Upbound Group Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 20, 2025

There are 11 speakers on the call.

Operator

Hello, and welcome to the Upbound Group, Inc. Fourth Quarter twenty twenty four Earnings Conference Call.

Operator

At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer To ask a question during the session, you will need to press 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. I would now like to turn the conference over to Jeff Testnet.

Operator

You may begin.

Speaker 1

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. On the call today from Upbound Group, we have Mitch Fadell, our CEO and Fami Cutum, 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. These factors are described in our earnings release as well as in the company's SEC filings.

Speaker 1

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. 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 1

And with that, I'll turn the call over to Mitch.

Speaker 2

Thank you, Jeff, and good morning, everyone. 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 Fami Karam as Upbound's next CEO effective June one of this year. This transition follows a deliberate and thoughtful succession planning process in which Fami emerged as the Board's unanimous choice for the role. Fami joined the company as an EVP and Chief Financial Officer two point five years ago as an experienced leader with an outstanding track record of strategic and financial execution, as well as deep experience with subprime consumers. Since then, he's become an instrumental force behind our success, including driving the Bridget acquisition, assisting and integrating Aseema and achieving its strong growth.

Speaker 2

Over my forty years at the company, this industry has changed immensely, 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 02/2005 to becoming a leader in the virtual channel today. We remained a leader thanks to our innovative spirit and our relentless commitment to our mission to elevate financial opportunity for all. Thanks to the stellar execution of our team, we've closed the two transformative acquisitions of Aseema and Bridgend firmly established ourselves as a technology driven growth company with a differentiated and expanding platform of financial solutions for underserved consumers. With Upbound in a position of incredible strength, now is the right time to make this change and Pham is the right person to lead the company in this next chapter. I look forward to continuing to work closely with them over the coming months to ensure a smooth transition.

Speaker 3

With that, let's begin with a

Speaker 2

review of key highlights from 2024 as well as a discussion of our priorities for 2025, then Fami will share a more detailed review of our financial results and our outlook. After that, we'll take some questions. Let's begin with a brief look at our recent achievements, which collectively represented another significant step forward for the company and our mission to elevate financial opportunity for all and to achieve our strategic growth objectives. At Asima, the momentum we generated in the second half of twenty twenty three continued across 2024 as we welcome nearly 1,000,000 new customers to our network by onboarding thousands of new merchants, reflecting the success of Aseem as industry leading sales force, merchant productivity gains, our growing direct to consumer marketplace and the trade down impact stemming from a tighter credit environment. Assema was able to capture share throughout the year highlighted by numerous regional wins

Speaker 4

and I'm

Speaker 2

pleased to announce already in the first quarter '2 more top 50 furniture merchants have elected to move to Assema as their preferred partner. Speaking of merchant growth, we've achieved all time highs for active locations, which increased approximately 10% year over year. Our large and diverse merchant roster also limits concentration risk. In fact, the SEMA's top 10 retailers represent approximately 30% of the GMV. All of these factors and our commitment to top tier service for our consumers and our merchants helped SEMA deliver top line growth of over 17% for the year with revenue ending at approximately $2,300,000,000 And even while serving a record number of consumers, the Asima team completes the conversion of the ANOS stores into Asima's platform, established a field customer service network in collaboration with Rentacenter and launched the Leasability engine for the Asima marketplace, which guides shoppers to lease eligible durable goods on unintegrated e commerce sites with a broad array of merchandise.

Speaker 2

We believe these efforts will support and extend the seamless growth into 2025 and beyond, while also prudently maintaining our stable consumer risk file. The Renaissance 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. 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 coworkers more efficient and reducing manual components of their day to day responsibilities. Behind the scenes, the team also maintained its disciplined approach to expense management, reducing labor expense as a percentage of revenue, while improving attrition rates. Our businesses delivered these results during a period in which economic and regulatory uncertainty were the norms.

Speaker 2

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, we can tighten at one end while welcoming higher income consumers into the top of the funnel. This helps us manage lease charge offs while protecting our stable base of volume. 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 and losses within our long term targets. So we're excited about the opportunities ahead of us.

Speaker 2

And 2025 brings the addition of Bridgit, a business with its own impressive growth profile, plus the ability to amplify the growth of Rent A Center and Aseema through its current lineup of products and capabilities. I'll remind you, our Bridgit colleagues officially joined Uptown when the acquisition closed on January 31. And as we shared in mid December when we announced the deal, Bridgit brings a host of new digital products that will complement what we already offer our consumers. Their liquidity solutions through earned wage access, 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. One of the reasons outbound was attracted to Brigid is our customer demographic overlap is so large, yet the actual customer overlap is so small.

Speaker 2

We're incredibly excited for that opportunity to introduce our millions of customers to the Bridgit ecosystem while benefiting from the reverse synergies of leveraging Bridgit's capabilities to enhance our underwriting and customer acquisition strategies. Across 2025, we look forward to seeing Bridget continue to grow and Rent A Center and Nasim executing their operating plans while testing collaboration opportunities across our brands to accelerate our growth profile. In fact, by the end of this year, we're expecting about two thirds of adjusted EBITDA before corporate expenses will come from our tech enabled channels including Asima, Pridgit and Rentacenter.com and we expect that share to increase in the coming years. Overall, we see the business continue to shift to a digital first platform to further align with consumers with Acima and Bridgit leading the way with their virtual and mobile solutions and Rentacenter continuing to evolve to offer its customers a frictionless omnichannel experience whether in store or online. Now before moving on to our 2025 priorities, let's go to Slide four and recap our consolidated financial results for Q4.

