Upbound Group (UPBD) Q4 2025 earnings review
Acima Growth Engine Stalls as Credit Tightens
Upbound delivered a mixed Q4. While consolidated revenue grew 11% aided by the Brigit acquisition, the core growth engine, Acima, screeched to a halt with GMV growth collapsing to +0.4% (from +11% in Q3 and +16% in Q2) due to credit tightening. Net Income fell 36% YoY to $19.7M as Acima's lease charge-offs spiked to 10.1%. On the bright side, the legacy Rent-A-Center business successfully pivoted to positive Same Store Sales (+0.8%) after a year of declines. FY26 guidance is underwhelming, forecasting essentially flat earnings growth ($4.18 midpoint vs $4.13 in FY25), suggesting the 'transition year' narrative continues.
🐂 Bull Case
After three quarters of negative comps, Rent-A-Center Same Store Sales flipped positive (+0.8%). The segment stabilized while maintaining strong cash flow, proving the efficacy of recent operational adjustments.
Brigit continues to scale rapidly with paying subscribers up 29% YoY to 1.55 million and ARPU up nearly 10%. It contributed $11.1M in Adjusted EBITDA this quarter, acting as a new profit pillar.
🐻 Bear Case
Acima GMV growth effectively zeroed out (+0.4%) as management tightened underwriting to control losses. Given Acima has been the primary growth driver, this stall puts the entire topline algorithm at risk for FY26.
Acima Lease Charge-Offs hit 10.1%, breaching the psychological 10% level and rising 110bps YoY. This pressure on the merchant portfolio limits management's ability to re-accelerate growth aggressively.
⚖️ Verdict: 🔴
Bearish. The sudden arrest of Acima's growth momentum is the dominant story. While RAC stabilized, the company is guiding for flat earnings in FY26, indicating they are in the 'penalty box' of credit repair rather than growth mode.
Key Themes
Acima GMV Growth Evaporated
Decelerating. Acima's Gross Merchandise Volume (GMV) growth plummeted from 16.0% in Q2 and 11.0% in Q3 to just 0.4% in Q4. This indicates that credit tightening measures implemented in late summer were drastic. While necessary to control losses, it removes the company's primary growth lever heading into 2026.
Lease Charge-Offs (LCO) Spike
Accelerating. Acima's LCO rate climbed to 10.1%, up from 9.0% a year ago and 9.7% in Q3. This confirms management's Q3 warning of a Q4 peak. While RAC LCOs stabilized (4.9%), the deterioration at Acima weighs heavily on consolidated margins.
Rent-A-Center Recovery
Reversing. After a year of contraction, Rent-A-Center achieved positive Same Store Sales (+0.8%). This marks a successful stabilization of the legacy business, which remains a cash cow (Adj. EBITDA margin 14.4%) even if revenue was flat YoY.
Brigit Scaling Efficiently
Accelerating. Brigit is performing well post-acquisition. Paying subscribers grew 29% YoY to 1.55M, and ARPU rose roughly 10% to $14.15. The segment contributed $11.1M in Adjusted EBITDA with a healthy 17.2% margin, validating the diversification strategy.
Macro Headwinds Persist
Management continues to cite 'challenging macroeconomic conditions' and 'inflation' impacting customer payment behavior. The necessity to tighten underwriting at Acima despite a desire for growth indicates the low-income consumer remains under significant stress.
Acima Marketplace Expansion
Direct-to-consumer GMV at Acima grew over 60% YoY and now represents nearly 10% of total GMV. This digital channel is crucial for diversifying away from brick-and-mortar retailer reliance.
Other KPIs
Accelerating (+10.9% YoY vs +6.0% in 24Q4). While impressive, this is largely driven by the inorganic addition of Brigit ($64.6M). Organic growth is significantly lower given Acima's GMV stall.
Decelerating. Down significantly from $31.0M in 24Q4. Net margin compressed to 1.7% from 2.9% a year ago, driven by higher interest expense ($28M vs $25M) and special items.
Reversing. Significantly improved from a cash burn of -$61.9M in 24Q4. This turnaround supports the dividend increase (+5.4%) and debt service.
Guidance
Stable/Decelerating. Midpoint ($4.825B) implies +2.8% growth, a sharp slowdown from the +8.7% growth seen in FY25. This reflects the difficult credit environment constraining Acima.
Stable. Midpoint ($517.5M) implies only ~1.7% growth vs FY25 ($508.8M). This suggests limited operating leverage despite cost controls.
Stable. Midpoint ($4.18) is effectively flat vs FY25 ($4.13). With net leverage at 2.9x and flat earnings, the valuation case relies entirely on multiple expansion rather than earnings growth.
Accelerating. Midpoint ($1.21B) implies ~3% YoY growth vs 25Q1 ($1.17B pro-forma/actuals). Shows slight seasonal improvement but remains muted.
Key Questions
Acima GMV Re-acceleration
GMV growth collapsed to 0.4% in Q4. When do you expect underwriting to normalize? Is mid-single digit growth the ceiling for 2026 given the credit backdrop?
Acima Loss Peak
Acima LCO hit 10.1%. Have we truly seen the peak, or could the post-holiday vintage drive this higher in Q1? What is the normalized target for LCO in this macro environment?
Rent-A-Center Sustainability
RAC posted positive SSS for the first time in a year. Is this driven by volume/deliveries or purely pricing? Can this positive trend sustain through FY26?
Brigit Cross-Sell
Brigit is growing well on its own. Can you quantify any early wins from cross-selling Brigit products to the RAC/Acima customer base, or is that still purely upside?