Upbound Group (UPBD) Q2 2024 Earnings: Robust Growth Amidst Challenging Macroeconomic Conditions

Published on September 24, 2024 | Ticker: UPBD

Upbound Group, Inc. (NASDAQ:UPBD), a leading provider of lease-to-own solutions, has reported its second-quarter 2024 financial results, showcasing resilience and adaptability in the face of ongoing macroeconomic headwinds. The company's performance underscores its ability to navigate a complex consumer landscape, delivering strong top-line growth while maintaining disciplined risk management.

Financials

For the full year 2023, Upbound Group reported annual revenue of $3,992,413,000 and a net loss of $5,179,000. The company generated annual operating cash flow of $200,290,000 and free cash flow of $146,888,000, demonstrating its ability to convert earnings into tangible financial resources.

In the second quarter of 2024, Upbound Group reported revenues of $1,076,510,000, a 9.9% increase from the prior-year period. This top-line growth was driven by a 9.7% increase in rentals and fees revenue to $885,977,000, as well as a 17.3% rise in merchandise sales to $146,239,000. The company's Acima segment, which focuses on virtual lease-to-own solutions, was a standout performer, with revenues increasing 19.0% year-over-year to $552,794,000.

The Rent-A-Center segment, which operates the company's brick-and-mortar lease-to-own stores, also contributed to the overall revenue growth, with a 1.9% increase to $474,903,000. This was primarily attributable to a 2.6% improvement in same-store sales, reflecting the segment's ability to engage customers through its omnichannel platform and digital initiatives.

Gross profit for the second quarter of 2024 increased by 5.1% to $531,959,000, with the Acima segment reporting a 12.5% increase in gross profit to $179,611,000 and the Rent-A-Center segment recording a 1.3% rise to $330,505,000. The company's overall gross profit margin, however, declined to 49.4% from 51.7% in the prior-year period, primarily due to a shift in revenue mix and higher merchandise costs.

Operating expenses, excluding depreciation and amortization, increased by 6.9% to $438,686,000, driven by a 12.6% rise in non-labor operating expenses to $203,945,000 and a 9.9% increase in general and administrative expenses to $53,638,000. These increases were partially offset by a 2.8% rise in operating labor costs to $156,181,000.

The company's operating profit for the second quarter of 2024 decreased by 4.0% to $80,655,000, with the Acima segment reporting a 10.9% increase in operating profit to $69,991,000 and the Rent-A-Center segment experiencing a 15.1% decline to $67,033,000. The Mexico segment, which operates the company's lease-to-own stores in Mexico, saw a 20.1% increase in operating profit to $1,559,000.

Upbound Group's net earnings for the second quarter of 2024 were $33,949,000, compared to a net loss of $45,618,000 in the prior-year period. This improvement was driven by a decrease in income tax expense, which declined from $102,418,000 in the second quarter of 2023 to $12,484,000 in the current quarter.

Liquidity

The company's balance sheet remains strong, with cash and cash equivalents of $82,515,000 as of June 30, 2024, and total debt of $1,315,687,000, resulting in a net debt position of $1,233,172,000. Upbound Group's liquidity position is further bolstered by $420,600,000 in available borrowing capacity under its revolving credit facility.

Outlook

Looking ahead, Upbound Group has provided guidance for the full year 2024. The company expects to generate consolidated revenues of $4,100,000,000 to $4,300,000,000, with adjusted EBITDA (excluding stock-based compensation) in the range of $465,000,000 to $485,000,000. The company has also guided for adjusted earnings per share of $3.65 to $4.00, up from $3.55 reported in 2023.

Recent Developments

The company's strategic initiatives, including the continued integration of its Acima and Rent-A-Center segments, the expansion of its digital capabilities, and the development of its non-prime consumer credit offerings, are expected to drive long-term growth and enhance shareholder value. Upbound Group's management team remains committed to disciplined capital allocation, prioritizing investments in the business, maintaining its dividend program, and opportunistically pursuing share repurchases.

Conclusion

Despite the challenging macroeconomic environment, Upbound Group has demonstrated its ability to adapt and capitalize on evolving consumer trends. The company's diversified business model, focus on innovation, and commitment to serving the underserved consumer market position it well for continued success in the years ahead.

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