Speaker 2

Fourth quarter revenue of nearly $1,100,000,000 was a 6% increase from a year ago period, mainly driven by strength at Aseema. Upbound delivered $123,000,000 of adjusted EBITDA, which was a lift of over 14% year over year and adjusted EBITDA margins of 11.4%, which was up 80 basis points from last year. Non GAAP diluted EPS was $1.05 which was nearly 30% higher than the year ago quarter. Each of these figures are within our or above the implied midpoint of guidance we provided on our last call. And in terms of consolidated lease charge offs, we finished at 7.3% for the quarter, which was 20 basis points better relative to last year's fourth quarter or twenty twenty three's fourth quarter where the LCO rate was 7.5%.

Speaker 3

So having said that, let's move to

Speaker 2

the full year results on Slide five. For the full year, our revenue grew 8.2 to over $4,300,000,000 representing the second highest on record for upbound behind fiscal year twenty twenty one, which of course benefited from stimulus and the pandemic related pull forward in the furniture sector. As Fami will discuss though, we expect to beat twenty twenty one's record with our top line performance this year. Adjusted EBITDA for the year was over $473,000,000 which was up 3.8% from the prior year. In the segment breakdown, family has discussed the drivers for Rent A Center last year and the tactical levers will pull it to SEMA in 2025 to see more flow through from its top line growth.

Speaker 2

Consolidated lease charge offs for the year totaled 7.3%, which was the same rate as I just mentioned for the fourth quarter, up slightly from fiscal year twenty twenty three, which was 7.1%. Our non GAAP diluted EPS was $3.83 compared to $3.55 in 2023, an 8% improvement 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. Overall, I'm really pleased with the strong performance that our team delivered in 2024. 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, 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 2

At Asima, we introduced 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. Asimah's revenue grew over 17% in 2024, which is really impressive when it comes off a base of nearly $2,000,000,000 in 2023. A portion of that growth came from trade down that we saw across the year, which pressured the Seema's EBITDA 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. And we expect our 2025 margin profile to improve over 2024 to be within our low to mid teens target. And that's a good segue into our priorities for 2025.

Speaker 2

So let's move to Slide six. On Slide six, let's discuss the strategic priorities that will guide our efforts this year. A seamless strategic imperatives for 2025 are organized around three key pillars: our merchants, our customers and our margins. For our merchants, we'll continue to expand the core LTO offering across our key verticals furniture, wheel and tire, jewelry and electronics. That effort will be deployed across two vectors, which are adding new merchants to our platform and driving more leases per merchant through compelling offers and attentive customer service.

Speaker 2

The focus on merchant growth and satisfaction has been a hallmark of the Sima since its founding and it will be a key part of our growth strategy going forward. 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. We're removing friction points for our familiar customers and making upgrades to our leasable durable goods. Just last month, we added Walmart, Amazon and Target as new unintegrated retail options for our consumers, pretty impressive list there.

Speaker 2

We'll also test and improve virtual lease card so that our customers have the freedom and flexibility to shop at any online and physical location for the leasable products they need in that moment. 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. This technology offers them access to Seam at their fingertips at most checkout counters just by using the app. Whenever and wherever our customers are shopping for durable goods, Asima will be ready to meet their needs and give them confidence to take home the products they want with the flexibility of our lease owned solutions. Aseema will complement that GMV growth with a separate yet equally important commitment to customer lifetime value, product profitability and prudent expense management.

Speaker 2

The trade down we've seen in the second half of twenty twenty four 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. This development does have several positive implications, including the ability for Ascema to acquire new and repeat customers for lower costs and to grow the business at a lower loss profile. Asima now has a new sizable cohort of customers who understand and appreciate the flexibility and value offered by the lease zone transaction. The Asima 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. To supplement that work, the Asima team will feature to its customers a robust lineup of leasable products leasable products will remain disciplined in pricing and underwriting with a hyperfocus on maintaining an appropriate expense structure that produces operating leverage as we continue to grow.

Speaker 2

Our plan for 2025 calls for a step up in those margins and family will cover that in a little more detail here in a bit. Shifting over to Rent A Center, unlike Asima, Rent A Center does not directly benefit from trade down in the 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. 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 monitor signs of consumer confidence and performance improvements. In addition to our disciplined underwriting, the recent liquidation sales across certain former competitors have also absorbed a portion of holiday demand for durable goods.

Speaker 2

We believe that most of those liquidation events are completed and should not impact us moving into 2025. Over our years in the business, our Rent A Center team has handled shifting economic cycles and customer performance metrics before and will do what we always do, which is adapt to the needs of our market and our consumers and shift our approach. 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 rack business by investing in our e commerce capabilities to streamline the fixed cost base and make Rent A Center more nimble across different cycles. Let me give you an example.

