Q4 2024 Upbound Group Inc Earnings Call
And John Chesnut, Fahmi Karam, John Chesnut, Mitchell Fadel
Hello, and welcome to the Upbound Group, Inc. Fourth Quarter 2024 Earnings Conference Call.
At this time, all participants are in a listen-only mode.
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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
I would now like to turn the conference over to Jeff Chesnut. You may begin.
Jeff Chesnut: Good morning and thank you all for joining us to discuss the company's performance for the fourth quarter and full year 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.
Jeff Chesnut: 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 are subject to factors that could cause actual results to differ materially and adversely from our expectations.
Jeff Chesnut: 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.
Jeff Chesnut: 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.
Jeff Chesnut: Finally, a found 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. And with that, I'll turn the call over to Mitch.
Thank you, Jeff, and good morning, everyone.
Speaker Change: Before I begin, I'd like to take a moment to address the announcement we made this morning about my decision to retire as CEO and step down from the board, as well as the appointment of Fahmi Karam as Upbound's next CEO effective June 1st of this year.
Speaker Change: This transition follows a deliberate and thoughtful succession planning process in which Fahmi emerged as the board's unanimous choice for the role.
Speaker Change: Fahmi joined the company as an EVP and Chief Financial Officer two and a half years ago as an experienced leader with an outstanding track record of strategic and financial execution, as well as deep experience with subprime consumers.
Speaker Change: Since then, he's become an instrumental force behind our success, including driving the Bridget acquisition, assisting in integrating with FEMA, and achieving its strong growth.
Speaker Change: Over my 40 years at the company, this industry's changed immensely.
Speaker Change: But we've remained at the forefront every step of the way, from brick and mortar consolidation in the 90s and 2000s, establishing the first national third-party LTO business in 2005, to becoming a leader in the virtual channel today.
Speaker Change: We remain a leader thanks to our innovative spirit and our relentless commitment to our mission to elevate financial opportunity for all.
Speaker Change: Thanks to the stellar execution of our team, we've closed the two transformative acquisitions of Acima and Bridget and firmly established ourselves as a technology-driven growth company.
Speaker Change: with a differentiated and expanding platform of financial solutions for underserved consumers.
Speaker Change: With Upbound in a position of incredible strength, now is the right time to make this change, and Fahmi's the right person to lead the company in this next chapter. I look forward to continuing to work closely with him over the coming months to ensure a smooth transition.
Speaker Change: With that, let's begin with a review of key highlights from 2024, as well as a discussion of our priorities for 2025, then Fahmi will share a more detailed review of our financial results and our outlook. After that, we'll take some questions.
Speaker Change: Let's begin with a brief look at our recent achievements, which collectively represented another significant step forward for the company in our mission to elevate financial opportunity for all and to achieve our strategic growth objectives.
Speaker Change: At the seam of the momentum we generated in the second half of 2023 continued across 2024 as we welcomed nearly a million new customers to our network by onboarding thousands of new merchants.
Speaker Change: reflecting the success of a seamless industry-leading sales force, merchant productivity gains, our growing direct-to-consumer marketplace, and the trade-down impact stemming from a tighter credit environment.
Speaker Change: The SEMA was able to capture share throughout the year, highlighted by numerous regional wins.
Speaker Change: And I'm pleased to announce already in the first quarter, two more top 50 furniture merchants have elected to move to Acima as their preferred partner.
Speaker Change: Speaking of nurturing growth we've achieved all-time highs for active locations which increased approximately 10% year-over-year.
Speaker Change: Our large and diverse merchant roster also limits concentration risk. In fact, the CMIS top 10 retailers represent approximately 30% of the GMB.
Speaker Change: All of these factors in our commitment to top-tier service for our consumers and our merchants help the FEMA deliver top-line growth of over 17% for the year with revenue ending at approximately 2.3 billion.
and even while serving a record number of consumers.
Speaker Change: The ACIMA team completes the conversion of the ANAL stores into ACIMA's platform.
Speaker Change: Establish a field customer service network in collaboration with Renner Center.
Speaker Change: and launched the Leasability Engine for the Athema Marketplace, which guides shoppers to lease eligible durable goods on unintegrated e-camera sites with a broad array of merchandise.
Speaker Change: We believe these efforts will support and extend the CMU's growth into 2025 and beyond while also prudently maintaining our stable consumer risk file.
Speaker Change: The Renaissance Center team focused on elevating the customer experience in 2024 while concurrently managing its operating expenses to deliver stable EBITDA and cash flow in a challenging environment.
Speaker Change: The successful rollout of our new point-of-sale system called RackPad resulted in a smoother and more efficient customer journey, whether in-store or online, by making our co-workers more efficient in reducing manual components of their day-to-day responsibilities.
Speaker Change: Behind the scenes, the team also maintained its disciplined approach to expense management, reducing labor expenses as a percentage of revenue while improving attrition rates.
Speaker Change: Our businesses delivered these results during a period in which economic and regulatory uncertainty were the norms.
Speaker Change: Overall it really emphasized the durability and resilience of the business model to drive profitable outcomes across economic environments.
When macroeconomic conditions are more cautious,
Speaker Change: We can tighten at one end while welcoming higher-income consumers into the top of the funnel. This helps us manage lease charge-outs while protecting our stable base of volume.
Speaker Change: And when conditions are more constructive for all consumers, we can accommodate more of them across all income levels, which helps us drive additional top-line growth with margin expansion at losses within our long-term targets.
Speaker Change: So we're excited about the opportunities ahead of us, and 2025 brings the addition of Bridget.
Speaker Change: a business with its own impressive growth profile plus the ability to amplify the growth of Reno Center and Acima through its current lineup of products and capabilities.
Speaker Change: I'll remind you our Bridget colleagues officially joined Upbound when the acquisition closed on January 31st.
Speaker Change: And as we shared in mid-December when we announced the deal,
Speaker Change: Bridget brings a host of new digital products that will complement what we already offer our consumers.
There are liquidity solutions through earned wage access.
Speaker Change: Credit building programs and financial literacy tools will help us improve our customers financial health while engaging with them more frequently compared to only when they need a big-ticket durable good.
Speaker Change: One of the reasons Upbound was attracted to Bridget is our customer demographic overlap is so large.
Speaker Change: yet the actual customer overlap is so small. We're incredibly excited for that opportunity to introduce our millions of customers to the Bridget ecosystem while benefiting from the reverse synergies of leveraging Bridget's capabilities to enhance our underwriting and customer acquisition strategies.
Speaker Change: will come from our tech-enabled channels including Acima, Bridget, and Rent-A-Center.com, and we expect that share to increase in the coming years.
Speaker Change: Overall, we see the business continue to shift to a digital-first platform to further align with consumers, with Acima and Bridget leading the way with their virtual and mobile solutions, and Renison are continuing to evolve to offer its customers a frictionless, omni-channel experience, whether in-store or online.
Speaker Change: Now before moving on to our 2025 priorities, let's go to slide 4 and recap our consolidated financial results for Q4.
Speaker Change: Fourth quarter revenue of nearly 1.1 billion was a 6% increase from a year ago period mainly driven by strength of the SEMA.
Speaker Change: Upbound delivered 123 million of adjusted EBITDA, which was a list of over 14% year over year. And adjusted EBITDA margins of 11.4%, which was up 80 basis points from last year.
Speaker Change: Non-gap diluted EPS was $1.05, which was nearly 30% higher than the year-ago quarter.
