Upbound Group, Inc.

Good day and thank you for standing by. Welcome to the third quarter 2026 Upbound Group 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 one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one 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,

and Abraham Albert. Please go ahead. Thank you, operator. Good morning, and thank you all for joining us to discuss the company's performance for the third quarter of 2026. 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. On the call today from Upbound Group, we have Fahmi Karam, our Chief Executive Officer, and Hal Khouri, our Chief Financial Officer. 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. These factors are described in our earnings release as well as in the company's most recent Form 10-K, upcoming Form 10-Q and other SEC filings. UpBound Group undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. 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. 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. With that, I'll turn the call over to Fahmi.

Thank you, Abraham, and good morning, everyone. We're pleased to report another strong quarter for UpBound, highlighted by efficient execution, responsible growth through disciplined underwriting, while generating significant free cash flow. I'll start this morning with the headline metrics, then cover the themes behind them and our priorities, before handing it off to Hal for the financials and updated outlook. After that, we'll open the line for questions. Before I get into the results, I want to formally welcome Scott Young as Chief Operating Officer and Dave Chakraborty as Head of Bridges. Together, they strengthened an already strong leadership team focused on execution and delivering long-term growth and value for our customers, merchant partners, coworkers, and shareholders. I'll share more on their priorities as we go through the segment highlights. Turning to the results and consolidated metrics, third quarter revenue was $1.15 billion at the high end of our guidance. Adjusted EBITDA of $123 million and non-GAAP EPS of $1.01 both exceeded the top end of our guidance. The quality of those results matters with every brand contributing. At Acima, adjusted EBITDA grew 15% year-over-year, and margin expanded approximately 270 basis points as lease charge-offs improved more than 100 basis points year-over-year. Bridget grew revenue 37% and paying users 27% year-over-year, driving an adjusted EBITDA increase of nearly 60%. And Rent-A-Center delivered sequential EBITDA growth and same-store sales growth in the quarter of 1.8%, compared to last year, its fourth consecutive quarter of growth despite a difficult operating environment. Our disciplined approach contributed to stronger profitability and healthier loss ratios at Acemo, while UpBound generated $121 million of free cash flow, more than double the prior year, allowing us to reduce net leverage to 2.4 times. The trade-off to more prudent and disciplined underwriting is reflected in lower GMV. Asima GMV was $431 million in the third quarter, down 11% year-over-year. The decrease is a combination of our disciplined underwriting posture, as well as lower traffic in our partner retail stores and e-commerce sites. Our underwriting capabilities are our core strength across Upbound. We actively manage underwriting as a strategic lever, balancing growth, portfolio performance, and risk-adjusted returns based on the data we see in each business. At ASEMA, our disciplined approach this quarter contributed to healthier loss rates, stronger margins, and cash generation. As consumer conditions and portfolio performance supported, we have the flexibility to adjust that lever to pursue profitable and responsible growth going forward. Moving on to the economic backdrop and its impact on our consumers. Our core consumer remains resilient, but continues to manage elevated costs across essential categories like groceries, rent, utilities, and energy. Gas prices in particular have stayed elevated, which has pressured customer wallet share for larger ticket discretionary purchases like furniture and appliances. Our customers have adapted to persistent inflation in their lives, but the uncertainty has put pressure on demand, with consumers selectively choosing how to spend their discretionary income, seeking value for each transaction. Notwithstanding the broader macroeconomic backdrop Our three complementary brands offer a range of solutions that help us manage category-specific demand and create multiple avenues for growth, as we remain focused on giving customers flexible, affordable ways to access the products and financial liquidity they need. We continue to strengthen the connections across our brands by investing in shared capabilities and creating a more connected experience for the customers we serve.