Speaker 2

Think about the millions of customers that visit us monthly on RentACenter.com. 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. Working with Google, we're eliminating friction points on the customer journey and elevating the shopping experience to greater personalization and on time offers to the right customers. This includes AI enabled search functionality to feature the durable goods that are the best fit for that shoppers sourced from over 1,000 products on RentCenter.com. 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 2

The Rentcenter team is also deploying an upgraded platform for pricing and promotions, which can deliver unique offers to specific customers for individual products. This next level 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 on the technology side at Rent A Center. Now moving to Bridgit, we previewed its priorities for 2025 when we announced the deal mid December and those goals haven't changed. Bridgit'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 2

The Bridgit 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 center. Bridge's plan for this year also includes testing and learning of new digital products and services in the financial health space. We'll have more fulsome updates on those initiatives as we move across the year. And as a reminder, Bridge's co founders Zubin Matthews and Hamil Kothari will continue to lead the team's efforts just as they have since the company's inception. And with such strong leadership across all three of our major segments, 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.

Speaker 2

Of course, all of these goals are a team effort. I feel so privileged to work with what I know is the best team in our industry and each day our colleagues and coworkers 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 Fami.

Speaker 4

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. 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. Thanks to Mitch's leadership, our company has continued to evolve with our consumers and achieve sustained profitable growth, strong cash flow generation and driven value for our shareholders. Over the past two years, we have made incredible progress in executing our growth strategy.

Speaker 4

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. This is an exciting time for Upbound. Our business is growing and we have the right strategy and team in place. As CEO, together with our credibly talented and dedicated team across the company, we will build upon our strong foundation and accelerate our core mission to expand financial inclusion. I look forward to working closely with Mitch over the next few months to ensure a smooth transition.

Speaker 4

Let's now turn to a review of the segment results and then discuss our outlook for fiscal twenty twenty five, after which we will take some questions. Aseema recorded 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. GMV this quarter was the highest it's been since we added Asima for four years ago and it was driven by the highest number of applications in a quarter, which were up 19% year over year. Similar to the third quarter, the growth was approximately a seventythirty split between new merchants and higher productivity from our existing merchant relationships. And with a seamless sales force registering hundreds of new merchant sign ups each month, we've achieved all time highs for total locations and active locations.

Speaker 4

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. The combination of adding new locations plus trade down resulted in a CEMA transaction with nearly 1,000,000 new customers in 2024, while our CEMA direct to consumer marketplace grew nearly 60% from the fourth quarter of twenty twenty three. CEMA 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. EBITDA margins were down 90 basis points from Q4 of twenty twenty three. However, we're up 60 basis points sequentially.

Speaker 4

As we discussed on our last call, trade down has impacted near term margins at Ascima, but it offers two important benefits. First, it introduces new customers to Ascima and drives repeat business for us at a low cost of acquisition. As more and more consumers understand the benefits of the LTO transaction. It also helps us balance the risk profile of our consumer base, which allows us to lower lease charge offs. Our loss rate of 9% for the fourth quarter was down 90 basis points year over year and 20 basis points sequentially.

Speaker 4

Let's move to the Rent A Center results starting on Page eight. Rent A Center's results included the impact of approximately 110 stores that were franchised or consolidated into a more limited extent the impacts of Hurricane Helene and Milton, which hit the Southeastern U. S. Early in the quarter. Due to the footprint optimization effort, Rent A Center finished the quarter with 111 locations fewer than year end 2023.

Speaker 4

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 twenty twenty three. In terms of product category performance, furniture and appliances represent almost 70% of the product mix with some softness in demand for consumer electronics relative to the year ago period. Rent A Center's revenue was down approximately $15,000,000 year over year, mostly driven by the franchising sale and the lower store count. However, adjusted EBITDA was up over $8,000,000 in part due to the reduction in operating expenses, including labor and occupancy expenses and the benefit from the disposition of older fleet inventory. 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 4

Center's loss rate in the quarter finished at 5%, which was up 80 basis points from 2023, but as forecasted relatively flat sequentially. As Mitch mentioned earlier, we took prudent actions in the latter part of the third quarter to protect our portfolio and respond to pressure on early performance indicators. 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. Let's cover our liquidity and capital allocation policies on Slide nine. 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 $150,000,000 of free cash flow in 2023.

Speaker 4

In 2024, our higher earnings and accelerating growth at Aseema meant higher cash tax payments and a ramp up in net working capital, resulting in free cash flow of approximately $50,000,000 in 2024. 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. At year end, our liquidity was $489,000,000 between our cash on hand and revolver availability. And as planned, we leverage a portion of that liquidity in January to address the upfront consideration for the Bridgit acquisition. As we've said in the past, our capital allocation priorities are to reinvest in the business, support the dividend, delever, pursue strategic M and A and execute opportunistic share buybacks.

Speaker 4

In 2024, our investments in the business included approximately $56,000,000 of CapEx, of which about half supported Rent A Center's customer, store and digital transformation initiatives. And even with the change in upbounds near term ABL availability post the Bridgit acquisition, the company's resources were more than sufficient to confidently raise the dividend by over 5% and maintain our strong dividend yield. 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. 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. The speed of reaching two times will largely depend on Aseemah's growth as we maintain discipline in underwriting and expense management to support margins.

