Upbound Group, Inc. · NASDAQ:UPBD
Upbound — Rent-A-Center — Investor Presentation (2013)
29 slides from Upbound's investor presentation, 2013
Slide 1: Investor Presentation Third Quarter 2013
Investor Presentation Third Quarter 2013
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "could," "estimate," "should," "anticipat
Slide 3: Rent-A-Center today
Rent-A-Center today 2
Slide 4: Rent-A-Center today is…
Rent-A-Center today is… The market leader in a growing industry with compelling fundamentals Focused on providing affordable, high-quality products to our customers that improve their standard of living An advantaged business model that delivers superior profitability A highly recognized bra
Slide 5: Market leader in an attractive industry
Market leader in an attractive industry Rent-A-Center’s current store base is over 5x the #3-8 competitors combined… Franchise Stores RAC Acceptance Kiosks 4,609 Significant opportunity to Number of Stores continue to take share 2,111 Easyhome (4) Flexi Buddy’s Home Premier Rent-A-Center(2) Aarons(3
Slide 6: Superior transaction economics relative to traditional retail
Superior transaction economics relative to traditional retail Summary Unit Revenue and Margin profile (Core U.S. segment) Monthly Revenue Stream Rental Revenues COGS Gross Margin (Example only – pricing may vary) Most similar to $800 $400 50.0% Buy upfront traditional retail $1,600 $400 75.0% Full t
Slide 7: With high brand awareness and exceptional customer loyalty
With high brand awareness and exceptional customer loyalty Brand awareness RAC Top of Mind and Total Unaided Awareness of Potentials are at the highest levels ever. Customer Awareness remains high. Perceptions of RAC’s core value proposition ratings have continued to improve among Potentials.
Slide 8: Rent-to-own has become a mainstream alternative to traditional retail
Rent-to-own has become a mainstream alternative to traditional retail Legislative framework by state National legislative framework States with favorable legislation 46 47 41 22 4 1985 1990 1995 2000 2001 Strong pace of acceptance and stability Favorable State Regulation Unfavorable State Regulati
Slide 9: Seasoned management team with deep rent-to-own expertise
Seasoned management team with deep rent-to-own expertise Chairman and Chief Executive Officer Mark Speese 30+ years of industry experience President and Chief Operating Officer, Director Mitch Fadel 25+ years of industry experience Executive Vice President - Finance, Chief Financial Officer and
Slide 10: Key Investment Highlights
Key Investment Highlights 9
Slide 11: Rent-A-Center is uniquely positioned to deliver value
Rent-A-Center is uniquely positioned to deliver value An established core business that generates significant free cash flow Successful vehicles for growth in both existing and new markets RAC Acceptance International A consistent financial policy that is prudent and focused on returning p
Slide 12: Combining profitability with consistent top-line trends creates an engine for free cash flow
Combining our profitability with consistent top- line trends creates an engine for free cash flow… Consolidated Free Cash Flow Attractive FCF despite increased investment in profitable growth initiatives $350 $323 $300 $261 $250 $200 $123 $154 $115 $150 $29 $100 $50 $0 2008 2009 2010 2011 2012 2013
Slide 13: Reinvest in high-return growth opportunities
…allowing us to reinvest in high-return, growth opportunities RAC Acceptance Increase domestic market share via partnerships with traditional retailers Rent-A-Center International Further expansion into Mexico to address an under- served core customer base 12
Slide 14: RAC Acceptance provides an opportunity to significantly grow our domestic footprint
RAC Acceptance provides an opportunity to significantly grow our domestic footprint Overview of RAC Acceptance RAC Acceptance customer vs. RTO (1) RCII Kiosks inside traditional retailers Credit scores: < 520 521–580 > 581 Customers turned down for credit are referred to RAC associates Retaile
Slide 15: Mexico is a promising platform for international expansion
Mexico is a promising platform for international expansion Mexico Highlights 111 million total population with over 50% Mexico stores remain on track to achieve four- falling into our core customer demographic wall breakeven for the first time in December Potential market of 1,000 stores $1
