I think we're ready to start. Good morning and welcome to both our live participants and those of you joining us on the web. We're really excited for you to join us for Upbound's Inaugural Investor Day and show the developments and the significant opportunities we see for the company. Before I begin, I wanna note that our remarks today may contain forward-looking statements and are subject to factors that could cause actual results to differ materially from our expectations. Please review the disclaimer about forward-looking statements in the presentation, as well as our annual report on Form 10-K filed with the SEC. Upbound Group undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. We will also refer to non-GAAP financial measures.
Please refer to our disclaimer regarding those non-GAAP financial measures and the reconciliations to the most comparable GAAP financial measures at the end of this presentation. These materials will be on the investor relations website, along with a replay of the webcast that will be available later today. Here's a snapshot of our agenda today. We'll start off with Mitch giving an overview of Upbound. Then we'll move on to Anthony, who will discuss the Rent-A-Center business, which is our stable cash flow generator.
W e'll then move to our growth story, which is Acima, and Tyler will walk through that with you. Finally, we'll bring it all together with the discussion of the company's financial profile, and Fahmi will walk you through that. We believe Upbound has a compelling opportunity to create shareholder value, and we're really looking forward to sharing that with you today. With that, I would like to welcome our CEO and board member, Mitch Fadel, to begin telling you about Upbound.
Thank you, Brendan. Good morning, everybody. Hope everybody's doing well. Thanks for coming. This is our first investor event as the Upbound Group. We had one years ago, but this is our first one as the Upbound Group. Again, thank you. Thank you very much for coming. Many of you, speaking of Upbound, many of you know us for our operating companies, Rent-A-Center and Acima. A few months ago, we announced and we adopted a new enterprise brand, Upbound, which aligns with our growing platform of leasing solutions and credit products to consumers. Upbound, the holding company, of course, Rent-A-Center and Acima are our two biggest segments, but like I said, Upbound kind of aligns with our mission going forward, and we're gonna talk a whole lot more about that today. We're excited to present this to you this morning.
Before we get into all the information we wanna share with you, I just wanna hit some key investment highlights of what we think you're gonna find intriguing or what should become evident to you as the morning goes on. We think you'll find these types of things important. Try to start out with an executive summary, if you will. And these should resonate as the morning goes on. First, we're well-positioned as one of the leaders in a relatively large market that provides us with the opportunity to generate strong profitability and grow at above average rates for the foreseeable future. I think you'll see that as the morning goes on.
Second, very resilient business model, a very resilient and self-funding business model with a track record of performing well under various economic scenarios, and we tend to, as most of you know, outperform in a more challenging time. Third, we've got some really key competitive differentiators that cannot be easily duplicated. Some of them can't be duplicated at all. We're interested to show you what we're talking about there when we talk about key differentiators. I think you'll find that interesting. Fourth, our platform of financial solutions and technologies provides us with significant opportunities to offer consumers new solutions and expand our business beyond just what we offer today, so we're set up to expand our offerings. That should be something very key and evident that comes across today.
Fifth, strong liquidity. Cash flow is a big part of our story. Fahmi will get more into that more towards the end of the presentation. We've got strong liquidity, strong cash flow to support growth. We pay a robust dividend and provide overall shareholder value. Lastly, we'll talk about our team. We have a strong, diverse leadership team with experience and expertise to be able to execute on our strategy. With that, let's get started talking about our company. As I said earlier, Upbound aligns with our growing platform of leasing solutions and credit solutions for consumers. Our mission at Upbound is really quite simple, as the slide shows, elevating financial opportunity for all. Just think about those words for a minute, elevating financial opportunity for all.
This mission is based on the belief that everyone should have the opportunity to access the things in life they need and the things in life they value, even if they don't have a typical financial profile that mainstream financial solutions are looking to serve. Not everybody has the financial profile to fit in the mainstream financial products. That's where we come in, where we provide flexibility, we provide answers, and we provide options. We'll talk more about that as the morning goes on. Just who is this group of customers I'm referring to? Who is a customer that doesn't fit in the mainstream financial solutions? We wanna start out by answering that question. Who's the customer that gets overlooked by the mainstream financial solution? Broadly, it's households.
If, if you can make one statement, you'd say broadly it's households with an income level of under $60,000. It's the vast majority of our customers. A lot of other statistics up here on the slide, but annual income of under $60,000 per year really fits into who our core customer is, our main customer, and they have a credit profile that's characterized as non-prime. You hear it called subprime and so forth. We call it non-prime. It's either, you know, a lot of customers don't have any credit rating at all. It's a much bigger market than most people think or that most people can appreciate. To give you some perspective, $106 million of U.S. households have either a subprime credit rating or no credit rating at all.
$106 million. Most people, that statistic surprises them the first time they hear it. You know, just over $100 million people with what's considered a subprime credit rating or no credit rating at all. As you can see on this slide, the majority of households today have challenging personal financial situations that limit their ability to meeting unanticipated events or access things that they need. I'll let the statistics speak for themselves. We see a tremendous opportunity to offer these people a platform of flexible financial solutions to address their evolving needs. Big need out there. We have the platform to serve their needs a lot of different ways, and we'll talk about that as we move forward.
To do this, we need the right team. We do have a team with a lot of market knowledge, strong functional expertise. You'll hear some of that this morning. It's critical we have the right leadership. We've undergone some changes over the last couple of years after we bought Acima, about doubled the size of our company. It's a little different management team, a newer management team than you've seen in the past. I'm really happy with where we are today. I think we got a great team in place to deliver on what we're gonna talk about today.
We got a good combination of people that have extensive experience in lease-to-own industry, plus new leaders from outside the company with strong functional expertise. It's a good combination. I don't think you ever wanna be, you know, have nine people or however many is up on the screen, 10 people, I guess, on the screen, and all of them, you know, been with the company 30 years, and you don't want 10 brand-new people either. I think you generally want a mix, and we have that. People like myself or Anthony, Anne, and Tiffany, we've got decades of experience with the company. About half of us. Some of us, no old jokes over here, but some of us have more decades than others.
About half of us have many decades with the company. Tyler's been with Acima for a number of years, heads up, and now he heads up that business segment. We have an announcement going on. All right. What I thought maybe it was a fire alarm or something. Okay, a little hiccup there. Tyler, I started to say, talking about people on the screen. Tyler's been with Acima a number of years, and he now heads up that segment, while folks like Fahmi and Sudeep and Mike Bagull and Brian and Tran Taylor have joined us more recently, bringing in fresh and diverse functional expertise. It's a good mix of people that know this business, been around a long time, and then some real strong functional expertise.
You're gonna hear from Sudeep here in a minute about his functional expertise in technology, which is so important to our strategy as well. You know, today we address a market with a platform that's primarily comprised of two complementary businesses that together make us the only player in the market with true omnichannel capabilities. When you think about these two companies together, we're the only ones with true omnichannel capabilities. The Rent-A-Center business, which Anthony will walk through in some detail today, is our branded retail business. The history of this segment goes back 50 years, really to the inception of lease-to-own. It's 50 years old this summer. In July, it Rent-A-Center turns 50 years old. It's been around a long time.
About 2,400 locations in all 50 states, Mexico and Puerto Rico, provides us with extensive last mile capabilities, between our local stores and our large fleet of trucks. We got the last mile, both outgoing and returns back to the store. We got that covered. About a quarter of Rent-A-Center's top-line performance is now through digital channels. As you'll hear from Anthony here in a few minutes, rentacenter.com is a really strong growth vehicle for us, really solid growth vehicle. Acima, which Tyler will cover in detail, is our third party or our virtual lease-to-own business and functions as our point-of-sale solution that provides lease-to-own for other retailers. It's a technology-driven business led by proprietary underwriting and analytics capability.
It's got over 30,000 locations in 46 states where we're integrated with a retailer. Of course, our key one of the key differentiators, and we'll talk more as the morning goes on about differentiators, but one of them is we can work with merchants with multiple models. We can be fully virtual. If they have some high volume stores, we can staff those high volume stores and even work with merchants when we're unintegrated. We'll talk more about that. More to come, more to come from Tyler later on Acima. It was a fire thing? Thank you. The company benefits from a long iconic track record. I just talked about 50 years at Rent-A-Center.
It's a testament to the durability and stability of our business and the value we provide to customers through various economic cycles. You know, there's always been a segment of the population that faces challenges in affording goods. We've been there 50 years to help them with a solution, to help them with the things they need and want. Fahmi's got a good slide later. I'll show you how the customer moves in and out of the transaction as far as when the economy is good and when the economy is not so good. But there's always a large segment for us. That's the beauty of our, of our niche model here. During the last 50 years, we've led the...
When you look at the timeline, we've led the industry consolidation in the nineties and early 2000s. The brick-and-mortar consolidation, we're the leader of that. That's how we got up to 2,400 stores. We established a third-party LTO business in 2005 that later developed into the virtual lease-own market that we know today. We expanded our geographic footprint to international markets. We made a significant move into the virtual market, obviously, consolidating our legacy virtual LTO business with Acima to become a leading player in the market back in early 2021. You can tell from the timeline, we certainly know this customer. I know this customer. I didn't meet this customer back in 1973, although I wasn't that much later.
1983, 40 years ago is when I first started in a Rent-A-Center store in a manager training program. We were talking about this the other day. I went out on a couple deliveries that first day, and I didn't even know what Rent-A-Center was. I was working at as a multi-unit supervisor. I know I don't look this old, but, you know, I am. A multi-unit supervisor for pizza, and my boss left and went to the startup Rent-A-Center. They've been around, been around. The very first day delivering refrigerator, we delivered bunk beds, which at the time was the only furniture we even carried, was just bunk beds for kids.
Again, I honestly tell you, 40 years ago, earlier this month, it was actually 30th April , 1983. Meeting those couple of customers that I met that day, I've had the passion ever since to serve that customer. When we were bringing a refrigerator into people that had their goods in a cooler, had the milk and all that in a cooler 'cause their refrigerator broke, they had no money. They had enough to get a refrigerator. I really had a passion for the customer. Of course, there's the other side of the business where sometimes you gotta go out if people can't afford something and pick it up until they can afford it later. Maybe they can come back and get it, and so forth.
There's both sides of the business. It's not only deliveries, but what you realize real quick is how I got the passion for serving the customer. You realize the return sometimes where you take it back is necessary for the model to work for the company. How do you serve these people? You gotta have the return feature. You see both sides of it early on. That passion for helping this customer has been with me ever since. -pay and, you know, all this stuff. Or they're bad people 'cause they have bad credit, and that's. I can tell you from 40 years of dealing with this customer, that's not the case.
There's a lot of good people out there that just financially aren't where they need to be, and we can help them. We also make good margins along the way doing it. It's a fun business, very passionate business. All of us are passionate about the business. You'll hear that in y ou see a lot of smiles. It's not like serving people like us that, you know I don't know how to describe the difference. Brendan starts pointing at the clock or something. Our business produces strong financial results like I just mentioned. You know, we can serve this consumer, but we can do it at good margins. We'll talk more about that.
We generated a little over $4 billion of revenues in 2022. It's about half and half between Rent-A-Center and retail business of Rent-A-Center that has always been there for us for the last 50 years, very resilient folio of leases. So that gives us good line of sight into the direction of the business and helps us make adjustments to low teens over the past four years. You know, 2022 was a tough year for a lot of us. We had record losses. Never had losses that high as we had in 2022 before we tightened our underwriting. You'll see numbers later, and I think most of you already know we've got it under pretty good control now. 50 years, since I was a kid and.
Yet we still had EBITDA margins of 10.7% in 2022, kind of a trough year. That's the worst it can get is 10.7%. We feel like it's pretty darn good business model. What happens, hopefully, you can see all the way down at the bottom of the slide, Cash flow. When you grow a lot, you're building your future earnings. When you don't grow, you generate a lot of cash that year. It's a very resilient model in any economic cycle. There's always a put and a take. That's the 50 years longevity, and only getting better. 50 years longevity and still growing. Pretty cool. Excited to share more with you as the day goes on.
