Upbound Group, Inc. · NASDAQ:UPBD
Upbound — Rent A Center Inc DE — Proxy Contest (April 2017)
39 slides from Upbound's proxy contest presentation, Apr 10, 2017
Slide 1: A New Plan to Improve Operations and Drive Value for All Stockholders
Slide 2: Safe Harbor
Safe Harbor Forward-Looking Statements. d forward looking terminology such as “may,” “will “expect,” “intend,” “could,” “estimate,” “should,” “anticipate,” “believe,” or confident, the negative thereof or variations thereon or similar terminology. The Hi performance could differ materially from such
Slide 3: Executive Summary
Executive Summary The Board and developed i ji financial plan that aims to maximize value for a stockholder: idresses ascrctn operational challenges, exacerbated under the previous management regime, that have readily fixable Bue that are underway and are generating improved key performance met - Im
Slide 4: Mark Speese is Again Committed to Making RAC Successful
Mark Speese is Again Committed to Making RAC Successful Cumulative total stockholder returns! Rent-A-Center sap 500 3,000% 2,500% 2,000% '95 "96 ‘97 "98 "99 ‘00 ‘01 "02 03 ‘04 ‘05 '06 ‘07 “0B 09 10 11 12 13 "14 15 16 Revenues ($mm) CAGRs $2,963 $2,732 6% $2 $2,339 32" oat] $1602 1995 2000 2005 2010
Slide 5: Mark and the Board Took Swift Actions to Correct the Unintended Effects of Initiatives
Mark and the Board Took Swift Actions to Correct the Unintended Effects of Initiatives Implemented in the Recent Past @) Corrective action Prior initiatives and impacts underway? Actions taken to correct + Rates, cash prices, and total BEE) psmentsunconpettne ff proposition + Overstocked with older
Slide 6: New Plan to Improve Operating Results and Create Value for All Stockholders
New Plan to Improve Operating Results and Create Value for All Stockholders Metric* 2018 Target range 2019 Target range enue growth Low single digits EBITDA margin 7.5% - 8.5% Free cash flow $70 - $90 million EPS $1.20 - $1.40 Note: Free cash fo Mid single digits 9.5% - 10.5% $110 - $130 million $2.
Slide 7: Unlike many other retailers today, the challenges RAC faces are well understood
Unlike many other retailers today, the challenges RAC faces are well understood and largely correctable by our own actions. Several pillars of our strategic plan represent a return to what has made us a strong franchise historically. The Board helped management create the plan and is already oversee
Slide 8: Overview
Overview Rent-A-Center today Best-in-class leadership and governance
Slide 9: 2012-2015 industry CAGR of 4.1%
2012-2015 industry CAGR of 4.1% RAC commands 1/3 share of > $9bn industry Decisive actions to restore long-term growth O underway Ll tion 9 Ability to generate strong free cash flow revenue Early innings of serving an addressable market of Growth opportunities with ANow, Omni & E-comm Dependable acc
Slide 10: Pillars of the New Plan
Pillars of the New Plan Mission: Be the preferred provider of durable goods for cash and credit-constrained consumers Enhance value proposition and facilitate ownership Optimize product mix Stabilize and upgrade the workforce Improve account management Drive efficiencies in-store Optimize footprint
Slide 11: Enhance Value Proposition
Enhance Value Proposition Creates clear path to ownership Initiatives + Reestablished 2x2 matrix as foundational pricing strategy + Most terms reduced by 30%, with additional term strategies for products with shorter lifecycles + Adjusted previously rented product terms to better reflect value based
Slide 12: Optimize Inventory Mix
Optimize Inventory Mix Expand selection of aspirational “Better / Best” products most desired by customers Initiatives Historical, current and future optimized idle mix = Good + Targeting 65% of inventory mix made up of S5% = Better Better/Best products vs. 45% currently es + Results in higher ticke
Slide 13: Stabilize and Upgrade Workforce
Stabilize and Upgrade Workforce Increase the mix of full-time positions to improve customer relationships Initiatives Hourly coworker mix by position . Following a a pat time labor initiative launched in 2015, the sei mbatioe: 100% e U.S. channel experienced elevated turnover feahauls a 18 a 60% + H
