Q1 2024 Upbound Group Inc Earnings Call
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Speaker Change: Good day and thank you for standing by welcome to the Barnes Group Earnings Conference call. At this time, all participants are in a listen only mode.
Unknown Executive: Good day, and thank you for standing by. Welcome to the Upbound Group Earnings Conference Call. At this time, all participants are in a listen-only mode.
Unknown Executive: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.
Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advisory. Your hand is raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.
Unknown Executive: To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jeff Chesnut. Good morning, and thank you all for joining us to discuss the company's performance for the first quarter of 2024. We issued our earnings release this morning before the market opened, and the release and all related materials, including a link to the live webcast, are available on our website at investor.upbound.com.
Speaker Change: Now I'd like to hand, the conference over to your first speaker today, Jeff Chesnut.
Jeff Chesnut: Good morning, and thank you all for joining us to discuss the company's performance for the first quarter of 2024, we issued our earnings release. This morning before the market open and our release and all related materials, including a link to the live webcast are available on our website at Investor <unk> Dot com.
Unknown Executive: On the call today from Upbound Group, we have Mitch Fadel, our CEO, and Fahmi Karam, our CFO. As a reminder, some of the statements provided on this call are forward-looking and 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 Change: On the call today from a bound group, we have Mitch Fidel our CEO and family cut them. Our CFO as a reminder, some of the statements provided on this call are forward looking and subject to factors that could cause actual results to differ materially and adversely from our expectations.
Speaker Change: These factors are described in our earnings release as well as in the company's SEC filings up down group undertakes no obligation to publicly update or revise any forward looking statements except as required by law.
Speaker Change: 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.
Unknown Executive: 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 webcast.
Speaker Change: Finally up down 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 will turn the call over to Mitch.
Jeff Chesnut: With that, I'll turn the call over to Mitch. Thank you, Jeff, and good morning to everyone on the call today. I'll begin with a review of the key highlights from the first quarter, then I'll hand it off to Fahmi for a more detailed review of our financial results and our financial outlook. After that, we'll take some questions.
Mitchell E. Fadel: Thank you, Jeff and good morning to everyone on the call today.
Mitchell E. Fadel: I'll begin with a review of the key highlights from the first quarter, then I'll hand, it off to family for a more detailed review of our financial results and our financial outlook after that we'll take some questions.
Mitchell E. Fadel: We're very pleased with the start to the year, which included revenues of nearly $1.1 billion, adjusted EBITDA of $109,000,000, and non-GAAP earnings per share of $0.79. The trajectory of our business, which started accelerating last year, continued through the first quarter and into April, as both segments grew the top line versus last year. Similar to the fourth quarter, these results were driven by strong execution across our strategic operating initiatives, namely growth in ESEMA's merchant count and performance of existing merchants, combined with disciplined underwriting decisions, diligent expense management efforts, and our emerging direct-to-consumer e-commerce channels
Speaker Change: We are very pleased with the start to the year, which included revenues of nearly $1 1 billion adjusted EBITDA of $109 million and non-GAAP earnings per share of <unk> 79.
Family: The trajectory of our business, which started accelerating last year continued through the first quarter and into April as both segments grew the top line versus last year.
Speaker Change: Similar to the fourth quarter. These results were driven by strong execution across our strategic operating initiatives, namely growth in the theme of merchant count and performance of existing merchants combined with disciplined underwriting decisions diligent expense management efforts and our emerging direct to consumer e-commerce channels.
Mitchell E. Fadel: Now, before we dive into our segment results, let's discuss some of the enterprise-wide themes we've seen since the start of the year. First, I'd like to start with what we're seeing in the external environment with our. Broadly speaking, macroeconomic conditions across the quarter were stable, with continued strength in employment metrics, but also with persistent inflation trends that continue to impact our customers' discretionary spending and have altered the market's expectations on the timing and size of potential rate cuts in 2024. This quarter was also affected by tax season, which typically has a positive impact on merchandise sales.
Speaker Change: Now before we dive into our segment results, let's discuss some of the enterprise wide themes, we've seen since the start of the year.
Speaker Change: First I'd like to start with what we're seeing in the external environment with our consumers.
Speaker Change: Broadly speaking the macroeconomic conditions across the quarter were stable with continued strength in employment metrics, but also with persistent inflation trends that continue to impact our customers' discretionary spending and have altered the market's expectations on the timing and size of potential rate cuts in 2024.
Speaker Change: This quarter was also affected by tax season, which typically has a positive impact on merchandise sales and while the external conditions. This quarter were characterized with puts and takes are consumers are accustomed and navigating uncertainty and if it remained resilient through a variety of changes in the macro landscape over the past several years.
Mitchell E. Fadel: And while the external conditions this quarter were characterized by puts and takes, our consumers are accustomed to navigating uncertainty and have remained resilient through a variety of changes in the macro landscape over the past several years. That resiliency and our focus on execution helped deliver profitable top-line growth at least charge-off rates that were in line with our plan for the quarter. Looking ahead, we discussed how our durable business model can succeed in a variety of macroeconomic environments.
Speaker Change: That resiliency and our focus on execution helped deliver profitable top line growth that lease charge off rates that were in line with our plan for the quarter.
Speaker Change: Now looking ahead, we've discussed our durable business model can succeed in a variety of macroeconomic environments when metrics like employment and overall consumer spending are stronger we expect consumer confidence to drive <unk> growth and to support portfolio growth and positive payment behaviors.
Mitchell E. Fadel: When metrics like employment and overall consumer spending are stronger, we expect consumer confidence to drive P&V growth and to support portfolio growth and positive payment behavior. Conversely, more difficult conditions introduce new consumers to our space through trade-down when traditional lending solutions tighten the availability of credit.
Speaker Change: Conversely, more difficult conditions introduce new consumers to our space through trade down when traditional lending solutions tightened availability of credit.
Speaker Change: While we continue to assume stable conditions across the year with elevated inflation persisting. We believe we are well positioned to adjust our business to the external environment and continue to grow.
Mitchell E. Fadel: While we continue to assume stable conditions across the year with elevated inflation persisting, we believe we are well positioned to adjust our business to the external environment and continue to grow. Second, we're continuing to enhance our underwriting capabilities with new tools and datasets. For Miranda Center, we're now leveraging a seamless, more advanced proprietary fraud detection algorithm to drive better outcomes on our e-commerce channel, which continues to grow as a portion of the segment's total revenue, representing over 26% of the segment's revenue for the quarter.
Speaker Change: Second we're continuing to enhance our underwriting capabilities with new tools and datasets.
Speaker Change: For Rns Center, we're now leveraging our seamless more advanced proprietary fraud detection algorithm to better to drive better outcomes on our ecommerce channel, which continues to grow as a portion of the segment's total revenue representing over 26% of this segment's revenue for the quarter.
Speaker Change: As that channel grows rent a center will be better positioned to underwrite profitable outcomes and deliver higher customer service levels.
Mitchell E. Fadel: As that channel grows, Renison will be in a better position to underwrite profitable outcomes and deliver higher customer service levels. At ASEMA, we continue to integrate our acceptance-bound merchants into the ASEMA decision engine, and we expect to approve more cohorts of stronger-performing leases, thereby increasing GMV and improving losses at the same time. Overall, the integration of ANOW into ASEMA is nearing completion and should result in improvements in ASEMA's lease charge-off rate across the balance of the year as the prior, higher-loss ANOW-originated portfolio winds down.
Speaker Change: And as Sema, we continue to integrate our acceptance now merchants into the Sema decision engine and we expect to approve more cohorts of stronger performing leases, thereby increasing <unk> and improving losses at the same time.
Speaker Change: Overall, the integration of <unk> now into a seamless nearing completion and should result in improvements in our seamless lease charge off rate across the balance of the year as the prior iron loss in our originated portfolio winds down.
Mitchell E. Fadel: Importantly, this unlocks a new growth opportunity for Acima because we can accelerate our efforts in our differentiated staff model with a more robust decisioning platform and can introduce full online checkout capabilities to some of our larger retailers, something the acceptance now platform could not do before the transition. And third, I'd like to reinforce our relentless focus on customer centricity, which for us means two stakeholders, the consumer and the retailer. For consumers, it's building relationships that start wherever we meet them, whether in one of our 2400 Renaissance stores.
Speaker Change: Importantly, this unlocks a new growth opportunity for <unk>, because we can accelerate our efforts and our differentiated staff model with a more robust decisioning platform and can introduce full online checkout capabilities as some of our larger retailers something the acceptance now platform could not do before the transition.
Speaker Change: And third I would like to reinforce our relentless focus on customer centricity, which for us means to stakeholders, the consumer and the retailer.
Speaker Change: For consumers its building relationships to start wherever we meet them whether in one of our 2400 rent a center stores.
Mitchell E. Fadel: Our more than 600 staff at SEMA locations, the 35,000 virtual doors at SEMA Merchant Partner locations, or even our variety of fully virtual channels in both segments. Once that relationship is established, our goal is to strengthen the connection over time and expand how we serve that customer while lowering our cost of service through our ongoing digital investment. As their needs change, we can serve those needs through the channels I just mentioned but also directly through our direct-to-consumer efforts such as the SEMA Marketplace and through our credit card partnership for consumers graduating to traditional credit.
Speaker Change: Our more than 600 staff to sema locations, the 35000 virtual doors at the Sema merchant partner locations.
Speaker Change: Our variety of fully virtual channels in both segments.
Speaker Change: Once that relationship is established our goal is to strengthen the connection over time and expand how we serve that customer while lowering our cost of service through our ongoing digital investments as their needs change we can serve those needs through the channels I just mentioned, but also directly through our direct to consumer efforts, such as sema marketplace and through our <unk>.
Speaker Change: Card partnership for consumers, graduating to traditional credit.
Speaker Change: For our retail partners is building relationships and customizing our process to meet their needs and ultimately drive more sales.
Mitchell E. Fadel: For our retail partners, it's building relationships and customizing our process to meet their needs and ultimately drive more sales, whether in-store or virtually with in-store staff. Through their website, or Pure Ecom Retailers, our goal is to support our partners to drive incremental revenue while expanding access for underserved customers. So as we work to grow our share of the market with new retailer additions and our share of mind with existing customers, with more leases per location, we are also equally focused on increasing our new customers by offering more solutions that meet our customers' needs and increasing customer lifetime value.
Speaker Change: Whether in store virtually <unk>.
Speaker Change: In store staffed through their website or <unk> com retailers. Our goal is to support our partners to drive incremental revenue, while expanding access for underserved customers.
Speaker Change: So as we work to grow our share of market with new retailer additions and our share of mind with existing merchants with more leases per location. We are also equally focused on increasing our new customers by offering more solutions that meet our customers' needs and increasing customer lifetime value.
Speaker Change: So let's review the details behind our segment financial results on slide four.
Mitchell E. Fadel: So let's review the details behind our segment financial results on slide. Starting with a seam, we achieved a strong double-digit increase in GMV for the second consecutive quarter with an improvement of nearly 20% year-over-year. Excluding the stimulus period of 2021, we achieved the single largest first quarter GMB that Exema has ever recorded.
Speaker Change: Starting with at Sema, we achieved a strong double digit increase in <unk> for the second consecutive quarter with an improvement of nearly 20% year over year.
Speaker Change: Excluding the stimulus period of 2021, we achieved the single largest first quarter <unk> has ever recorded.
Speaker Change: This was powered by a number of factors our business development sales team delivered all times, all time highs for active merchant locations.