Each of these figures are within our or above.
Speaker Change: the implied midpoint of guidance we provided on our last call. And in terms of consolidated lease charge-offs, we finished at 7.3 percent for the quarter, which was 20 basis points better relative to last year's fourth quarter or 2023's fourth quarter, where the LCO rate was 7.5.
Speaker Change: So having said that, let's move to the full-year results on slide five.
Speaker Change: For the full year, our revenue grew 8.2% to over $4.3 billion, representing the second highest on record for upbound behind fiscal year 2021, which, of course, benefited from stimulus and the pandemic-related pull forward in the furniture sector.
Speaker Change: As Fahmi will discuss though, we expect to beat 2021's record with our top-line performance this year.
Speaker Change: Adjusted EBITDA for the year was over $473 million, which is up 3.8% from the prior year.
Speaker Change: In the segment breakdown, Fahmi will discuss the drivers for Rent-A-Center last year, and the tactical leverage will pull it to SEMA in 2025 to see more flow from its top-line growth.
Speaker Change: Consolidated lease charge-offs for the year totaled 7.3 percent, which was the same rate as I just mentioned for the fourth quarter, up slightly from fiscal year 2023, which was 7.1 percent.
Speaker Change: Our non-GAAP diluted EPS was $3.83 compared to $3.55 in 2023, an 8% improvement.
Speaker Change: and in line with our guidance last quarter and in line with the framework for growth that we introduced at our investor day in 2023.
Speaker Change: Overall, I'm really pleased with the strong performance that our team delivered in 2024.
Speaker Change: The Rent-A-Center segment successfully navigated a number of challenges across the year between the uncertain environment for Rent-A-Center's core consumer, pressure on demand, and payment behavior as inflation continued to take a toll in an evolving competitive landscape despite those hurdles.
Speaker Change: The entire Rent-A-Center team stayed focused and grew Adjusted EBITDA by 5.4%, while simultaneously investing to advance the segment's digital capabilities going forward.
Speaker Change: At Acima, we introduce more merchants and more consumers to our virtual LTO platform, which enabled the segment to print its fourth consecutive quarter of double-digit top-line growth.
Speaker Change: The CIMA's revenue grew over 17% in 2024, which is really impressive when it comes off a base of nearly $2 billion in 2023.
Speaker Change: A portion of that growth came from trade down that we saw across the year, which pressured us even on margins by more than 200 basis points the first three quarters of the year when compared to the prior year, but that gap narrowed pretty significantly to 90 basis points in Q4.
Speaker Change: And we expect our 2025 margin profile to improve over 2024 to be within our low to mid-teens target.
Speaker Change: And that's a good segue into our priorities for 2025, so let's move to slide 6.
Speaker Change: On slide six, let's discuss the strategic priorities that will guide our efforts this year. ASEMA's strategic imperatives for 2025 are organized around three key pillars.
Our merchants, our customers, and our margins.
Speaker Change: For our merchants, we'll continue to expand the core LTO offering across our key verticals, furniture, wheel and tire jewelry, and electronics.
Speaker Change: That effort will be deployed across two vectors, which are adding new merchants to our platform.
Speaker Change: And driving more leases per merchant through compelling offers and attentive customer service.
Speaker Change: The focus on nurturing growth and satisfaction has been a hallmark of the SEMA since its founding, and it will be a key part of our growth strategy going forward.
Speaker Change: And this year, we're amplifying our commitment to our customers. Similar to the importance of increasing productivity with our merchants, it's equally, if not more important, to increase our repeat business with our first-time consumers.
Speaker Change: We're removing friction points for familiar customers and making upgrades to our SEMA marketplace where our shoppers can find a vast assortment of leaseable durable goods.
You know, just last month we had at Wal-Mart...
Speaker Change: Amazon and Target as new unintegrated retail options for our consumers. Pretty impressive list there.
Speaker Change: We'll also test and improve virtual lease cards so that our customers have the freedom and flexibility to shop at any online and physical location for the leaseable products they need in that moment.
Speaker Change: With this new product, our customers are not limited to the roster of retailers that are our active partners, so that lineup is really robust, as you know, with tens of thousands of locations.
Speaker Change: This technology offers them access to the seam with their fingertips at most checkout counters just by using the app.
Speaker Change: Whenever and wherever our customers are shopping for durable goods, a seam will be ready to meet their needs and give them confidence to take home the products they want with the flexibility of our lease-sold solutions.
Speaker Change: The FEMA will complement that GMV growth with a separate yet equally important commitment to customer lifetime value, product profitability, and prudent expense management.
Speaker Change: The trade-down we've seen in the second half of 2024 helped drive a portion of the double-digit GMV and top-line growth, but those customers are electing the earliest purchase option more often than our traditional customers.
Speaker Change: This development does have several positive implications, including the ability for a team to acquire new and repeat customers for lower costs.
and the growth of business at a lower loss profile.
Speaker Change: The CIMA now has a new sizable cohort of customers who understand and appreciate the flexibility and value offered by the lease zone transaction.
Speaker Change: The ASEMA folks, our team, will work to capitalize on these new relationships by guiding them back to our merchants through our marketplace for subsequent leases and by introducing them to the virtual lease card that I just mentioned.
Speaker Change: To supplement that work, the ACIMA team will feature to its customers a robust lineup of leasable products. We'll remain disciplined in pricing and underwriting with a hyper-focus on maintaining an appropriate expense structure that produces operating leverage as we continue to grow.
Speaker Change: Our plan for 2025 calls for a step up in those margins and Fahmi will cover that a little more detail here in a bit.
Speaker Change: Shifting over to Rent-A-Center, unlike from Trade Down in a retailer's checkout waterfall, and it's not expanding its overall footprint to new locations. So, as we tightened underwriting in the second half of the year, in response to performance indicators,
that put pressure on the portfolio value.
Speaker Change: Open lease count and lease portfolio value on a same store basis are expected to be slightly lower across the first part of the year as the team monitors signs of consumer confidence and performance improvements.
Speaker Change: In addition to our disciplined underwriting, the recent liquidation sales across certain former competitors have also absorbed a portion of the holiday demand for durable goods. We believe that most of those liquidation events are completed and should not impact us moving into 2025.
Speaker Change: Over our years in the business, our Renner Center team has handled shifting economic cycles and customer performance metrics before, and we'll do what we always do, which is adapt to the needs of our market and our consumers and shift our approach.
Speaker Change: The pandemic prompted us to strengthen our online channel and our strategy is to continue to focus on web traffic in response to consumer shopping habits. We're focused on continuing to grow the online portion of the RAC business by investing in our e-commerce capabilities to streamline the fixed cost base and make Renison or more nimble across different cycles. Let me give you an example.
Speaker Change: Think about the millions of customers that visit us monthly on RenoCenter.com
Speaker Change: Our focus is to convert more of those visitors into customers and we're doing that by streamlining and improving the website experience, the checkout process and the communication with the store.
Speaker Change: Working with Google, we're eliminating friction points on the customer journey and elevating the shopping experience through greater personalization and on-time offers to the right customers.
Speaker Change: This includes AI-enabled search functionality to feature the durable goods that are the best fit for that shopper, sourced from over 1,000 products on RentCenter.com.
Speaker Change: And as our web channel grows, we're evolving our customer identity validation and underwriting tools as well to ensure responsible risk-adjusted outcomes, no matter the customer acquisition channel.