To really understand the opportunity that we have, though, I think it's important to drill down into the fundamental solutions that enable us to generate durable earnings power and growth. They normally only have mainstream financial solutions for customers, and they lack the data, the analytics, and the servicing capabilities to profitably transact with the financially underserved customers. What do they do with the intermediary between that underserved customer and how we differentiate. There's two examples up here. Ashley Furniture. I think everybody's probably heard of this customer outside of their own home stores. We're the largest Ashley buyer of merchandise. We supply the stores. We also have without ever talking to anybody.
Numerous access points, and we're the only LTO company with all of those access and distribution points, and using Rent-A-Center and Acima together is a real differentiator. It's truly a differentiator. Soon we'll also add the second look financing operation. Between underserved consumers, retail products people need and desire, and retailers themselves who need this growth. You see the income levels of each of our two main segments. Younger than you might have guessed also, when you look at that age thing. Most people think our customers are older, but they're not. They're younger than most people think. The consumer spends about 8% of their income on durable goods, the average consumer, our average consumer.
Only 8% of their wallet through durable goods, but we'll talk more in a few minutes about how we increase our potential wallet share with them, you know, with some of the new financial products beyond that 8%. Retail locations provide a huge market for Acima. Less than, and yet we have less than 10%. Not even talking about the e-com opportunity, but just the actual durable goods locations, 400,000-450,000. We're at 31,000. Coming along, we're growing e-com, but still, it's still in its early stages. We've got a, we've got a lot of growth opportunity with on the e-com side, too. Not to mention additional industries we can still move into besides the one we service today, so that are on that bottom right-hand chart.
There's other verticals for us to get to as well. Lots of growth opportunities. Expanding our offerings. Talking about expanding our offerings, we are uniquely positioning. $5 billion-$55 billion in the durable goods side. There's we can branch out. We've got new industry. We got everyday needs through a general purpose credit card that we announced when we announced the w hat do we mean when we say investing? What do I mean when I think about investing? Creating the omnichannel play for consumers to move in and out of products is one way. Moving into new product verticals, like I mentioned a minute ago. Technology enhancements.
Industries a lease can't serve, like dental and medical and so forth, or really getting deeper into the automotive industry as well. Our omnichannel platform. You know, we've already got really good repeat business. With more products, we can drive up even more lifetime value than we have today. For our smaller retailers, the opportunity to have a large second look provider to say yes to more. Lease-to-own through our Genesis partnership. We announced this, I guess just last week. It seems long. We're not talking about partnering with somebody that's really small. They have scale. They won. It allows us to leverage relationships. We're really talking about 2 main pieces. The left side being general purpose credit card, which will be, with our data, we can off.
we can offer a card for everyday needs like groceries and gas that others can't. It's really a data play when you think about there's a lot of m illions every year, and we've got the data on the customer that others don't have, like how they've been paying us and so forth. We have the data that allows us to give someone a credit card that nobody else will give to. Not big. You're talking five, six, 700 types of credit cards. We can do that with Genesis' ability to underwrite and with our data. It's really a data play that nobody else can do because they don't have our data, right? That's o ne option now. One integration, two different products. We can do it with our current sales team that's already out selling Acima.
It doesn't add overhead. Integration in two products. Pretty exciting stuff. You might not be able to see down at that bottom screen with people sitting in front of you, but we estimate an additional profit range. We didn't stretch to get to those numbers. I think it's also important to point out in this kind of partnership, this is a fee-based partnership where we're using their expertise. What does that also mean? There's no risk to us. We don't have any risk. This isn't our balance sheet. As well as some other benefits, right? It makes us stickier with retail partners, offering two products.
It gives us a much larger addressable market than we currently talk about in the $45 billion-$55 billion range. A lot of benefits to it. No risk. Partnering with a very large company in that space now. Really excited. Jazzed up about it. This means optimized offerings where consumers have numerous choices With us. They can have a lease at Rent-A-Center. Customer can move in and out. They can lease at Rent-A-Center. Many different options of going in and out of the transaction. It goes on and on. Like I said earlier, we got flexibility to move between our offerings with multiple up-bump products will create an even more compelling lifetime value for our customers.
Good morning, everybody. My name is Sudeep Gautam . I'll be the technology for the Upbound. I'll explain our digital strategy, select initiatives that we are embarking upon, and discuss how we plan to leverage technology in shaping our growth. Very important characteristics. First, we want to maximize conversion. The customer experience in each of these products is directed towards increasing our Net Promoter Score. Top industry models. If you look at it from a Rent-A-Center perspective, our payment, the Acima track. We recently announced that the Acima mobile app had surpassed 1 million downloads. That is a testament to the usability and stability of the app. The Acima mobile app today, as well as the Rent-A-Center app. Talk a little bit about our e-commerce footprint, right? Our digital adoption rate has been significantly increasing over the last. Investments in technology focused on unlocking the value of financial access.
Intelligent and innovative intuitive solutions that shall enable or turn on the switch for high. Through new capabilities into our e-commerce channels. Second, organizational and technology readiness. The portfolio to maximize business impact, which essentially means that how do you direct investments today or money that we spend today on keeping. I'm specifically very excited about some of the initiatives that we've carefully chosen to invest in that would drive some of these growth strategies. You will see over the next few presentations, both by Anthony and Tyler, they would be talking a lot about these initiatives plus a lot more. The expected outcomes that you see on this chart directly coincide with each of the initiatives that we've talked about. Our digital ambition is to seamlessly connect a financ.
Potentially underserved demographic base across a diverse product portfolio, irrespective of brand or channel, supported by an Upbound ecosystem of suppliers. I would say giving them, you know, a power of choice, as we call it. This power of choice is about choice of customers, choice of experience, choice of price, choice of the products they choose, and choice of ownership. From a growth strategy perspective, we are playing offense, and technology will continue to drive that growth strategy that is centered around creating this value network of offerings enabled by a frictionless experience, thereby increasing our customer lifetime value. Our technology strategy is transformative, yet practical. It shall fundamentally change the way we actually bring all these technology domains together, a modern stack, and how we integrate them to form meaningful solutions. Fosters collaboration, resilience, and innovation.
Efforts around leveraging our technology domains have been extensive. Let me do a double click on a couple of these things. Let's talk about data. Needless to say, tables, which means identifying an accurate data available in real time across all our value streams. We've also unified our data, right? We've unified data across our business lines. Data integration is an important and essential part of a data pipeline. We've also seamlessly combined data from multiple sources where these data aspects are generated, and we direct it towards a unified view into our cloud-based enterprise data warehouse and our data lake. These repositories, which store vast amounts of data today, really spur our AI engine that we use for our decision and risk models. Functions to deliver the kind of insights they need at the velocity we desire. Let's talk about platform-oriented architecture.
In my mind, this is something which is really close to my heart because this is one single technology domain that will reduce and contain the amount of technical debt. Flexible architecture is going to dramatically contain the technical debt. Not only reduce the technical debt, but also increase the speed of building applications, scale them from simple to complex applications, and while decreasing the cost base of developing the same applications. The amount of reusable components that we would be kind of using for this, through this architecture would simplify dramatically. Print in the data center. We've also put in place a hybrid cloud environment. Keep in mind one thing, that our broader cloud strategy is actually defined by the kind of workload or the characteristic of the workloads that we have today and tomorrow.
That will continue as we kind of, you know, drive our jour. Next, let me talk a little bit about cybersecurity. Our posture on cybersecurity is extremely aggressive. We have implemented the best-in-class tools, the most sophisticated monitoring tools identifying any kind of possible vulnerabilities within the enterprise, and we address them immediately. To summarize it all, I would say digital at Upbound is about simplification. Simplify, yet revolutionize the way we engage with our customers and empower our coworkers. We increase organizational effectiveness and innovate our business models. Thank you so much. Next, I'm gonna hand over to Anthony Blasquez for going through his slides.
Rent-A-Center. A little bit over a quarter of a century ago in Tampa, Florida, I walked into my first Rent-A-Center location to start a new job as a delivery driver. I'm fortunate that I've had every operational position in the company since. Like Mitch, after some time, I began to realize two things. Number one, I could see this turning from a job and turning into a career. And number two, I saw the opportunity to serve people in a community that I grew up in. Actually, the store that I started in was about a mile away from where I was born and where I grew up, so I was really embedded in that community.
Some close to 26 years later with our organization, I'm as excited today as I was back then with the opportunities that we have, not only in front of us right now that we can capture, but also through our strategic initiatives, the things that I really believe we can bring to bear in the future. As I begin this next 30 or 40 minutes with you, I really wanted to start by making sure that you understand who Rent-A-Center is and what exactly it is that we do. Starting right here, we are the leading dedicated lease-to-own retail platform. We really are a unique blend of retail, consumer services, and specialty finance. As Mitch mentioned, and it's something that I'm very, very proud to be a part of. We bridge the gap between customers and high-quality goods with an almost exclusive 100% LTO transaction.
That's where our transactions start predominantly 98%, close to 100, round up, but it starts with the customer coming in and entering into a lease-to-own transaction inside of one of our retail stores. Speaking of which we have a very strong market presence, 2,400 local retail locations and a growing digital business. Thank you, Anne. Appreciate that. Overall, it's a very, very strong value prop for our customers, quality products customers. That's really who we are. When you think about who we serve, that's on this slide right here. It really is a unique, captive, and underserved customer base due to limited choices. They're lower income. They skew, much lower than the national average. You can see in the Rent-A-Center business, a little bit north of 50% of our customers earn less than $30,000.
You can see that in comparison to the national average. 75% of our customers earn less than $50,000. Based on that criteria right there and that makeup, it provides a pretty good moat for us. We're able to serve that customer, and it's a steep barrier to entry for others that don't understand this type of underserved consumer. Generations of families, you can imagine after 50 years, have rented with us. As families change, we're there to support their needs. I can still walk into Rent-A-Center stores that I managed as I was, are still renting inside of the first store that I ever worked in, which is really, really great that we're able to serve generations of families.
We know that our customers have a unique need, and knowing how to serve them is really what I believe our differentiator and our secret sauce. I think we should look at how we serve that customer. We know that it's a differentiated business model, and it meets our consumers' needs. Here's this sourced wholesale. As Mitch mentioned, with extended aisle, our access to Best Buy and other local retailers, we're able to source regionally, if need be, to serve a customer's needs. By and large, the product is sourced wholesale. The customer shops with us either digitally, which continues to grow, which is fantastic, or inside of our stores, which we're always there for our customers. We underwrite them, we set up the agreement, and then we service the product after we do the delivery for them.
We manage the account locally. Our stores, those 2,400 locations, they help our customer. The differentiator here for us, you can see it on the bottom right-hand side of the slide, is that we offer our customers the ability to return the product at any time with no further long-term obligation. As I mentioned earlier, the lifetime reinstatement being one of the cornerstones of our value proposition, it really allows our customer. Couple of months, they can do a return very easily, they can come back in, and they can keep what they've invested with us and apply that towards something else. It is a very, very unique model that allows repeat business regularly. Mitch mentioned it earlier, if you think about that returns, not only is it a differentiator, it's also an enabler for the transaction.
If you start thinking about the makeup of the type of consumer that allows this model to work on a consistent basis going on 50 years. We know our customers' pain points, and we have a relationship with them. I can tell you another part, another ingredient, if you will, of the secret sauce is having ran these stores since 1997, having the opportunity to work in these locations, I know that our customers, especially this type of customer, is under pressure. There is always someone that they owe money to, and we happen to be another person that they might have a bill coming due, a payment coming due.
The interesting thing about it is that because I am in the community and our 2,400 locations are in the communities that we serve, we have a relationship with the customer, and they have a relationship with Anthony, not just someone else that they owe money to. It really does facilitate a better important. When you think about the uniqueness of those customers, I think you're getting the clue that they require a higher touch. That's both during and after we open the rent-to-own agreement with them. Because of this, our local store base. I mentioned it a couple of times, 2,400 locations across all 50 states, Puerto Rico and Mexico as well. Around 9,000 coworkers who I love working with, and I appreciate everything that they do for our company. Is 100% of their own PNL.