Mitchell E. Fadel: This was powered by a number of factors. Our business development and sales team delivered all-time highs for active merchant locations and helped drive more productivity per existing location. That led to significant increases year over year in both applications and funded leases for our SEMA business. On top of that, we realized a full quarter of elevated activity from two of our enterprise partners, namely Wayfair and Ashley.com, after the realignment last year of their LTO partner relationship.
Speaker Change: And helped drive more productivity per existing location.
Speaker Change: That led to significant increases year over year in both applications and funded leases for our <unk> business.
Speaker Change: On top of those efforts, we realized a full quarter of elevated activity from two of our enterprise partners, namely wafer and Ashley Dot com channels. After the realignment last year of their <unk> partner relationships as.
Mitchell E. Fadel: As a result, we continue to find success in the furniture vertical for SEMA, despite the broader challenges in that category from the pandemic-related pull forward. Finally, our direct-to-consumer offerings continue to expand, with applications on the Acima Marketplace growing 68% year-over-year in the first quarter and GMV growing 51%. Although working from a relatively small base as we further develop the channel, these efforts resulted in Q1 revenues up 16% year over year. Average ticket size was down slightly in the quarter.
Speaker Change: As a result, we continue to find success in the furniture vertical for sema. Despite the broader challenges in that category from the pandemic related pull forward.
Speaker Change: Finally, our direct to consumer offerings continue to expand with applications in the athima marketplace growing 68% year over year in the first quarter and <unk> growing 51%.
Speaker Change: There'll be a working from a relatively small base as we further develop the channel collectively.
Speaker Change: These efforts resulted in Q1 revenues up 16% year over year.
Speaker Change: Average ticket size was down slightly in the quarter. So the top line lift was driven by expanded penetration as we continue to add merchants.
Mitchell E. Fadel: So the top line lift was driven by expanded penetration as we continue to add merchants and Grower Staffed in the E-Commerce Business. We also have a robust pipeline of integrations planned for the remainder of the year, which we believe will be a tailwind for growth in 2024 and beyond. We are pleased to recently announce another exclusive relationship with a top five, excuse me, top 50 furniture retailer in the quarter, which went live in late April.
Speaker Change: And grew our staffed and ecommerce businesses.
Speaker Change: We also have a robust pipeline of integration is planned for the remainder of the year, which we believe will be a tailwind for growth in 2024 and beyond.
Speaker Change: We were pleased to recently announce another exclusive relationship with a top five excuse me top 50 furniture retailer in the quarter, which came online in late April.
Speaker Change: Overall <unk> exited the first quarter with an open these comp that was more than 24% higher versus last year is as well as sequentially higher than our seasonally high fourth quarter.
Mitchell E. Fadel: Overall, ACIMA exited the first quarter with an open lease count that was more than 24% higher versus last year, as well as sequentially higher than our seasonally high fourth quarter. From an underwriting standpoint, we continue to take an active and vigilant approach to risk management.
Speaker Change: From an underwriting standpoint, we continue to take an active and vigilant approach to risk management.
Mitchell E. Fadel: Our SEMA segment loss rate was 9.6%, up 70 basis points from a year ago period, but down 30 basis points sequentially. Despite the volume of applications increasing 32% year-over-year and all the strong growth numbers I've just been discussing, the SEMA accomplished all of that with an approval rate 130 basis points below last year. As for delinquencies, it seems this rate in the first quarter was down 80 basis points from a year ago and flat sequentially to the fourth quarter of last year. These results were all in line with our expectations for the first quarter and with the acceptance now integrated into a CMIS decision. We remain confident in our risk management outlook for the year.
Speaker Change: Our CMS segment loss rate was nine 6% up 70 basis points from a year ago period, but down 30 basis points sequentially.
Speaker Change: Despite the volume of applications, increasing 32% year over year and all of the strong growth numbers I've just been discussing the sema accomplished all of that with an approval rate of 130 basis points below last year.
Speaker Change: As for delinquencies that seamless rate in the first quarter was down 80 basis points from a year ago and flat sequentially to the fourth quarter of last year.
Speaker Change: These results were all in line with our expectations for the first quarter and with the acceptance now integration into a seamless decision engine.
Speaker Change: We remain confident in our risk management and outlook for the year.
Speaker Change: Rent a center finished the first quarter with our same store lease portfolio value that was slightly positive year over year, we're particularly pleased to see positive same store sales growth of 80 basis points for rent a center, which represented.
Mitchell E. Fadel: Rent-A-Center finished the first quarter with a same store lease portfolio value that was slightly positive year over year. We're particularly pleased to see positive same store sales growth of 80 basis points for Rent-A-Center, which represented the first increase in same store sales in eight quarters going back to the stimulus period of 2021. In addition, we saw slight year-over-year increases in our customer count and our open lease count as our ongoing omni-channel marketing efforts and digital investments drove higher consumer engagement.
Speaker Change: The first increase in same store sales in eight quarters going back to the stimulus period of 2021.
Speaker Change: In addition, we saw a slight year over year increases in our customer count and our open lease count as our ongoing omnichannel marketing efforts and digital investments drove higher consumer engagement outcomes.
Mitchell E. Fadel: As I mentioned earlier, Renaissance Web Channel volume continues to grow, and it represented more than 26% of revenue in the first quarter, which was an increase from both the year ago and the sequential period. These elements help deliver revenue growth to 20 basis points, which represents the highest segment revenue since mid 2022 for Rent-A-Center. And, well, well, Rent-A-Center's top line was up slightly.
Speaker Change: As I mentioned earlier rent a center's web channel volume continues to grow and represented more than 26% of revenue in the first quarter, which was an increase from both the year ago and sequential periods.
Speaker Change: These elements helped deliver revenue growth of 20 basis points, which represent the highest segment revenue since mid 2022 for rent a center and well while Renaissance topline was up slightly.
Mitchell E. Fadel: We realized a nearly 9% lift in segment-adjusted EBITDA due to strength in gross profit. This also helped us expand our adjusted even out margins by 140 basis points. Our continued emphasis on underwriting and account management at Reno Center resulted in a lease charge-off rate of 4.7% for the quarter, down 10 basis points from the first quarter of last year. Our past due rate, which is an early indicator of potential future lease charge-offs, was 3.1%, which was up 10 basis points from a year-ago period, but flat sequentially.
Speaker Change: We realized nearly 9% lift in segment adjusted EBITDA due to strength on the gross profit line.
Speaker Change: This also helped us expand our adjusted EBITDA margins by 140 basis points.
Speaker Change: Our continued emphasis on underwriting and account management and <unk> resulted in a lease charge off rate of four 7% for the quarter down 10 basis points from the first quarter of last year.
Speaker Change: Our past due rate, which is an early indicator of potential future lease charge offs was three 1%, which was up 10 basis points from a year ago period, but flat sequentially.
Speaker Change: It's a tax season runs up we expect our improvement in the second quarter similar to trends in 2023, and consistent with our guide last quarter.
Mitchell E. Fadel: As the tax season runs off, we expect our improvement in the second quarter to be similar to trends in 2023 and consistent with our guide last quarter. Meanwhile, as the Rent-Center core consumer continues to deal with higher inflation and pressure on payment behavior.
Speaker Change: As the rents in our core consumer continues to deal with higher inflation and pressure on payment behavior. Our account management efforts will be an increasingly important element of customer connectivity in the near to medium term to help us maintain our delinquency and charge off rates than our target ranges.
Mitchell E. Fadel: Our account management efforts will be an increasingly important element of customer connectivity in the near to medium term to help us maintain our delinquency and charge-off rates in our target range. Overall, we're very pleased with our operating and financial results in the first quarter, having successfully anticipated and met our customers and merchants' expectations, enabling us to achieve that 20% GMV growth at Acima, along with positive same-source sales growth at Renison.
Speaker Change: Overall, we're very pleased with our operating and financial results in the first quarter, both segments successfully anticipated anticipated and met our customers and merchants expectations, enabling us to achieve that 20% GNP growth at the sema, along with positive same store sales growth at rent a center.
Mitchell E. Fadel: These results, along with the momentum we've already seen in the early April results... give us confidence that we're tracking well towards achieving our full year target. On slide five, let's discuss the progress we've made on the strategic priorities we outlined when we last spoke.
Speaker Change: These results along with the momentum we've already seen in the early April results give us confidence that we are tracking well towards achieving our full year targets.
Speaker Change: On slide five let's discuss the progress we've made on our strategic priorities, we outlined when we last spoke at a FEMA we're.
Mitchell E. Fadel: We're committed to strong top-line growth through our business development efforts with smaller and medium-sized businesses, our enterprise sales initiative for super regional and national accounts, and our direct to consumer. Well, our enterprise client team continues to build presence in relationships with the largest retailers. Our S&P team continues to have local and regional merchants as partners on our virtual leasing platform. This quarter, we realized a 9% lift in active locations year over year while adding merchants and capabilities to our online direct-to-consumer marketplace as well.
Speaker Change: We're committed to strong top line growth through our business development efforts with smaller and medium sized businesses or enterprise sales initiative for Super regional and National accounts, and our direct to consumer channel.
Speaker Change: While our enterprise client team continues to build presence and relationships with the largest retailers. Our SMB team continues to add local and regional merchants as partners on our virtual leasing platform.
Speaker Change: This quarter, where we realized a 9% lift in active locations year over year, while adding merchants and capabilities to our online direct to consumer marketplace as well.
Speaker Change: We're also refining and enhancing the ways in which we work with our existing merchants and consumers with a goal of driving customer retention and more active leases per merchant location per month.
Mitchell E. Fadel: We're also refining and enhancing the ways in which we work with our existing merchants and consumers with a goal of driving customer retention through more active leases per merchant location per month. This will be driven by a combination of our service-first mindset as well as our investments in the digital tools to help us outperform expectations.
Speaker Change: This will be driven by a combination of our service first mindset as well as our investments in the digital tools to help us outperform expectations.
Mitchell E. Fadel: And by way of example, we replaced an LTO competitor and added a large regional furniture retailer last year that was realizing around $100,000 in lease activity per month. With stronger collaboration and leveraging our integration tools, e-commerce capabilities, and best practices, we drove a meaningful difference in their sales. In fact, in the first quarter, we partnered with them to achieve a significant increase in lease activity to nearly a million dollars per month, showcasing that we can elevate results and exceed expectations for our partners and our customers. At Rent-A-Center, we continue to invest in our online e-commerce experience, both web and mobile, to help meet our customers when and where they want to interact.
Speaker Change: And by way of example, we replaced an LTE competitiveness and added a large regional furniture retailer last year that was realizing around $100000 in lease activity per month.
Speaker Change: With stronger collaboration and leveraging our integration tools ecommerce capabilities and best practices, we drove a meaningful difference in their sales in fact in the first quarter, we partnered with them to achieve a significant increase to nearly a $1 million of lease activity per month showcasing the we can elevate results and exceed expectations for.
Speaker Change: Our partners and our customers.
Speaker Change: At rent a center, we continue to invest in our online economy experienced both web and mobile to help meet our customers when and where they want to interact with us.
Mitchell E. Fadel: We also executed a variety of marketing campaigns and promotions across the quarter to engage our customers and boost our value proposition, which helped deliver the top-line and same-source sales growth that we booked this quarter relative to the year-ago period. Additionally, we continue to roll out our new Rent-A-Center point-of-sale system, known internally as RACPAD, which will enhance the productivity of our store-based co-workers and provide more centralized visibility and reporting for our regional and district leaders. It has been architected for flexibility and additional scalability, enabling it to accommodate the evolving needs of our store-based focus.
Speaker Change: We also executed a variety of marketing campaigns and promotions across the quarter to engage our customers and bluestar value proposition, which which helped deliver the topline and same store sales growth that we booked this quarter relative to the year ago period.
