in house, whether it's on the rentacenter.com and the digital channels and the consumer driven approach at Asima. I think we have plenty in front of us to hit our growth targets and plus some. And then with this level of uncertainty in the market, definitely makes M and A even tougher.

Speaker 3

So I think that's a fair comment.

Speaker 9

Great. Thanks again.

Speaker 2

Thanks, Bill.

Operator

On your telephone keypad. Your final question comes from the line of Carla Casella with JPMorgan. Please go ahead.

Speaker 10

Hi, thanks for taking the question. And 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 starting to near the end of the tax refund season, any color you can give us on what you're seeing?

Speaker 3

Sure. Good morning, Carla. So on really both segments on uptick in buyout activity year over year, it more pronounced on the Rent A Center side than the ACMA side, at least compared to our expectations. But both of them, you look at activity year over year, tax season got off to a slow start, probably a week or so delayed. But by the March, we had gotten up, well, we got caught up and I would say buyout activity was higher year over year and you can see that in our gross margins at really both segments.

Speaker 10

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?

Speaker 3

I haven't really noticed anything on the traffic side. I would characterize the state of the consumer as pretty stable. We haven't despite all the other kind of headlines and noise that we've gone through, I would say it's been pretty stable over the last few quarters as far as their behavior both on the demand side and on the payment side. And if you look at our numbers, delinquencies are stable, flat to down in both segments. Losses improved sequentially and year over year in both segments and still doing that with growing SEMA at a double digit clip.

Speaker 3

So again, mixed signals on macro and the consumer, tariff and inflation is potentially there, but you still have low unemployment and some wage growth kind of offsetting some of those things. So I would say, based on our underwriting, based on what we're seeing to date, I would say the consumers is relatively stable.

Speaker 2

And for us, mean, with the benefit of trade down, we're going to continue to see great traffic, especially at the CEMA. And even from a rent center standpoint, we haven't seen any change in consumer behavior. I mean, we had not tightened underwriting and still were running mobile devices, we'd have had positive same store sales again. But we just thought it's more prudent to get rid of some of those high loss items. So no change in consumer behavior at all, but we're seeing if anything it's positive from a trade down standpoint.

Speaker 10

Okay, that's great. And if I could just ask one follow-up from Bill's question. 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 2025, '20 '20 '6 on the SEMA side in terms of customer wins or losses?

Speaker 3

Yes. I think based on what the momentum that we saw throughout the quarter and into the second quarter results, I think that speaks for us taking more share as the year goes on. So I think nice regional wins. We had a couple last quarter and expect a few more this year. So no, I think the pipeline is still very strong.

Speaker 3

We still have a few of the enterprise accounts that we're talking to and still in RFPs. So nothing to announce formally today, but yes, you can say it in GMV numbers and the trends that we highlighted that we are still taking share.

Speaker 2

Yes, the regional wins have been strong and nothing to announce on the real big enterprise accounts, but continue to win regionally, obviously, with the low double digit growth.

Speaker 10

Great, thank you.

Speaker 2

Thanks, Carla. Thanks, Carla.

Operator

Your last question comes from the line of Kyle Joseph with Stephens. Please go ahead.

Speaker 11

Hey, good morning, guys. Thanks for taking my questions. Must 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 twenty twenty three that seems to be having its desired effects.

Speaker 11

I know on a CEMA, 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.

Speaker 3

Yes, Kyle, morning. To your point, I think we've been on the conservative side of underwriting and our posture has been relatively conservative now for a couple of years, which actually gives us even more confidence in the guide going forward because we look at our portfolio and compare it to this time last year and even further back and feel really good about the metrics that we're seeing in the current portfolio because of our underwriting tightening that we're doing. So as we mentioned, we're continuously looking at it and finding both areas of opportunities and areas of potential risk and continuing to it. And I would say still being very conservative in our approach. We have a little bit more flexibility on the SEMA side to be more conservative because of the trade down.

Speaker 3

As we mentioned, applications are up 10% at ESEMA. The approval rate overall is flat, but if you break it down, we're tighter on the higher risk segments and probably slightly up on like furniture and appliances. So we are finding our spots to we can be aggressive and we're finding other spots where we can be conservative. So we feel like we're pretty well balanced, taking a conservative approach in underwriting given the uncertainty in the market. But we think we can hit our low double digit growth at Asima and continue to bring our losses down and improve margins.

Speaker 3

If you think about our margins for the first quarter, year over year they're up 170 basis points. We expect that trend to continue really for the rest of the year, if not expand, as the portfolio continues to grow. So look, if things get a little bit better, we can always relook at underwriting. But for now, we're going to keep it on the

Speaker 2

conservative side. When you think about that low double digit growth on top of last year's growth, would you say the first quarter '2 year stack was in your comments twenty nine percent two years and lowering losses with twenty nine percent two year growth is easy. That's some impressive work by the team. That's all I'll say. Then on the Rent A Center side, lowering losses only sliding 2% on same store sales in this environment.

Speaker 2

And the second quarter to be similar by the latter half of the year. We'd expect that to improve the minus 2%. So that's some impressive stuff when you combine it. And I think trade down is one of the reasons we can do it and the resiliency of our business model. We can do it because we're getting more of the what you might call the the top side customers coming into the category, especially the SEMA.

Speaker 2

So very positive stuff there, Kyle.

Speaker 11

Got it. Thanks for fitting me in, Mitch. Enjoy your retirement. And finally, look forward to working together still.

Speaker 2

Thanks, Kyle. Appreciate it.

Operator

I will now turn the call back over to Mitch Fadel, Act Down CEO, for closing remarks. Please go ahead.

Speaker 2

Thank you, operator, and thank you to everyone who joined us today for our first quarter update and our outlook for the balance of 2025. And I want to thank everybody for everything over the years. As I sign off, like to thank all of you and all my colleagues and friends who have helped really helped build UpBound into the leader that it is today. I think we're this is a real high note. I knew the company was in great shape when I announced my retirement.

Speaker 2

It's only gotten better since then. And and I know family and the team, I wish them the best of luck. I know they're gonna take it to even a higher level than I was able to do. So I sure appreciate everybody. And I know I'm going to miss everybody, but I'll be watching from the sidelines.

Speaker 2

Thank you, everybody.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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Earnings Conference Call
Upbound Group Q1 2025
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