It's an owner-operator mentality. Having that local presence, our store management team is responsible for all aspects of the PNL. There's a real defined amount of ownership inside of those stores. We also have 2,800 vehicles travel around delivering products and servicing them for our customers. Starting a journey with insert brand here on the web, and you wanna call someone that's in a local location a couple of miles away from where you live, and you can. It's one that we like to lean into. In addition to that, having those local showrooms, as Mitch mentioned, we've got a lot of product on endless aisle, but it is also good to have the staple products inside of those 2,400. That we know that there's risk, and we know that there's account management.
50% of the stores are still made, 50% of the payments rather, are still made inside of these stores. The coworkers in the location are going to do the delivery. We have the coworkers that are there, those trucks that are there that can visit the customers if need be. Being that close to our customers' houses. Their food could begin to spoil. Their medication could start to go bad. You think about this differentiated model that can really serve a customer's needs as well as their wants. Here it is right there. I'm very, very excited. A long time. 1973. 50 years young this year. Fantastic. To us making it through the pandemic. I want to thank our merchants. They did a phenomenal job of sourcing product for us during that time when there were issues with supply chain.
To have centralized underwriting allowed us to complete and transact with our customers as much or as little on the web as they wanted to. It just so happened that it was. That was a game changer for us. We could text back and forth with our customers. We could make instant contact with them. They could respond to the store and so forth. We continued, and we still continue today, to make major website enhancements to reduce friction for our customers and help them get through the transaction smoothly. We know that Stimulus raised our retention rates and lowered our exposure to losses. When you look at Q1 and Q2 of 2022, it was good. We were on track. I felt good about the trajectory of the business.
Q3 and Q4 came along, and inflation and gas prices spiked. Mitch mentioned it on the last earnings call, which was, we feel our customer already went through their own recession, and they've gone ahead and balanced themselves out, and they've normalized now. Q3 and Q4 was a tough 2 quarters for us. We did adjust. I feel that we've made some really good decisions. The business and the losses have stabilized and are now normalizing. If you look at the difference between Q4 of 2022 and Q1 of 2023, our losses improved by 100 basis points. If you look at the trajectory in Q2, our loss is going to improve Q2 versus Q1 of this year. I feel like we've got a good handle on the fundamentals of the business. There it is.
We know that we had some challenges in the back. Where are we today? When you look at a snapshot of the business today, annualized portfolio value of $1.7 billion. We have about 1.2 million agreements on rent. Those agreements come. Through good times and bad. Really, that's there to showcase that this covers presence with over 50 million visits to the website each year. 18 million of those visits are directly shopping with us. If you think about the balance. Excited about the opportunity there is now over 25% of our portfolio. Excited about and discuss the progress and really some of the opportunities that we have ahead. Overall intentional efforts to improve volume and conversion. Look at that web traffic.
If the customer wants to go from soup to nuts and go ahead and complete the entire transaction on their own, they can do so. Shortly thereafter, smiling Rent-A-Center employees will be out delivering the product to their house. Aisle, as well as we know that over half of the products, because the transaction is so flexible for our customers and allows them to return at any time, we know we get returns, and that's okay. Now we have the showcase our previously rented products. It's really opening up the assortment that we have for our customers. Conversion is $40 million, give or take. These aren't this isn't payment. That's an audience as well that we have an opportunity to go ahead and add on or continue to. I think you'll be pretty impressed.
3.1 million app downloads. Hopefully, you can make it like 3.1 million in another enhancements. As we look ahead, other things that make me really excited about the future is the opportunity to extract value from what already exists today. Our opportunity to drive growth, if you look at the internal opportunities, looking back on the last five years, look at the number of unique customers that we've touched. When you look at even with the progress that we've made, there's still more opportunity in front of us. We serve. There's a lot of internal things that we can address, and we're working on it. On the right-hand side of the slide, this is what's already there.
On the right-hand side of the slide is that addressable market of about 40 million potentials and only about 1 million are transacting with us. Somewhere around 70% of the target households. We remain embedded in the communities that we serve. The next question that needs to be answered is: how are we going to address this opportunity? Here's our strategic our losses and improve our logistics capacity. As Mitch mentioned, the omnichannel opportunity. Active customer conversion by 100 basis points, close to $20 million. Don't forget. Website enhancements. Reduce the friction for the customer. Continue to enhance the self-service checkout. It's really twofold. It's helping us. I wanna just make sure that I reiterate this. This is centralized support. We still know the importance of the location being there for our customers.
The other thing that is important for us as well is, this is my day job, is to continue to strengthen our local presence and elevate our store talent to drive the sales and the relationship expectations that we have. Making sure that we're optimizing our store performance, surgical tactics when we find something that we need to improve. You can imagine 2,400 locations requires some degree of touch and trying to help our coworkers just get better every single day. The other component of growing customers is really, I mentioned it earlier, attracting more customers. The opportunity, 40 million U.S. households in our TAM, 70% of those households are under $50,000 per year, and they're within our local market. Marketing is the other component. Driving brand awareness, making sure that the consumer knows that we're out there.
Leveraging first and third-party data to personalize the customer shopping history, make sure that we maximize awareness with personalized offerings, make sure the customer understands our value proposition. While we're doing that, let's highlight some new products. Let's make sure that we're constantly looking for new categories. We recently launched jewelry. I remember renting jewelry years and years ago, and I am super excited to be back in that business today. In addition, the endless aisle, continuing to put products on the site that can enhance our store footprint and give our customers more access to a lot of different products that they might not see. Of course, there's the partnerships and the organizational synergies.
Being now a part of Upbound, in my opinion, gives us the opportunity to capitalize on a whole slew of synergies to have new products and services that I can give and our customer in the Rent-A-Center stores can have access to. That growing customer is very excited about it. That's the first area, focus area around converting and attracting more. Now we need to talk about what we're doing to grow our customer lifetime value once we get them. There's really four points here. Number one, the opportunity. When I think about improving customer lifetime value, it's about how can we retain them. Ever since I started with this organization, we know that the transaction is very, very flexible, allowing the customer to move in and out of it as they wish.
In addition to that, it's our opportunity to help this underserved and customers under pressure get closer and closer. In additional revenue. We're constantly trying to help our customer continue along the journey. The second point is continuing to enhance the value proposition, creating more flexibility in the agreement terms and customer options. I think we have a very, very differentiated value proposition, and I think that we're only gonna get it, make it better. The third is. Focused and continue to build more of those retention offers like I mentioned as the first point. Improving the customer experience. With 2,400 stores, it's critical that we create as consistent of an experience for both the web customers and the in-store customers as possible. Continuing to enhance the self-service capabilities so the customers can continue to do more for themselves.
They can go in and manage their account themselves, provides consistency. We all know we go on websites all the time, able to manage our accounts, able to take advantage of offers and so forth and credits, and we wanna make sure that we can gamify the experience for our customers as well. The other point around improving the customer experience is we're now improving our logistics technology, optimizing the last mile experience for the customer, and that's also gonna increase capacity to serve them. When you think of the other side, upselling and cross-selling is another opportunity for us. We wanna retain them, and then while we're retaining them, we wanna go ahead and take advantage of what other things can we offer them.
The opportunity size on that category is if we can increase the number of customers who stay on rent with us for longer than 12 months, if we can improve that by 10%, it's about $50 million in annual revenue, and that's because we're adding additional agreements to our customers. In order to upsell and cross-sell, we need to personalize that upselling. We need to replicate the A experience inside of the store to our virtual customers. I can remember that even when customers would come in, back then it was almost exclusively payments made inside of the stores. When the customers would come in on Saturday, it was a great opportunity for me to, number one, make sure they were happy with the product that they had, but also find out what they might be interested in next. It was an art.
You'd watch the customers, they'd come in, you'd see if they'd stop and pause at something as they're walking around the store, and you go, "Bing, they might be interested in that." We wanna replicate that type of experience on the website, and whether that's shopping, whether that's making payments or just reviewing their account. From a customer relationship sales perspective, we know who our customers are, we know what their needs are, and we know what they want. We built a strong foundation with our CRM with Salesforce, and now it's our opportunity to extract value out of that. Finally, from an upsell and cross-sell and perspective, incremental products and services that we offer build the bridge between customers and the products and services that they need.
Genesis partnership, Mitch mentioned it earlier, I look forward to a day where hundreds of thousands of my Rent-A-Center customers also have a general-purpose credit card in their pocket as well that they can use for other incidentals and things that they have inside of their life. As you can see, there's a lot that we're able to do with the customers that we have right in front of us, as well as the opportunity in order to maximize the relationship. How we do that and continue to drive profitability in this 50 years business is really we wanna see that with our third focus area, which is continuing to improve our operational efficiencies. This is where we increase the productivity. Our opportunity is to scale efficiently via the omnichannel.
If we can reduce our OpEx per new agreement by 1%, it's an additional $20 million in operating profit. We can shift the economics through the rising tide. Centralize and digitize certain functions, like I said, sales, account management, payment support. The stores are still integral, but we do realize that there's an opportunity to centralize some of the support functions so that we can have a consistent experience across the board in all of our stores. We can be there for our customers, as I've mentioned a couple of times, as much or as little as they need. We know that launching new technologies is important. We're recently introducing tablets and delivery devices for all of our vehicles. Now our coworkers can improve the speed of the delivery.
Not speeding, but the speed of the delivery through optimized routes and efficiencies. We continue to test new concepts and as a matter of fact, we're here in New York City. We have a location in Washington Heights and Jamaica, Queens, both of those locations are right under 1,000 sq ft. Our typical Rent-A-Center location in the legacy business, the square footage is between four and 4,800 sq ft. We have two stores here, one in Washington Heights and Jamaica, Queens, under 1,000 sq ft, able to have a few SKUs, lot of digital interaction for our customers to see the extended aisle, we still have coworkers there.
We're in a community in New York that maybe would've been a higher barrier to entry, real estate costs and so forth, but we're able to be here and serve our customers. From an underwriting and loss perspective to continue to improve the operational efficiencies, another thing we're working on is introducing new data, new tools rather. Data and insight-driven regulation of approvals and approval amounts, underwriting committee, and constantly looking at how our underwriting is performing. Continuing to implement predictive modeling using data and an insight-driven approach. You and the operational efficiencies. When you think about those things, I hope that I've made you a bit as excited as I am about the future of the business. When you put all of this together, what does this really, really mean in terms of tangible results?
Some key takeaways from this presentation is, number one, we're a strong cash business. We have proven sustainable results. This is a resilient business model that is now evolving ever more into e-commerce. I wanna remind everyone that we normalized after a tough back half of 2022, and I feel that we're on a good path now. I believe also that we have significant opportunity to grow. Not only with what we have, but with what we know is in front of us. By 2026 for the Rent-A-Center business from a CAGR perspective, and reminding you, in a 50 years retail business that generates strong cash, we still expect revenue growth in the 2%-4% range, adjusted EBITDA in the 3%-6% range, and adjusted EBITDA margins in this awesome business in the mid to high teens. Thank you very much.
Our business has so much potential. I'm extremely passionate about it. I don't want to, nor do I know how to do anything else for a living. I'm excited about the opportunities that we have in front of us. I do look forward to your questions later on this afternoon. I believe we're gonna take a couple minute break, 10-minute break, then we'll regroup here, and my partner, Tyler Montrone for the Acima business, will stand up and tell you about all the awesome things he has going on there. Thank you very much for your time today.
I'll start over again for those that couldn't hear. Good afternoon. We've got a few things that I wanna cover, and so we're gonna dive right in. I'll start with introductions. My name is Tyler Montrone. I'm the Executive Vice President of Acima. I'm running our operations, and I've been with Acima long enough to see who it is, understand where it came from, know where it is today, and know where it's going into the future, and I look forward to sharing that with you.