Slide 14: Improve Account Management
Improve Account Management Lower delinquency rates by focusing on training, tools and incentives to resolve store-level execution issues Thorough rental agreement verifications and approvals Run-rate EBITDA improvement: - ‘ F 7 reer ~$35mm* Incentive compensation moving to bottom line profitability
Slide 15: Drive Efficiencies in-Store
PILLAR #1: STRENGTHEN THE CORE Drive Efficiencies in-Store Initiatives to improve underperforming stores Filling open positions and right-sizing number of employ in all stores Launched store inventory health reporting for visibility and ownership Created Acceptance Now returned inventory transfer “r
Slide 16: Optimize Physical Footprint
Optimize Physical Footprint Rationalize undeforming brick-and-mortar stores ou ise structures: ee an 8, will provide te fexbity "quired to proactively manage our footprint RAC will prepare a store Solna plan for Gracin r upon iving our turnaround efforts opportunity to make a meaningul impact Opport
Slide 17: Enhance Value Proposition
Enhance Value Proposition Help customers achieve ownership to improve profitability Initiatives Shorten terms to reduce time to ownership and risk of transaction fatigue Calibrate early purchase option structures to support retention and incentivize ownership Implement more granular pricing to accou
Slide 18: Optimize Key Retail Partner Relationships
Optimize Key Retail Partner Relationships Deliver improved service and profitability Initiatives + Re-design program to formally offer multiple relationship options with varying service levels Continue to negotiate exclusivity arrangements with critical retail partners + National accounts is a huge
Slide 19: Focus on Growth-Enabling Capabilities
Focus on Growth-Enabling Capabilities Centralized account management Ensures consistent process execution & creates path for rapidly improving efficacy of account management Enables in-store staff to focus on selling and driving volume; similar to retail partners’ selling culture More dynamically ma
Slide 20: Enhance Decision Engine and Risk Analytics
PILLAR #2: GROW ANow Enhance Decision Engine and Risk Analytics Reduce losses and increase ownership Reduced losses Systematic learnings Improved decision Customer experience Key benefits Recent enhancements Consistent risk assessment policies and 8 all Acceptance Now locations (and eventually brick
Slide 21: Leverage Technology Investments
PILLAR #3: EMBRACE TECHNOLOGY & CHANNEL EXPANSION Leverage Technology Investments brand and brick channel E-commerce Establishes foundation for 9 Mobile apps le mobile tic lick-to-ps Data L i ii is the next 12 months landscape Eniencesdan ' j Cloud adoption ity, seal y oworker 9 empowerment - Leads
Slide 22: Build Digital Capabilities to Support Omni-Channel Platform
PILLAR #3: EMBRACE TECHNOLOGY & CHANNEL EXPANSION Build Digital Capabilities to Support Omni-Channel Platform Digitally-enabled brick-and: rtar and t direct-t RTO + Cloud-based POS and account management + E-commerce and mobile apps launching in 2017 in 2017-18 will ible d- id RTO ti ti yti id that
Slide 23: Expand to New Channels, Customers and Products
PILLAR #3: EMBRACE TECHNOLOGY & CHANNEL EXPANSION Expand to New Channels, Customers and Products RAC has the assets to leverage and technology strategies underway for a winning omni-channel offering Open omni-channel opportunites for 7 r the Fr proposition to a broader group of customers Opportuniti
Slide 24: Overview
Overview Rent-A-Center strategic roadmap Best-in-class leadership and governance
Slide 25: RAC's Value Proposition Delivers Customer Satisfaction and Ownership
RAC’s Value Proposition Delivers Customer Satisfaction and Ownership Mission To replace credit with TRUST We see a fairer world where more people have more opportunities to pursue their dreams for a better life Value Proposit Access Affordability Flexibility immediacy Safety Purpose To believe in an
Slide 26: Segment Overview — Core U.S.