Speaker Change: Additionally, we continue to rollout our new rent a center point of sale system known internally as rec pad, which will enhance the productivity of our store base co workers and provide more centralized visibility and reporting for our regional and district leaders.
Speaker Change: It has been architected for flexibility and additional scalability, enabling it to accommodate the evolving needs of our store base footprint.
Speaker Change: Our upbound team is committed to creating a shared services environment unifies and amplifies our capabilities across the organization things like underwriting information technology collections and operations.
Mitchell E. Fadel: Our Upbound team is committed to creating a shared services environment that unifies and amplifies our capabilities across the organization, things like underwriting, information technology, collections, and operations. To that end, this quarter, we rolled out an additional network of collection points for Esteem of Merchandise that leverages Renaissance locations for returns and customer service. We believe this will drive improvements in the Seamless Lease Charge Operator and make it easier for customers to interact with us while simultaneously providing select Rent-A-Center locations with additional merchandise to offer for rent.
Speaker Change: To that end this quarter, we rolled out an additional network of collection points for sema merchandise that leverages renesola locations for returns and customer service.
Speaker Change: We believe this will drive improvements in our seamless lease charge operate and make it easier for customers to interact with us while simultaneously, providing select rent a center locations with additional merchandise to offer for rent.
Speaker Change: Additionally, we continue to build out our partnership with concur as we explore the non prime consumer credit adjacency to our current MTO space.
Mitchell E. Fadel: Additionally, we continue to build out our partnership with Concurra as we explore the non-prime consumer credited adjacency to our current LTO. We're now beginning the ramp-up phase for the Yosemite private label credit card, which can be used at any Yosemite partner location, and the Acima General Purpose Credit Card, which can be used anywhere MasterCard is accepted.
Speaker Change: We are now beginning their ramp up phase for the Athima private label credit card, which can be used at any athima partner location.
Speaker Change: And the theme of general purpose credit card, which can be used anywhere Mastercard is accepted.
Mitchell E. Fadel: As we expressed previously, we believe we can leverage our substantial in-house knowledge of non-crime consumers, extensive customer base, and our brand awareness software, White Label Credit Products, which can help our customers build their credit history while shopping for the products and services they need for themselves and their families. Over time, we believe the non-prime consumer credit adjacency will represent an important and growing contributor to our bottom line. Finally, I'd like to share my perspective on our capital allocation philosophy.
Speaker Change: As we expressed previously we believe we can leverage our substantial in house knowledge of non prime consumers.
Speaker Change: <unk> customer base.
Speaker Change: Our brand awareness software White label credit products that can help our customers build their credit history or shopping for the products and services they need for themselves and their families.
Speaker Change: Over time, we believe the non prime consumer credit adjacency will represent an important and growing contributor to our bottom line.
Speaker Change: Finally, I'd like to share my perspective on our capital allocation philosophy.
Speaker Change: After investing in the business will support our dividend.
Mitchell E. Fadel: After investing in a business, we'll support our dividend first, with a focus on deleveraging after that as we work to reduce our leverage ratio to less than two times. Our share repurchase strategy will be a tertiary goal, one that's opportunistic rather than programmatic. So before I hand it over to Fahmi, I'd like to acknowledge the collective work of our whole team because they're the reason we're able to deliver these strong results and their commitment, and Passion, has helped deliver these terrific results and a terrific start to the year. And with that, I'll turn it over to Fahmi.
Speaker Change: With a focus on deleveraging after that as we work to reduce our leverage ratio to less than two turns.
Speaker Change: Our share repurchase strategy will be a tertiary goal one this opportunistic rather than programmatic.
Speaker Change: So before I hand, it off to family I'd like to acknowledge.
Speaker Change: We acknowledge the collective work of our whole team because they are the reason we're able to deliver these strong results and their commitment.
Speaker Change: And passion has helped deliver deliver these terrific results in a terrific start to the year and with that I'll turn it over to <unk>.
Speaker Change: Thank you mentioned and good morning, everyone I will start today with a review of our first quarter results and then discuss our outlook for the rest of the year after which we will take questions.
Fahmi Karam: Thank you, Mitch, and good morning, everyone. I'll start today with a review of the first quarter results and then discuss our outlook for the rest of the year, after which we will take questions, beginning on page six of the presentation. Consolidated revenue for the first quarter was up 7.9% year-over-year, with SEMA up 16% and Rent-A-Center up 20%. Rentals and fees revenue was up 8.2%, merchandise sales revenues increased 10.3%, reflecting higher GMV at Acima and a larger portfolio at Rent-A-Center coming into the year. The consolidated gross margin was 48.3% and decreased 150 basis points year over year, with a 190 basis point decrease in the ESIMA segment.
Fahmi Karam: Partially offset by a 110 basis point increase in the Renner Center sector. Consolidated non-GAAP operating expenses, excluding lease charge-offs and depreciation and amortization, were up mid-single-decade, led by a mid-teens increase in general and administrative costs, which was a result of corporate investments in technology and people, in addition to an increase in non-labor operating expenses led by investments to support S The consolidated lease charge-off rate was 7.4%, a 30 basis point increase from the prior year period and in line with our expectations. On a sequential basis, the consolidated lease charge-off rate decreased 10 basis points due to a 30 basis point sequential improvement at CEMA.
Fahmi Karam: Putting the pieces together, consolidated adjusted EBITDA of $109.1 million decreased 2.2% year over year, as higher Rent-A-Center segment EBITDA was offset by lower ACIMA segment EBITDA and higher corporate costs. Adjusted EBITDA margin of 10% was down approximately 100 basis points compared to the prior year period, with approximately 140 basis points of expansion for Renner Center, offset by approximately 260 basis points of margin contraction for Acemo, I will provide more detail and segment results in a moment.
Speaker Change: Beginning on page six of the presentation.
Speaker Change: <unk> revenue for the first quarter was up seven 9% year over year with the Sema up 16% and rent a center up 20 basis points.
Speaker Change: Rentals and fees revenue were up eight 2% merchandise sales revenues increased 10, 3%, reflecting higher <unk> at a FEMA and a larger portfolio of rent a center coming into the year.
Speaker Change: Consolidated gross margin was 48, 3% and decreased 150 basis points year over year.
Speaker Change: With 190 basis point decrease in the seamless segment, partially offset by 110 basis point increase in the rent a center segment.
Speaker Change: Consolidated non-GAAP operating expenses, excluding lease charge offs and depreciation and amortization were up mid single digits led by mid teens increase in general and administrative costs, which was a result of corporate investments in technology and people.
Speaker Change: In addition to an increase in non labor operating expenses led by investments to support our sema application growth.
Speaker Change: The consolidated lease charge off rate was seven 4%, a 30 basis point increase from the prior year period and in line with our expectations.
Speaker Change: On a sequential basis, the consolidated lease charge off rate decreased 10 basis points due to a 30 basis points sequential improvement at our CMO.
Speaker Change: Putting the pieces together consolidated adjusted EBITDA of $109 1 million decreased two 2% year over year as higher rent a center segment EBITDA was offset by lower Sema segment, EBITDA and higher corporate cost.
Speaker Change: Adjusted EBITDA margin of 10% was down approximately 100 basis points compared to the prior year period with approximately 140 basis points of expansion for rent a center offset by approximately 260 basis points of margin contraction for our Cmos and.
Speaker Change: And a 20 basis point increase in corporate costs as a percentage of revenue.
Speaker Change: I will provide more detail on segment results in a moment.
Speaker Change: Looking below the line first quarter net interest expense was approximately $29 million compared to $28 million in the prior year due to approximately 80 basis points of year over year increase in variable benchmark rates that affected our variable rate debt, which is approximately $862 million at quarter end.
Fahmi Karam: Looking below the line, first quarter net interest expense was approximately $29 million compared to $28 million in the prior year, due to approximately 80 basis points of year-over-year increase in variable benchmark rates that affected our variable rate debt, which was approximately $862 million at quarter end. The effective tax rate on a non-GAAP basis was 26%, compared to 27.4% for the prior year period.
Speaker Change: The effective tax rate on a non-GAAP basis was 26% compared to 27, 4% for the prior year period.
Fahmi Karam: The diluted average share count was 55.8 million shares in the quarter. Gap earnings per share was $0.50 in the first quarter compared to earnings per share of $0.84 in the prior year period. After adjusting for special items that we believe do not reflect the underlying performance of our business, Non-GAAP diluted EPS was $0.79 in the first quarter of 2024, compared to $0.83 in the prior year period. During the first quarter, we generated $33.6 million of free cash flow, which decreased from $95.9 million in the prior year period, primarily due to Acima GMB growth. We pay a quarterly dividend of $0.37 per share, an increase from $0.34 per share in the prior year.
Speaker Change: The diluted average share count was $55 8 million shares in the quarter.
Speaker Change: GAAP earnings per share was <unk> 50 in the first quarter compared to earnings per share of <unk> 84 in the prior year period.
Speaker Change: After adjusting for special items that we believe do not reflect the underlying performance of our business non-GAAP diluted EPS was <unk> 79 in the first quarter of 2024 compared to <unk> 83 in the prior year period.
Speaker Change: During the first quarter, we generated $33 6 million of free cash flow, which decreased from $95 9 million in the prior year period, primarily due to a CMO GMB growth.
Speaker Change: We distributed our quarterly dividend of <unk> 37 per share an increase from 34 per share in the prior year. We finished the first quarter with a net leverage ratio of approximately two seven times unchanged from the fourth quarter.
Fahmi Karam: We finished the first quarter with a net leverage ratio of approximately 2.7 times, unchanged from the fourth quarter. Drilling down to the segment results, starting on page 7. For ACIMA, double-digit year-over-year GMV growth continued in the first quarter. After returning to growth with a 19% year-over-year increase in the fourth quarter of 2023, GMV increased nearly 20% year-over-year in the first quarter of 2024. GMV growth was above our expectations and was driven by year-over-year growth in key underlying drivers, with active merchant locations up over 9% year-over-year, more productivity per merchant, and a full quarter of the enterprise e-com partners Mitch mentioned earlier, which resulted in overall applications increasing over 30%.
Speaker Change: Drilling down to the segment results starting on page seven.
Speaker Change: For Sema double digit year over year GNP growth continued in the first quarter after returning to growth with a 19% year over year increase in the fourth quarter of 2023, <unk> increased nearly 20% year over year in the first quarter of 2024.
Speaker Change: <unk> growth was above our expectations and was driven by year over year growth in key underlying drivers with active merchant locations up over 9% year over year more productivity per merchant and a full quarter of the enterprise E. Comm partners, Mitch mentioned earlier, which resulted in overall applications increasing over 30%.
Speaker Change: Those tailwind were partially offset by lower approval rates across all major categories. As we remain disciplined in our underwriting approach as inflation continues to impact our core consumer base.
Fahmi Karam: Those tailwinds were partially offset by lower approval rates across all major categories as we remain disciplined in our underwriting approach as inflation continues to impact our core consumer growth. The asset value of inventory under lease was up mid-teens year over year. Revenue increased 16% year over year, including a 16.3% year over year increase in rental and fees revenue and a 15.2% increase in merchandise sales revenue due to a larger beginning portfolio in 2024 compared to last year. Lease charge-offs for the ACIMA segment were 9.6%, 70 basis points higher year-over-year, and 30 basis points lower sequentially.
Speaker Change: The asset value of inventory under lease was up mid teens year over year.
Speaker Change: Revenue increased 16% year over year, including a 16, 3% year over year increase in rentals and fees revenue and a 15, 2% increase in merchandise sales revenue due to a larger beginning portfolio in 2024 compared to last year.