Speaker 4

Post the Bridget acquisition, we do not currently have any near term plans for M and A, but our capital structure is flexible and will be ready if the right combination of value and strategic fit arises. Let's shift over to our financial outlook. The near to mid term horizon will be characterized by shifting domestic policies, realignment of traditional geopolitical relationships, uneven macro factors and disruptive advancements like generated AI. And while these new variables may emerge, this outlook assumes a stable backdrop consistent with current conditions 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. At Aseema, we expect continued growth and opportunity with GMV and revenue both up high single digits to low double digits.

Speaker 4

Adjusted EBITDA margin should improve from the prior year with movement towards the mid teens area. 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. 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. 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. 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 4

For Bridgit, we're reiterating our guidance from December, which is revenue in the $215,000,000 to $230,000,000 range and adjusted EBITDA in the $25,000,000 to $30,000,000 range. Due to closing on January 31, we'll pick up eleventwelve of that performance in our consolidated results for 2025. Our integration plan for Bridget is intentionally light touch and we are aligned with strong incentives to collaborate for enterprise wide benefits. We plan to focus on continued R and D initiatives, marketing efforts to increase paying subscribers and increasing retention rates, all targeted to achieving a step change in performance for 2026. 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 4

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 58,900,000.0 shares, which includes approximately 2,700,000.0 shares related to the Bridget acquisition. Taken together, our outlook for 2025 includes a revenue range of $4,500,000,000 to $4,750,000,000 and adjusted EBITDA range of $500,000,000 to $540,000,000 dollars fully diluted non GAAP earnings per share of $3.9 to $4.4 and free cash flow ranging from $150,000,000 to $200,000,000 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. 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 ACEMA and the addition of BRIDGID offsetting mid single digit step back at Rent A Center for the reason we outlined earlier. Our lease charge off metrics are stable to improving, demonstrating that our proactive risk management strategies continue

Speaker 2

to be

Speaker 4

effective. 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 Aseema plus Bridget's contribution. After accounting for the Bridget related adjustments to interest expense and share count, we expect non GAAP EPS to range from $0.9 to $1 compared to $0.79 a year ago. Note that BRIDGET's contribution in the first quarter will include February and March only and that Bridge's cash advance losses are not included in our lease charge off metric, which measures performance of lease transactions. 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 4

EBITDA margins are expected to be in the mid teens and below the prior year. Aseemah losses should be in the 9% area, improving from the 9.6% in the first quarter of twenty twenty four. Aseemah 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. As we wrap up on Slide 11, I'd like to emphasize a couple of the points that Mitch mentioned earlier. In 2024, we made substantial progress on our key strategic priorities.

Speaker 4

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. 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. Our consumers' needs and expectations are always evolving and they count on us to help them lead better financial lives. We'll continue to bring them relevant solutions to reinforce our relationship and our commitment to the underserved consumer.

Speaker 4

For our stakeholders, we remain committed to creating long term sustainable value by building a strong foundation, allocating capital thoughtfully and growing responsibly. 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. We look forward to delivering on our goals again in 2025 and continuing the strong momentum we've built across our brands. Thank you for your time this morning. Operator, you may now open the line for questions.

Operator

Thank Our first question comes from the line of Bobby Griffin with Raymond James.

Speaker 5

Open. Good morning, Budd. Thanks for taking the questions. And Mitch, congrats on the retirement. It's been great working over the years.

Speaker 5

I've learned a lot. And Sammy, congrats on the new role.

Speaker 2

Thanks, Bobby. Yes, thanks, Bobby. Appreciate it.

Speaker 5

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 of months ago? Obviously, the low end consumer has been under pressure. 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 2025. So just how do you view the consumer now heading into 2025?

Speaker 5

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?

Speaker 2

Sure, Bobby. This is Mitch. I'll start and then Fami can weigh in. A little different when we think about Asima and Andrans, we have had to tighten in both cases last year we tightened. Asimah with the benefit of trade down though has been you see their numbers as far as growth where we can tighten at the bottom and the trade downs helping quite a bit and you see the losses coming down delinquencies in really good shape and so forth.

Speaker 2

So I think that the trade down at a FEMA 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 and in the delinquency rates of new customers versus the core customers and so forth. So we've really tightened on the bottom and they're beginning to benefit a trade down. 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 CEMA does on trade down because they're not in a retail waterfall.

Speaker 2

So Rent A Center, that's the same store sales was strong based on the environment for the year at 1.5%, but it was flat in the fourth quarter. So it's decelerating a little bit primarily because we've had to tighten at the bottom and they're not getting all the benefit of trade down the way an Asima does. So our growth vehicle, Asima is in great shape because of the trade down or the trade down certainly helping and Rent A Center certainly even being flat on same store sales, a pretty darn good job in this environment with still strong mid teen EBITDA margins as we think about next year. So overall, 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.

Speaker 2

So, it's a long way of saying the trade downs really helping offset the struggle at the what you might call the core customer. Okay. Bob, maybe just to add to that just a

Speaker 4

little bit. I think the core customers, as Mitch said, is still under pressure. So our posture from an underwriting standpoint is still, I would say, on the conservative side. And the dynamics that Mitch just laid out between the two major segments, and you can see it in the results, CEMA is still growing at a very nice clip, 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 of that trade down.

Speaker 4

With Credit Center, losses were relatively flat 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 5

Okay. I appreciate that. And I guess secondly for me, Vam, maybe can we dive into one of the strategic priorities? I think it's on Slide six you guys referenced on the FEMA business improving margins. Understand that some of the dynamics between early buyouts a little out of your control back to that trade down aspect.

