10-K: Upbound Group Navigates Growth, Acquisitions, and Macro Headwinds

Upbound Group reports increased revenues driven by the Brigit acquisition and Acima segment growth, despite a decline in Rent-A-Center, while managing significant legal accruals and macroeconomic challenges.

Summary

• Consolidated revenues increased by $374.5 million (8.7%) to $4,695.1 million for the year ended December 31, 2025, primarily due to the Brigit acquisition and Acima segment growth.
• Gross profit increased by $191.3 million (9.2%) to $2,271.7 million, but operating profit decreased by $68.3 million (23.4%) to $223.3 million.
• Net earnings decreased by $50.2 million (40.7%) to $73.2 million, with diluted EPS falling to $1.25 from $2.21 in the prior year.
• The Acima segment's revenues grew by $251.0 million, with Gross Merchandise Volume (GMV) increasing by 8.6%, driven by more third-party retailer locations and productivity.
• The Rent-A-Center segment experienced an $83.2 million (4.2%) decrease in revenues, with same-store sales declining by 2.2%.
• The newly acquired Brigit segment, integrated on January 31, 2025, contributed $206.0 million in revenues and $30.7 million in operating profit.
• Cash flow from operations significantly increased by $200.9 million to $305.6 million in 2025.
• Total indebtedness stood at approximately $1.6 billion as of December 31, 2025, with $237.6 million available under the ABL Credit Facility.
• Estimated legal accruals increased substantially to $72.0 million at December 31, 2025, up from $20.7 million in 2024, reflecting ongoing legal and regulatory matters.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed filing with significant concerns. While revenue growth from acquisitions and the Acima segment is positive, the substantial decline in operating and net profit, coupled with a sharp increase in legal accruals and ongoing macroeconomic headwinds, indicates considerable operational and regulatory challenges.

Positives

• Consolidated revenues increased by 8.7% to $4,695.1 million in 2025.
• Gross profit increased by 9.2% to $2,271.7 million in 2025.
• Acima segment revenues increased by $251.0 million, with Gross Merchandise Volume (GMV) up 8.6%.
• Acima's growth was driven by an increase in third-party retailer locations, higher productivity (more leases per retailer), and expanded direct-to-consumer offerings.
• The Brigit acquisition contributed $206.0 million in revenues and $30.7 million in operating profit in less than a full year.
• Mexico segment revenues increased by 0.8% and operating profit increased by 13.4%.
• Cash flow from operations increased significantly by $200.9 million to $305.6 million in 2025.
• The One Big Beautiful Bill Act (OBBB) is expected to have a favorable impact on cash taxes paid in the near term.
• The Term Loan Facility maturity was extended to August 19, 2032.
• Maintained effective internal control over financial reporting as of December 31, 2025.

Negatives

• Operating profit decreased by $68.3 million (23.4%) to $223.3 million in 2025.
• Net earnings decreased by $50.2 million (40.7%) to $73.2 million in 2025.
• Rent-A-Center segment revenues decreased by $83.2 million (4.2%), with same-store sales down 2.2%.
• Rent-A-Center operating profit decreased by $47.6 million (16.0%).
• Non-labor operating expenses increased by $138.3 million (17.0%), partly due to the Brigit acquisition and increased lease charge-off expense in Acima.
• Other gains and charges increased by $107.6 million, driven by Brigit acquisition costs and a significant increase in estimated legal accruals.
• The effective tax rate increased to 32.2% in 2025 from 30.5% in 2024, partly due to non-deductible expenses from the Brigit acquisition.
• Merchandise losses in Acima locations due to Lease Charge-Offs (LCOs) increased to 9.5% of revenues in 2025 from 9.4% in 2024.
• Brigit Net Advance Losses were approximately 3.0% of total cash advances originated.
• Estimated legal accruals significantly increased to $72.0 million at December 31, 2025, from $20.7 million in 2024.
• Cash used in investing activities increased significantly by $362.2 million to $403.7 million, primarily due to the Brigit acquisition and customer cash advance originations.