Our operations, our organization, took the time from 2013 to 2014 to really evaluate the market and understand what virtual LTO looked like, understand the soft spots and the existing players, understanding the operational requirements, understanding the regulatory requirements, all of that sort of thing. We started from a foundation of recognizing where the market was and where it could go before we ever tried to issue our first lease. In 2014, we started issuing leases. We like any other startup, we encouraged ourselves to fail fast and then to learn from those mistakes and move forward. We did. Outside VC. At that point, we had all of the ingredients with aside from some of the
Management team, the right leadership team in order to help them succeed. I came on to save money, we really wanted to make a run at utilizing the resources that we had for the actual leasing activities of Acima. Most specifically for our investments and our underwriting. As we moved into 2018, 2019. By the time we landed in 2017, we did 10,000 leases a month. By the time we're into the 18s and 19s, it's 50,000-60,000 leases per month. We land Wayfair as an enterprise customer, we learn all the
Platform in order to handle both the small and medium sized businesses that had got us to that point and continue to carry us into the future, but also to work with some of the larger enterprise accounts that are going to make the world of difference from Acima's perspective as it expands into the next phase of its existence. Expertise with this customer. We have extraordinary resources from the perspective of marketing and of digital experience transformation and of evolution. Very short period of time. We have a remarkable returning customer base. Medium-sized business locations filtered in with a number of larger locations as well. 31,000 locations out there for us to start working with.
All of a sudden, you recognize the true growth that's available to Acima if we can really put everything toward. Let's break this market up just a little bit, and let's look at how we look at the $106 million available consumers, the 450,000 locations, and then the $45 billion-$55 billion TAM. We've shown this information to you at various points. Just to make sure that we were still on the right track, we took the retail locations as well, and we looked at the average productivity from a leasing perspective of each retail location based on its size within the marketplace, and we arrived at roughly the same place. That's how we get to $45 billion-$55 billion.
We looked at it from both perspectives, the retailer perspective and It services two types of unique customers, retail locations as one type of customer and it's designed to be navigable by anybody from the store associate clear to the CFO, CEO of that company because in often, overhead that comes with a financing platform or a lease-to-own platform, either way. What we tried to do is we tried to create. We do that by engaging directly with the retailer but also engaging with the customer. This is where our platform pulls the two together, right? It allows for us to The decision and plug in whatever it is that they're looking for from a property perspective and move forward and close.
Because we wanna meet both customers and retailers where they are most comfortable, right? You've got to make sure that you explain the transaction. You've got to make sure that the Very readily navigable, but we also had to make sure that it was explanatory, that it was educational in nature. We did that side of it. Both customer and retailer in mind and where they live. Now, as we dig into this a little bit further, as we dig into what we mean by that, we built Personal touch. They like to be able to look at the property and understand exactly what it is before they make their selection. Various service models. We have a purely virtual service model. That's where Acima started, right?
We started with just a web application that everybody could. Quite honestly, that experience needed to be improved and has been to this today. Nevertheless, we had a virtual platform. With the acquisition from, or by Upbound, we now have the remote around particular large high-value relationships. If the staff, if the store isn't quite large enough to have staff in it, or it doesn't have quite as much volume to have staff in it, but the aggregation of location needs. They're always available. They can help store associates work their way through approvals, origination. Magento, WooCommerce, so on and so forth.
We've integrated with all of those as a plugin that makes it extraordinarily easy for them to walk in. If you've got somebody who knows what they're doing, and if they don't, we can help them walk through that process, and we have support for that. We've integrated with a number of waterfall partners, ChargeAfter, Versatile, STORIS, Synchrony, so on and so forth. These waterfall partners allow that transaction to process from top to bottom, providing all of the financing solutions to a particular customer, and make sure that the customer understands which financing solution they're receiving, whether that's a lease or it's a traditional credit instrument. On for a couple of different variations in transaction.
The consumer or the Customers that we have inside our platform today. It gives them the opportunity in a very easy and integratable fashion to control their online transaction value with Acima. In addition, we've connected that marketplace to our mobile app. Now any one of us that's got it downloaded on our phone Today can shop online in our marketplace utilizing your cell phone, pick out Desire to work with us but do not have the technological resources to devote towards the integrations.
We, as a result of that, created a virtual lease card process that allows us to work with allowing us to continue to fund the retailer utilizing their traditional payment rails, but still allows the customer to lease the product. That retailer in an unintegrated fashion, whenever the retailer chooses but doesn't have the technological resources to devote to our particular transaction. That's game-changing when you think about the number of large and medium-sized businesses out in the country today that truly are looking, based on macroeconomic factors for additional sales departments. We have a substantial mechanisms and means of working with and solving issues for our retailer group.
Let's talk about the customer experience again, and we'll do this in a your lease using our mobile app. You can actually even start the returns process through our mobile app. Based on its simplicity and ease of use. As part of that, I think it's important for us to, for a moment, talk about the lease itself and how it operates, just to make sure that every action has, at all times, the opportunity to return property, whether it's because they no longer need it anymore, or maybe it's because it's. Way. The first is to exercise an ownership option within 90 days. This tends to be the least expensive option. The second is to exercise an early purchase option after the 90 days, but before the full term of the lease.
From a VLTO. What's interesting is if you compare that to alternative options, say credit cards available to these consumers, or maybe not even this consumer, but the consumer in the tier just above them, our costs are not all that different. You can see that we're within a stiff putt of, say, the card. Let's talk about the merchant experience for a moment. When we get to the merchant experience, like I said, we meet them anywhere in any way they want us to, whether it's through integration, whether it's through Shopify plugins, whether it's through in order to make that happen. More than just how you integrate with them, it's all the resources you provide to them in an effort to make sure that they understand the transaction as well. We provide them training on demand.
They have self-service marketing order materials. They have the ability to start helping customers understand their true options at the moment where the customer recognizes that they may not be within a traditional credit offering environment. This helps drive loyalty from retailers. It helps drive loyalty from customers. Now the retailer gets to be a partner to the customer in providing the services and products and things like that the customer requires. Of the customer to Acima. We've gotten so good at making sure that we can explain this transaction to retailers, and we've refined our process here so well that even despite all of the in the years before. What's interesting about that is the demand softening that we see out in the marketplace today, we all should hope.
start to return to normalcy, what we've done is we've positioned ourselves for extraordinary accelerated growth because now we have more retailers engaged. We've got more time to explain the transaction to them. We've gotten them more comfortable with what the lease. Great run at converting those customers into actual leases. Though you see slight fall off in customer into 2022, though you see slight fall off in GMV growth into 2022, at the end of the day, this is a blip. We're going to see a remarkable electronics, wheels and tires. Acima ventured out into jewelry. It ventured out into eyewear. There's a whole host of verticals that we now deal in and have become relatively sizable portions of our, of our ultimate distribution. They did so very quickly.
That gives us a very, an insulated and distribution because we've differentiated our retailer base relatively substantially. In addition to that, what we're now focusing on is distributing our further as we refine our processes after the onboarding of Wayfair. You can see when we brought Wayfair on, our e-commerce transactions were relatively immaterial. But as we started to refine those processes, as we started to understand what those look like, our focus is on making that e-commerce transaction every bit as meaningful, every bit as enjoyable, every bit as personalized as an in-store transaction. And we're starting to make a lot of headway in that regard, especially under Sudeep's guidance. To perfect our underwriting. Almost all of that investment in those early days.
The reason I sat in a janitor closet instead of having an office, the reason we had meetings in a hallway instead of having them, you know, in a conference room, is because we wanted to redirect that money into our underwriting and make it best in class. Dozens of providers in seconds in order to make decisions, and we do that repeatedly throughout the day, thousands of times per day. Particular environment if we had to, whether that's e-commerce or in-store, so that we could really push the limits of what we could accept from an underwriting perspective and make those good decisions. We made sure of data piece within a provider, say, you know, one of the big three providers, was ever degraded and rendered useless, and that would affect our underwriting.
It would take us months, if not longer than that, in order to recover. This has only expanded since we've been acquired by Upbound. We now have a very diverse group of individuals with deep subprime experience monitoring this. I monitor it daily. Others with me, Fahmi will talk about his daily monitoring of it here shortly. We monitor it daily in an effort to make sure it's doing what we expect it to do. We meet every other week in order to make sure that we can go through those results and see those predictions and make sure that they look exactly like what we need. We do an extraordinary amount around the underwriting, and that's because unlike Rent-A-Center, we're buying at retail.
I don't have all of the margin inside my transaction to make a mistake and recover from it. If I have after the retail transaction. Our results demonstrate that we've done pretty well with it so far. We make pretty good decisions almost all the time. If you look at, if you look at where we were at in 2021. I say we make pretty good decisions all the time, then I'm gonna show you where we had to tighten extraordinarily in order to react to markets. I know that that's a little, that's a little tongue-in-cheek. Launched that unintegrated experience. We just launched Marketplace. We were doing a number of different testing initiatives. We were trying to understand what that market looked like.
In addition to that, you had all the macroeconomic factors that came into play, cessation of stimulus, inflation on all of those things. We could have waited to see what was gonna actually happen. Our underwriting and our gut and our experience told us, "Tighten early and do it now, and take the pain now and understand it." We did. What that allowed us to do was come to a place where we didn't have massive loss rates.
It allowed us to generate significant cash flows that could then be deployed as soon as we started to see turns in the market, signs in the marketplace anyway that things were improving, increased demand, return of customers to storefronts. As we have always done, as we will continue to do in the future. We've talked about this a little bit you've seen the 450,000 - roughly 3%-4% of the total TAM today. With respect to the 106 million customers, we're about 1%-2% of that today. With respect to the 450,000 locations, we're about 7% of that.
As that demand returns back to the marketplace, as we start seeing those customers flood back into retail stores in order to make purchases, as inflation normalizes or even starts to reduce some. As customers are no longer quite as concerned about, you know, all the other things that are going on in Washington, maybe even today. Let's talk about that because growth is really what we wanted to touch on today, what we really wanted to express to you today. We've got three priorities. What we've recognized- Given the Upbound experience, and given the synergies between Rent-A-Center and Acima, we have an extraordinary market that we can dive into, and we can be more targeted with the retailers.
We can provide value to the retailers, not just from the perspective of being a solution for underserved customers, but also by being a partner, from a Rent-A-Center acquisition perspective or a product acquisition perspective. Those things give us a lot of strategic advantage. We can expand Acima into new verticals and that's always an exciting and interesting prospect, having done it a number of times so far, whether it be with jewelry or cell phones or eyewear. Those verticals often significantly surprise and outperform what you think they will. We look forward to what that expansion looks like. We can enable more of those partnerships like we talked about.
Whether it's on the buy side, whether it's on the leasing side, we can enable those partnerships that can really start to transform Acima from just being a from what it was in 2017, which was primarily a transaction, to being a payment solution for our customers. This is gonna be critical as we step into the next slide, but I want everybody to kinda think through that for a moment. We're no longer just looking at this like we can facilitate one transaction. What we're doing now is we're transforming via Upbound and via our connectivity and our resources. We're transforming ourselves. That it can go select and a product that it can work with.
As we think about increasing the growth from a retailer perspective, we also look at increasing the lifetime value for the customer. I've touched on that and I told you that this slide was coming. We have the option of dedicating resources to bringing in customers, which we can then direct towards retailers for purposes of lease transactions, improving our relationship with them. Making sure that the retailers can see and understand the value of the proposition, understand the value of those returning customers.
That's a major focus for us and we want to make sure that all of the digital experience work that Anne does and all of the remarkable marketing activities that our team does, all of that flows into making that retailer understand that we're not just a vendor, we're a partner. That's truly what takes us beyond just being, you know, one of the other LTO companies that's out there. What we really wanna do is continue to execute on that core principle that we started with, that idea that we're going to be the best partner, the best service provider in the industry. As we do that, we have to pay attention to making sure that we're still providing, still improving on profitability, still managing risks.