Speaker Change: These charge offs for the <unk> segment were nine 6% 70 basis points higher year over year, and 30 basis points lower sequentially.
Fahmi Karam: The year-over-year increase in ASEMA lease charge-offs was slightly better than our expectation as the A-NOW leases originated on the legacy decision engine will now begin to wind down. The conversion will strengthen our underwriting capabilities and should reduce lease charge-off rates as lease cohorts from the legacy system wind down throughout the year. Operating costs, excluding lease charge-offs, were up approximately $7 million in the first quarter, which was flat as a percentage of revenue.
Speaker Change: The year over year increase in our CMO lease charge offs was slightly better than our expectation as the a now leases originated on the legacy decision engine will now begin to wind down.
Speaker Change: The conversion will strengthen our underwriting capabilities and should reduce lease charge off rates at least cohorts from the legacy system wind down throughout the year.
Speaker Change: Operating cost excluding lease charge offs were up approximately $7 million in the first quarter, which was flat as a percentage of revenue.
Speaker Change: Adjusted EBITDA of $64 9 million was down five 4% year over year, primarily due to a 19, 3% increase in cost of goods sold that was partially offset by 16% increase in revenue.
Fahmi Karam: Adjusted EBITDA of $64.9 million was down 5.4% year-over-year, primarily due to a 19.3% increase in cost of goods sold that was partially offset by a 16% increase in revenue. Adjusted EBITDA margin of 11.6% decreased approximately 260 basis points year-over-year, while gross margins contracted approximately 190 basis points. The decrease in margins was due to a few factors.
Speaker Change: Adjusted EBITDA margin of 11, 6% decreased approximately 260 basis points year over year, while gross margins contracted approximately 190 basis points.
Speaker Change: The decrease in margins were due to a few factors, including a growing portfolio, where revenue lagged higher incentive labor and underwriting costs, an increase in merchandise sales in the quarter from a dollar perspective due to a larger portfolio entering tax season than last year and the performance of the legacy <unk> portfolio.
Fahmi Karam: Including a growing portfolio where revenue lags higher incentive, labor, and underwriting costs, an increase in merchandise sales in the quarter from a dollar perspective due to a larger portfolio entering tax season than last year, and the performance of the Legacy A-NOW Portfolio, all of which is in line with our expectations. For the Rent-A-Center segment, at quarter end, the same store lease portfolio value was slightly up year over year, while same store sales increased 80 basis points year over year, improving from a 1.6% decrease in the fourth quarter of 2023.
Speaker Change: All of which is in line with our expectations.
Speaker Change: For the rent a center segment at quarter end, the same store lease portfolio value was slightly up year over year, while same store sales increased 80 basis points year over year, improving from a one 6% decrease in the fourth quarter of 2023.
Speaker Change: Total segment revenues returned to growth in the first quarter, increasing 20 basis points year over year, improving from a one 7% decrease in the fourth quarter.
Fahmi Karam: Total segment revenues returned to growth in the first quarter, increasing 20 basis points year over year, improving from a 1.7% decrease in the fourth quarter. The increase in revenues was driven by an 80 basis point increase in rental and fees revenues. First quarter merchandise sales revenue decreased 3.6% due primarily to fewer customers electing early purchase options compared to the prior year period and represented an improvement of 12.2% decline in the fourth quarter.
Speaker Change: The increase in revenues was driven by an 80 basis point increase in rental and fee revenue.
Speaker Change: First quarter merchandize sales revenue decreased three 6% due primarily to fewer customers electing early purchase options compared to the prior year period and represented an improvement of 12, 2% decline in the fourth quarter.
Speaker Change: These charge offs improved year over year, driven by ongoing underwriting and account management efforts decreasing 10 basis points to four 7%.
Fahmi Karam: Lease charge-offs improved year-over-year, driven by ongoing underwriting and account management efforts, decreasing 10 basis points to 4.7%. 30-day path view rates averaged 3.1% for the first quarter, up 10 basis points from the prior year period and flat sequentially. Adjusted EBITDA margin for the first quarter increased 140 basis points year-over-year to 16.6 percent, primarily due to higher gross margins, in addition to a 10 basis point year-over-year decrease in the ratio of non-GAAP operating expenses excluding lease charge-offs as a percent of revenue.
Speaker Change: 30 day past due rates averaged three 1% for the first quarter of 10 basis points from the prior year period and flat sequentially.
Speaker Change: Adjusted EBITDA margin for the first quarter increased 140 basis points year over year to 16, 6% primarily due to higher gross margins. In addition to a 10 basis point year over year decrease in the ratio of non-GAAP operating expenses, excluding lease charge offs as a percent of revenue.
Speaker Change: Adjusted EBITDA margin increased 210 basis points from the fourth quarter, reflecting the effect of higher revenues on less variable cost.
Fahmi Karam: Adjusted EBITDA margin increased 210 basis points from the fourth quarter, reflecting the effect of higher revenues on less variable costs. For the Mexico segment, adjusted EBITDA was higher year over year, and the franchise segments adjusted EBITDA was lower due to timing of operating expenses compared to last year. Non-GAAP corporate expenses were approximately 12% higher compared to the prior year, primarily due to additional investments in technology and people.
Speaker Change: For the Mexico segment, adjusted EBITDA was higher year over year in the franchise segment's adjusted EBITDA was lower due to timing of operating expenses compared to last year.
Speaker Change: non-GAAP corporate expenses were approximately 12% higher compared to the prior year, primarily due to additional investments in technology and people.
Speaker Change: Shifting to the financial outlook.
Fahmi Karam: Moving to the Financial Outlook, considering the trajectory of our business and the latest projections for the macroeconomic environment, we believe that we are well positioned to achieve the targets we shared for 2024 in our previous earnings. As a reminder, the forecast assumes a stable macro environment, with durable goods demand remaining under pressure, continued disciplined underwriting, and no additional material benefit from trade-in. With that backdrop, we'd like to share a bit more on the quarterly cadence of our performance. Note that references to growth or decreases generally refer to year-over-year changes unless otherwise stated.
Speaker Change: Considering the trajectory of our business and the latest projections for the macroeconomic environment. We believe that we are well positioned to achieve the targets. We shared for 2024 in our previous earnings call.
Speaker Change: As a reminder, the forecast assumes a stable macro environment with durable goods demand remaining under pressure continued disciplined underwriting and no additional material benefit from trade down.
Speaker Change: With that backdrop, we'd like to share a bit more of on a quarterly cadence of our performance.
Speaker Change: Note that references to growth or decreases in generally refer to year over year changes unless otherwise stated.
Speaker Change: I had a female we expect to see a similar increase in <unk> in the second quarter continuing the trend we have experienced the last two quarters, including a strong April.
Fahmi Karam: At ACIMA, we expect to see a similar increase in GMV in the second quarter, continuing the trend we have experienced the last two quarters, including a strong April. For the year, we are updating our GMV guidance from up mid to high single digits to double digit growth. Rent-A-Center's portfolio should be up slightly in the second quarter from the first quarter based on what we saw in April from a consumer demand perspective.
Speaker Change: For the year, we are updating <unk> guidance from up mid to high single digits to double digit growth.
Speaker Change: Rent a center's portfolio should be up slightly in the second quarter from the first quarter based on what we saw in April from a consumer demand perspective.
Speaker Change: For both our Sema and rent a center, we expect our second quarter revenue to fall the same sequential pattern as in 2023 with a slight step back in line with typical seasonal patterns coming off tax season, and lower merchandise sales.
Fahmi Karam: For both ACIMA and Rent-A-Center, we expect the second quarter revenue to follow the same sequential pattern as in 2023, with a slight step back in line with typical seasonal patterns coming off the tax season and lower merchandise. We expect losses to remain within our previous guidance commentary, with Rent-A-Center improving in the second quarter from the first quarter and to be in the 4.5% range for the year, flat to last. FEMA losses are expected to improve in the second half of the year as the Legacy A-NOW portfolio winds down, to finish the year also relatively flat to 2020.
Speaker Change: We expect losses to remain within our previous guidance commentary with rent a center improving in the second quarter from the first quarter and to be in the four 5% range for the year flat to last year.
Speaker Change: Our CMO losses are expected to improve in the second half of the year as the legacy now portfolio winds down to finish the year also relatively flat to 2023.
Speaker Change: In terms of adjusted EBITDA margins for the second quarter, the rent a center and corporate segments should track the first quarter with a CMO realizing an improvement driven by a pickup at the gross margin line coming off tax season.
Fahmi Karam: In terms of adjusted EBITDA margins for the second quarter, the Rent-A-Center and Corporate segments should track the first quarter, with the SEMA realizing an improvement driven by a pickup at the gross margin line coming off tax payers. We are assuming a fully diluted average share count of 55.9 million shares for the quarter, with no share repurchases assumed in our guidance.
Speaker Change: We are assuming a fully diluted average share count of $55 9 million shares for the quarter with no share repurchases assumed in our guidance.
Speaker Change: Interest expense and our tax rate are expected to be similar to the first quarter, resulting in a non-GAAP EPS range for the second quarter of 95.
Fahmi Karam: Interest expense and our tax rate are expected to be similar to the first, resulting in a non-GAAP EPS range for the second quarter of $0.95 to $1.05. However, part of the GMB growth is most likely benefiting from some of the trade down. We are not including any material benefit in our forecast, though we continue to monitor the consumer credit profiles we receive via retailer waterfall. Additionally, the CFPB recently enacted new rules reducing credit card late fees, which are currently facing legal challenges from industry participants seeking an injunction.
Speaker Change: <unk> to $1 <unk>.
Speaker Change: Although part of the GMB growth is most likely benefiting from some of the trade down we.
Speaker Change: We are not including any material benefit in our forecast, but we continue to monitor the consumer credit profiles, we received via retailer waterfalls.
Speaker Change: Additionally, the CFPB recently enacted new rules, reducing credit card late fees, which are currently facing legal challenges from industry participants seeking an injunction.
Fahmi Karam: We are waiting to see what impact, if any, the rule changes may ultimately have on credit card approval rates and approval amounts, which could drive trade down to the LTO in this. As for capital allocation, I will reiterate Mitch's earlier comments. We have a proven business model that generates strong operating cash flows over time and an experienced management team that allocates those cash flows in support of our strategic priorities. Our first priority continues to be supporting innovative ideas that will improve our customer interactions and merchant output.
Speaker Change: We are waiting to see what impact if any the rule changes may ultimately have on credit card approval rates and approval amounts, which could drive trade down to the <unk> industry.
Speaker Change: In terms of capital allocation I will reiterate rich's earlier comments, we have a proven business model that generates strong operating cash flows over time and an experienced management team to allocate those cash flows in support of our strategic priorities. Our first priority continues to be supporting innovative ideas that will improve our customer interactions.
Speaker Change: And merchant outcomes concurrently, we will focus on enhancing shareholder value by maintaining our commitment to our dividend program and being opportunistic regarding share repurchases.
Fahmi Karam: Concurrently, we will focus on enhancing shareholder value by maintaining our commitment to our dividend program and being opportunistic regarding share repurchase. Based on the strength of our year-end results and our outlook for 2024, we raised our dividend in the fourth quarter by three cents per quarter, and we distributed our first dividend at the increased rate in the first quarter. We expect the balance of our free cash flow this year will go towards deleveraging as we progress towards a net leverage ratio of under two times and our long-term target of one and a half times. We ended the first quarter at 2.7 times, which included $19 million of debt paydown in the quarter and an increase in working capital needs to support GMV growth.