Speaker Change: The Rent-A-Center team is also deploying an upgraded platform for pricing and promotions.
Speaker Change: which can deliver unique offers to specific customers for individual products.
Speaker Change: This next level of targeting will improve personalized, more relevant, and actionable communications with our consumers, while also helping the business manage its inventory based on real-time metrics like rental status, age, and remaining value of the product.
Pretty exciting stuff and the technology side at Renner Center.
Speaker Change: Now, moving to Bridget, we previewed its priorities for 2025 when we announced the deal mid-December, and those goals haven't changed.
Speaker Change: Bridget's product lineup, which I highlighted earlier, offers our shared targeted consumer a value proposition that really resonates in this economic climate, but also meets a critical market need regardless of economic conditions.
Speaker Change: The Bridget leadership team will look to extend their growth curve in 2025 by introducing those products to new consumers, including consumers who have interacted with the CMN Rent-A-Center.
Speaker Change: Bridget's plan for this year also includes testing and learning of new digital products and services in the financial health space.
Speaker Change: We'll have more Folsom updates on those initiatives as we move across the year, and as a reminder Bridges co-founders Zubin Matthews and Hamil Katari
Speaker Change: will continue to lead the team's efforts, just as they have since the company's inception. With such strong leadership across all three of our major segments,
Speaker Change: I'm very confident we'll be able to achieve the goals I've outlined here and that our combined business will create meaningful value for our customers and for our stakeholders in 2025.
Of course, all of these goals are a team effort.
Speaker Change: I feel so privileged to work with what I know is the best team in our industry. And each day our colleagues and co-workers across North America take immense pride in helping our customers lead better lives with our innovative and flexible financial solutions. And I'd like to thank them for their passion and their dedication to the upbound business and to the financially underserved community.
And with that, I'll hand it over to Fahmi.
Fahmi Karam: Thank you Mitch and good morning everyone. I'd like to start by expressing my gratitude to the board for their confidence in me and for giving me the honor to serve as Upbound's next CEO.
Fahmi Karam: I'd also like to thank Mitch for his incredible mentorship over the past two and a half years and for his invaluable contribution and commitment to Upbound.
Speaker Change: Thanks to Mitch's leadership, our company has continued to evolve with our consumers.
Speaker Change: and others, and achieve sustained profitable growth, strong cash flow generation, and driven value for our shareholders.
Speaker Change: Over the past two years we have made incredible progress in executing our growth strategy.
Speaker Change: Our performance has positioned us as a differentiated leader in delivering technology-driven financial solutions with room to profitably grow our platform with new products and services.
Speaker Change: This is an exciting time for Upbound. Our business is growing and we have the right strategy and team in place.
Speaker Change: I look forward to working closely with Mitch over the next few months to ensure a smooth transition.
Speaker Change: Let's now turn to review the segment results and then discuss our outlook for fiscal 2025, after which we'll take some questions.
Speaker Change: ASEMA recorded a Q4 GMV growth of 15.3% year-over-year, above our expectations and especially impressive coming off 19% growth in the same quarter of 2023, resulting in over 34% GMV growth on a stacked two-year basis.
Speaker Change: GMB this quarter was the highest it's been since we added a FEMA for four years ago and it was driven by the highest number of applications in a quarter which were up 19% year-over-year.
Speaker Change: Similar to the third quarter, the growth was approximately a 70-30 split between new merchants and higher productivity from our existing merchant relationships.
Speaker Change: And with the SEMA sales force registering hundreds of new merchant signups each month, we've achieved all-time highs for total locations and active locations.
Speaker Change: In addition to our merchant diversification that Mitch mentioned, our largest product category, Furniture, only represented approximately 43% of rental revenue in the fourth quarter.
Speaker Change: The combination of adding new locations plus trade-down resulted in Acima transacting with nearly a million new customers in 2024, while our Acima direct-to-consumer marketplace grew nearly 60% from the fourth quarter of 2023.
Speaker Change: SEMA revenues grew 14.4% year-over-year, which was the fourth consecutive quarter of double-digit growth, and adjusted EBITDA was up nearly 8% from a year ago.
Speaker Change: Ibadal margins were down 90 basis points from Q4 of 2023. However, we're up 60 basis points sequentially.
Speaker Change: As we discussed on our last call, Trade Down has impacted near-term margins at Acima, but it offers two important benefits. First, it introduces new customers to Acima and drives repeat business for us at a low cost of acquisition.
Speaker Change: as more and more consumers understand the benefits of the LTO transaction.
Speaker Change: It also helps us balance the risk profile of our consumer base, which allows us to lower lease charge-offs.
Speaker Change: Our loss rate of 9% for the fourth quarter was down 90 basis points year over year and 20 basis points sequentially.
Speaker Change: Let's move to the Renner Center results starting on page 8.
Speaker Change: Rent-A-Center's results included the impact of approximately 110 stores that were franchised or consolidated, and to a more limited extent, the impacts of Hurricane Helene and Milton, which hit the southeastern U.S. early in the quarter.
Speaker Change: Due to the footprint optimization effort, Renaissance Center finished the quarter with 111 locations fewer than year-end 2023.
Speaker Change: Same source sales were relatively flat in the fourth quarter, and the percentage of revenue from the web channel increased approximately 70 basis points in the quarter compared to the fourth quarter of 2023.
Speaker Change: In terms of product category performance, furniture and appliances represent almost 70% of the product mix, with some softness and demand for consumer electronics relative to the year-ago period.
Speaker Change: Rent-A-Center's revenue was down approximately $15 million year-over-year, mostly driven by the franchising sale and the lower store count.
Speaker Change: However, adjusted EBITDA was up over $8 million, in part due to the reduction in operating expenses, including labor and occupancy expenses, and the benefit from the disposition of older fleet inventory.
Speaker Change: In addition to these fleet savings that will reverse next year with new, higher-priced vehicles coming online, the quarter also benefited from expenses related to workers' comp and other store-level initiatives that are not expected to recur in 2025.
Speaker Change: Venice Center's loss rate in the quarter finished at 5% which was up 80 basis points from 2023 but as forecasted relatively flat sequentially.
Speaker Change: As Mitch mentioned earlier, we took prudent action in the latter part of the third quarter to protect our portfolio and respond to pressure on early performance indicators.
Speaker Change: As conditions change, our decisioning will adjust, and we'll be ready to responsibly support our consumers' needs across the year if the environment improves.
Speaker Change: Let's cover our liquidity and capital allocation policies on slide 9.
Speaker Change: Our business has a proven and long track record of delivering strong, adjusted EBITDA to free cash flow conversion year after year, including generating nearly $150 million of free cash flow in 2023.
Speaker Change: In 2024, our higher earnings and accelerating growth at Acima meant higher cash tax payments and a ramp-up in net working capital, resulting in free cash flow of approximately $50 million in 2024.
Speaker Change: Even as the earnings and associated tax burden increases in 2025, our net working capital investment should moderate, delivering free cash flow more aligned to historical levels.
Speaker Change: At year-end, our liquidity was $489 million between our cash-on-hand and revolver availability, and as planned, we leveraged a portion of that liquidity in January to address the upfront consideration for the Bridget acquisition.
Speaker Change: As we've said in the past, our capital allocation priorities are to reinvest in the business, support the dividend, de-lever, pursue strategic M&A, and execute opportunistic share buybacks.
