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UPBOUND GROUP, INC. (UPBD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered across-the-board beats: consolidated revenue rose 7.3% to $1.176B, adjusted EBITDA increased 15.6% to $126.1M, and non-GAAP diluted EPS was $1.00; GAAP EPS was $0.42 due to special items .
  • Versus Wall Street: revenue and non-GAAP EPS both modestly beat S&P Global consensus; revenue $1.176B vs $1.129B*, EPS $1.00 vs $0.946*; management raised the midpoint of FY25 revenue, adjusted EBITDA, and EPS guidance, adding an upward estimate-revision catalyst .
  • Acima drove the quarter: GMV up 8.8%, revenue up 13.5%, adjusted EBITDA up 31% with 170 bps margin expansion; Brigit’s two-month contribution produced 35.9% EBITDA margin; Rent-A-Center (RAC) remained profitable with 14.7% EBITDA margin despite -2.0% SSS and store optimization headwinds .
  • Stock reaction catalysts: estimate beat, higher FY25 midpoint, improving loss metrics (Acima LCO -70 bps YoY), and CEO transition clarity (CFO Fahmi Karam to CEO June 1), alongside resolved CFPB matter (dismissed with prejudice) .

What Went Well and What Went Wrong

What Went Well

  • Acima momentum: “on a tear since late 2023” with highest-ever quarterly revenue, GMV +8.8% YoY, LCO down 70 bps YoY to 8.9%, and adjusted EBITDA margin +170 bps YoY; management expects low-double-digit GMV growth through year-end .
  • Brigit integration: paying users ~1.23M, ARPU $12.88, two-month revenue $31.9M, EBITDA $11.4M (35.9% margin); management initiated cross-marketing to RAC and Acima bases and sees the business as countercyclical .
  • Cash generation and balance sheet: free cash flow $127.2M, net cash from ops $137.7M, liquidity $312M; net leverage 2.9x LTM adj EBITDA, with target ≤2.0x over time .

What Went Wrong

  • Rent-A-Center top-line and margins: RAC revenue -4.9% YoY with -2.0% same-store sales; EBITDA down to $72.1M as underwriting tightened and certain high-loss product categories (mobile phones) were exited .
  • GAAP EPS dilution from special items: GAAP EPS $0.42 vs non-GAAP $1.00; items included legal accruals, Brigit transaction/comp and acquired intangibles amortization (e.g., Acima acquired assets D&A $0.18 per share; legal matters $0.14) .
  • Mix-driven margin pressure at Acima: elevated early purchase activity associated with trade-down customers compresses gross margin near-term, though management highlighted offsetting loss rate declines and repeat-lease profitability .

Financial Results

Consolidated Performance vs Prior Year, Prior Quarter, and Estimates

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$1,096.0 $1,079.2 $1,176.4
GAAP Diluted EPS ($)$0.50 $0.55 $0.42
Non-GAAP Diluted EPS ($)$0.79 $1.05 $1.00
Adjusted EBITDA ($USD Millions)$109.1 $122.8 $126.1
Adjusted EBITDA Margin (%)10.0% 11.4% 10.7%
Free Cash Flow ($USD Millions)$33.6 -$74.0 $127.2
Revenue Consensus Mean ($USD Millions)——$1,129.3*
Primary EPS Consensus Mean ($)——$0.946*
  • Consensus comparisons: revenue beat by ~$47.1M; EPS beat by ~$0.05; Values retrieved from S&P Global.*

Segment Breakdown (Selected KPIs)

SegmentKPIQ1 2024Q4 2024Q1 2025
AcimaGMV ($USD Millions)$417.6 $547.8 $454.1
AcimaGMV YoY (%)19.9% 15.3% 8.8%
AcimaRevenue ($USD Millions)$561.3 $581.1 $637.3
AcimaAdjusted EBITDA ($USD Millions)$64.9 $80.9 $85.0
AcimaAdjusted EBITDA Margin (%)11.6% 13.9% 13.3%
AcimaLease Charge-Off Rate (%)9.6% 9.0% 8.9%
RACRevenue ($USD Millions)$514.1 $479.8 $489.0
RACSame-Store Sales YoY (%)0.8% — -2.0%
RACAdjusted EBITDA ($USD Millions)$83.8 $80.0 $72.1
RACAdjusted EBITDA Margin (%)16.3% 16.7% 14.7%
RACLease Charge-Off Rate (%)4.7% 5.0% 4.6%
Brigit (Feb–Mar only)Revenue ($USD Millions)——$31.9
BrigitPaying Users (#)——1,230,158
BrigitARPU ($ per month)——$12.88
BrigitAdjusted EBITDA ($USD Millions)——$11.4
BrigitAdjusted EBITDA Margin (%)——35.9%
BrigitNet Advance Loss Rate (%)——2.4%

Additional KPIs and Balance Sheet

KPIQ1 2024Q4 2024Q1 2025
Net Cash Provided by Operating Activities ($USD Millions)$45.4 -$61.9 $137.7
Liquidity ($USD Millions)——$311.8
Net Leverage Ratio (x)—2.7x (YE) 2.9x LTM
On-Rent Rental Merchandise, Net ($USD Millions, consolidated)$1,056.4 $1,134.9 $1,056.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenues ($B)FY 2025$4.50–$4.75 $4.60–$4.75 Raised midpoint
Adj. EBITDA excl. SBC ($M)FY 2025$500–$540 $510–$540 Raised midpoint
Non-GAAP Diluted EPS ($)FY 2025$3.90–$4.40 $4.00–$4.40 Raised midpoint/tightened
Free Cash Flow ($M)FY 2025$150–$200 $150–$200 Maintained
Revenues ($B)Q2 2025—$1.05–$1.15 New
Adj. EBITDA excl. SBC ($M)Q2 2025—$125–$135 New
Non-GAAP Diluted EPS ($)Q2 2025—$1.00–$1.10 New
Corporate Tax Rate (%)FY 2025~26% (prior) ~26% Maintained
Average Diluted Shares (MM)FY 2025~58.9 ~58.9 Maintained
Interest Rate AssumptionFY 2025One cut in Sep One cut in Sep Maintained