Speaker Change: Based on the strength of our year end results and our outlook for 2024, we raised our dividend in the fourth quarter by <unk> <unk> per quarter, and we distributed our first dividend at the increased rate in the first quarter.
Speaker Change: We expect the balance of our free cash flow. This year will go towards deleveraging as we progressed towards a net leverage ratio of under two times and our long term target of one five times.
Speaker Change: We ended the first quarter of two seven times, which included $19 million of debt Paydown in the quarter and an increase in working capital needs to support GMB growth.
Speaker Change: The strength of our balance sheet gives us confidence in our ability to execute against multiple priorities.
Fahmi Karam: The strength of our balance sheet gives us confidence in our ability to execute against multiple priorities. As of quarter end, we carried over half a billion dollars of available liquidity, which positions us well for both defensive and offensive postures, depending on future macroeconomic circumstances. Looking ahead, we'll monitor market conditions for opportunities to optimize our debt capital stack to best support our growing business.
Speaker Change: As of quarter end, we carried over half a billion dollars of available liquidity, which positions us well for both defensive and offensive postures, depending on future macroeconomic circumstances circumstances.
Speaker Change: Looking ahead, we will monitor market conditions for opportunities to optimize our debt capital stack to best support our growing business.
Speaker Change: Finally on slide 11.
Fahmi Karam: The first quarter was a promising start to the year for the company. Our team's focus on execution and expense management, as well as our strategic investments and key growth drivers, resulted in operational and financial performance that was at the high end of our expectations. Our first quarter results and our strong competitive position give us confidence that we have the tools and team in place to continue producing strong risk-adjusted returns in each of our business sectors.
Speaker Change: The first quarter was a promising start to the year for the company our team's focus on execution and expense management as well as our strategic investments in key growth drivers resulted in operational and financial performance that was at the high end of our expectations.
Speaker Change: Our first quarter results and our strong competitive position give us confidence that we have the tools and team in place to continue producing strong risk adjusted returns at each of our business segments.
Fahmi Karam: Going forward, we will continue to execute against our day-to-day priorities to serve our customers and boost our retail partners while pushing forward with the innovations that help us achieve our long-term growth. Thank you for your time this morning.
Speaker Change: Going forward, we will continue to execute against our day to day priorities to serve our customers and boost our retail partners' businesses, while pushing forward with the innovations that help us achieve our long term growth plans.
Speaker Change: Thank you for your time. This morning, operator, you May now open the line for questions.
Operator: Operator, you may now open the line for questions. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby while we compile.
Operator: To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Bobby Griffin at Raymond James. Good morning, buddy.
Speaker Change: The Q&A roster.
Speaker Change: Our first question comes from Bobby Griffin.
Robert Kenneth Griffin: And Raymond James.
Robert Kenneth Griffin: Good morning, Bonnie Thanks for taking my questions and congrats on a good quarter.
Unknown Executive: Thanks for taking my questions and congrats on a good quarter. Thanks, Bob, and good morning. Good morning.
Robert Kenneth Griffin: Thanks, Bob and good morning.
Unknown Executive: Yeah, I guess the first thing I want to talk about is a little bit more of a high-level question. The GMB, you know, pickup there has been very impressive and seems like it's balanced between new merchants as well as some organic growth. And I understand there's a timing lag between revenue and some of the costs, but can you talk about what you see kind of now that you've got a good hand on that business as the incremental flow through there?
Robert Kenneth Griffin: Good morning, Yeah, I guess, firstly I want to talk about is it seem a little bit more of a high level question. The gym. The pick up there has been very impressive and it seems like it's balanced between new merchants as well as some organic growth.
Robert Kenneth Griffin: And there is a timing lag between the revenue and some of the cost but can you talk about what the what you see kind of now that you've had good hand on that business as the incremental flow through.
Robert Kenneth Griffin: They're and I'm kind of just really targeting context, EBITDA was slightly down despite all the growth in there is that timing factor, but what should the flow through be over a more consistent period of time to think about on an annual basis or something like that.
Unknown Executive: And I'm kind of just, you know, really talking in the context of, you know, EBITDA was slightly down despite all the growth, and there's that timing factor. But what should the flow through be over a more consistent period of time? Think about it on an annual basis or something like that. Good morning, Bobby.
Unknown Executive: Thanks for the question. Yeah, as we commented in the prepared remarks, we expected the first quarter this year to have a pretty tough comp from both the margin standpoint, the gross profit margin standpoint, as well as the EBITDA margin. So, the results for ACIMA are very much in line with our expectations, and as you know, revenue does lag the GMV probably by a couple months, maybe even a full quarter.
Speaker Change: Good morning, Bobby Thanks for the question, Yes, as we commented on.
Speaker Change: In the prepared remarks, we expected the first quarter this year to have a pretty tough comp from a both a margin standpoint.
Speaker Change: Gross profit margin standpoint, as well as an EBITDA margin standpoint, so the results for our Cmos are very much in line with our expectations and as you know the revenue does lag the GMT probably by a couple of months, maybe even a full quarter.
Unknown Executive: But looking out for the full year, we still expect the margins to pick back up in the second quarter seasonally, and where we've targeted the margins to be for the ACIMA segment in the low-teens to mid-teens range, and so we haven't changed our guidance there at all for the ACIMA segment. So, we expect the flow-through to be very similar to what we saw in 2023, just with higher revenues coming off the two quarters in a row of almost 20% growth from a GMV standpoint.
Speaker Change: But looking out for the full year, we still expect the margins to pick back up in the second quarter seasonally and then and where we've targeted the margins to be for the <unk> segment in the low teens to mid teens range and so we haven't changed our guidance there at all for the seamless segment. So we expect the flow through to be very similar to what we saw in 2023.
Speaker Change: <unk>, just with higher revenues coming off two quarters in a row of 'twenty for almost 20% growth from a <unk> standpoint, so so very consistent with what we saw in 2023 and very consistent with the guide that we had coming into the year and I would add to that I would add to that Bob.
Unknown Executive: So, very consistent with what we saw in 2023 and very consistent with the guide that we had coming into the year. Yeah, and I'd add to that, Bobby, that not only does the revenue lag a little bit, but so do some of the expenses. I mean, some of the expenses are up front when you think about all that growth. And, you know, you pay. You pay some rebates on the growth, you know, depending on the retail partner and things like that. And those are all paid on the GMV, and certainly underwriting on.
Speaker Change: Not only does the revenue lag a little bit, but so too I mean, some of the expenses are upfront when you think about all that growth and underwriting expenses.
Speaker Change: And.
Speaker Change: You pay.
Speaker Change: Pay some rebates on that on the growth.
Speaker Change: Depending on the retail partner and things like that and those are all those are all paid on the <unk> and then certainly underwriting on them.
Speaker Change: What was it 30000 more applications or something like that so.
Speaker Change: With all that growth you got not only it was a revenue lag a little bit but the expenses are upfront, but yes as the year goes on you can see those EBITDA margins coming up and of course the.
Unknown Executive: [inaudible] The tax season always affects the first quarter. And when you think year over year, there was a little more margin deterioration based on the tax season on the First Early Payouts, you know, and the same as cash or the cash options stuff at ASEMA. You know, similar to pre-pandemic levels, but it was higher than last year, the impact of that. Those are all the factors that are going on.
Speaker Change: The tax season.
Speaker Change: I always affects the first quarter when when do you think year over year. There was a little more there was a little more margin deterioration based on the from tax season on the.
Speaker Change: First early payouts on the same as cash or the cash option stuff at the sema.
Speaker Change: Similar where similar to pre pandemic levels.
Speaker Change: But it was higher than last year, but the impact of that so.
Speaker Change: Those are all the factors that are going on.
Unknown Executive: And I guess secondly, for Mitch, and this is a more industry-type question, and maybe it's across both businesses, but, you know, we haven't, it doesn't seem like people or the industry want to call out a lot of trade down yet. It's, you know, incremental signs of it, I think, are getting referenced. And I don't know the exact wording everybody's using.
Speaker Change: And I guess secondly permission and this is more industry type question and maybe it's across both businesses, but.
Speaker Change: We haven't it doesn't seem like people are that the industry wants to call out a lot of trade down yet it's incremental signs of it I think is getting reference and I don't know the exact wording everybody is using but so with your team. The GMB growth is it all just market share shifts going on in between all the players in since we're not really seeing a major impact.
Speaker Change: Trade down where we'd actually.
Speaker Change: Does materialize you could see even further upside I'm just I'm, just trying to unpack kind of the organic growth year, because it does seem notable without any major trade down or significant trade down.
Unknown Executive: But with your GMV growth, is it all just market share shifts going on then between all the players since we're not really seeing a major impact of trade down, where we'd actually, you know, if that does materialize, as you can see in the further upside, I'm just trying to unpack kind of the organic growth here, because it does seem notable without any major trade down or significant trade. Yeah, I think that's a I think I think, you know, trade down is a hard thing to quantify and put your finger on. That's why nobody wants to talk about how much trade down there is. But, but I agree with the point I think you're making there's, there's got to be some trade down in there, right?
Speaker Change: Yes, I think Thats a good point I think I think yes trade down. This is a hard thing to quantify and put your finger on is why nobody wants to talk about how much is trade down, but but I.
Speaker Change: I agree with the point I think youre, making there is theres got to be some trade down in there right now how material. It is the question that you get different answers from different people, but.
Unknown Executive: Now how material it is is the question you get different answers from different people, but But you know, certainly half of our GMB growth when you have 9% merchant growth is coming from there. We're certainly taking share in the market, but there is trade down in there. I think, I can't tell you how much of it's trade down, but there's certainly some. If you listen to lenders above us in the stack, you hear them talking about tightening. So there's certainly trade down there, and quite honestly, I think there's more to come later in the year. It's not in our forecast, but I think there's going to be more.
Speaker Change: But certainly half of our GMB growth when you have 9% merchant growth is coming from there. We're certainly taking share in the market, but theres trade down in there.
Speaker Change: I think I'd say.
Speaker Change: I can't tell you how much of it's trade down, but theres certainly some if you listen to if you listen to lenders above us in the stack you hear them talking about tightening so.
Speaker Change: Yes.
Speaker Change: Certainly trade down and they're not quite honestly.
Speaker Change: I think theres more to come later near its not in our forecast, but I think theres going to be more to come obviously, the the credit card fee issue.
Unknown Executive: The credit card fee issue could cause even more tightening above us and so forth. So I think there's some in there, and I think there's more to come. Thank you, Mitch. That answered my follow-up as well. So I appreciate it. I'll jump back in the queue.
Speaker Change: Could could cause even more tightening above us and so forth. So I think there are some in there and I think theres more to come.
Speaker Change: Thank you Mitch that answered my follow up as well so I appreciate it I'll jump back in the queue best of luck going forward.
Mitchell E. Fadel: Thanks Ravi.
Speaker Change: Thank you.
Unknown Executive: Best of luck going forward. Thanks, Bobby. Thank you. One moment for our next question. Our next question comes from Brad Thomas at Key. Hi, thank you. Good morning, Mitch and Fahmi.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Brad Thomas at key.
Speaker Change: Yeah.
Bradley Bingham Thomas: Hi, Thank you good morning mentioned Tommy.
Unknown Executive: I wanted to follow up first on ASEMA and ask a little bit about, you know, what has been working for you in terms of these wins? Can you share a little bit more about the dynamics behind, perhaps, where your approval rates may be different? Any sort of, you know, kickbacks to retailers that you're using?
Bradley Bingham Thomas: Wanted to follow up first on Tmall.
Bradley Bingham Thomas: And ask a little bit about.
Bradley Bingham Thomas: What has been working for you in terms of these wins.