Speaker Change: In 2024, our investments in the business included approximately $56 million of CapEx, of which about half supported Reno Center's customer, store, and digital transformation initiative.
Thank you very much.
Speaker Change: The company's resources were more than sufficient to confidently raise the dividend by over 5% and maintain our strong dividend yield.
Speaker Change: As for leverage, our net leverage ratio was approximately 2.7 times at year-end and moved to about three times when the Bridget deal closed.
Speaker Change: With higher free cash flow and EBITDA growth expected in 2025 and a consistent focus on deleveraging, we're reaffirming our commitment to achieving a leverage ratio at or under two times.
Speaker Change: The speed of reaching two times will largely depend on a seamless growth as we maintain discipline and underwriting and expense management to support margins.
Speaker Change: Post the Bridget acquisition, we do not currently have any near-term plans for M&A, but our capital structure is flexible and we'll be ready if the right combination of value and strategic fit arises.
Let's shift over to our financial outlook.
Speaker Change: And while these new variables may emerge, this outlook assumes a stable backdrop consistent with current conditions.
Speaker Change: With a tight credit environment, maintaining current levels of trade down, and pressure on durable goods demand, especially in furniture, that's still recovering and we expect to remain under pressure in 2025, albeit a little less than in 2024.
Speaker Change: At ASEMA, we expect continued growth and opportunity, with GMV and revenue both up high single digits to low double digits.
Speaker Change: Adjusted EBITDA margins should improve from the prior year with movement towards the mid-teens area.
Speaker Change: At Rent-A-Center, we expect revenue to be down in the low single-digit range due to the sale and consolidation of approximately 110 stores that I mentioned earlier.
Speaker Change: We expect adjusted EBITDA margins to be in the mid-teens area, decreasing year-over-year due to higher operating expenses as a percentage of revenue.
Speaker Change: 2024 benefited from several expense initiatives throughout the year, some of which will not occur again in 2025, especially in the second half of the year, resulting in a normalization of the ratio of operating expenses, less losses, to revenue.
Speaker Change: The Rent-A-Center leadership team will be working across the year to accelerate the pace of the digital impacts to realize more operating leverage in the business and create further margin enhancing opportunities going forward.
Speaker Change: For Bridget, we're reiterating our guidance from December, which is revenue in the $215 million to $230 million range, and adjusted EBITDA on the $25 million to $30 million range.
Speaker Change: Due to closing on January 31st, we'll pick up 11-12ths of that performance in our consolidated results for 2025.
Speaker Change: Our integration plan for Bridget is intentionally light touch, and we are aligned with strong incentives to collaborate for enterprise-wide benefits.
Speaker Change: We plan to focus on continued R&D initiatives, marketing efforts to increase paying subscribers, and increasing retention rates.
Speaker Change: All targeted to achieving a step change in performance for 2026.
Speaker Change: At the upbound level, our corporate costs should be flat on a dollar basis to 2024, and we're modeling one interest rate reduction in September.
Speaker Change: We expect the tax rate to be consistent with 2024 at approximately 26% and steady across the quarters, with an average diluted share count for the year of approximately 58.9 million shares, which includes approximately 2.7 million shares related to the Bridget acquisition.
Speaker Change: Taken together, our outlook for 2025 includes a revenue range of $4.5 to $4.75 billion.
and adjusted EBITDA range of $500 million to $540 million.
Speaker Change: Fully diluted non-GAAP earnings per share of $3.90 to $4.40 and free cash flow ranging from $150 to $200 million.
Speaker Change: We're also pleased to share our preliminary thoughts on the first quarter, which is off to a busy start as each of our segments navigate seasonal and macro factors, including the start of tax season and extreme weather in some key geographies.
Speaker Change: Based on what we've seen to this point, we expect consolidated revenue to be up mid-single digits year-over-year, with continued momentum at Acima and the addition of Bridget, offsetting mid-single digit step back at Rent-a-Center for the reasons we outlined earlier.
Speaker Change: Our lease charge-off metrics are stable to improving, demonstrating that our proactive risk management strategies continue to be effective.
Speaker Change: Adjusted EBITDA margins on a consolidated basis are expected to be up slightly, with the pressure on the Rent-A-Center's margins being offset by margin improvements at a SEMA plus Bridget's contribution.
Speaker Change: Note that Bridget's contribution in the first quarter will include February and March only, and that Bridget's cash advance losses are not included in our lease charge-off metric, which measures performance of lease transactions.
Speaker Change: At the segment level, rent-a-center losses for the first quarter should be relatively flat to the period a year ago, and a slight improvement from the fourth quarter.
Speaker Change: Ibiza margins are expected to be in the mid-teens and below the prior year.
Speaker Change: ASEMA losses should be in the 9% area, improving from the 9.6% in the first quarter of 2024.
Speaker Change: ASEMA EBITDA margins are expected to improve year-over-year and be seasonally low compared to our overall annual target of low to mid-teens range.
Speaker Change: As we wrap up on slide 11, I'd like to emphasize a couple of the points that Mitch mentioned earlier.
Speaker Change: In 2024, we made substantial progress on our key strategic priorities.
Speaker Change: For our customers, we've always supported them with the accessibility and flexibility of the lease-to-own model. And now with Bridget, we've added digital financial health products and capabilities.
Speaker Change: Bridget's EWA and credit building tools will help our customers improve their financial situation while simultaneously helping us become more relevant more often when our consumers need us the most.
Speaker Change: We'll continue to bring them relevant solutions to reinforce our relationship and our commitment to the underserved consumer.
Speaker Change: For our stakeholders, we remain committed to creating long-term, sustainable value by building a strong foundation, allocating capital thoughtfully, and growing responsibly.
Speaker Change: We delivered on those goals across the year as we extended and repriced our debt stack, raised our dividend, and grew revenue EBITDA and EPS while managing risk in a volatile environment.
Speaker Change: We look forward to delivering on our goals again in 2025 and continuing the strong momentum we've built across our brands.
Speaker Change: Thank you for your time this morning. Operator, you may now open the line for questions.
Speaker Change: Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 11 on your telephone, then wait for your name to be announced.
To withdraw your question, please press star 1 once again.
Please stand by while we compile the Q&A roster.
and John Chesnut. Thank you. Thank you.
Speaker Change: Our first question comes from the line of Bobby Griffin with Raymond James, your line is open.
Speaker Change: Good morning, everybody. Thanks for taking the questions. Mitch, congrats on the retirement. It's been great working with you over the years. I've learned a lot. And Fahmi, congrats on the new role.
Thanks, Bobby. Yeah, thanks, Bobby.
Appreciate it.
Speaker Change: I guess, first, I want to start at maybe a high level, and can you talk a little bit about your view of your core customer, where they sit today versus a couple months ago? You know, obviously, the low-end consumer has been under pressure.
Speaker Change: It looked like it stabilized a little, and then we kind of saw some commentary out of you guys, as well as one of your peers, and some tightening in the fourth quarter, and maybe even some in 25.
Speaker Change: How do you view the consumer now heading into 25, kind of how you're approaching managing that risk and any details there to help us think about what's going on from the core business customer?
Mitch Fadel: Sure, Bobby. This is Mitch. I'll start and then Fahmi can weigh in.
You know the...
Thank you.