We're gonna consistently look at our risk profile. Like I say, that underwriting group, the risk team that we have and the underwriting decision engine that we have, it's constantly evaluating itself in order to change given current economics. It's constantly evaluating itself. We look at these as things that really can drive value above and beyond what the stickiness that comes from being in a retailer and having the opportunity to work with one of the best-in-class providers from a subprime perspective and an LTO provider, and have one integration, have one platform that you're working through. The opportunity with the Genesis partnership is truly understated.
When you think about what that looks like, just from the perspective of small and medium-sized businesses, that's one thing. But as you carry that experience over and you start looking into the enterprise relationships and the effect that that can have on enterprise relationships, well, we've now got a scenario where we're my friend Mike Bagull here, this is the leader of our enterprise sales team. My friend Mike now has all of the tools at his disposal in order to go sell additional big names. I mean, Ashley's the biggest furniture manufacturer in America, and that's ours. Maybe even, you know, as Mitch pointed out, one of the.
The Genesis Acima relationship becomes when you start talking about some of the other major retailers in the space, how all of a sudden resource constraint isn't as big a deal when you can integrate to one platform as opposed to two, right? What does that all lead up to? What, you know, I've sort of danced around it a little bit now I'll get really pointed in. We truly believe that that large untapped market is one that's attainable, one that's reasonable, and one that we are uniquely positioned to take advantage of today.
Our platform emphasizes the customer and the merchant experience. It does so because in an effort to get to that large untapped market, we have to continue to push ourselves to be that best-in-class experience, and we will do so. Finally, we have all of these optimization efforts that are out there, you know. Anthony talked about just some of the value that comes out of his optimization efforts. Imagine being 10 years old as opposed to 50 years old. I know I promised I wouldn't continue to say that. Imagine being 10 years old and being able to take advantage of all of the optimization efforts on our side in order to help drive additional margin expansion within our group.
All of that leads to GMV, but in the double-digits, revenue growth also in double-digits, and adjusted EBITDA between 8%-12%, adjusted EBITDA margins in the low-to-mid teens. If we can execute on all of those strategies, and we have supreme confidence that we can based on the dynamic nature of our team, based on the unique experiences of our team, and based on the fact that we are a great team. All of that is easily. Somebody's gonna say, "Not easily." All of that is attainable. I'm gonna pass it over to Fahmi so he can walk you through exactly what that looks like, but I very much appreciate your time today. Thank you very much for having us, and thank you very much for letting me speak.
My name is Fahmi Karam. I'm the Chief Financial Officer of Upbound. Unlike Tyler, Mitch gave me a real-life office, my first day on the job. I did start just a few months ago in the fall of last year. I came over from Santander Consumer, where I was a CFO there for the last three years. For those of you who don't know or aren't familiar with Santander Consumer, it's one of the largest auto finance companies in the U.S., focused on the non-prime sector. Not surprisingly, I've been able to leverage my experience there, in Santander Consumer here at Upbound over the last few months.
I know the consumer, I know the non-prime consumer, and I spent a lot of time at the bank at SC, really focused around the pricing function and the risk function. It's been great to be able to leverage that experience so far at Upbound. You know, one of the important things that I looked at when I was joining the Upbound team, what drew me to join the team was the potential I believe that the company has to continue to evolve and really grow the business, both from the Rent-A-Center side as well as on the Acima side in our two core businesses, and through that, really create value for our shareholders. That opportunity stems from a compelling business model and a really compelling market dynamic.
Each of our businesses have different qualities and different growth opportunities that we're going to achieve. It really starts with the Rent-A-Center business. Rent-A-Center is a large and stable business, really rooted in a really strong customer value proposition. Think of it as a large, profitable, significant cash flow generating business. It's really our a free cash flow generation engine. It's been proven out for the last 50 years, as Tyler mentioned. We mentioned that a few times today. It's proven out through several cycles and continues to have growth opportunities. When you think about Acima is our growth engine. Also very profitable, also generates a lot of free cash flow, but is a little bit different than the Rent-A-Center business.
Acima is asset light, doesn't have a lot of inventory to manage like a Rent-A-Center does. There's low fixed costs. Different conditions. We've been able to do that with the Upbound brand to bring in a lot of the best practices and best shared services. And different products as we've discussed earlier today. This profile of the two businesses together really allows us to service our two main stakeholders, consumers and the retailers in a very unique. Mitch kinda skipped this part in his timeline page. When he came back to the company in 2018, and the team that was there at that time, what they've done to turn around the operations and turn around the profitability and those gains in the portfolio were unsustainable.
We saw that drawback and that reversion back in 2022 in our financial results. Even without that, if you look at the financials here. EPS has grown about 18% on a CAGR basis between 2019 and 2022. One of the reasons why we have strong fundamentals and strong results is the compelling economic. Of the lease-to-own transactions for our consumers, there are several outcomes that could happen with the lease. Based on those different outcomes, our return profile can be a little bit different. We try to bucket those outcomes into four main buckets. The first of them being same-as-cash, the early buyout option that Tyler mentioned. At Acima, it's about 90 days, and at Rent-A-Center, it's up to 180 days.
The second bucket we bucketed it into was charge-offs. Profile for the business. As the consumer stays on rent longer, our profile or our return profile then grows. The customers that go full term obviously has the highest return profile for us. A few things to kinda take away from this chart. I think the first thing I would point out is how few customers go full term. Flexibility of an LTO transaction. Most customers use us as a way to structure payments in a manner their budgets can fit, and how their cash flow spending and how their habits fit their lifestyle. The full-term option especially is low on the Rent-A-Center side when you compare it to the EPO column. As you see a big drop off from EPO down to full term.
That's because if you think about Rent-A-Center weekly, payments pretty low. As you get closer to the full term, it makes a lot of sense for those customers to go ahead and take advantage of the EPO percentage off of remaining payments, and go ahead and purchase it, purchase it early. In the aggregate, our lease outcomes are generally profitable, even on the charge-offs. On the Rent-A-Center side, you can see because of the wholesale pricing that Anthony walked us through, it's still profitable even on the charge-off level. Even on Acima, it's just a modest loss during the charge-off. Right? They're looking for an affordable solution to a product that they need. On Acima, you have the majority of the customers going same-as-cash, which also makes sense because they view it as a point-of-sale financing solution.
When we look at the same as cash percentage at Acima, during our last quarterly earnings call, we talked a little bit about how we started to see the consumer behavior and the payment behavior change in the first quarter, given the muted tax season. What we said, given that they're same as cash, they're usually our better credit customers. They're gonna make one or two extra payments. You start shrinking that gap between our returns and our break-even point. In general, very profitable businesses on both sides. One other thing I'll point out on this slide is the charge-off column at Acima. We think this is a huge opportunity for us.
I think Tyler mentioned a little bit about the account management practices and being able to leverage the Rent-A-Center infrastructure, leverage the best practices from a collection standpoint that Rent-A-Center has, you know, fine-tuned over the last 50 years. If we can find a way to efficiently help customers Another important factor, and you guys have heard us talk about this, it kinda differentiates LTO and Upbound specifically, is that we do well, in kind of any macroeconomic condition. The business is countercyclical. We talked about that as a form of trade down.
What we've tried to do here is kind of depict a couple different scenarios, kind of normal credit conditions as well as, you know, both the To consider waterfall and how the consumers go about buying these goods. They typically go down from prime to near-prime to subprime, all the way down into the deep subprime where people don't have. Usually stays true to their segments. What happens in a strong environment, so this chart over here on the left-hand side. It's in a strong environment, credit profiles generally improve, and so you'll start The prime lenders dip down into the near-prime bucket as the near-prime bucket starts to trade up in a strong environment, and it kind of works its way down the line.
You're gonna have, maintain decent losses in a strong environment. In a weak environment, you kinda see the inverse of that. Really works the same way. In a, you know, in a worse environment, you start seeing the trade down. Think about it as a typical economic recession, high unemployment without the spike of inflation that we've seen this past time. It could be higher forecasted losses, it could be higher interest rates where their cost of funds have gone up, but whatever. The combination of the two. The prime bucket drop into near prime and near prime into the non-prime bucket. Mitch referenced this a little bit.
When in an economic downturn from an LTO perspective, we have a little bit of flexibility on our side. Depending on what we're seeing in our portfolio that day or, during those conditions, what we're seeing in our core consumer to either keep the bottom end of our buy box the same, or do what we've done today, which is actually lift it up a little bit given the current economic conditions are really hard on our core consumer in the deep subprime space. We've actually had to lift ourselves up. In that environment, what happens in the top end of the funnel, we start seeing a much better consumer.
Just when Rent-A-Center their portfolio did drop a little bit, but not like other consumer companies, and losses actually improved as we had more and more near-prime consumers come into the LTO space. We felt like this was an important page and an important topic for those of you who are new to us, and maybe new to the LTO space, to really point out that we adjust based on the macroeconomic conditions, and this is a differentiator for Upbound. Right? We can maintain our portfolios in both good and hard times. We can maintain our losses and really can adapt to any market conditions.
We've talked a little bit about some of the fundamentals of the business and different fundamentals of the aspects of why we think it's a compelling investment opportunity. Maybe let's switch gears a little bit now and talk about the recent financial performance and why we think we're positioned well for Q4 of 2021 and into the beginning parts of 2022. And through that era, I think simply stated, us, like most other consumer companies, probably overearned in 2020 and 2021. After the stimulus programs ended, the business started to normalize. We had the high inflation kick in in early 2022, and we started to see really high losses come through the portfolio, beginning with the Acima in the first half of 2022, and then the Rent-A-Center side in the second half of 2022.
Most consumers, given they already have tight budgets and inflation really spiked up in all of their essential goods. We had to adjust our underwriting. They had to adjust how they manage their budgets. That process has really continued into 2023. We do expect 2023 to be a trough year for us as the portfolio has come down from 2022. Losses are improving but are still elevated compared to normal times. There are some headwinds out there in the market. There's still a lot of uncertainty, but we are starting to see some green shoots in the business. We do think we'll reach an inflection point at the end of this year. We talked about it a little bit with Acima.
SEMAA G-GMV, we do expect it to grow, in the fourth quarter on a year-over-year basis and potentially, in the third quarter. On the Rent-A-Center side, we do think it'll be down a little bit, in the second and third quarter from a year-over-year standpoint, kinda even out through those summer months, but then really pick back up in the fourth quarter seasonally and be flat to 2022, which is at a much higher level than we were pre-pandemic. We highlighted a lot of these trends during our last earnings call and then gave guidance for 2023, and we're reaffirming that guidance today. You know, We've implemented over the last, you know, several months. You know, Tyler and Anthony both gave insightful commentary around the technology and the tools that we've implemented.
We had to go through a Major change at the beginning of 2022 in our underwriting and really cut back from kind of the stimulus high in 2021 and really tighten up from an underwriting standpoint. An important part about that is we're better off today from an underwriting standpoint, from an underwriting capability standpoint, than we probably ever have been. You know, I always like to say we've probably had to exercise some muscles on the underwriting side and collection side that we haven't had to do for a couple of years. We'll continue to invest in that process. We'll continue to invest in those tools and really try to optimize both our portfolio, optimize new GMV, and ultimately increase EBITDA dollars. We do take a very holistic approach to risk.
We look at the customer attributes. We look at the product category that they're shopping at. We look at the channel they've come to us, whether it's one of our It's a returning customer to us. We actually rank our Acima merchants , and even we rank our own stores on the Rent-A-Center side to assess the retail risk. We try to take a combination of all those things and try to make the best underwriting decision that we possibly can. As Tyler said, sometimes it works, sometimes it doesn't. We look at it at a very granular level. All of us do. You know, in the committees that we have on a weekly basis, we look at it at a very granular level.