Bradley Bingham Thomas: And can you share a little bit more about.
Bradley Bingham Thomas: The dynamics behind perhaps where your approval rates may be different.
Bradley Bingham Thomas: Any sort of.
Bradley Bingham Thomas: Kickbacks to retailers that youre using.
Unknown Executive: What is it that you think has changed here that's helping to drive all the success? Yeah, I think that's a good question. I think it's a combination of quite a few things.
Bradley Bingham Thomas: What is it that you think has changed here, that's helping to drive our success right now.
Speaker Change: Yes, I think Thats a good question I think.
Speaker Change: There's quite a few things.
Speaker Change: Our sales team is hitting on all cylinders.
Unknown Executive: Our sales team is hitting on all cylinders, even without any, you know, the biggest name brands coming in from a national account standpoint, regional account wins, the SMB account wins, the sales team's doing a great job, both in the field and our inside sales teams and so forth. Our direct-to-consumer team, the people that do the programming for that, are doing a great job adding merchants to that. And always looking at different friction points in any kind of marketplace; you're always looking at that. Obviously, we do have some nice national accounts that we've got 100% of national accounts now, like Ashley Corporate.
Speaker Change: Even without any.
Speaker Change: The biggest named brands coming in from a national account standpoint regional account wins, the SMB account wins. This the sales team has done a great job both in the field and our inside sales teams and so forth our direct to consumer team that people that do the programming for that or.
Speaker Change: Are doing a great job, adding adding merchants to that.
Speaker Change: And I always look in the different friction points on any kind of any kind of marketplace Youre always looking at that we obviously do have some nice national accounts.
Unknown Executive: And, you know, Wayfair last year did a repositioning of LTO providers and so forth, and companies like Rooms to Go and Bob's Discount Furniture. So national accounts are performing very strongly for us as well. But the combination of the sales team, and then it's the differentiation, I think, and some of the things that differentiate us from our competition. Brad, where do we, from an integration standpoint, believe we're the easiest to integrate with, with different, with all, with different partners? Our e-com process, as we compare it to everybody else's, is not only easiest to integrate but, you know, works very, very well.
Speaker Change: We've got 100% of National accounts now like Ashley corporate.
Speaker Change: And wafer last year due to repositioning of MTO providers and so forth.
Speaker Change: Companies like rooms to go and Bob's discount furniture. So so national accounts are performing very strong forces as well, but it's a combination of the sales team and then it's the.
Speaker Change: The differentiation I think some of the things that differentiate us from our competition.
Speaker Change: <unk>.
Speaker Change: Where.
Speaker Change: From an integration standpoint, we believe we are the easiest to integrate with with different with all with different partners.
Speaker Change: Our E comm processes.
Speaker Change: As we compare it to everybody else's, not only easier to integrate but but.
Speaker Change: Works works very very well.
Unknown Executive: You know, we have an ability others don't have to leverage Rent-A-Center when it comes to large partners and how we work together. We have the staff option that really drives revenue, and when you take a 30- or 40-store regional player, and you, you, you So probably don't have enough volume in every store to justify a subject matter expert, and it's a theme of subject matter experts in the store to supplement their Sales Team.
Speaker Change: We have an ability others don't have to leverage rent a center when it comes to large partners and how we work together we have the staffed option that really drives revenue and when you take a.
Speaker Change: 30, or 40 store regional player.
Speaker Change: And.
Speaker Change: So probably don't have enough volume in every store to justify.
Speaker Change: A subject matter expert in this.
Speaker Change: Seem a subject matter expert in the store to supplement their sales.
Unknown Executive: But if you, let's say you do it in 10 out of the 40, and of course, you're going to get exclusivity for spending the money on the staff, not only in those 10 stores but all 40 in that example. So I think our staff option is a differentiator. And when I talk about that sales team out there doing such a great job, they also, it's not just signing people up; it's also ongoing training.
Speaker Change: Sales team, but if you, let's say you do it in 10 out of the 40 and of course here Youre going to get exclusivity for spending the money on the staff not only in those 10 stores, but all 40 in that example, so I think our staffed option as a differentiator and when I talk about that sales team out there doing such a great job. They also it's not.
Speaker Change: Not just signing people up but it's also the ongoing training and that's where you get some of that organic those organic increases by going back in and constantly doing niche training. You can you can sign people up with US we get sign people up with a smaller team, but you won't get the organic.
Unknown Executive: And that's where you get some of that organic, those organic increases by going back in and constantly doing that training. You can, you can sign people up, you know, with us, we can sign people up with a smaller team, but you won't get organic growth if you're not going back into those stores, depending on the partner, monthly or quarterly, and making sure new sales people know how to, how to sell the transaction within that retailer and stuff So I think it's a combination of all those things, sales, and underwriting. I mean, our approval rates are lower than they were last year. I don't hear differences in approval rates between us and the competition.
Speaker Change: Growth, if youre not going back in those stores.
Speaker Change: Depending on the partner monthly or quarterly.
Speaker Change: And making sure new salespeople know how to how.
Speaker Change: How to sell the transaction within that retailer and stuff like that so I think it's a combination.
Speaker Change: Of all those things.
Speaker Change: Sales underwriting I mean, our approval rates are lower than they were last year I don't hear differences.
Speaker Change: Approval rates between us and competition.
Speaker Change: Those are those are pretty consistent you think about losses within the industry is pretty is pretty consistent.
Unknown Executive: I think those are pretty consistent. Losses within the industry are pretty consistent throughout the partners. Obviously, ours will get better as the year goes on, as the legacy Now accounts wind down. But I don't think it's approval rates or buying the business. I think the other part of your question you asked about rebates. We all offer some rebates depending on the size of the account. Those haven't really changed.
Speaker Change: Throughout the partners, obviously, RSO ours will get better as the year goes on as the legacy now accounts wind down, but I don't think its approval rates or buying the business I think your other part of your question you asked about it for rebates, we I'll offer some rebate depending on the size of the account those haven't really changed.
Speaker Change: Over the years Theyre not theyre not any higher now than they were before so I think it's really the other stuff I just mentioned.
Unknown Executive: Over the years, they're not any higher now than they were before. So I think it's really the other stuff I just mentioned. That's, that's really helpful, Mitch.
Unknown Executive: Thank you. If I can ask a follow-up question on the Rent-A-Center side of the business, just, you know, congratulations on getting, you know, Sainsbury's sales back to positive territory after two years of decline. I guess you can just talk to your confidence that, you know, we're past the more difficult period here for the segment on the revenue side of things. I know that in the first quarter, there can sometimes be some abnormalities with early buyouts and tax refund season.
Speaker Change: That's really helpful. Thank you.
Speaker Change: If I can ask a follow up on the rent a center side of the business.
Speaker Change: Just congratulations on getting same store sales back to positive territory.
Speaker Change: After the two years of declines I guess, if you could just talk to your confidence.
Speaker Change: Yes.
Speaker Change: <unk> past.
Speaker Change: A more difficult period here for the segment on the revenue side of things I know that in the first quarter there can be some time sometimes.
Speaker Change: Sometimes some haven't.
Speaker Change: Normality.
Unknown Executive: How are you feeling about that customer and the outlook for keeping Sainsbury's sales positive here? Yeah, certainly, certainly optimistic when you know, he First of all, when you think about a SEMA, and you think about trade down, the same thing happens at Rent-A-Center. It does come a little slower, though, because they're not in a waterfall stack within a retailer. So, when consumer credit tightens, it eventually helps Rent-A-Center, but not as quickly as it can help a SEMA for probably obvious reasons.
Speaker Change: Early buyouts from tax refund season, how are you feeling about that.
Speaker Change: Is that customer and the outlook click to keep 10 store sales positive here for the year.
Speaker Change: Yes, certainly certainly optimistic.
Speaker Change: First of all when you think about a scene when you think about trade down at the same thing happens to rent a center does come a little slower though because.
Speaker Change: Theyre not in a they are not in a waterfall spec within a retailer so when consumer credit tightens and eventually helps Brian is there, but not as quickly as it can help sema.
Speaker Change: Probably whats obvious reasons, but Ronda center, yes, I think we've mentioned in the prepared comments that even as we looked at April the portfolio Silicon looking looking good so we would expect.
Unknown Executive: But Rent-A-Center, yeah, I think we mentioned in the prepared comments that even as we looked at April, the portfolio is looking good. So, we would expect at least slightly positive same-source sales the whole rest of the year. They're not gonna start turning five, and eight, and 10% same-source sales numbers, but certainly slightly positive numbers, which is great for that mature business. The website continues to grow.
Speaker Change: At least slightly positive same store sales the whole the whole rest of the year.
Speaker Change: They're not going to start turning five 8% to 10% same store sales numbers, but certainly slightly slightly positive numbers, which is great for the mature business. The website continues to grow.
Unknown Executive: The resiliency of the customer, back to maybe the core of your question, is certainly proven over the years. You go back to the Great Recession and so forth, and the customer is very resilient. When you have really strong consumer confidence, you know that business grows even better. And when you have, when things get tight out there, you know, you do see trade downs.
Speaker Change: The resiliency of the customer to your back to maybe the core of your question is certainly certainly proven over the years.
Speaker Change: You go back to the great recession, and so forth and the the customers very resilient.
Speaker Change: When you have really strong consumer confidence that business grows even better than when you have when things get tight out there you do see trade down so it's been very resilient over the years. It will continue its nice to be in the positive territory, we'd like it to be even a little higher as we go through the year and that team is certainly.
Unknown Executive: So it's been very resilient over the years. It will continue. It's nice to be in positive territory. We'd like it to be even a little higher as we go through the year. And that team is certainly working hard to do that.
Speaker Change: We're working hard to do that very encouraged by the growth in the E Com channel.
Unknown Executive: I am very encouraged by the growth in the e-com channel. A lot of new customers are coming that way. As far as the pressures on the customer, their losses came down a little bit year over year, and their delinquencies, as you saw in the presentation, as we mentioned, are flat. So, you know, the customer's performing there, the team's performing there, and we'd expect to continue at least low single-digit positive counts the rest of the year. Great. Thank you, Mitch. Thanks, Brett.
Speaker Change: Adding new customers come in that way, they're delinquencies in line as far as the pressures on the customer the.
Speaker Change: Losses came down a little bit year over year in there their delinquencies as you saw in the presentation as we mentioned are flat.
Speaker Change: So.
Speaker Change: <unk> performing the other team's performing there and we can.
Speaker Change: We'd expect to continue at least low low single digit comps positive comps for the rest of the year.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thanks, Brett.
Speaker Change: One moment for our next question.
Speaker Change: Yeah.
Hong: Our next question comes from Hong win at TD Cohen.
Unknown Executive: Thank you. One moment for our next question. Our next question comes from Hal Nguyen at TD Cohen. Hi team, congratulations on the quarter. I just want to touch base on, maybe, the guidance.
Hong win: Hi team congratulations on the quarter.
Hong win: I just wanted to touch based on maybe the guidance.
Unknown Executive: Looks like business trends are pretty strong and, you know, have improved since the last quarter. I mean, the guidance is maintained, right? So I guess my question is, you know, what would you get?
Hong win: It looks like business trends are pretty strong and you know have improved since the last quarter.
Hong win: The guidance is maintained right. So I guess my question is now what would you what would take.
Hong win: For you guys to get more constructive on the guidance going forward.
Unknown Executive: What would it take for you guys to get more constructive on the guidance going forward? And maybe if you could give us some color on some of the strong and weak categories within FEMA during the quarter, that would be helpful. And I have a follow-up. Thank you. Morning Hong, thanks for the question.
