Yahoo Finance Upbound (UPBD) Q1 Earnings Surpass Estimates, Sales Decline
Upbound Group, Inc. UPBD, earlier known as Rent-A-Center, posted first-quarter 2023 results, wherein the top and the bottom lines surpassed the Zacks Consensus Estimate, and the latter improved year over year. The company’s revenues, however, declined year over year.
Shares of this Zacks Rank #3 (Hold) company have increased 26.5% in the past six months compared with the industry’s 1.3% fall.
Q1 in Detail
Upbound posted adjusted earnings of 83 cents a share, surpassing the Zacks Consensus Estimate of earnings of 65 cents per share. Also, the bottom line increased from 74 cents per share earned in the year-ago quarter.
Total revenues of $1,016.1 million came above the Zacks Consensus Estimate of $1,001 million. The metric fell 12.4% year over year, mainly due to lower rental revenues and fees, and merchandise sales. Rentals and fees revenues tumbled 8.6%, mainly due to a lower lease portfolio value for the Acima segment. Merchandise sales plunged 30%, owing to fewer customers opting for early pay-outs.
Upbound Group, Inc. Price, Consensus and EPS Surprise
Upbound Group, Inc. price-consensus-eps-surprise-chart | Upbound Group, Inc. Quote
Adjusted EBITDA came in at $111.5 million, up 12.1% from the year-ago period’s level, mainly owing to higher gross margin and loss rates for the Acima Segment, partly offset by lower revenues and increased loss rates for the Rent-A-Center Business unit. Adjusted EBITDA margin of 11% jumped 240 basis points year over year.
Segmental Performance
Revenues at the Rent-A-Center Business segment dipped 6.5% to $485 million, due to the lower rentals and fee revenues stemming from a smaller lease portfolio value, year over year. Same-store sales declined 6.6%. E-commerce accounted for 25% of the quarterly revenues, compared with 23% in the prior-year period. At the end of the reported quarter, the segment’s lease portfolio value slipped 3.2% year over year. The segment’s adjusted EBITDA came in at 15.2%, decreasing 550 basis points from the prior year.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) declined 19.3% from the prior-year quarter’s level to $483.8 million, mainly due to lower rental and fee revenues. Also, gross merchandise volume declined 12.6% due to fewer lease applications resulting from reduced durable goods demand at merchant partners. The segment’s adjusted EBITDA increased to 14.2% , compared with the year-ago period’s figure of 4,8%.
The Franchising segment’s revenues rose 14% to $29.8 million primarily due to increased inventory purchases per store. As of Mar 31, Rent-A-Center had 440 franchise-operated locations.
The Mexico segment’s revenues totaled $17.4 million, up 1.1% on a constant-currency basis. As of Mar 31, the unit had 126 company-operated locations.
Other Financial Aspects
Upbound ended the reported quarter with cash and cash equivalents of $171.7 million, net senior debt of $890 million and a stockholders' equity of $670.3 million.
UPBD provided cash from operating activities of $105.4 million and free cash flow totaled $95.9 million.
2023 Guidance
Management revised guidance for 2023. For the year, management continues to anticipate consolidated revenues of $3.8-$4 billion, compared with $4.2 billion reported in 2022. Adjusted EBITDA is projected between $395 million and $435 million versus the earlier provided guidance of $380- $415 million. The adjusted EBITDA was at $453.5 million last year.
Upbound envisions adjusted earnings in the range of $2.70 to $3.20 per share, compared to the earlier projection of earnings of $2.50 to $3.00 per share. Adjusted earnings came in at $3.70 in 2022. The company expects free cash flow in the band of $200-$235 million for 2023.
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