Slide 16: Proven track record of returning cash to shareholders while deleveraging
Rent-A-Center has a proven track record of returning cash to shareholders while deleveraging ($ in millions) $40 $38 $36 $30 $27 $20 2.2% Current Dividends paid $10 $8 dividend yield (1) $0 $0 $0 2008 2009 2010 2011 2012 Sep'13 YTD ($ in millions) $250 $217 $550MM / 18MM $200 $164 shares repurchased
Slide 17: Financial review
Financial review 16
Slide 18: 2012 Rent-A-Center posted strong operating results
2012 Rent-A-Center posted strong operating results 2012 Financial Metrics 2012 Key Highlights Record total revenues for the year increased ~ $200MM, or 7.0% ($ in millions, except for EPS) 2012 2011 Revenue increase primarily driven by growth in the RAC Total Revenue $3,083 $2,882 Acceptance seg
Slide 19: 2013 Rent-A-Center operating results
2013 Rent-A-Center operating results 2013 Financial Metrics 2013 Key Results Total revenues for the year increased $16MM, or 2.1% Q3 Q3 Revenue increase primarily driven by both the RAC ($ in millions, except for EPS) 2013 2012 Acceptance and International segments, partially offset by Total Rev
Slide 20: Maintain a sound balance sheet through judicious approach to leverage
Maintain a sound balance sheet as a result of our judicious approach to leverage… Q3 2013 Balance Sheet % of % of Q3 Book Q3 Book ($ in millions) 2013 Capital 2012 Capital Cash $52.9 $81.8 Senior Credit Facilities 284.6 13.0% 293.3 14.3% Senior Unsecured Notes 550.0 25.2% 300.0 14.6% Total Debt 834.
Slide 21: Ample free cash flow to execute on growth initiatives and return value
…and ample free cash flow to execute on our growth initiatives and return value to our shareholders Reconciliation of EBITDA to Free Cash Flow 2013 Estimate ($MM) $450 Approx. $370 $375 $40 $300 $225 $110 $150 $75 Approx. $90 $75 $55 $0 EBITDA Net Cash CapEx Working Cash Free Cash Interest Capital T
Slide 22: New initiatives will drive meaningful growth
New initiatives will drive meaningful growth Illustrative new store economics summary New Store Economics (Before ($ in 000’s) Revenues EBITDA After Allocations Allocations) $1,000 $840 $875 $905 RTO CORE $800 $720 Year 1 Investment of $675K $600 (55% for inventory) $370 $400 Profitable within
Slide 23: Continuing strong store growth will increase our customer base
Continuing strong store growth will increase our already substantial customer base Store Counts 4,658 4,288 4,040 3,601 3,299 Note: (1) Includes Get-It-Now / Home Choice stores 22
Slide 24: Our 2013 forecast includes low single-digit revenue growth
Our 2013 forecast includes low single-digit revenue growth 2013 Guidance (1) 2010 2011 2012 2013 ($ in millions, except EPS) Actual Actual Actuals Midpoint Total Revenue $2,732 $2,882 $3,083 $3,113 YoY Growth % 1.3% 5.5% 7.0% 1.0% Same Store Sales (0.4%) 0.8% 1.4% (1.5%) Total Gross Profit $1,996 $2
Slide 25: Rent-A-Center has a compelling strategic vision
Rent-A-Center has a compelling strategic vision Leader of an established and growing industry Established and advantaged business model that has demonstrated superior profitability and continues to generate strong free cash flow Dependable cash flows with a proven track record of returning cap
Slide 26: Rent-A-Center represents an attractive investment opportunity
We believe Rent-A-Center represents an attractive investment opportunity EBITDA Margin profile benchmarking 2013 Forward P/E benchmarking Note: Market data as of 10/22/2013 (1) Source: Capital IQ; as calculated and defined; Latest available 12 month data 25 (2) Forward P/E based on 2013 Estimates
Slide 27: Appendix
Appendix 26
Slide 28: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Reconciliation of Adjusted EBITDA to Earnings Before Income Taxes FYE FYE FYE YTD ($ in millions) 2010A 2011A 2012A 2013A GAAP EBIT $274.8 $256.6 $287.2 $185.1 Plus: Litigation Expense (Credit) - 2.8 - - Plus: Impairment Charge 18.9 7.3 - - Plus: Restructuring Charge -
Slide 29: Company Information
Company Information For quarterly press releases, conference call transcripts, investor presentations, annual reports and other company information, please access our investor relations Web site at: investor.rentacenter.com 28