We look at both the portfolio and the vintage level, try to make good decisions and find pockets of risk, but also pockets of opportunity. Ultimately, trying to get to a point where we can make smarter decisions, grow GMV at some point, and maintain our losses. We're going to continue to do that. It's been great to see over the last couple quarters some of the changes that we've made actually come through the portfolio, both from a loss standpoint and from a delinquency standpoint. Here's some of the data and some of the charts. You can see we've come down off the highs that we had in both businesses a little bit earlier on in Acima, the first half of 2022.
With Rent-A-Center jumping up in Q3 and Q4, both of them coming down nicely in the first quarter, both on the losses as well as on the past due rates. The other thing I'll point out though is that we still have a little room to go to get to where we think is normal. Acima Virtual is in the range, our 600-800 basis point improvement in the first quarter compared to the fourth quarter, but is still at 4.8%. As Anthony said, we do believe we have room there to continue to improve. Outside of underwriting, we also have a lot of opportunities here that we've listed on the page to drive expansion, including productivity initiatives and synergies.
As we think about what we've done this year, announcing Upbound, putting in a new enterprise operating structure, we think that's going to be a key enabler for us to drive a lot of these synergies to align our resources and use those shared practices and shared services. You know, Mitch mentioned our ability to kind of cross-sell and have revenue synergies in those example at the beginning of the presentation between Ashley and Best Buy. Those revenue synergies are real, we are just now in the first phases, I would say, of implementing a lot of those cross-selling synergies. Another opportunity that we've mentioned throughout the day is around account management. You know, implementing the 50 years history of collections and leveraging the Rent-A-Center infrastructure over at Acima.
There are also things that Acima brings to the table that are new to Rent-A-Center. Tyler mentioned a lot about the data analytics and the data capabilities, modeling strategies, for us to be able to implement that on the Rent-A-Center side. That we think there's a lot of room for us to continue to share in those best practices and drive synergies between the segments. Okay, moving on to the balance sheet. The company continues to have a really strong financial position to support our growth. A few times, that we are focused on paying down debt to our target level of about one and a half turns over time. We made progress towards that. In the first quarter, we paid down gross debt by just over $40 million.
We still have a really strong liquidity position, and the business essentially self-funds itself. We have a little bit over $400 million or just under $428 and 2029. Feel really good about where the balance sheet is, as well as our liquidity position. Moving on to capital allocation. Obviously, we've mentioned it a few times, the company is very profitable, generates significant cash flow. How we allocate capital is a critical part of us creating shareholder value. We are focused on allocating capital in a manner that balances short-term value, while looking and being mindful of the long-term value. We've listed our priorities here in order of our strategy.
The top one being investing back into the business to support the growth and support the expansion and sustainability of our earnings power of our company. Second, paying dividends. We feel like we have a very healthy dividend between if you look at our dividend yield as well as our dividend payout ratio, that we're gonna maintain that dividend, which is very, very sustainable. Next, I mentioned already a couple of times, paying down debt. We do wanna get back down to the 1.5 times net debt to EBITDA leverage ratio. We will consider other forms of capital allocation if the risk-return profile is correct, but this is a focus for us, especially in this environment. We'll continue to look at M&A opportunities.
We've talked a little bit today about we still have some room to go with the Acima acquisition. We're still going to get that fully integrated before we do another transformational deal. As Mitch mentioned, that's the history of the company is to do M&A. We'll be opportunistically looking at transactions as they come up. We will opportunistically look at doing more share repurchases, more on a returns approach, rather than a programmatic approach. Over the last couple years, we've delivered outside of just a normal dividend, almost $500 million of capital back to the shareholders. As far as the forecast for the next few years, we've covered a lot of material today between Mitch, Anthony, Sudeep, and Tyler.
Trying to put it all together for you with some financials all on one page. We believe we have a great opportunity here, Upbound. We have a really strong, stable business that's been around for 50 years. We have a growth engine in Acima to go out and continue to evolve the business and add new products over time in a disciplined way. We're trying to give you guys here is a little bit of a framework of how you should think about Upbound as an investment. We've laid out some three-year growth targets for the company. These are CAGRs based on the midpoint of our 2023 year-end guidance. We feel like we can grow revenues in the 6%-8% range.
We think we can grow EBITDA in the 8%-10% range. Through that period of time, we'll generate free cash flow of $650 million to $850 million cumulatively. Then moving over to the right on the TSR, the total shareholder return, if we take that free cash flow, and we assume we keep our dividend at $1.36 per share, and we assume that it stays at a current yield, a dividend yield of about 4%, and if we conservatively take all of that excess cash flow above our dividend and pay down debt over the next three years, we think we can generate a total shareholder, annual shareholder return somewhere in the high teens to low 20% range.
One other thing that I'll note on this forecast is that this does not include any benefit to our new partnership with Genesis on the credit card side. It also is not dependent on us landing any new enterprise accounts at Acima. Both of those would be incremental to this forecast. Hopefully, with putting all this together, you can see why we're excited about the company's prospects. Hopefully, you guys are all excited about the company. I want to thank you all for your time today. I'm gonna hand it back over to Mitch, who's gonna give us some closing remarks, and then we'll open it up for Q&A.
Great. Thanks, Fahmi. Lot of information, like Fahmi said. We've shared a lot of information in the last hours. Covered a lot of ground, and I'll go back to my opening slide, which was a summary of key investment highlights. I think you heard this kind of stuff today that how well-positioned we are as the leader, how big the market is, the first point up there. Certainly providing us the opportunity to generate strong profitability and growth and above average rates for quite a few years, really, when you think about it. Second, the resiliency of the model. You heard a lot about the resiliency of the model and our track record of how we performed through various economic cycles.
The key competitive differentiators, we talked about quite a few of them. I hope that resonated with you. They really can't be duplicated. The synergies between, you know, Rent-A-Center and Acima can't be duplicated. Nobody else has that footprint. It can't very easily be duplicated unless somebody's gonna open a couple thousand retail storefronts to have that crossover. First. We have to offer customers new solutions in our expansion. Some of the things that Fahhmi just mentioned that aren't even included in those kind of returns we think we can provide over the next three+ years. Strong liquidity, the cash flow speaks for itself. The shareholder value speaks for itself. We talked about the dividend and so forth. You heard from the leaders today. There's other leaders in the room.
We obviously have a lot around the country, but the leaders of each segment, Tyler and Anthony, and leader of our technology, and Sudeep, and then of course, me and Fahmi, and like I said, we got some other leaders here too. We've got a strong, diverse team that can execute on this plan. Hopefully you got that point came across very well too. Thank you again, team. A lot of time goes into preparing this. Thank you, Brendan. We were happy to present this to you. Now, questions. Maybe Fahmi, maybe you, Tyler, and Anthony come up, and then if we get anything the four of us can't answer, we'll call on one of our friends down here in the front row.
Just for Q&A, if you could raise your hand and give your name and firm and keep it to two questions, that would be great.
Sudeep said I was answering all the tech questions.
Good luck.
He may be up here shortly.
All right, I'll kick things off. It's Bradley Thomas from KeyBanc right here. Thanks for all the details. Clearly, a lot of work went into this. I think the question is really just around the confidence in the top line outlook for the segments, particularly given that we're in a such an unusual spot for the industry today. Could you speak a little bit more to the confidence in the sort of bottom-up build for the organic growth opportunity for the two segments?
Sure. You want me to take it?
Yeah, go ahead. You can start.
I was gonna say, we probably should let Anthony and Tyler take it, take it, but I'll, I'll start. I think you have to look at it between the two businesses, right? On the Rent-A-Center side, 2%-4% revenue growth, top line growth. you know, that if you look and you take out kind of what happened during stimulus and you look at just 2019 and where we are in 2023, it's about 3.5% growth, and you take out all that noise in between the pandemic and stimulus. We think we can replicate that. Anthony talked a lot about the e-commerce channel and converting a lot of visits into leads and into applications and ultimately, hopefully to leases.
We feel like that's very, very achievable. I know you didn't ask about EBITDA, but I'll even take it down another step to EBITDA. 2%-4% for the Rent-A-Center business on revenue, and then we said 3%-6% on the EBITDA CAGR. That 1% difference or 1%-2% difference in operating leverage really stems from losses. He continued to improve losses on the Rent-A-Center side, but the growth side of it, 2%-4%, is very achievable.
I think the other thing you have to remember before these guys can speak about each segment is we're starting to see trade down. When you think about any economic cycle, these are not overly aggressive, overly aggressive numbers as you think about people having to trade down, already seeing higher third-party scores coming into our decision engine at both segments, Rent-A-Center and Acima. Just like in 2008 and 2009, we're starting to see it. It took a little longer this time because unemployment has stayed so low for so long, but now we're seeing it as there's tightening above us through more traditional lenders.
When you think about those kind of growth numbers, there's a big segment. Fahmi had that slide right towards the end where, you know, it might go down a little, but our lines stay the same in there. When it comes back up, it pulls people up from the bottom of those columns that he was showing and gets you back to those numbers, so. With some of our and some of the When you add the initiatives onto that trade down, we're very confident in the numbers we talked about.
Yeah. I would say, I mentioned it many times during my remarks, the traffic that's coming to e-com. I mean, just seeing that opportunity, the trade down that Mitch Fadel mentioned. Fahmi Karam mentioned, like, from an EBITDA perspective, the improvement of losses for the Rent-A-Center business. I look at it the other way. When we get our hands around the underwriting, we have our hands around losses, then especially in a retail store, where you've got human beings who aren't chasing a bunch of collections, it gives them more opportunity to focus on the offense, on the growth aspect of the business.
I'll mirror much of what's already been said, you know. Between underwriting, between trade down, and between Acima's efforts throughout the kind of pullback and recessionary period, we've been able to develop those additional channels as additional vectors of application acquisition, GMV acquisition. From our perspective, we feel, and you know, you heard me say, I almost said easy in front of this group, and you heard that, and I took it back. Easy is not the right word. Optimistic is the right word.
Your question was, are we optimistic about our top line? Absolutely. We've got the right tools, we've got the right positioning, we've got the right people in place, we've got the infrastructure laid out already, and we know where we need to go in order to optimize, as Fahmi had put on the or mentioned, optimize these pockets of GMV within various retail groups and within various verticals to truly drive that GMV.
You know, we said, for the Acima side, 10%-12% of GMV growth on a CAGR basis between now or the end of this year to 2026. I think about that chart that Tyler put up there on retailer growth that we've had, and even through kind of the tough times that we're seeing now, I think that's what gives us the confidence. Right now, we're looking at furniture being one of our still our biggest segments, and that pull forward effect will.
The further we get away from 2021, each month that we go by, you know, that pull forward effect is going to lighten up. I think on top of that, you put in some of the optimization from an underwriting standpoint, and we're already seeing the trends, right? In the first quarter, we had thought it was gonna be down mid-teens, and we ended up down almost at 12%. You know, we think we're gonna beat the guide for the second quarter and then grow into the second quarter. The momentum is there.
If you look at
Comping over the tightening of the underwriting too is a big part of starting to grow the latter half of the year.
Kyle?
Yeah. Thanks, guys. Kyle Joseph with Jefferies. Thanks for putting this together. Very helpful. Two questions. I'll start with Anthony. Just really kinda wanna dig into the kinda health of the underlying consumer. Obviously, there's a lot of moving parts. Inflationary impacts, post stimulus in 2022. Obviously, there was a lot of concern that, you know, the lower tax refunds this year were gonna be kind of the knockout punch, but you know that it's consumer's been fairly resilient. Obviously, they're still employed. Inflation hasn't gone away. Just, yeah, you're boots on the ground. You interact with consumers.
Yeah.
Just kinda.
Sure. I think Mitch mentioned it during the earnings call that, you know, our customer had their recession in Q3 and Q4. They've adapted, they've normalized now. I think they're living in this new normal. I think, for those that are interested in a job, there's plenty of jobs out there for our customer right now, so I think that they're working and, I think they're healthy. If they want a job, they can certainly find one. I think that wages have increased. Our customers Was it slightly muted? Sure. To this point, what I can say is the customers have stayed on rent, and that's good for us, right? It's helped the portfolio hold up.