Speaker 5

But if you can maybe highlight a couple of things that you believe are in your control that you can what's going to get worked on this year, dive into that a little bit, 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 of Q3?

Speaker 4

Yes. Thanks, Bobby. Yes, I think you've started to see a little bit of that the flow through happening between Q3 and Q4 of twenty twenty four. We said there was going to be a delay in timing and we started to see the impact of that in the fourth quarter. Going into 2025 for Aseemah, the guide was improved margins as you noted on the page.

Speaker 4

Generally speaking from a P and L standpoint, I would say gross profit for the year, we think is going to be relatively flat year over year. 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. 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 4

In the first quarter, our estimate based on kind of the tax season where it's 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 at a sema.

Speaker 2

Yes. I'd add to that, Sami, 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, twenty twenty three and 2024, 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 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.

Speaker 2

I'd reiterate that.

Speaker 5

Thank you. I appreciate the details and best of luck here in 2025.

Speaker 2

Thanks, Bobby.

Operator

Please standby for our next question. Our next question comes from the line of Vincent Caintic with BTIG. Your line is open.

Speaker 6

Hey, good morning. Thanks for taking my questions. But first, a round of congratulations to both of you. Mitch, it's been great seeing you over the past decade

Speaker 1

to build up the center then rescue center and then build up

Speaker 6

to where it is based on well deserved retirement. And finally, I think we've seen you as well for the past and previously and well deserved on your role as CEO now. So congratulations to both of you. First question on the so kind of a follow-up on previously and on the kind of the macro environment. If you could talk about maybe how much you tightened and where you see some of the weakness?

Speaker 6

You gave some couple of details about your applications are up 19% year over year in Asima, but your GMV 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 Asima and Rent A Center and attributed some of that to some of the sales differences there. Like how much of that has been a headwind? And are there other categories where you may be seeing some strength or other categories to point out?

Speaker 6

Thank you.

Speaker 2

Yes. Vincent, on the furniture mix, let me start with that and then Fami can talk about the underwriting. And the furniture mix, the great news with Asima is the diversification over the last couple of years of the different categories. With that being in the 40% range where they used to be, I don't know, five years ago or four years ago when we bought a seam, it might have been 70% or 80%. So between wheel and tire and jewelry and 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 2

So I think that's the good news, very diversified. And when furniture does come back and it's in our drop in furniture year over year has certainly diminished. It's not any big gap anymore for us. It's pretty flat. And but still having said that, I'm really glad to see the diversification of the categories.

Speaker 2

And when furniture does come back, it's still a big category, obviously 40%, forty five %, whatever it is. It's going to certainly help us when that does come back, although we did nobody thinks 2025 is going to be a banner year for it, but maybe by 2026 or something like that. So great diversification in that category. And on Rent A Center, furniture is actually it's about the same percentage. Furniture I know furniture and appliances is close to 70%.

Speaker 2

The furniture part itself is pretty close to the Aseema number as far as the percent of the business. The difference in Rent A Center is those are where Aseema, the profitability of each product is very similar, but at Rent A Center, furniture and appliances are two most profitable products to rent. As you might guess, just based on retail markups of furniture especially compared to say electronics. So where Rent A Center gets that wholesale to retail markup as well, whereas CEMA doesn't. So the margins matter.

Speaker 2

So the fact that furniture is still a strong product for Rent A Center is something we want to continue to do and because it really helps drive the margin. So it's a little bit about the diversification and profitability of those products. On the underwriting, I'll let Fami talk about that. Sure. And maybe just a follow on on

Speaker 4

the categories. I think for Onasimha, all categories are up year over year in the fourth quarter as well as for the full year. Some of the as Mitch mentioned, furniture may be still under pressure, and the team has done a great job of diversifying where that where the GMV comes from. Some couple of standouts would be the Jewelry segment. We've really done well in Jewelry really all year.

Speaker 4

It's more of a seasonal product, so obviously really strong in the fourth quarter,

Speaker 6

as

Speaker 4

well as our wheel and tire practice is still a very strong growth and strong performance business for us. As far as the approval rates go, as you mentioned, after up 19% in the quarter, our approval rates, I would say, were relatively flat year over year. When I look at twenty twenty four in total, apps were up 26 in total and approval rates were down about 70 or so basis points for the year. But as you think about underwriting or managing a portfolio, you always have to break it down into its components, whether it's new versus returning customers by channel, whether it's brick and mortar,ecom or our staff business or by product category. So I would say generally speaking, year over year, we had higher approval rates in our less risky segments and our less risky categories like furniture.

Speaker 4

Approval rates for furniture are actually up year over year, but everything else was down in our more risky segments when you compare it to electronics or jewelry. 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 match that. Approval rates on new customers given the trade down 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 find pockets of risk and also pockets of opportunity and really balance out the mix between growth, losses and profitability.

Speaker 4

And the team has done a really great job of balancing that while still growing a CEMA at 17% for the year.

Speaker 2

Yes. A couple of things I'd add to that on the underwriting, Vincent. As Fami mentioned, the approval rates are pretty flat, but when you look inside of them, they are a lot of people think, well, if you have to tighten at the bottom, at the top, it must 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 with approval rate to offset the tightening at the bottom because 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.