Hong: And maybe if you could give us some color on some of the strong and weak categories within a CE mark during the quarter.
Speaker Change: It'd be helpful and I have a follow up thank you.
Speaker Change: Good morning, Thanks for the thanks for the question, Yes look I think as far as the <unk>.
Unknown Executive: Yeah, look, I think as far as the guidance for the rest of the year, we're very pleased with the first quarter results, obviously, at the high end of our range. So we're very pleased with the performance, we're pleased with the momentum we built into both businesses, but Acima specifically, with another strong quarter from a GMV standpoint, which we look to continue for the rest of the year. As far as the guidance goes, as I said, the quarter came in line with exactly where our expectations were, maybe slightly towards the higher end. So, still early in the year; no point to change it at this point to, you know, for the rest of the year.
Speaker Change: <unk> for the rest of the year, we're very pleased with the first quarter. Our results obviously at the high end of our range. So we're very pleased with the.
Hong: Performance, we're pleased with the momentum we built into both businesses, but a seamless specifically with another strong quarter from a <unk> standpoint, which we look to continue for the rest of the year as far as the guidance goes I as I said the quarter came in line with exactly where our expectations were maybe slightly.
Unknown Executive: But as we progress, if we get the margin pickup we expect and we continue to do the GMV growth that we expect, we'll revisit the outlook at the appropriate time. But we feel really good with the results that we've been able to do. And April has been a continuation of the first quarter. As far as you know, what we saw from a strength or weakness standpoint on Acima, I'm guessing your question is really around, you know, GMV, and performance, loss performance, really strong across the board.
Hong: Towards the higher end so still early in the year no point to change it at this point to for the rest of the year, but as as we progress if we get the margin pickup. We expect we continue to do the GMB growth that we expect will we revisit the outlook at the at the appropriate time, but we feel really good with our results that we've been able to.
Hong: And April has been a continuation of the first quarter.
Hong: As far as what we saw from a strength or weakness standpoint on a CMO Im guessing Youre question is really around.
Unknown Executive: If I look at all the different categories, you know, we talked a little bit about furniture, even though furniture has been under pressure, furniture and mattresses have been under pressure as a category, our ability to add some of those merchants that Mitch mentioned has made that category for us a growth category, even in this, you know, in this environment. So between furniture, auto, jewelry, some of those bigger categories for us, we're really up across the board on all of those categories. The performance has been in line with our expectations.
Hong: <unk>.
Hong: Performance loss performance really strong across the board if I look at all the different categories.
Hong: We talked a little bit about furniture, even though furniture has been under pressure furniture and mattresses have been under pressure as a as a category our ability to add some of those merchants that Mitch has mentioned has made that category for us.
Hong: Growth category, even in this environment, so between furniture auto jewelry some of those bigger category.
Unknown Executive: You know, the ANOW conversion is still putting a little bit of headwinds on our loss rate, but early indications of the merchants who've converted over to the Acima platform have been really, really strong, both from a GMV standpoint and from a early read on performance. So across the board, across categories, being able to grow GMV at the level that we've been growing it at, with tighter underwriting and lower approval rates, is a great story for us and should be a tailwind for us for the rest of the year. And I'll be at the end of that.
Hong: Categories for Us, we're really up across the board on all of those categories performance has been in line with our expectations.
Hong: The a now conversion is still putting a little bit of headwinds on our loss rate.
Hong: Early indications of the merchants, who have converted over to the CMO platform had been really really strong both from a <unk> standpoint and from a early read on performance.
Hong: Across the board all categories are being able to grow <unk> at the level that we've been growing it with with tighter underwriting and lower approval rates is a great story for us and should be a tailwind for us for the rest of the year.
Speaker Change: I would add to that family in Hong.
Unknown Executive: Fahmi Inhang, the, You know, what may be, what may be lost here a little bit is, is you gotta think about, The commentary Fahmi gave on the second quarter of when he went through all the different components of it and came out on a range between 95 cents and $1.05, so if you just use the midpoint of that range of $1.00. You know that when the first quarter 79 cents a dollar, I mean, that's not that's not nothing that increase from 79 cents to $1. And when you think about how that sequences and you compare those, that sequence that and people say, when's it going to flow through?
Family: Well, maybe we'll maybe lost here a little bit as you guys think about.
Family: The commentary family gave on the second quarter of <unk>.
Family: When he went through all the different different components of it and came out on a range between $95. Five. So if you just use the midpoint of that range of dollar.
Hong: When the first quarter of <unk> 79 to the dollar I mean, that's not that's not nothing net increase from 79 cents to one dollar and when you think about how that sequences and you compare those that sequence that in.
Hong: People say when is it going to flow through I mean, 79 cents going up to a dollar that doesn't always happen in this industry. When you look at our numbers or anybody else's. So.
Unknown Executive: I mean, 79 cents going up to $1. That doesn't always happen in this industry, whether you look at our numbers or anybody else's. So that's a, there's a strong trajectory there. So don't lose sight of that, I guess my point.
Hong: There's a strong trajectory there. So so don't lose sight of that I guess is my point.
Speaker Change: Gotcha and I saw that you guys commented on early buyout transform our rent a center, but I mean can.
Unknown Executive: Gotcha. And I saw that you guys commented on the early buyout trends for Rent-A-Center. But I mean, can you give the same, or can you give a comment on, you know, the SEMA buyout early buyout trend as well? I mean, I think merchandise sales in SEMA were a little bit elevated this quarter. So just, you know, want to get some color on that.
Hong: Can you give the same I mean can you give a comment on the <unk> buyout, Andy about China as well I mean, I think <unk>.
Hong: <unk> was a little bit elevated this quarter.
Andy: So just wanted to get some color on that thank you.
Andy: Sure, Yes, so as we mentioned among the.
Unknown Executive: Thank you. Sure. Yeah, as we mentioned, Hong, the early purchase option is pretty much normalized to pre-pandemic levels. What we saw this year, if you look at each of the monthly vintages for the last six, seven months, they've come in flat to last year, if not slightly lower from a percentage standpoint of the outcome of the 90-day buyout. So we continue to normalize there. You know, for the quarter, you know, coming into the year with the, you know, kind of mid-teens, higher portfolio, you're going to have higher merchandise sales from a dollar perspective.
Andy: The early purchase option, we think is pretty much normalized to pre pandemic levels. What we saw this year. If you look at each of the vintage of monthly vintages for the last six seven months they've come in flat to last year, if not slightly lower from us a percentage or an outcome standpoint of of the 90 day buyouts. So so we.
Andy: To normalize there.
Andy: For the quarter coming into the year with the kind of mid teens higher portfolio youre going to have higher merchandise sales from a dollar perspective, and we saw that play out in the first quarter. So merchandise sales were up year over year and that obviously has an impact to our to our gross profit margin, but when we look at it on a vintage by vintage basis.
Unknown Executive: And we saw that play out in the first quarter. Merchandise sales were up year over year, and that obviously has an impact on our gross profit margin. But when we look at it on a vintage by vintage basis, you know, it's very normal to pre-pandemic levels and actually slightly better than it was this time last year. So that trend has continued.
Andy: Very normal to pre pandemic levels and actually slightly better than it was this time last year. So that that trend has continued.
Speaker Change: Got you. Thank you.
Speaker Change: Thanks Scott.
Speaker Change: One moment for our next question.
Unknown Executive: Gotcha. Thank you. Thank you. One moment for our next question. Our next question comes from Derek Summers at Jeffrey's. Hey, good morning, everyone. You kind of touched on this a little bit in your commentary on the scheme of growth, but just wondering if you could touch on kind of product category mix at RAC as well and then kind of trends in average ticket price across. Boatwreck, and, Yeah, and ticket prices.
Speaker Change: Our next question comes from Derek Summers at Jefferies.
Unknown Executive: It was actually down a little bit as a CMO, and you know, not surprising in this economy. And of course, there's a little bit of deflation out there too, you know, more on the electronic side, but even in furniture, there's some so it's down a little, which is, you know, just, probably makes the growth that much more impressive because it's not a ticket. But it didn't drop a lot, but it is. The mix, as was mentioned earlier, is all across the board. It is SEMA with between furniture and jewelry, electronics, appliances, and wheel and tire. And the same with Rent-A-Center.
Derek Summers: Hey, good morning, everyone.
Derek Summers: Kind of touched on this a little bit on your commentary on the theme of growth, but just wondering if you could touch on kind of.
Derek Summers: Product category mix at rack as well and then kind of a.
Derek Summers: Trends in average ticket price across both.
Derek Summers: Both racket.
Derek Summers: Yes.
Derek Summers: On the ticket prices.
Derek Summers: It was actually down a little bit.
Derek Summers: It is FEMA maps.
Derek Summers: Not surprising in this economy, and then of course, there's a little bit of deflation out there to more on the electronics side, but even in furniture.
Derek Summers: So down a little.
Derek Summers: Which is just probably makes the growth that that much more impressive because its not ticket.
Derek Summers: But it didn't drop a lot, but it is down a little the mixes.
Derek Summers: As was mentioned earlier is all across the board it is seem up with with between furniture.
Derek Summers: Jewelry electronics appliances in wheel and tire and.
Derek Summers: And same with same with rent a center rent a center's ticket, it's probably a little higher in the first quarter year over year.
Unknown Executive: Rent-A-Center's ticket is probably a little higher in the first quarter, year over year. That's a lot of the mix we carry and so forth in what we put in the stores. But it was only a slight increase. So we're not getting a lot out of tickets, we're just getting a lot out of new customers. And it's pretty much across the board.
Derek Summers: And that's a lot of the mix, we carry and so forth.
Derek Summers: And what we've put in the stores.
Derek Summers: It is the only slide so we're not getting a lot out of ticket.
Derek Summers: It is getting a lot of new customers and it's pretty much across the board we did see some.
Unknown Executive: We do see some... You know, we get asked a lot about the furniture category. And, and, of course, that had the biggest pull-forward of demand during the during the pandemic, but we've seen in the first quarter, some of our larger partners, a couple of them have turned positive comps year over year, of course, after two years of negative comps, but at least they've turned positive. So we're starting to see. Well, we were talking about that yesterday.
Derek Summers: We get asked a lot about the furniture category and.
Derek Summers: Of course that had the biggest pull forward of demand during the during the pandemic, but we have seen in the first quarter. Some of our larger partners. A couple of them have turned positive comps year over year of course, those after two years of negative comps, but at least they have turned positive. So we're starting to see what we were talking about the yesterday.
Unknown Executive: We called some green shoots in there about starting to see some positive signs. You may have seen the report on Wayfair's report this morning. It was pretty positive on the furniture side of things. So I think we're seeing some similar results in furniture where, you know, that seems to be coming back. It certainly is at least stabilized and isn't dropping anymore, I would say. And, if anything, it's actually coming back a little. A great helpful color there.
Derek Summers: Called some green shoots in there about.
Derek Summers: And to see some positive you may have seen.
Derek Summers: Report of a wafer to report this morning was pretty positive on the furniture side of things. So I think we're seeing some similar results in furniture, where.
Derek Summers: That seems to be coming back.
Derek Summers: Certainly is at least stabilized and isn't dropping anymore I would say.
Derek Summers: And if anything it's actually coming back a little bit.
Unknown Executive: And then just one more quick one for me, kind of on the acceptance now, charge off headwind. Just based on your, you know, your integration commentary there onto a schema, is it fair to assume that the charge off headwind is going to abate over, you know, next quarter and two quarters from now? That headwind will be gone. Yeah, I think it's going to be more in the second half of the year than it is in the next quarter.
Derek Summers: Great helpful color, there and then just one more quick one for me kind of on the acceptance now charge offs headwind based on.