That's another thing that leads me to be optimistic about how we can finish this year, as Fahmi had mentioned, getting back to normal because the customer is working, they've had their recession, they've normalized, and they're staying on rent to this point. I feel pretty optimistic about it currently.
Kyle, I'd add to that in that when you think about the trade down in our business, especially on the Rent-A-Center side. When you get trade down, you actually have a better credit quality coming in, right?
Yeah.
As long as we're good enough, and I think we're proving right now with the adjustments we made from an underwriting standpoint, as long as you're good enough to know where to cut off at the bottom when it goes down like that, you get actually a better customer coming in. If you don't cut off the bottom, when in this kind of environment, you might have a problem. We didn't cut it off fast enough last year. That's when we had the higher losses and that's why you're seeing them come down now.
Yeah.
We've figured out where to cut off now, and we got a better customer coming in, so that's why you're seeing the improvement you're seeing now. There's not too many businesses with tighter underwriting can actually have a better customer coming in. It's one of the benefits of being at the bottom of the waterfall, so to speak.
Got it. Very helpful. Then shift over Tyler. I would say, you know, the industry had a lot of momentum in terms of landing large nationwide retailers pre-pandemic. Since then, it's been not just you guys, the industry broadly, has been relatively quiet in terms of landing large nationwide retailers. You know, 2020 obviously everyone's concerned with the pandemic. Maybe 2021 was overshadowed by BNPL or the pay in 4s and whatnot. As retailers have started struggling in the post-stimulus world, I would have thought this might, you know, be the impetus for a retailer to add. You know, what's it gonna take to get over the hill and to get retailers, large retailers to add? Second part of the question is that even as big of a concern as it once was, given all of your alternative products?
That's a great question. I appreciate it. So I would tell you that back in 2020, like you say, that there's a lot of concern, there's a lot of worry about where the world's going, much less the economy, right? Companies buckle down, and they try and figure out what they need to do in order to survive as retail drops off and as sale of goods drops off. 2021 comes around, everybody realizes that what they really need to do is reinvest resources into making online transactions more fluid. Those same tech resources that otherwise would've integrated an Acima or somebody else are now being dedicated to improving infrastructure within their internal environments in order to capture all the sales volume that can come through the online environment.
Now we're into 2022, 2023, right? 2022, there's all the things that happened inside 2022. Spending falls off again, and you've got some interesting things there. Here we are in 2023, and retailers are looking around and saying to themselves, "All right, great. Now I understand sort of what the marketplace looks like. It's still a little uncertain, but I got a better grasp of it." More to the point, now I've got the tech resources available to do some of these integrations
Not to mention the fact that some of us have come up with solutions that don't require tech integration. The conversations are starting to increase, improve, and become extraordinarily meaningful within the enterprise environment. I'm not gonna say that that's still an easy, an easy win out there, but it is something that's starting to pick up in both velocity, and in quantity throughout the marketplace, which is encouraging. So that's the first half. The second half of your question was?
Is it still as important to us as it once was?
Yeah. Is it still as important to us as it once was? Absolutely, right? At the end of the day, I look at it like it is important because it continues to improve Acima. Now is it as important to the growth numbers that you saw? No, we didn't account for it at all. Is it important to us? Absolutely, right? We wanna be able to serve our customers where they want to go, and that includes all of the big enterprise relationships that you see out there in the marketplace. It's still an extraordinary focus. We hired Mike Bagull.
We hired a team around Mike in order to facilitate those conversations. We wouldn't have gone through that effort all by itself if it wasn't something that we considered truly important. We also, we look at it again, not just from the perspective of the business, but from the perspective of our customer and what it means to them to have that normalized shopping experience out in the marketplace of all the big box and big retailers that we all go to on a daily basis. Yes, absolutely.
Yeah, it's a good point. Mike's been here about nine months, Kyle, and we've got the biggest team around Mike. Mike came from Synchrony, Mike Bagull. I don't know. I'll ask you if you have anything to add. You can grab the mic. it's the biggest team we've had, and with a leader that someone was on the enterprise team at Synchrony, like Mike, this is the best effort we've had at it as well. Yes, it's very important to us. I don't know. Anything to add from anything we said?
Yeah. I think the only thing I might add is, we do see an uptick as the pipeline has increased in folks who don't have the product today, not necessarily across the biggest of the big, but across the spectrum of everything that we chase. I think the issues that you can then run into on the biggest of the big is that they're huge organizations.
We talk to a certain segment of the company and, you know, kind of put our best foot forward as to what this might mean to them and their customer base. Ultimately, you can see the process happening now with racks and stacks against all the priorities within the organization, That's kinda, you know, often where the rubber meets the road. I think the dialogue's ongoing as to when it meets the top X number of priorities that get initiated, and I think is kind of the when somebody will land the next big deal.
Thanks very much.
Thanks, Kyle. Hey, Bobby.
Bobby Griffin from Raymond James.
All right. Yeah.
Bobby Griffin from Raymond James. Appreciate all the info and you guys taking my questions. I guess first is more kinda a near-term question, then I do have one for Acima as well. Just this year's been kinda very unique with the tax refund season, the way it played out. If you look at the cohort of leases that you guys did, right, say in December and January, I think last time we spoke, we were talking about how we gotta kinda see how they perform to see what we learn from those consumers that would've maybe typically purchased an early option but didn't. Is there anything you can share there as we've kinda moved further away from maybe the buyout season or how those leases are performing? Anything unique there for us?
Yeah. At our expectations, for sure. As Stanley said earlier, reaffirming guidance today, everything's at our expectations. Certainly, not every single one's gonna convert to a full-term payout, but we expect some fall off there, but certainly to expectations, and I think you just mentioned it, Anthony. It's not like we're getting the returns. Seem to be holding up very well and, you know, we'll have a few more losses without the, you know, without the payouts. We've got that factored in, though. We haven't had any surprises. They're holding up really kind of extraordinarily well at this point.
Yeah. I think when I think about the losses and those cohorts, at this point, we're just expecting more seasonality, more typical seasonality, you know, as we get into the warm weather months. Mitch mentioned a couple more returns, but not that it's fallen off of a cliff. They're performing.
The 12% revenue growth, is there a way to unpack it maybe a little further into door growth or is it ticket per door, and I guess what would drive that to kinda get to that level? I guess the second part of that, and we were talking about it earlier with the large accounts, from us, it's always hard to kind of get our heads wrapped around the size of the TAM that gets put out there by you and your primary peer, just how large it is versus where the GMV is today. When you look through maybe top 100 retailers, do you see a large number that don't have these products that could? There's any examples like that? I mean, obviously, you know, we have one big home improvement has one doesn't.
Just like throughout, kind of when you work your way down, is there more examples of that that stick out there that maybe we're not realizing to really get to that large of a TAM that is talked about?
Sure. Okay. Let's take the TAM question and we'll start there. When we look at the TAM, and those top 100, they're penetrated. There's some groups in there that have it, but there are some identifiable names, and we do have those target lists. Mike's chasing those on a daily basis, making sure that we can get in front of them. We're having those competitive conversations as between us and some of our peers, not all of them. From the perspective of the TAM, we truly do believe that it's achievable and realistic based on the fact that there is enough interest, enough continued pipeline, enough conversations occurring amongst those that don't have or even amongst some of those that do have an incumbent that are looking to at least understand what the other options in the marketplace are. That's the first part.
Now on the second part, you know, the unpacking the 10% to 12% top line growth, we've done that across a number of different initiatives, whether that's improving the efficiency and the return rates of existing customers, whether that's changing value props a little bit from one place to another in order to drive more value, whether that's bringing on all those new doors that we talked about before. It's distributed among seven or eight different initiatives inside Acima. No one initiative is designed to make up all that difference and get us to where we need to go. There's a series of things, each of which has been evaluated, and we believe is truly attainable and achievable within there, drive us to that, to that number.
I think a couple things I can add on to that, Bobby . When I think about the 10%-12%, I think the doors are growing. The we're comping over, you know, the tightening. That won't be a headwind starting the second half of this year. Not that we're not always tweaking the underwriting, and there's tightening with a certain retail partner this week, right? I mean, it's a very iterative process. When you think about generally speaking, we're growing doors. We're the second half of the year, we start tightening, or we start comping over the tightening. New verticals, you start to get away from every quarter that goes by, you get farther away from the some of the pull forward as well.
I think that's kinda the short answer to that. As far as the TAM you and Tyler were talking about, when you think about names that you're, that you may not be including, you think about names like Walmart. For durable goods, Walmart, Target, Sam's, Costco, you know, Home Depot, the one of the two large ones you said that doesn't already have it, and you just keep going. There's some awfully large names, and I don't believe when we've looked at the TAM that even includes anything online with Amazon. It's just the brick-and-mortar ones.
We actually have. We don't use it anymore, but we actually have a consultant report from one of the biggest names in consulting that is what was that $85 million to $100 million, and we don't even. We decided our own calculation is more $45 million to $50 million. A few years ago, you hear us talking about $100 million. We actually have a consulting report. We hear that's a few years ago, but 2019.
Yeah, late 2019, early 2020.
19. You know, from a firm like, and one of the big ones, you know?
Hi. John Rowan from Janney. Mitch, I guess I'm struggling to understand, just going to the Genesis product, what, like, how is it sold to consumers? Where and when is it sold?
Yeah.
What are the use cases of the product? Also, you mentioned that it was a fee-based product.
Yeah.
Upbound. I don't know what the formula is that goes into determining the fees, but I just wanna make sure there's nothing within the fee structure that is related to late fees and whatever proposals are going around...
Right.
regarding changes to that fee structure.
Right. Right.
Thank you.
It's not related to late fees. I can answer that one first. The two real products here. General purpose credit card, we got millions of customers that nobody else would give them. They, you know, some might have a subprime credit card with a $500 limit, most won't get them because nobody has our data. Using our data, we'll market to those customers, you know, with Genesis, we'll market to those customers primarily through email, I think is the plan. It's primarily email marketing. We can do some direct mail. It's more expensive. We probably won't need to. We can probably handle it mostly through just direct mail offers from a brand they're familiar with.
You know, when people get emails and, you know, they go into, they go into spam folders and so forth, but this is gonna be from a brand they've done business with or are currently doing business with. That's primarily the email marketing. The, and then the other one, the use case for the retail side. We got a, call it 100 salespeople out there, as Tyler showed earlier. We're still growing locations at Acima, right? This is from people being. This isn't Mike's team working on enterprise accounts. It's six or seven people, but this is the 100 people that are out doing regional accounts and even signing up one to two store chains at a time.
The way Acima has grown to 30,000 locations over the last, you know, six, seven, eight years. They will, they will now be selling or soon, later this year, will be selling a package of a second-look financing through Genesis with the lease-to-own. You know, one integration, two products. A lot of the smaller retailers don't have that. The largest second-look offerings in the country, which is pretty much. It really gets split between Atlanticus, they have the Fortiva brand. Genesis is just as large, if not, if not larger. And there's a couple others, Great American and so forth. They work really enterprise accounts. They don't have sales teams after those small regional people, small regional businesses.
The small ones, somebody with 5 furniture stores in Queens that probably don't have the second-look. Most of them will have a prime look, whether it's Synchrony or Wells Fargo or Citi or somebody. Most of them won't have the secondary because there's nobody out selling that. We're gonna use our sales team of 100 people plus our inside sales team to sell that. In the use cases, one-stop shopping and more conversion for that retailer. We give up a little, we might give up a little of what we would have got off our top customer.
We get a fee instead. Probably replaces some of that same as cash business anyhow at the top, but we just get a bigger piece of the pie. That answer your question? Good. Thanks, John. Good question. Yeah, we're really excited about where we can go with that partnership. We're gonna learn a lot, obviously. My answer a year from now might be slightly different, right, once we, once we learn.