Speaker 2

Certainly, you can see with the delinquency and the loss rates, we're pretty happy with what the underwriting team is doing. You made a comment in your question, you implied that maybe the difference between 19% apps versus 15% growth is the difference siting and underwriting. And as Fami just pointed out, there's not 4% less approvals for the reasons we both just talked about. Remember, also in that number, there's mixed shifts and things like that as we do more direct to consumer. And I mentioned some great names being added to our marketplace like Amazon and Walmart and Target, but some of those products come at a lower ticket as well.

Speaker 2

So you got a mixed shift there With our AI driven 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 you got a mix shift in there. So I wouldn't try to draw a straight line between approval rate and the really good strong growth that the seam has had. And lastly, on the new customers, as Fami pointed out, they certainly new customers are always risky than your returning customers. And thankfully, both teams, the CEMA, with like 40% repeat business and Renison has always been strong on repeat business in the 65% to 70% range.

Speaker 2

So fortunately, we have a lot of great returning customers that are less risky. But having said that, the new customers are more risky, but I will tell you our credit metrics on new customers year over year are down. They're performing as we 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 performed. So we're really happy with that as well. And again, we're really happy with the way the underwriting team is working with Efemie's direction, of course.

Speaker 2

So hopefully that gives you the color you are looking for.

Speaker 6

Okay, that's perfect. Very helpful detail and that actually answered all my questions. So thanks again and congratulations.

Speaker 2

Thanks Vincent. Appreciate it.

Operator

Please standby for our next question. Our next question comes from the line of Hong Wen with TD Cowen. Your line is open.

Speaker 7

Thank you. And congratulations on your retirement, Mitch, and congrats on your new role, Sami. Maybe if I can touch a little bit on Bridgit. So you've closed acquisitions for a month now. Maybe can you update us on the integration process so far?

Speaker 7

I know that previously you mentioned one of the benefits from Bridgit is cash flow underwriting. I guess, I mean, how is that going on your side in terms of integration? And what's your on your product roadmap? And how do you plan to cross sell to, I guess, the customer base of the two companies? Thank you.

Speaker 4

Thanks, Han. Appreciate the question. So, yes, I mean, we're three weeks in, so 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 of months ago when we announced the transaction.

Speaker 4

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. And I think the order of operations, I guess, will be more on the cross marketing side first. 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 between the two organizations. And then from an underwriting standpoint, it takes a little bit more time to test the data, apply it to our consumer base, how does it complement our underwriting that we do today because it is very, very different.

Speaker 4

But it's something that we feel very, very bullish on our ability now to really understand our consumer, their payment behavior with real time data. That is going to be a game changer for us. And we talk about the benefits of applying some of the techniques and models and tools that Ascema has been doing for years over on the Rent A Center side. The lift that we should be getting from the cash flow underwriting that Bridget does over onto Aseema and Rent A Center should be just as strong. So we're still early on in the process.

Speaker 4

We'll give updates as the year progresses, but we're very excited to add them to the team and getting going.

Speaker 2

Yes. And I agree, family, the cross selling should 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. I've been on a couple of calls just listening to the marketing teams, Anne and Sarah on our side and 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.

Speaker 2

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 7

Got it. And I think you mentioned earlier that you had the two sizable merchant wins in the quarter. Maybe can you talk a little bit about your pipeline? How is that tracking? And what has contributed to the success of your sales team in, I guess, winning over merchants from other providers?

Speaker 7

Thank you.

Speaker 2

Yes. Good question, Hong. And it's been strong. 10% and we talked about 10% location growth in 2024. And 10% is just a number and sometimes 10% sounds great and sometimes it's just 10%.

Speaker 2

But you think about how big the number is when you top 30,000 or 40,000 locations in the first place and you still can grow at 10% a year. Our sales team is just knocking it out of the park at Asim. And yes, two good wins in the first quarter on regional players, top 50 furniture players in the pipeline remain strong. Lots of conversations going on like we always talk about and it's a long process. We just keep growing at the SMB level in these regional wins as some of the larger players take a lot longer to close, if you will.

Speaker 2

So really, really happy with all the wins and happy with the pipeline. Continues to be strong. I think people are needing lease to own in this environment more so they're waking up to that. So lots of conversations going on. Like I said, I dare say that our sales team is the best there is because they're just guys like Chris and Jerry and Ed and Charles and I'll forget a whole bunch of names, but these guys are just with Tyler's direction, Tyler Montrone's direction, they are just knocking it out of the park.

Speaker 2

I think how do you win? Technology, our technology is strong, our offering is strong. We can integrate really, really fast. We can integrate a lot of different ways. So you got to have you got to be able to do that.

Speaker 2

You got to have the right sales team in the first place. You got to be able to integrate, have the right offering. You have the right customer service. 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 Ashley, a computer company like Jesus, where you can be on their website as well as buying computers for Anthony's team on the Rent A Center site. So, there's a lot of things that benefit us.

Speaker 2

If they've got a few locations that really have a lot of our kind of customers come in, we'll staff them unlike anybody else in the industry, staff a few stores, if that helps. So we've got subject matter experts who are willing to put in the stores. So there's a lot of reasons why we're winning and things are really looking bright on the Asima side for sure.