Speaker Change: A little different when we think about a SEMA end-round center. We have had to tighten
Speaker Change: In both cases, last year we tightened. ASEMA, with the benefit of trade-down though, you see their numbers as far as growth, where we can tighten at the bottom, and the trade-down is helping quite a bit.
Speaker Change: You see the losses coming down, delinquency is in really good shape and so forth. So I think that the trade down at ACIMA is offsetting the tightening we had to do at the bottom. I don't think that, I know that just from looking at our internal numbers.
Speaker Change: in the delinquency rates of new customers versus the core customers and so forth. So we've really tightened down the bottom and they're beginning to benefit a trade down.
Speaker Change: Rent-A-Center, we've had to tighten at the bottom also. As I mentioned in my prepared comments, they don't get the benefit quite as quickly or as directly as the SEMA does on trade down because they're not in a retail waterfall. So Rent-A-Center, you know, that's a same-store sales.
Speaker Change: You know was was was strong based on based on the environment for the year at one-and-a-half percent But it was flat in the fourth quarter, so it's decelerating a little bit primarily Because we've had to tighten at the tighten at the bottom And they're not getting all the benefit of trade down the way and the SEMA does so
Speaker Change: You know, our growth vehicle, Vecima, is in great shape because of the trade-down. The trade-down is certainly helping, and the renaissance is certainly...
Speaker Change: You know, even being flat on same-store sales is a pretty darn good job in this environment, you know, with still strong mid-team EBITDA margins as we think about next year, so
Speaker Change: Overall, you know, you've heard me say it before too, Bobby, I mean, our core customers kind of always under pressure, other than the stimulus time, maybe in 2021. So yeah. I mean, I'm I'm I'm I'm I'm I'm
Speaker Change: It's a long way of saying the trade-down is really helping offset the struggle at what you might call the core customer.
Okay, just to add to that just a little bit.
Speaker Change: You know, I think the core customer, as Mitch said, is still under pressure. So our cost from an underwriting standpoint is still, I would say, on the conservative side.
Speaker Change: and the dynamics that Mitch just laid out between the two major segments, and you can see it in the results. Acima is still growing at a very nice clip.
Speaker Change: You know, 15% in the fourth quarter, coming off a big comp year the year before, and 17% for the year while also reducing its loss rate. So you can see that impact of us tightening some...
Speaker Change: with that trade down. With Grenda Center, you know, losses were relatively flat.
Speaker Change: sequentially but the portfolio had some pressure in the fourth quarter and that had an impact on margins as we said in the fourth quarter as well as going into 2025. But generally speaking we're taking a cautious approach given where the consumer is and where the macro is.
Speaker Change: But, I'm not going to be in the room with them today. So, I'm going to be talking about the athletic aspect. But, I'm going to be talking about the
Speaker Change: If you could maybe highlight a couple of things that you believe are in your control that you can, you know, what's going to get worked on this year, dive into that a little bit, you know, the timing of it, just anything there to help us understand the variables that you feel are opportunities within the team's control from an improvement on EBITDA flow-through and margin structure of that benefit, or that segment, excuse me.
Speaker Change: Yeah, thanks. Thanks, Bobby. Yeah, I think you've started to see a little bit of that the flow-through happening between Q3
Speaker Change: and Q4 of 2024, we said there was going to be a delay in timing and we started to see the impact of that in the fourth quarter. You know, going into 2025 for ACIMA, the guide was improved margins, as you noted on the page.
Speaker Change: Generally speaking, from a P&L standpoint, I would say gross profit for the year we think is going to be relatively flat.
year-over-year.
Speaker Change: and where you're going to see the benefit in margin improvements is around losses, which obviously we have control over. We just talked about some of the underwriting posture that we're in.
Speaker Change: And then, obviously, some scale and operating leverage on the expense side. So as we go into 2025, my expectation is for gross profit to be relatively flat, gross profit percentage to be relatively flat, losses coming down, and then some leverage on expenses.
Speaker Change: In the first quarter, our estimate based on, you know, kind of the tax season we're starting, signs of strength there, plus the trade down, my assumption is that gross profit margin will actually be lower, but we're going to offset that with better losses and better expenses to be up.
quarter-over-quarter adezema.
Speaker Change: I'd add to that, Fahmi, when do you look at, and I think you touched on it, when you think about the 60 basis point improvement in the fourth quarter, we're already starting to see it like we've talked about. When you look at the last two years, 23 and 24,
Speaker Change: other than the way the second quarter bounces back from the first quarter, because first quarter is always lower with all the extra payouts of the tax returns. If you look at the trends, and that's the...
Speaker Change: that you can see the turn just from looking between the third quarter and the fourth quarter of last year. That doesn't normally happen that it goes up 60 basis points in the fourth quarter. And so I think we're already seeing the turn as well. I'd reiterate that.
Speaker Change: Thank you, I appreciate the details and best of luck here in 2025.
Thank you.
Please stand by for our next question.
Speaker Change: Our next question comes from the line of Vincent Cainton with BTIG. Your line is open.
Vincent Cainton: Hey, good morning. Thanks for taking my questions. But first, a round of congratulations to both of you. Mitch, you know, it's been great seeing you over the past decade to build up the Renner Center, then rescue Renner Center, and then build up to Uptown to where it is today. So, both of you, well-deserved retirement. We love you.
Speaker Change: And Fahmi, it's been great seeing you as well. I think we've known each other for the past decade, both in Uptown and previously. And well-deserved on your role as CEO now, so congratulations to both of you.
First question.
Speaker Change: on the kind of a follow-up on previously and on the kind of the macro environment.
Speaker Change: If you could talk about maybe how much you've tightened and where you see some of the weakness
Speaker Change: Your GMB growth is up 15%, so I wonder if that kind of implies the level of tightening. And then if you could also talk about, you highlighted the furniture mix differences between Acima and Reno Center and attributed some of that to
Speaker Change: to some of the sales differences there. Like how much of that has been a headwind and are there other categories where you're maybe seeing some strength or other categories to point out? Thank you.
Yeah, Vincent, on the...
Speaker Change: On the furniture mix, let me start with that, and then Fahmi can talk about the underwriting. On the furniture mix, you know, the great news with ESEMA is the diversification over the last couple of years of the different categories. You know, with that being in the...
You know
in the 40% range where they used to be.
Speaker Change: These, I don't know, five years ago or four years ago when we bought a seam, it might have been 70 or 80 percent. So, between wheel and tire and jewelry and...
Speaker Change: Even things like eyeglasses, there's been a lot of diversification there and really has taken the pressure off of a category that's pretty flat.
Speaker Change: So, I think that's the good news, very diversified, and when furniture does come back, and it's
Speaker Change: You know, our drop in furniture, you know, year over year is certainly diminished. It's not any big gap anymore for us. It's pretty flat.
Speaker Change: But still, having said that, I'm really glad to see the diversification of the categories. And when furniture does come back, it's still a big category, obviously 40, 45 percent, whatever it is. It's going to certainly help us when that does come back, although we didn't.
Speaker Change: You know, nobody thinks 2025 is going to be a banner year for it, but maybe by 26 or something like that. So, great diversification in that category. And on Rent-A-Center...
Speaker Change: You know, furniture is actually, it's about the same percentage. Furniture, I know furniture and appliances is, you know, close to 70. The furniture part itself is pretty close to the, to the, to the Acima number as far as the percent of the business.
Speaker Change: The difference in rent-a-center is those are where the profitability of each product is very similar.
