Upbound Group, Inc. (NASDAQ: UPBD) announced its Q1 2024 financial results, which showed an increase in revenue alongside a decline in earnings compared to the previous year.
Q1 Operational Information
The company reported strong execution of strategic initiatives including merchant growth, disciplined underwriting, and rigorous expense management, all contributing to the quarterly outcomes. Enhanced technological capabilities in underwriting and strengthened relationships with customers and retailers have bolstered Upbound’s market presence.
The segments Acima and Rent-A-Center exhibited significant improvements, with Acima achieving double-digit growth and Rent-A-Center reporting its first rise in same-store sales in the last two years. These developments underscore the strength of Upbound’s business model and strategic vision for growth.
Detailed Earnings and Revenue Analysis of First quarter
- The company recorded adjusted earnings of 79 cents per share, a slight decrease from 83 cents in the same quarter of the previous year.
- Total revenues reached $1,096 million, marking a 7.9% year-over-year increase, primarily fueled by growth in rentals, fees, and merchandise sales.
- Adjusted EBITDA stood at $109.1 million, experiencing a 2.2% decline from the previous year, influenced by mixed performance across various segments and rising corporate expenses.
Segmental Breakdown
Rent-A-Center Segment: Revenues slightly increased by 0.2% year-over-year to $485.8 million. The segment also saw a 0.8% increase in same-store sales and a 140 basis point increase in adjusted EBITDA margin.
Acima Segment: This segment reported a 16% revenue increase to $561.3 million, with a notable 19.9% rise in gross merchandise volume. However, its adjusted EBITDA margin declined by 260 basis points.
Franchising and Mexico Segments: Franchising revenues fell by 5% to $28.3 million, while the Mexico segment saw a 7.2% revenue increase on a constant-currency basis.
Additional Financial Details
As of March 31, 2024, Upbound concluded the quarter with $84.8 million in cash and equivalents, $848.6 million in net senior debt, and $578.3 million in stockholders’ equity. The company also increased its quarterly dividend to 37 cents per share.
Future Outlook
Looking forward, Upbound Group is optimistic about its performance across various macroeconomic scenarios. The company plans to leverage advanced underwriting tools and expand its e-commerce channels, expecting these efforts to continue driving growth. The integration of Acceptance Now into Acima’s CMS decision engine is expected to improve GMV and reduce losses, enhancing the company’s underwriting capabilities.
Upbound is hopeful about its growth trajectory for 2024, anticipating consolidated revenues between $4 billion and $4.20 billion, with adjusted EBITDA expected to range from $455 million to $485 million. The company also projects adjusted earnings per share between $3.55 and $4.00 and forecasts free cash flow between $100 million and $130 million for the year.
Investment Recommendation
Considering Upbound Group’s strong quarterly performance, strategic initiatives for growth, and stable financial outlook, it appears well-positioned for sustained growth. Investors might find UPBD a compelling buy, especially if they are looking for exposure in a company with robust operational strategies and resilience in fluctuating economic conditions. However, it’s crucial to monitor the macroeconomic factors and their potential impacts on consumer spending and credit markets, which could influence future performance.
For those holding the stock, it might be prudent to maintain the position to benefit from potential growth driven by strategic expansions and operational efficiencies. New investors might consider buying on dips, especially if the macroeconomic environment shows signs of improvement or stability, providing a favorable backdrop for Upbound Group’s business model.