Speaker 7

Thank you.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Kyle Joseph with Stephens. Your line is open.

Speaker 8

Hey, good morning. Let me echo congratulations to you both. Just a question for me regarding furniture retailers, seeing a lot of headlines on bankruptcies there. And I understand that, you know, Aseem has been relatively immune to that given diversification. But on the Rent A Center side of the business, is that a big opportunity for you as brick and mortar locations of pure play furniture retailers are on the decline?

Speaker 2

We sure feel like it is, Kyle, especially as we go into 2025. The last quarter of twenty twenty four might have been a headwind for us with all the going out of business sales going on out there. Of course, some of them are regional players and some of them are more nationwide, but there's an awful lot of to your point, an awful lot of closeout sales that maybe were a headwind the latter couple of months of the year. But as we go into 2025, that's all turning that should all turn the other way. So we do see that as a potential.

Speaker 2

We didn't forecast anything great coming out of it, but we certainly see that as upside.

Speaker 4

It could be upside to both Rent A Center and Asima. So if those customers end up going to Rent A Center or one of Asima's partners, as long as we get them from the upbound standpoint, then that could be upside.

Speaker 2

Yes, because we weren't in any of the big ones that have closed up. So I guess we just got lucky there, but that is yes, it's a benefit as they head into a store that more than likely would have a seam in it.

Speaker 8

Got it. Thanks. Yes. And then just on the credit side of things, a seam of losses are moving in or moved in the opposite direction of rack. You guys touched on this.

Speaker 8

I think you mentioned that some of that's trade down and some of that the integration of ANOW and Asima, what's driving that? And then I know you highlighted that you're underwriting changes at both and different timing there as well.

Speaker 2

Yes, I think it is just the trade down helping us seem more than the trade downs helping Rent A Center. Rent A Center was sequentially flat, I think it was 10 basis points or something, but it was basically flat for the fourth quarter. So we're happy that we stabilized and we look at the delinquency going into tax season, which really starts in earnest today, is when we'll see some money coming through the door. So as we go as we've come into tax season, we're comfortable with where Rent A Center is. But yes, they haven't gotten all the benefit of trade down helping the number go down.

Speaker 2

But we've been able to stabilize it and the delinquency numbers look okay. I always want them a little lower, but they look okay and we're pretty happy where we are.

Speaker 8

Great. Thanks very much for answering my questions and congrats again.

Speaker 4

Thanks Kyle.

Operator

Please stand by for our next question. Our next question comes from the line of John Hecht with Jefferies. Your line is open.

Speaker 9

Good morning. Thanks for taking my questions. And I definitely want to echo the congratulations to both you, Mitch and Fannie. Good story and good transition. And just congratulations all around.

Speaker 9

I guess, yes, there are a lot of the questions you've been asked for me. First one is, I know it's the first day of tax season that you just referred to that, but is there any structure I mean, we've heard that tax season from different operators or credit offers that tax season the influence of tax season has changed over the past couple of years, partly because of timing factors and some other structured tax changes. Do you anything you want to call out for this year that you're just looking out for and how that might influence the business?

Speaker 2

The only thing I have read about this year compared to really the last two years, I would say. I think you're right, it's changed a lot over the years, but really the last couple of years haven't been much different. But everything I'm reading and I believe it, I mean, they're kind of IRS facts that the refunds are starting out higher than last year, which will be a good thing for us. More money in our customers' pockets, 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's more money out there.

Speaker 2

So I think that if that continues to be the case, the higher refunds, I think that's going to be a better season than normal for us for sure.

Speaker 9

Okay. That's great. Second, you guys have done a good job building out DTC to volume and products and services and so forth. Maybe can you talk about the customer acquisition there? Is that as much cross sell as it is new customers?

Speaker 9

What's the opportunity set there and how does that influence I'm assuming it's the customer acquisition profile or the cost might be a little different. So how does it impact the metrics? And then how does the new acquisition influence that over the next few quarters as well?

Speaker 2

Yes, that's really good question, John, because if we didn't have millions of customers already in our database to which are a lot easier to market to, to send back to the marketplace, to either go back to the retailer where they came from or to shop on our marketplace with some of the unintegrated retailers. Your cost of customer acquisition can be pretty darn high if you didn't already have all those millions of customers. So what we're doing is certainly using a lot of the cross selling in those 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 standpoint, so that we don't drive up a lot of costs on customer acquisition. So it's a balance and we can keep our new customer acquisition low as we filter in new customers because we have so many repeat customers to deal with first.

Speaker 9

Great. Appreciate that and congratulations again.

Speaker 2

Thanks John.

Operator

Please standby for our next question. Our next question comes from the line of John Rowan with Janney Montgomery Scott. Your line is open.

Speaker 4

Good morning, guys.

Speaker 2

Good morning.

Speaker 4

I'll add my congratulations for both a great career, Mitch, and obviously, Fami, a good promotion. So, Mitch, you'll be missed. Obviously, I'm late in the questions here, so most of my questions have been answered. But any updates on the CFPB lawsuits between with CFPB and Asima, given the changes at the Bureau?

Speaker 2

No. I mean, we're reading the same things you're reading about the Bureau. We're waiting for the dust to settle, lots of changes over there and we'll see what happens. We certainly feel good about our position in those cases. That part hasn't changed in all those legal cases certainly continue to feel good about our position.