Speaker Change: But at Rent-A-Center, you know, furniture and appliances are two most profitable products to rent. As you might guess, just based on...
Fahmi Karam: because it really helps drive the margins. So it's a little bit about the diversification and profitability of those products. On the underwriting, I'll let Fahmi.
Speaker Change: Talk about that. Sure, and maybe just to follow on on the categories, I think for Onesima
Fahmi Karam: All categories are up, year over year, in the fourth quarter as well as...
Mitch Fadel: for the full year. You know, some of the, you know, as Mitch mentioned, furniture may be still under pressure.
The team has done a great job.
Mitch Fadel: diversifying where that or the DMV comes from some couple standouts would be the jewelry segment we've really done well.
Mitch Fadel: in jewelry really all year. It's more of a seasonal product, so obviously really really strong in the fourth quarter, as well as our wheel and tire practice is still a very strong growth and strong performance business for us.
Mitch Fadel: As far as the approval rates go, as you mentioned, after about 19% in the quarter, our approval rates, I would say, were relatively flat.
Mitch Fadel: But if you think about underwriting or managing a portfolio, you always have to break it down into its components, whether it's new or returning customers by channel, whether it's brick-and-mortar, e-com, or our staff business.
Mitch Fadel: year-over-year, but everything else was down and are more risky segments when you compare it to electronics.
or Jewelry.
Mitch Fadel: And really, same with new versus returning consumers. Generally speaking, new consumers have a higher loss profile than returning consumers, and so our approval rates...
Mitch Fadel: Match that you know approval rates on new customers given the trade down is
Mitch Fadel: is down year over year, and for returning customers, it's slightly up. So, as with everything underwriting and managers of risk, it's a pretty dynamic process that we go through, and our job is to...
Mitch Fadel: find pockets of risk and also pockets of opportunity and and really balance out the mix between growth Losses and profitability and the team has done a really great job of balancing that while still growing a seam at 17% for the year
Mitch Fadel: Yeah, a couple things I'd add to that on the underwriting, Vincent. As Fahmi mentioned, the approval rates are pretty flat, but when you look inside of them,
Mitch Fadel: A lot of people think, well, if you have to tighten at the bottom, at the top, there's not much room to gain anything back at the top because you must be approving everybody anyhow at the top. And that's not necessarily the case. So you can weigh in more at the top.
Mitch Fadel: with a with a approval rate to offset the tightening at the bottom Because
Mitch Fadel: It's not like you're starting at 100% approval even at the top end of the spectrum when it comes to the approval. So that's kind of an offset inside that. Certainly, you can see with the delinquency and the loss rates, we're pretty happy with what the underwriting team's doing.
Mitch Fadel: You made a comment in your question, you implied that maybe the difference between 19% apps versus 15% growth is the difference tightening and underwriting. And as Fahmi just pointed out, there's not 4% less approvals for the reasons we both just talked about. Remember.
Mitch Fadel: Leasability engine, we were able to lease things that we couldn't even lease before. They're durable goods, but they might only be $200 or $300. So,
Mitch Fadel: The really good, strong growth that the team has had. And lastly, on the new customers, as Fahmi pointed out, they certainly, you know, new customers are always riskier than your returning customers. And when, thankfully, the...
Mitch Fadel: Both teams, the SEMA, you know, with like 40% repeat business, and Rent-A-Center has always been strong on repeat business in the 65% to 70% range. So fortunately, we have a lot of great returning customers that are less risky.
Mitch Fadel: But having said that, the new customers are more risk-able. I will tell you our credit metrics on new customers year over year are down. They're performing as there's more on the high end and less on the low end. Our new customers are outperforming a year ago with new customers.
Mitch Fadel: So we're really happy with that as well. And again, really happy with the way the underwriting team is working with Fahmi's direction, of course. So hopefully that gives you the color you are looking for.
Speaker Change: Okay, that's perfect. Very helpful detail and that actually answered all my questions. So, thanks again and congratulations.
Thanks Vincent, appreciate it.
Please stand by for our next question.
Speaker Change: Our next question comes from a line of Hong Wen with TD Cowen. Your line is open.
Hong Wen: Thank you and congratulations on your retirement Mitch and congrats on your new role at Fahmi.
Speaker Change: Maybe if we can touch a little bit on Bridget. So you've closed acquisitions for a month now. Maybe can you update us on the integration process so far?
Speaker Change: I know that previously you mentioned one of the benefits from Bridget is cash flow underwriting. I guess, I mean, how is that going on your side in terms of integration and what's on your product roadmap and how do you plan to cross-sell to, I guess, the customer base of the two companies?
Thank you.
Harm: Thanks, Harm. Appreciate the question. So, yeah, I mean, we're three weeks in on the Bridget acquisition, so not much to report as far as the integration goes and things like that. But we're equally excited today as we were a couple months ago when we announced the transaction. We're very pleased that we were able to close it early in the quarter and get the process of integrating with them and really cross-marketing with them as quickly as possible.
Harm: You know, the order of operations, I guess, will be more on the cross-marketing side first. You know, the underwriting teams have begun dialogue and figuring out ways that we can leverage some of the cash flow underwriting, but if I was going to prioritize one over the other, I think it's going to be more on the cross-marketing, given the customer overlap.
Speaker Change: Fahmi Karam, John Chesnut, Mitchell Fadel, John Chesnut, Mitchell Fadel, John Chesnut,
Speaker Change: start pretty darn soon. Probably coming right out of tax season where it's going to be more necessary for the consumer as well, coming out of tax season, call it April or May. But the teams are already working on that.
Speaker Change: I've been on a couple of calls just listening to the marketing teams, you know, Ann and Sarah on our side.
Speaker Change: Farah and Zubin on the Bridget team working together and really etching it out already. So they're going to move pretty fast on that and none of that kind of stuff is in our guidance for next year. So that could all be, the latter half of the year could all be a tailwind for us.
Speaker Change: Got it. And I think you mentioned earlier that you had two sizable merchant wins in the quarter. Maybe can you talk a little bit about your pipeline, how it's tracking and, you know, what has contributed to the success of your sales team in, I guess, winning over merchants from other providers? Thank you.
Thank you.
Speaker Change: Good question, Hong. It's been strong. We talked about 10% location growth in 2024.
Speaker Change: 10% is just a number and sometimes 10% sounds great and sometimes it's just 10%, but you think about how big the number is in your top 30 or 40000 locations in the first place and you still can grow at 10% of our sales team is just knocking it out of the park as Sema and yeah, two good wins in the first quarter on regional.
Speaker Change: Players.
Speaker Change: Top 50 furniture players.
Speaker Change: And the pipeline remained strong lots of conversations going on like we always talk about and it's a long process and we just keep.
Speaker Change: Keep growing at the SMB level and these regional wins at some of the some of the larger players to take a lot longer to.
Speaker Change:
Speaker Change: To close if you will so.
Speaker Change: Really really happy with all the all the wins and happy with the pipeline.
Speaker Change: It continues it continues to be strong I think people are people are needing lease to own in this environment more so they are waking up to that so lots of conversations going on like I said.
Speaker Change: I Dare say that our sales team is the best there is because there are just too.
Speaker Change: Okay, So, Chris and Gerry and Ed and Charles ill forget a whole bunch of names, but these guys are just with Tyler's direction Tyler mine trumps direction there just.
Speaker Change: Knocking it out of the park I think how do you win.
Speaker Change: Technology, our technology is strong our offering is strong.