Derek Summers: Your integration commentary there onto a scheme that is it fair to assume that charge off headwind going to abate Youll Birmingham NEC.
Derek Summers: Quarter, two quarters from now that that headwind will be gone.
Speaker Change: Yes, I think it's going to be more the second half of the year than it is next quarter I think we guided to.
Speaker Change: Guided to a better second half than a first half into the second quarter loss rate will be similar to the first quarter and then youll start to see a trend down we still think for the year will end up pretty flat to where we ended up in 2023 somewhere in between the 99, 9% nine 5% range for the year.
Unknown Executive: I think we got it guided to a better second half in the first half, and so the second quarter loss rate will be similar to the first quarter, and then you'll start to see a trend down. We still think for the year we'll end up pretty flat to where we ended in 2023, somewhere in between the 99 and nine and a half percent range for the year. So I look forward to it starting winding down now that it's pretty much fully converted, probably closer to the second half of the year.
Speaker Change: So look forward to start winding down.
Derek Summers: Now that it's pretty much fully converted.
Derek Summers: Probably closer to the second half of the year.
Speaker Change: Perfect. Thank you that's all for me.
Unknown Executive: Perfect. Thank you. That's all for me.
Unknown Executive: Thanks, Chairperson. Thank you. One moment for our next question. Our next question comes from Alex Fuhrman at Craig Hollum Capital Group. Hey guys, thanks for taking my question. It's really nice to see the very strong GMB growth at Acima, especially in spite of lower approval rates here. Can you give us a little bit more color on what's been driving the lower approval rates? And, you know, if you were to see more meaningful trade down later this year or into next year, especially, you know, perhaps as a knock-on effect, if the, you know, credit card fee issue goes through, would you start to see approval rates perhaps then start to rise?
Speaker Change: Thank you Sir.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from Alex Fuhrman at Craig Hallum Capital Group.
Unknown Executive: Yeah, good question, Alex. It certainly could, depending on how much that trade down happens, because you're certainly going to be approving those that come in at the top of the top of the funnel, so to speak. So it certainly could.
Alex Joseph Fuhrman: Hey, guys. Thanks for taking my question really nice to see the very strong GMB growth at Athene.
Alex Joseph Fuhrman: And especially and in spite of lower approval rate here can you give us a little bit more color on what's been driving the lower approval rate and if you were to see more meaningful trade down.
Speaker Change: Later, this year or into next year, especially.
Speaker Change: Perhaps.
Speaker Change: Got it back.
Speaker Change: If the <unk>.
Speaker Change: Credit card fees you goes through.
Speaker Change: Would you start to see approval rate, perhaps start to rise.
Speaker Change: Yes, good question Alex.
Speaker Change: Certainly could depending how much the trade down.
Speaker Change: Happens because you.
Speaker Change: Certainly going to be improving those that come in at the top of the top of the funnel so to speak so it certainly could.
Speaker Change:
Unknown Executive: You know, and of course, all of that when you think about underwriting, it varies, you know, depending on the category, depending on the retail partner. We're very targeted when we look at things look at underwriting and our underwriting committee, which includes all the way up to Fahmi and myself. Like I said, there may be one retailer, if we're seeing more trade-down, they might have had a higher approval rate in the first quarter than last year. But that's the combined rate of everybody, so I think it would be, say, down 130 basis points. So it's never all across the board.
Speaker Change: Yeah on a course to all of that when you think about underwriting all varies depending on the category depending on the retail partner, we're very targeted when we when we look at look at underwriting and our underwriting committee.
Speaker Change: Which which includes all the way up to family and myself.
Speaker Change: Like I said, there may be one retailer foreseeing more more trade down they might have had a higher approval rate in the in the first quarter and last year Thats accumulation of everybody them I think it would we say.
Speaker Change: Down 130 basis points the approval rate so.
Unknown Executive: It's a very targeted process, and certainly we have the ability to target down to every single store. And our underwriting team is so good that it's that targeted; it's not a blanket. It's certainly on the ASEMA side, that's part of all that benefit we're going to get from ASEMA on those Acceptance Now conversions. But certainly more trade-down will help that number. Performance of the customer as payments come in
Speaker Change: It's never all across the board, it's a very targeted.
Speaker Change:
Speaker Change: Process and certainly our we have the ability to target down to every single store. So in our underwriting team is so good.
Speaker Change: It's that target is not a blanket that certainly on the seamless side. That's part of all of that benefit we're going to get from our Cmos and those acceptance now conversion so.
Speaker Change: But certainly more trade down to help that number performance you know of the customer as payments come in.
Speaker Change: Yes.
Speaker Change: You bet.
Unknown Executive: You know, that affects it too, the customer performance, not just trade down, you know, our you know, how what we're collecting on our current portfolio impacts it and so forth. So I think all of that will matter, and we'll just be diligent. It's always a balance. We've got plenty of demand, but we need to keep our, and certainly we could add higher GMB if we were kind of running wide open, so to speak, but we wouldn't do that. So you know, it's a balance.
Speaker Change: <unk> to the customer performance not just trade down.
Speaker Change: R R.
Speaker Change: You know how what we're collecting on our in our current portfolio impacts and so forth. So.
Speaker Change: I think all of that will matter and we'll just we'll be diligent it's always a balance.
Speaker Change: We've got plenty of demand, but we would need to keep our and certainly we could add higher G&P. If we were kind of running wide open so to speak but we wouldn't do that so.
Speaker Change: It's a balance.
Speaker Change: Okay. Thank you very much appreciate that.
Unknown Executive: Okay, thank you very much. I appreciate that. Thank y'all. Thank you. One moment for our next question. Our last question comes from Anthony Chukumba at Loop Capital Markets. Good morning.
Speaker Change: Thanks Bill.
Speaker Change: Thank you.
Speaker Change: One moment our next question.
Speaker Change: Our last question comes from Anthony <unk>.
Anthony: And loop capital markets.
Anthony: Good morning, Thanks for squeezing my question in.
Unknown Executive: Thanks for squeezing my question in. So I was just looking back at your original guidance for 2024, which you've reiterated, and it certainly seems like you're off to a pretty good start. You were anticipating three Fed rate cuts. Now it looks like, you know, that's certainly probably not going to happen. Maybe we don't even get any.
Anthony: So I was just looking back at your original guidance for 2024, which you've reiterated and certainly it seems like you are off to a pretty good start.
Anthony: We're anticipating three fed rate cuts.
Anthony: Now it looks like that.
Anthony: Certainly probably not going to happen, maybe we don't even get any.
Anthony: Does that give you any sort of pause.
Unknown Executive: Does that give you any sort of pause? You know, given that it really looks like inflation, hire for longer, we may not get those fed rate cuts. How do you think about that? Yeah, Anthony, good morning.
Anthony: Given that it really looks like inflation is.
Anthony: Higher for longer we may not get those fed rate cuts, how do you think about that.
Speaker Change: Yeah. Good morning. Thanks for the question the new version of our forecast doesn't include three rate cuts any longer.
Unknown Executive: Thanks for the question. You know, the new version of our forecast doesn't include three rate cuts anymore, pretty consistent with how the market is feeling after the last few data points. But given that we've given a 50 cent range to our EPS guy, we didn't feel like we needed to adjust for it. It's about eight cents from an EPS standpoint of having three rate cuts at 25 basis points apiece. So, nothing really there from an EPS standpoint as far as interest expense goes. We can definitely absorb it inside our range.
Speaker Change: Pretty consistent with out of the market is feeling after the last few data points.
Speaker Change: But given that we've given a 50 cent range to our EPS guide, we didn't feel like we needed to adjust for it its about eight.
Anthony: From an EPS standpoint of having three rate cuts of 25 basis points a piece so.
Unknown Executive: As far as any impact of any kind of interest rates being higher for longer, I think the consumer, as we stated, has been very resilient to the environment today. So, we expect them to continue to be resilient going forward. You know, going back to maybe the last question from Alex on why approval rates are a little bit on the lower end, we're very mindful of the environment we're in and the uncertainty in the environment.
Anthony: So nothing really there from an EPS standpoint as far as interest expense goes we can we can definitely absorb it inside our range as far as any impact to kind of interest rates being higher for longer I think the consumer as we stated has been very resilient to the environment. Today. So so we expect them to continue to be.
Anthony: Our resilient going forward.
Unknown Executive: And we're being very cautious in our approach. And the great part about it is we're able to grow GMV by 20 percent and still have that cautious approach. So, the consumer is very resilient, and we expect them to continue to be resilient.
Anthony: Going back to maybe the last question from Alex on why approval rates are a little bit on the lower end.
Anthony: We're very mindful of the environment, we're in and the uncertainty in the environment and we're being very cautious in our approach.
Anthony: <unk> part about it is we were able to grow <unk> by 20% and still have that cautious approach. So so the consumer is very resilient and we expect them to continue to be resilient on the other thing I'd add to that Anthony is that yes. It.
Unknown Executive: Well, the other thing I'd add to that, Anthony, is that, yeah, the range is wide enough to absorb that eight cents without any rate cuts as well as the start we got off in the first quarter, which obviously helps offset that. Okay. And so, you know, so can you just remind us like what percentage of your debt is floating rate debt? I'm just looking at y'all. So you got you got to $105, $850 million of the variables add a little bit higher than that of $1.3 billion.
Anthony: The range is wide enough to absorb that <unk> without any rate cuts as well as the start we got off to.
Anthony: In the first quarter as well, obviously helps offset that.
Speaker Change: Got it okay and so.
Speaker Change: <unk>.
Speaker Change: Can you just remind us like what percentage of your debt is floating rate debt because I am just looking at jobs and you've got your guidance of 105 to 150 million.
Speaker Change: Yes.
Speaker Change: <unk> remains the same so yes, what percentage is floating rate it's.
Speaker Change: It's about $850 million of the variables that a little bit higher than that of the 1.3 billion.
Speaker Change: Got it that's helpful. Thanks.
Unknown Executive: Got it. That's helpful. Thanks. Congratulations on the strong start to the year and good luck with the rest of it. Thank you. Thank you. This concludes the question and answer session. I would now like to turn it back to Mitch for closing remarks.
Speaker Change: Congrats on the strong start to the year and good luck with the remainder of the year.
Speaker Change: Thanks, Hey, Thanks Anthony.
Speaker Change: Thank you. This concludes our question and answer session I would now like to turn it back to Mitch for closing remarks.
Mitchell E. Fadel: Thank you very much. Thank you operator, and thank you to everyone who joined US today for an update on our on our first quarter performance and further and our outlook for the remainder of the year, certainly certainly I'm grateful for the collective efforts of our team and our merchants, who helped deliver such strong <unk> and.
Mitchell E. Fadel: Thank you very much. Thank you, operator. Thank you to everyone who joined us today for an update on our first quarter performance and our outlook for the remainder of the year. Certainly, I'm grateful for the collective efforts of our team and our merchants who helped deliver such strong GMB and positive sales results for the quarter. So, very grateful for everyone's hard work, and certainly thankful for your interest and support as well, and we look forward to updating you more towards the middle of the year on our continued progress towards our near, mid, and long-term goals.
Mitchell E. Fadel: And the positive same store sales results for the quarter, So very grateful to everyone in the hard work of all.
Mitchell E. Fadel: All of our coworkers and certainly thankful for your interest and support as well and we look forward to updating you took.
Speaker Change: More towards the middle of the year on our continued progress towards our near mid and long term goals. So have a great day everyone. Thank you.
Mitchell E. Fadel: So, have a great day, everyone. Thank you. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??
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Mitchell E. Fadel: [music].
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