Segment Overview — Core U.S. A market-leading platform that provides flexibility and buying power to credit-challenged customers Segment overview Company-owned stores in the U.S., Canada and Puerto Rico lease household durable goods on a RTO basis Largest operating segment, comprising ~70% of consol
Slide 27: Segment Overview — Acceptance Now
Segment Overview — Acceptance Now ANow is a proven concept that saves the sale for retailers and presents a large market share opportunity Segment overview Provides on-site Rent-to-Own options at third-party retail partner locations ‘Now has historically demonstrated a strong gro trajectory, and the
Slide 28: RAC Has Two Strong Platforms Providing an Exceptional Value Proposition
RAC Has Two Strong Platforms Providing an Exceptional Value Proposition to Customers and Retailers @) © AcceptanceNOW/ C1] No credit needed Ci) ~$565k per location in annual revenue (2) Serves nearly everyone (2) 6-8x productivity vs. all competitors (3] Never goes on credit report (3) Low capital i
Slide 29: Overview
Overview Rent-A-Center strategic roadmap Rent-A-Center today
Slide 30: Rent-A-Center Has the Right Board and Governance Structure
Rent-A-Center Has the Right Board and Governance Structure In Place to Drive Long-term Value Creation for All Stockholde + Rent-A-Center’s Board is diverse, experienced and committed to acting in the best interests of the Company and all stockholders - The majority of Board members are independent a
Slide 31: RAC's Nominees Offer a Diverse Mix of Skills and Expertise
RAC’s Nominees Offer a Diverse Mix of Skills and Expertise and are Best Positioned to Oversee Continued Changes at RAC Chairman and CEO pespenaent Independent Dire Director rae ack Compensation } Committee Chair Committee Chair + Founder of the Company and CEO since + Managing Director . (O of Radio
Slide 32: RAC's Continuing Directors Consist of Independent and Highly Qualified Individuals
RAC’s Continuing Directors Consist of Independent and Highly Qualified Individuals with Skills that Support RAC’s Strategy i Steven Pepper Lead Director Rent-A-Center Director since May 2013 ~ Chair of the Finance Committee zs 2 z 3 g 8 ~ President of “ sna Africa ne lay Serve rr Of equity groups re
Slide 33: Corporate Governance Practices In-line With Peers and Broader Market
Corporate Governance Practices In-line With Peers and Broader Market Overall Stockholder QualityScore Board Structure Compensation Rights Audit RAC 3 5 1 5 1 ISS Peers 4 3 4 5 2 Company Peers 3 3 4 o 2 S&P 500 5 5 5 5 2 1 = Lowest governance risk (e.g. best) 10 = Highest governance risk (e.g. worst)
Slide 34: Clear Alignment of Compensation and Stock Performance
Clear Alignment of Compensation and Stock Performance RAC adheres to many ISS compensation “best practices” - Disclosure of full information on performance measures used in the Company's long-term incentive plan Minimum twelve month vesting period for the equity incentive plan No “golden parachute”
Slide 35: Board Taking Decisive Actions to Drive Value for All Stockholders
Board Taking Decisive Actions to Drive Value for All Stockholders + Rent-A-Center has the right Board, and the right strategy in place to aggressively pursue value- maximizing strategies for all stockholders The Rent-A-Center Board and management have taken, and will continue to take, decisive and i
Slide 36: Unlike many other retailers today, the challenges RAC faces are well understood
Unlike many other retailers today, the challenges RAC faces are well understood and largely correctable by our own actions. Several pillars of our strategic plan represent a return to what has made us a strong franchise historically. The Board helped management create the plan and is already oversee
Slide 37: Slide 37
Slide 38: Implementing a New Plan to Improve Operations and Drive Stockholder Value
Rent-A-Center Implementing a New Plan to Improve Operations and (e Drive Stockholder Value CG Strategic Plan Positions Rent-A-Center for Restored Growth, Improved Profitability and Value Creation for All Stockholders ‘Strengthen the Core U.S. Business ‘Optimizing inventory mix to expand "Better/Best
Slide 39: Rent-A-Center
Rent-A-Center Implementing a New Plan to Improve Operations and Drive Stockholder Value Forward-Looking Statements 1° “wil” “expect, “intend,” “could,” “estimate, “should,” “anticipat M: 0 He include, but a Strength of the 6 pending factors affect ailable to the Cor difcuties nts; Ou the in attract