Jason Haas, Bank of America. Thank you guys for the presentation and putting out some long-term targets. To ask about the Acima ones, we've talked about the top line growth of 10%-12%. Can you just talk about, you know, the decision to grow EBITDA 10%-12%, assuming that 10%-12% top line growth? Like, why not let a little bit more flow through the bottom line? I guess the other aspect of that question would be, you know, if, you know, growth isn't as high as that 10%-12%, do you still feel confident that you can maintain that low to mid-teens EBITDA margin?
Yeah, great question. Thank you very much. The reason you're seeing it is more one-to-one flow through from top to bottom line is because we recognize some of these new value props, whether we're talking about returning customers or whether we're talking about engaging with some of the larger retailers that Mike's working with, may come with different value propositions than we're currently used to. As we're working our way through those conversations, and we're starting to understand what those retailers require and what the customers on the other side are looking for, what they demand from a repeat business perspective, we're building ourselves a little bit of cushion there from the perspective of margin erosion, right? That's why you're seeing sort of that one-to-one relationship coming through.
Of course, we're gonna do everything we can in order to preserve that as much as we can. What we're accounting for is the fact that as we start bringing on some of the larger retailers that tend to demand a little bit different value prop, as we're working with customers that are coming back in, we may need to change the value prop that we provide to them. We're building ourselves just a little bit of wiggle room there so that we know whether or not we've got to give something away in order to get that business back.
Another way to say that, Jason, is if we've got to give up yield to get the 10%-12%, we've got it built in. If we don't have to give up any yield to get the 10%-12% top line, then we'll have better than that number, so from an EBITDA standpoint.
If we don't get there, Jason, as far as the growth, I do think we can still add low double digits.
Yeah.
To teens, EBITDA margin, 'cause that's where we've been the last few quarters.
'Cause then you didn't have to give up as much on the yield if you don't get there on the growth.
Sorry.
it kinda t hat make sense?
Got it. Yeah, it definitely does. Thank you. As my second question, maybe for Anthony, just curious, you talked a little bit about for the Rent-A-Center business, how you may be able to pull some activities out of certain stores. I guess that would be like collections and maybe deliveries and things like that. Can you just talk about how you're thinking about the store base over the next three years or so? What does it look like? Is that sort of a hub and spoke model to use the stores more like showrooms? Just curious how you're thinking about, you know, the store base.
Sure. I think, I've said it numerous times that our strategy is to remain embedded in the communities that we serve. If you think about where we're at today, we know that the store is integral in order to keep, number one, that relationship with the customer, but also all the other things that I mentioned from an underwriting perspective, from a loss profile perspective, from a conversion perspective. We are going to go ahead and centralize some of the support functions, and we're doing that now. Some centralized communications, allowing the customers to speak with a centralized sales support team after hours. In some of our stores that have higher volume, going ahead and adding and augmenting the in-store sales team with some centralized functions.
To this point, and as far as I can see in the future, I know that the stores are important and staying there is critical. If you think about what do the store footprint look like in, you know, two, three, four years, I can see that it's really net neutral, you know. 'Cause I know the importance of the store, and I see what happens when we vacate a market, how we don't end up. We're not able to keep all of that share if we go and merge stores and so forth. There'll be some, you know, puts and takes, some horse trading, if you will. Move a store from here, move a store from there. I think as far as the overall store count is concerned, I think it'll remain pretty much net neutral.
The one thing that I am excited about is the fact that I mentioned it during the presentation, that we've got these retail footprints that are closer to 4,000-5,000 sq ft on average. Is there an opportunity in the future as e-com grows to turn these more into a fulfillment center type of location? If, you know, a larger share of the business is starting on e-com, we don't have to showcase as much product from a showroom perspective, but more like a preparation for delivery perspective.
You know, our leases turn over inside of these locations every five to seven years, give or take. Do I see an opportunity to go from 4,000 to 3,000? Yes, I do. As a matter of fact, the stores that we opened last year, we opened, you know, call it 12 stores. They averaged about 3,500 sq ft. Already seeing an opportunity to shrink the square footage.
Still stay inside of the community.
With technology.
With technology, yeah, primarily.
Same number of stores with less cost.
Yeah
Or less square footage is really, really the goal there over the next five years.
Yeah.
The way technology is helping us show people the product when they walk in rather than have to have everything displayed.
Yeah.
There was so much coming from e-com. You know, you still deliver. That's still our final mile, but if you're not displaying it, you can store a lot more if you keep things in boxes just to deliver, right?
Yeah.
You know
Yeah, sorry. More and more customer shopping on e-com, they wanna see the thing come in the box to their house. You know, they wanna see us unbox it. We can store the product at a smaller location and still do a great delivery to the customer.
Got it. Thank you.
Yeah, thanks.
Hi, Carla Casella from JP Morgan. You talked about when we mentioned M&A briefly, and you said you're still, you know, want to complete the Acima integration. Where do you stand in terms of what's left to do on this Acima? Are you done with all the integration, just waiting for the pieces to roll through, or are there any key kind of points that you need to address?
Yeah. You want me to start?
Yeah, go ahead.
Sure. I would say that, you know, the company and part of the name change was to get everybody from an internal standpoint to kind of buy into one company and to kind of, you know, have a mentality of we are two separate companies that have come up differently, but we are now under one umbrella, and we need to start sharing some of those best practices and have those centers of excellence. I still think there are certain functions that are still being kind of combined. I think about Sudeep's organization and the systems. We're still on two separate platforms today on both those businesses. Part of what Sudeep is gonna be focused on is putting us onto one platform to be able to share and communicate and collaborate as an organization.
I mentioned it during my slides around some of the revenue synergies, the cross-selling synergies, and those are in the works. We've identified a lot of them, and those are on to come. Over the next, call it 12, 18 months, you'll start hopefully seeing that play out into some of our financials. I still think there's a lot of things that we haven't even gotten to start working on that we can do, so.
Yeah, we're working on the collections part. I don't know what the suite stuff is. Tiffany's working on the collections stuff.
Yeah.
We've got this. We've got the process for Rent-A-Center to help Acima to monetize the returns. We've got to make some technologically, primarily technologically and a little bit of labor resources to perfect that or optimize it, maybe is the better word. I think we're probably 6 months away from optimizing that. I think if we're standing here sometime 6-9 months from now, we're going to say there's very little left to do.
Start, yeah
synergy standpoint. I think we're more than halfway there, but we got some things still to do, Carla.
Great. Thank you.
Thanks.
Hi, guys. This is Wan Lin from Credit Suisse. Thanks a lot for putting this together. It looks like your loss and delinquency rates are at or slightly above pre-pandemic. With the student loan, prepayment coming back, and you guys have 65% customers being millennials and Gen Z, how is that gonna affect the payment behavior? I mean, when that resumes and I guess maybe you have a number of, you know, how many of your customers are exposed to student loans?
Yeah, not many. I mean, college education level is pretty low with our customer, lower than certainly the national average. You may know off the top of your head, Dan, but it's pretty low. I mean, most are high school graduates, and some college is like 15%, things like that, and it's some college. We're not seeing anything yet and don't expect that to have any impact. Some of the delinquency levels are a little higher than pre-pandemic levels. You know, our losses at Acima are within our range, that six to eight on the virtual losses, even though it's at the high end.
Some of that is, you know, is translating okay to losses as long as we stay in our losses. When you look at some of the delinquency numbers like if first payment missed and so forth, they don't automatically translate to losses. We watch both of them. But they've come down nicely and we're. You know, they're a little higher first quarter over first quarter of like 2019 because the income taxes were lighter. Overall, we're pretty happy with what the underwriting has done for us, especially when you look at the losses and the revenue collections.
There's been a lot of different parts of the program, stimulus areas that have come off recently. Snap came off earlier
Right.
this year. In the face of all those things, we're still being able to lower our delinquencies and lower our losses.
The other thing about Acima being higher than pre-pandemic levels, when you add a lot of e-com, and it's not huge yet, but even at the 15% range, those aren't necessarily gonna be higher losses, but they're gonna be higher in some of the metrics like first payments missed and some of that.
Right.
So.
Thank you.
You're welcome. Thank you.
Thank you.
Good afternoon. It's David Scharf at JMP Securities. Hey, this is kind of partially an introduction to the company for me and particularly on the Acima side. Trying to get a better sense of the sales cycle in terms of the process, and specifically, a lot of these questions about your retailer pipeline are the exact same question. Where does the second look provider first have to be? Do you have to sort of piggyback on penetration already?
That Atlanticus and Genesis are in there before it kind of trickles down to the lease-to-own option, or help me out?
Yeah, I'll take that.
Go ahead.
If you don't mind. Yeah. Not at all. In fact, overwhelmingly, we're not, right? Mitch had mentioned earlier in that small to medium-sized business bracket, very few have a Genesis, a Fortiva, a Great American Finance. Very few have that secondary look. Some of them have a primary... oftentimes we may be the only actual solution within their environment. Our solution's built so that I don't have to integrate to anything, whether it's a point of sales solution, whether it's a waterfall. If they have it, I can, and I can turn that on immediately, I don't have to.
In fact, we generally prefer, if we can, to not, because it provides a means of flexibility and choice for the consumer right off of the bat, and it lets those consumers that walk in and know that they're going to be Acima customers to self-select and effectuate the transaction that much faster. We still we'll take all of the others, and we like them, and they're there. If we can, we do generally like to be standalone on, I won't say unintegrated, because there's a level of integration.
By that, what I mean is we set them up, we enroll them, we create a funding pattern and a funding platform for them, as opposed to using the virtual lease card that I discussed earlier. All things considered, no, I don't have to be through a waterfall. I don't have to be a part of a secondary or a primary in any way, though I can be if that's the preference of the retailer.
When you think about asking those same questions to a Genesis, we talk a lot about what it means to us. You know, one obvious question, especially if you follow them closely, especially the public company of Atlanticus, why did they do that? Why are they giving us a fee? You know, why are they doing this? They don't get to that SMB retail store base. They don't get to the three-store people, the five-store furniture stores, the three-store tire wheel and tire guy or automotive guy. They don't get to it. We're gonna t hat's the beauty of the partnership from their end, is that it's the access that we provide with our sales team out there, not.
The general purpose credit card, you know, it's just a data play and a customer play. For the retail partners, it's a matter of getting to those small and medium retailers that don't have it, and they don't have a sales team. When you talk to them, they're going after big accounts. We are too. This play for Genesis is a way to get to those 30,000 that are smaller players.
Got it. You know, yeah, it sounds like it's an effective customer acquisition-
Right.
cost for them.
Right.
Just to clarify, maybe following up on John's questions, understanding the economics of rolling out a card. When you talk about fee-based, is it effectively a referral fee? You're basically giving them a look at, you know, an account that you think can graduate to a traditional second look product. Or is it ongoing, such as participating in the annual fees that they generate on their cards? 'Cause, excluding late fees, a big.
Right.
Big part of the gross yields
That's right.
of those products are annual fee based.
It's both.
It's both.
On the general purpose, credit card is both an upfront fee per account, and then we are gonna participate in the balances going forward on the general purpose credit card. On the retail side, it's just basically a fee per purchase, so % of purchases going forward. It's not tied to any late fees. It's strictly on balances.
Okay. Now, obviously, the unit economics are more compelling than the cannibalization you give up of-
Yeah.
Referring some of those.
Yeah.
Sure.
In the general purpose credit card, we would expect almost no cannibalization because that's not at the household durable goods level, the $500, $600, $700 cards.
Great.
What else? Anything else? I think, for those of you in the room. Wow, you scheduled lunch for 1:30, and I got 1:29. Brendan, you're like a magician.
You knew.
You're like a magician with this stuff. For those of you who are here, I think I'm right. We serve lunch at 1:30, right? Stay for lunch. And those of you who joined us online, thank you for spending your time with us this morning and this afternoon, and thank you, team. We appreciate it. Thanks, everybody.
Thank you. Thank you.