Speaker Change: The.
Speaker Change: We can integrate really really fast we can integrate a lot of different ways.
So you've got to have that you've got to be able to do that you've got it alright TLC in the first place you got to be able to integrate have the right offering.
You have the right customer service.
Speaker Change: Rent a center helps a lot it seem a lot of times, where when you think about a company the size of Ashley because when you buy a lot of furniture from from Ashley a computer company. Unlike <unk>, where you can be on their website as well as.
Speaker Change: Buying computers for.
Anthony: Anthony Anthony steam on the rent a center side so.
Anthony: There's a lot of things that benefit us if they if they've got a few locations that are really have a lot of our kind of customers come in we'll staff them.
Anthony: Unlike unlike anybody else in the industry SaaS a few stores if that helps yes. So we've got subject matter experts were willing to put in the stores. So theres a lot of reasons why we're winning in.
Anthony: Things are really looking looking bright on the seamless side for sure.
Anthony: Thank you.
Anthony: Thank you.
Anthony: Please standby for our next question.
Speaker Change: Our next question comes from the line of Kyle Joseph with Stephens. Your line is open.
Anthony: Yes.
Hey, Good morning, let me Echo congratulations.
Anthony: You bet.
Anthony: Just a question for me.
Anthony: Regarding furniture retailers seen a lot of a lot of headlines on bankruptcies there.
Anthony: And I understand that the team has been relatively immune to that given the diversification, but on the rent a center side of the business unit is that a big opportunity for you is as brick and mortar locations are pure play furniture retailers are on the decline.
Anthony: We sure feels like it is Kyle, especially as we go into 2025.
Anthony: Last quarter of 2024.
Anthony: It might've been a headwind for us with all the with all the going out of business sales going on out there.
Anthony: Now of course, some of them are regional players and some of them are more nationwide, but there's an awful lot of <unk>.
Anthony: To your point, an awful lot of.
Anthony: Closeout sales.
Anthony: Maybe were a headwind the letter the letter a couple of months of the year, but as we go into 2025.
Anthony: That's all turning that should I'll turn the other way. So we do see that as a as a potential we didnt forecast any any having great coming out of it but we certainly see that as upside.
Anthony: Could be it could be upsides and both are in the center of NFC months. So if those customers end up going to rent a center or one of our seamless partners, yes as long as we get them from the standpoint that could be upside, yes, because we werent in any of the big ones that have closed up.
Anthony: I guess, we just got lucky there but.
Anthony: The benefit is as they head into a store that.
Anthony: More than likely would have the same minute.
Anthony: Got it thanks.
Anthony: Then just on the credit side of things.
Anthony: <unk>.
Anthony: Things are moving in or moved in the opposite direction of Iraq.
Anthony: You touched on this I think you mentioned that some of that trade down and some of that the integration of <unk> now and as Sema.
Anthony: What's driving that and then I know you highlighted that underwriting changes and different timing there as well.
Anthony: Yes, I think it is just the trade down helping at sema more than the trade down something around a set of rent a center.
Anthony: Sequentially flat.
Anthony: I think it was 10 basis points or something but it was basically flat for the fourth quarter. So we're happy that we've stabilized when we look at the delinquency going into tax season, which really starts in earnest today is what we will see some some money coming through the door. So as we go as we've come into tax season, where we're comfortable with where we're.
Anthony: Rent a center is but they haven't gotten all the benefit of trade down helping the number go down.
Anthony: But we've been able to stabilize it in the delinquency numbers look look okay.
Anthony: We'd want them, a little lower but they look okay.
Anthony: We're pretty happy where we are.
Anthony: Great.
Speaker Change: Thanks, very much for answering my questions and congrats again.
Speaker Change: Thanks Kyle.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of John Hecht with Jefferies. Your line is open.
John Hecht: Good morning, Thanks for taking my questions and I definitely want to echo the congratulations.
Speaker Change: You mentioned.
Speaker Change: Good story and a good transition congratulations all of them.
Speaker Change: I guess, how did the questions we've been asked.
Speaker Change: First one is I know I know, it's the first day in Texas. The midstream has concluded that but is there any structural I mean, we've heard that.
Speaker Change: From different operators are credit offerings.
Speaker Change: Okay.
Speaker Change: Actually what has changed over the past couple of years.
Speaker Change: Partly because of timing factors and some others.
Speaker Change: Awesome.
Speaker Change: Structured tax changes.
Speaker Change: Thank you all I'll call out through this year that should be spoken for and how that might influence the business.
Speaker Change: Yeah, the only thing.
Speaker Change: I have read about this year compared to really the last two years I would say I think youre right. Its changed a lot over the years, but really the last couple of years Havent havent been much different but everything I am reading and I believe it I mean, they're kind of IRS facts that the the refunds.
Speaker Change: Charting out higher than last year.
Speaker Change: Which would be a good thing for us.
Speaker Change: More money in our customers' pockets.
Speaker Change: More consumer confidence with more money in their pocket I think we've proved that during stimulus how much better you can do when there is more money out there. So I think that if that continues to be the case, the higher refunds and I think that's going to that's going to be a better season than normal for for us for sure.
Speaker Change: Okay, that's great.
Speaker Change: Second.
Speaker Change: You guys have done a good job building out DTC.
Speaker Change: Volume from products and services and so forth.
Speaker Change: Maybe can you talk about the customer acquisition there.
Speaker Change: Is that right.
Speaker Change: Is that as much cross sell of that is new customers.
Speaker Change: Whats the opportunity set there and how does that influence.
Speaker Change: Assuming thats it.
Customer acquisition profile.
Speaker Change: Cost might be a little different so how does it impact the metrics.
Speaker Change: And then how does the new acquisition influence that over the next few quarters.
Quarters as well.
Speaker Change: Yeah, that's really that's really a good question John because.
Speaker Change: If we didn't have millions of.
Speaker Change: <unk> customers.
Speaker Change: Customers are already in our database to.
Speaker Change: A lot easier to market to send back to the marketplace to you to go back to the retailer where that came from or to shop to shop on our marketplace with some of the unintegrated retailers.
Speaker Change: Your cost of customer acquisition, you'd be pretty darn high.
Speaker Change: If you didn't already if you didn't already have all of those those millions of customers. So what we're doing is certainly using a lot of the cross selling and those millions of millions of customers that are both active and inactive already in the database as well as leaning into driving new customers, but doing it very very cautiously from an expense.
Speaker Change: Standpoint.
Speaker Change: So that we don't don't drive up a lot of costs on customer acquisition. So it's a balance and we can keep our customer new customer acquisition low as we filter and new customers because we have so many repeat customers to deal with first.
Speaker Change: Great I appreciate that and congratulations again.
Speaker Change: Thanks, Sean please.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of John Rowan with Janney Montgomery Scott Your line is open.
Good morning, guys.
Speaker Change: I'll add my congratulations for both a great career, Mitch and obviously you have a good promotion so Mitch you'll be missed.
Speaker Change: Obviously.
Speaker Change: And the questions here. So most of my questions have been answered but.
Speaker Change: Any updates on the CFPB lawsuits between Cfe in the Sema given the changes at the Bureau.
Speaker Change: No I mean, we're reading that we're reading the same things you are reading about the Bureau, we're waiting for that.
Speaker Change: US to settle lots of changes over there and.
Speaker Change: We will see what happens.
Speaker Change: We certainly.