Speaker 2

Like I said, we're all reading the same thing about the CFPB and where it may end up. But maybe just as important as where they end up or even more important is our when you think about the CFPB litigation we have going on, an almost identical lawsuit, one of our competitors got just about fully dismissed. So that's probably more important than anything else. The fact that a competitor of ours with a very similar lawsuit is basically one big parts of their case against the CFPB. So that's a positive.

Speaker 2

We still continue to feel good about it and certainly we'll see what happens in Washington. As far as people we talk to there, we just got to wait for the dust to settle. There's a whole lot of confusion right now and we'll see over the next couple of months who we can even talk to up there. I guess it's one way to think about it, John.

Speaker 4

Okay. And just I guess kind of staying with the CFU to some degree for a second. Obviously trade down is a big part of the story and how much do you think that that's influenced by or at least was influenced by the pending implementation of late fee rule? And obviously, that's another murky issue at this point. But how are you looking at the future of trade downs, assuming that the late fee roll does not go into effect as Debra?

Speaker 2

Yes, that's a good question. I actually never thought that it was being driven as much by late fee rules as it's driven by the delinquency that happens with the inflation in 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 the bottom at the lower tiers of the prime customer and the near prime customer, there's stress. And there's going to be I think there's going to be continued tightening above us no matter what no matter what happens with late fee rules.

Speaker 2

I think it's more about delinquency than it is about that, not to diminish the fact of what they could done to the industry. But I think that the delinquency is above us in the with some of the prime and near prime lenders is going to continue to drive trade down. That's my view, Fami. I don't know if

Speaker 4

you have any other view, but No, I agree. And then John, as you know, when you're increasing price or tightening up, you tend to go faster on the way up than you do on the way down to give up some of that margin. So our expectation and the guide that we had for the year was a relatively stable trade down environment. So we'll see how fast they start unwinding some of those things that they put in place to mitigate the late fee rules. Some are doing it, some aren't waiting to see where it settles.

Speaker 4

But either way, we'll be ready to adjust to the environment throughout the year. Okay. Fair enough. Thank you very much.

Speaker 2

Thanks, Jeff.

Operator

Please standby for our next question. Our next question comes from the line of Anthony Chukumba with Loop Capital Markets. Your line is open.

Speaker 10

Good morning. Let me add my congratulations as well on the retirement and the promotion. So So just real quickly, you talked about a similar marketplace and you talked about the fact that you added these new partners, certainly very impressive names. I guess I just had two quick questions. One, even just directionally, if you can just let us know what the assumed marketplace, how much GMV had accounted for in 2024?

Speaker 10

And then how did that grow in 2024? And sort of what is your expectation in 2025? Thanks.

Speaker 4

Anthony, good morning. Thanks for the question. So the marketplace in general, we've talked about the 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 $1,900,000,000 of GMV for Ocema for the year, it's in the low single digit range is what its contribution is to GMV. But the growth rate is nice.

Speaker 4

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 go shop. And as we talk about the pipeline for some of the integrated options, we're going to continue to work on those names and we're in a couple of RFPs that and we've talked about how long those take to kind of work themselves through and we'll continue to do that. But But at the same time, we're trying to find additional ways to increase our GMV 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 through the app on their phone. That's where we're going to in the meantime go after the DMV. And now that we have the leasability engine, which allows us to understand what products that they're shopping at these locations, that's a new powerful tool that we look forward to growing as the year goes on.

Speaker 2

Yes. And to your point, Fami, low single digits becomes mid in 2025 and next couple of years, it will hit double digits with it. It's a great vehicle for us.

Speaker 10

That's helpful. Thank you. Thank

Speaker 2

you. Thanks, Anthony.

Operator

Please stand by for our next question. Our next question comes from the line of William Rutter with Bank of America. Your line is open.

Speaker 3

Hi. Most of them might have been asked. I just have one. You mentioned that there's nothing imminent in terms of the M and A pipeline, but you also mentioned that you will continue to look for additional technology solutions to add or digital solutions to

Speaker 9

add to the platform. I guess, how do

Speaker 3

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 Brigid over that period? That's it. Thanks.

Speaker 4

Thanks for the question. Yes, I think as we said, right now, we have plenty of work to do amongst all three brands, plenty of work to do to get the collaboration going with Bridget and you can tell by the guide we have a lot of growth kind of baked in. So we feel like we have plenty to do, but you never close the door if there's an opportunity that arises that we feel like fit the strategic plan, we feel like we'll expedite that plan and we can get the right value from it, then you never say never and we'll look at it. But for the moment, I think all the team here 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 and Acima. So nothing in the near term.

Speaker 5

Great. Thank you.

Operator

Thank you. 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 2

Thanks, Towanda, and thanks to everyone who joined us today for our fourth quarter update and our outlook for 2025. We appreciate your time. I'll add my congratulations to Fami and his promotion publicly added. Thankful for the way we work together and look forward to working 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 pretty impressive fourth quarter results and setting us up for a very strong 2025.

Speaker 2

So we're I'm grateful to everyone for the collective efforts, some great jobs being done out there. And I appreciate it. We appreciate it. I know our stakeholders do. And thank you again for your support.

Speaker 2

And look forward to updating you next quarter. Have a great day.

Operator

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

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