Segment outlook (Q2 2025):

  • Acima: low double-digit GMV and revenue growth; EBITDA margin slightly better YoY; charge-offs stable .
  • Rent-A-Center: mid-single-digit sequential revenue step-down vs Q1; EBITDA margin down slightly sequentially; loss rates improve .
  • Brigit: full-quarter revenue; mid-teens EBITDA margin; net advance loss rate similar to Q1 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
AI/technology initiativesAI “leasability engine” powers marketplace & onboarding; Google partnerships for personalization Google AI search at RAC; marketplace adds Walmart/Amazon/Target; virtual lease card to expand access Google AI search & chatbot at RAC; AI-powered leasability engine; Cash App payments; personalization upgrades Expanding scope and deployment
Supply chain/tariffs/macroHoliday season outlook; stable macro assumptions; trade-down tailwinds Cautious macro; elevated early purchase mix; loss mitigation via underwriting Tariff exposure modest; suppliers diversifying; RAC >70% furniture/appliances assembled in US; no price increases observed Monitoring; limited direct impact
Product performance/mixFurniture diversification; marketplace contribution growing Marketplace GMV growth; early purchase activity up Furniture/appliances ~66% RAC revenue; buyouts higher YoY; Acima marketplace +~75% YoY DTC/marketplace mix rising
Regional trends (Mexico)RAC Mexico steady; exploring opportunities Positive decision-engine build-out in Mexico Acima pilot in Mexico later 2025/early 2026 pending regulatory approvals Building to pilot
Regulatory/legalLegal accruals estimated; CFPB/AG matters noted Ongoing disclosures and accrual evolution CFPB matter dismissed with prejudice; pleased with resolution, no financial penalty Legal overhang improving
Cross-sell/R&D executionBuilding digital-first platform; credit card pilots Light-touch Brigit integration plan; cross-marketing first Cross-selling Brigit underway post tax season; data collaboration to improve approvals/losses Integration progressing

Management Commentary

  • CEO Mitch Fadel: “Acima has been on a tear since late 2023, 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.”
  • CFO Fahmi Karam: “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.”
  • On Brigit: “Results have been really good… revenue up over 35%, subscribers up 26%… cross-marketing campaigns to RAC and Acima customers have begun.”
  • On tariffs: “To date, we have not encountered any price changes… in certain categories we’ve actually seen a reduction vs last year.”
  • On Mexico: “Acima’s expansion into Mexico is a natural extension… leveraging RAC Mexico’s 130-store footprint for accelerated growth.”

Q&A Highlights

  • Tariffs and pricing: Management has seen no price increases to date; RAC’s >70% US assembly for furniture/appliances and pricing levers ($1–$2/week or additional weeks) mitigate potential shocks; inventory buffers help margin preservation .
  • Brigit seasonality and margins: Q1 margins highest given lower marketing and low losses; margins likely mid-teens in Q2; subscriber growth expected to pick up post tax season .
  • Acima in Mexico: Pilot leverages RAC Mexico infrastructure, reducing risk and capital needs; focus on scalable virtual model .
  • Product exits: RAC exited mobile phones due to elevated losses; may redirect a subset of qualified customers to Acima where phones perform better given higher-income approvals .
  • Early buyouts: Buyout activity higher YoY across segments; more pronounced at RAC; contributed to gross margin dynamics .

Estimates Context

  • Q1 2025 actual vs S&P Global consensus: revenue $1,176.4M vs $1,129.3M*, EPS (non-GAAP) $1.00 vs $0.946*; both modest beats. Values retrieved from S&P Global.*
  • Forward consensus context: management raised FY25 midpoints, and provided Q2 guidance ranges; expect upward estimate revisions to FY revenue/EPS for models incorporating Acima margin expansion and Brigit contribution .
  • Selected forward quarterly consensus (illustrative): Q3 2025 EPS ~$0.983*, revenue ~$1.144B*; Q4 2025 EPS ~$0.973*, revenue ~$1.181B*; Q1 2026 EPS ~$1.081*, revenue ~$1.266B*. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Acima is the primary growth engine: double-digit revenue growth, improving losses and margin expansion signal durable share gains and operating leverage .
  • Brigit is accretive and countercyclical: strong initial margins and subscriber base; cross-sell and cash-flow underwriting should improve approvals and loss rates across segments .
  • RAC optimizing for profitability: store optimization and underwriting discipline support mid-teens EBITDA margins despite SSS headwinds; e-commerce ~27% of LTO revenue enhances scalability .
  • Capital and cash: FCF inflected strongly in Q1; liquidity solid; path to ≤2x leverage intact with EBITDA growth and cash generation .
  • Guidance raised: FY25 midpoint increases for revenue/EPS/adj EBITDA add estimate-revision and sentiment tailwinds; Q2 guide sets near-term expectations .
  • Legal/regulatory risks eased: CFPB matter dismissal with prejudice removes a key overhang; focus shifts to execution and integration .
  • Watch items: early purchase mix near-term margin pressure at Acima, tariff developments, and Brigit margin normalization post-Q1; management has levers on pricing, underwriting, and portfolio mix .

Values retrieved from S&P Global.*