Speaker Change: Feel good about our position in those cases that part Hasnt changed.
Speaker Change: Yeah.
Speaker Change: And all of those legal cases, certainly continue to feel good about our position.
Speaker Change: Like I said, we're all reading the same thing about the CFPB and where it may end up.
Speaker Change:
Speaker Change: But maybe just as important as is where they end up or even more important is our when you think about the CFPB litigation, we have going on in the almost.
Speaker Change: Nickel lawsuit one of our competitors.
Speaker Change: Just about fully dismissed.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: That's probably more more important than anything else the fact that.
Speaker Change: Competitor of ours with very similar lawsuits.
Speaker Change: Is basically.
Speaker Change: One big parts of their case against the CFPB. So.
Speaker Change: That's a positive we still continue to feel good about it and certainly we will see what happens in Washington as far as as far as.
Speaker Change: People, we talk to there we just got to wait for the dust to settle there. So there's a whole lot of confusion right now and we'll see over the next couple of months.
Speaker Change: Who we can even talk to up there I guess is one way one way to think about it John Okay.
Speaker Change: Just kind of staying with this year from you to some degree for a second.
Speaker Change: Obviously trade down is a big part of the story.
Speaker Change: How much do you think that thats influenced by or at least was influenced by the pending implementation of late fee rule and obviously.
Speaker Change: That's all that's another murky issue at this point.
Speaker Change: But how are you looking at the future of trade Downs.
Speaker Change: Assuming that the late year old does not go into effect is.
Speaker Change: Deborah.
Speaker Change: Yes, that's a good question I actually.
Speaker Change: Never thought.
Speaker Change: It was being driven as much by late fee rules as it's driven by the delinquency that that.
Speaker Change: Happens.
With the inflation and the environment. The way. It is now just like we talked about the sema tightening up at the bottom and getting the benefit of trade down that happens all the way up the spectrum and it's.
Speaker Change: At the bottom at the lower tiers of the prime customer in the near prime customer their stress and.
Speaker Change: There's going to be I think theres going to be continued tightening above us no matter what.
Speaker Change: No matter what happens with the with late fee rules. So I think it's more about delinquency than it is about that.
Speaker Change: Not to diminish the fact of what they were.
Speaker Change: They could have done to the industry, but I think that the delinquencies.
Speaker Change: Above us in the in this with some of the prime and near Prime lenders is going to continue to drive trade down. That's my view family I don't know if you have any other view, but.
Speaker Change: Agreeing and John as you know.
Speaker Change: When you are increasing price or tightening up yet you tend to to go faster on the on the way up than you do on the way down to give up some of that margin.
Our expectation in the guide that we had for the year was a relatively stable trade down environment.
Speaker Change: So we'll see how fast they start unwinding some of those things that they put in place to mitigate the delay <unk> rule. So some are doing it some art waiting to see where the.
Speaker Change: Where it settles, but either way, we will be ready to adjust to the environment throughout the year.
Speaker Change: Fair enough. Thank you very much.
Speaker Change: Thanks, Chad.
Speaker Change: Please standby for how next questions.
Speaker Change: Our next question comes from the line of Anthony <unk> with loop capital markets.
Speaker Change: Your line is open.
Speaker Change: Good morning.
Speaker Change: Add my congratulations as well on the retirement and the promotion.
Speaker Change: So just real quickly you talked about a seam of marketplace you talked about the fact that you're <unk>.
Speaker Change: New partners certainly very impressive names I guess I just had two quick questions. One you even just directionally. If you can just let us know what the streaming marketplace how much.
Speaker Change: <unk> accounted for in 2024 and then.
Speaker Change: How did that grow in 2024 and sort of what is your expectation in 2025.
Speaker Change: Anthony Good morning, Thanks for the question so the marketplace in general we've talked about.
Speaker Change: Impressive growth rate that it's had this year growing 60% or so in the fourth quarter, but it is on a relatively small base in total when you think about almost $1 9 billion of <unk> for <unk> for the year in a low single digit range as what its contribution is.
Speaker Change: <unk>, but but.
Mitch Fadel: But the growth rate is nice and as Mitch mentioned, we just recently added some of those bigger names that gives our consumers a lot of different variety and a lot of different options for them to to go shopping.
Mitch Fadel: We talk about the pipeline for some of the integrated options, we're going to continue to work on those names and we are in a couple of Rfps that.
Mitch Fadel: And then we've talked about how long those those take to kind of work themselves through and we'll continue to do that but at the same time, we're trying to find additional ways to increase our <unk> in that virtual lease card that we talked about being able to put more of the control in the hands of consumers to be able to go shop, whether it's through our marketplace or or through the.
Mitch Fadel: The app on their phone and that's where we're going to in the meantime go after the Dnb and now that we have the least ability engine, which allows us to to understand what products that theyre shopping at these locations at a new powerful tool that we look forward to growing as the year goes on.
Mitch Fadel: To your point family loss low single digits becomes mid in 2025.
Mitch Fadel: Next couple of years.
Mitch Fadel: It will hit double digits.
Mitch Fadel: Great vehicle for us.
Mitch Fadel: That's helpful. Thank you.
Mitch Fadel: Thanks Anthony.
Mitch Fadel: Please standby for our next question.
Speaker Change: Our next question comes from the line of William Reuter with Bank of America. Your line is open.
William Reuter: Hi, most of mine have been asked I just have one.
Speaker Change: You mentioned that there is nothing eminent in terms of the M&A pipeline.
Speaker Change: But you also mentioned that you will continue to look for additional technology solutions to add our digital solutions to add to the platform I guess, how do you think about the next year would you be in a position to buy something over the next year or will you be focusing on optimization of bridge it over that period. That's it. Thanks.
Speaker Change: Thanks for the question, Yes, I think as we said right now we have plenty of work to do amongst all three brands.
Speaker Change: Plenty of work to do to get the collaboration going.
Speaker Change: With Bridget and you can tell by the guide we have a lot of growth.
Speaker Change: Baked in.
Speaker Change: We feel like we have plenty to do but you never close the door. If there is an opportunity that arises that we feel like fit the strategic plan, we feel like will expedite that plan and we can get the right value from it and you never say never and we'll look at it but for the moment I think all the team.
Speaker Change: Here in the inherent in the building is ready to start integrating with Bridget and achieve some of the initiatives that we laid out for both rent a center.
Speaker Change: So nothing in the near term.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Mitch Fadel: Ladies and gentlemen, I'm showing no further questions in the queue I would now like to turn the call back to Mitch for closing remarks.
Speaker Change: Thanks to Wanda and thanks to everyone, who joined US today for our fourth quarter update our outlook for 2025, we appreciate your time.
Mitch Fadel: I'll add my congratulations to <unk> and <unk>.
Speaker Change: Promotion publicly added.
Speaker Change:
Speaker Change: Thankful for for the way, we work together and look forward to work in the next few months together to make a smooth transition.
And just as important as that very thankful for all of our employees all of our dedicated employees and of course, our merchant partners, who are helping us deliver what I call a pretty impressive fourth quarter results and setting us up for a very strong 2025 store.
Speaker Change: Grateful to everyone for for their collective efforts.
Speaker Change: Some great jobs being done out there and I appreciate it we appreciate it and all of our stakeholders doing and thank you again for your support and look.
Speaker Change: Forward to updating you next quarter have a great day.
Speaker Change: Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Yes.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Sure.