Risks

• The success of the business is dependent on macroeconomic and other factors affecting consumer demand, spending, and payment behaviors that are outside of control, including inflation, interest rates, and potential recession.
• Disruptions in the lease-to-own supply chain and distribution, or reliance on third-party data vendors, could materially and adversely affect business operations and financial condition.
• Inability to successfully manage Rent-A-Center inventory to reflect customer demand and changing consumer preferences could negatively impact revenue and profitability.
• Allegations or actual product safety and quality control issues, including product recalls, could harm reputation, divert resources, reduce sales, and increase costs.
• Failure to effectively implement and execute strategies for growth and transformation, including integrating new products/services and expanding data/technology capabilities, could materially and adversely affect prospects.
• Proprietary algorithms and customer decisioning tools are subject to unexpected changes in behavior caused by macroeconomic conditions, potentially leading to increased merchandise write-offs or customer losses.
• The industries in which the company operates are highly competitive, which could impede the ability to maintain and grow consumer transaction volumes and pricing.
• Failure to effectively manage operating costs (merchandise, labor, advertising, charge-offs) could have a material adverse effect on profitability.
• The Acima third-party retailer business and virtual locations face unique risks, including reliance on unaffiliated third-party retailers, increased regulatory focus, and potential for fraud.
• The integration and use of AI and similar technology in the business presents risks and challenges, including technical failures, rapid adoption by competitors, and evolving regulatory requirements.
• Operations depend on effective information management systems; failure of these systems or those of third-party partners could negatively impact business, financial condition, and results of operations.
• Failure to protect the integrity and security of customer, employee, supplier, third-party retailer, bank partner, or other third-party information could incur significant liability and damage reputation.
• The Brigit segment's EWA advances expose it to repayment risk from customers, and insufficient decisioning criteria or inaccurate data could adversely affect financial condition.
• Termination of Brigit's key banking relationships could adversely affect its business if new partners cannot be secured or client portfolios migrated in a timely manner.
• The businesses are heavily regulated and subject to active enforcement, including legal and regulatory proceedings that may result in damages, penalties, or significant monetary obligations and restrictions.
• The use of arbitration agreements may not prevent costly litigation or mass arbitrations due to judicial, regulatory, or legislative actions.
• Federal and state regulatory authorities are increasingly focused on the lease-to-own and EWA industries, and any negative changes in laws or regulations could expose the company to significant additional costs or compliance burdens.
• Laws and regulations regarding information security and data collection, use, and privacy are increasingly rigorous and subject to change, causing significant compliance costs and potential adverse impacts.
• Improper conduct by employees, agents, or business partners, including third-party retailers, could impair reputation, ability to do business, or operating results.
• Products and services may be negatively characterized by consumer advocacy groups, the media, and government officials, potentially decreasing demand.
• Inability to protect intellectual property or allegations of infringement could result in a loss of competitive advantage, diversion of resources, and material adverse effects.
• Brigit has ongoing compliance obligations under a November 2023 FTC settlement, noncompliance with which could result in material regulatory enforcement.
• The Brigit segment is subject to extensive regulation and oversight in a variety of areas under federal, state, and local laws, and may face challenges in obtaining or maintaining necessary licenses.
• Significant indebtedness (approximately $1.6 billion) could make debt repayment difficult, reduce funds for other purposes, and increase vulnerability to adverse economic conditions.
• The company is a holding company dependent on the operations and funds of its subsidiaries, whose ability to pay dividends or make other payments is subject to applicable laws and debt restrictions.
• The stock price is volatile and can be significantly affected by factors such as market expectations, quarterly results, regulatory changes, and legal proceedings.
• Inability to realize the anticipated benefits of the Brigit acquisition, including synergies, and substantial expenses related to the acquisition, could have a material adverse effect.
• Inability to attract and retain key personnel hired as a result of the Brigit acquisition could lead to disruptions in operations and loss of customers.

Future Outlook

The company expects the One Big Beautiful Bill Act (OBBB) to favorably impact cash taxes in the near term. It anticipates continued growth in Brigit's Earned Wage Access (EWA) and credit builder products, aiming to expand Brigit's overall product portfolio. For the Rent-A-Center segment, the strategy involves accelerating the shift to e-commerce, enhancing the omni-channel customer experience, and expanding product categories. However, the full extent of the impact from volatile macroeconomic trends on future periods remains uncertain.

Management Comments

• "Our strategy is focused on achieving our mission to elevate financial opportunity for all and growing our business through emphasis on the following key initiatives: Grow penetration with current Acima third-party retailers... At Brigit, continue to grow Brigits EWA, credit builder and other existing products... At Rent-A-Center, accelerate the shift to e-commerce, improve the fully integrated omni-channel customer experience and expand product categories..."
• "As we pursue our strategy, we have taken, and may in the future take, advantage of joint venture, partnership, or merger and acquisition opportunities from time to time that advance our key initiatives and elevate the financial mobility of underserved consumers."
• "We believe our executive management team's extensive industry and company experience will allow us to effectively execute our strategies."
• "We believe that by leveraging our advertising efforts to highlight the benefits of accessible and inclusive financial solutions, we will continue to educate our customers and potential customers about the ways we address the evolving needs and aspirations of underserved consumers."
• "We believe our coworkers are one of the primary keys to successfully operating our business and achieving our strategic objectives."
• "We believe cash flow generated from operations and availability under our ABL Credit Facility will be sufficient to fund our operations during the next twelve months."

Industry Context

StockSavvy.ai notes that Upbound Group operates in a dynamic and competitive landscape, serving underserved consumers with evolving financial needs. The acquisition of Brigit positions the company to capitalize on the growing demand for financial health technology solutions, including Earned Wage Access (EWA) and credit building products, which are seeing increased regulatory scrutiny but also significant market opportunity among subprime consumers (approximately 26% of the U.S. population with credit scores below 650). The continued shift to e-commerce in the lease-to-own sector, as evidenced by Rent-A-Center's increasing e-commerce revenue, aligns with broader retail trends, while the company's reliance on third-party retailers for its Acima segment highlights a common strategy for market penetration in the virtual lease-to-own space. The industry faces intense competition from traditional and online competitors, as well as fintech companies offering alternative financing options like Buy-Now-Pay-Later.

Comparison to Industry Standards

• Upbound Group's focus on the subprime consumer market (approximately 26% of the U.S. population with credit scores below 650 and 30% with incomes below $50,000) positions it in a niche that traditional lenders often overlook, similar to other specialized fintechs like Chime or Dave in the EWA space, or lease-to-own competitors like Aaron's.
• The 8.6% growth in Acima's Gross Merchandise Volume (GMV) indicates strong performance in the virtual lease-to-own sector, potentially outpacing some traditional brick-and-mortar retail growth, but specific comparable company GMV figures are not provided in the filing.
• Rent-A-Center's 2.2% decline in same-store sales suggests challenges in its traditional retail model, which contrasts with the growth seen in its e-commerce channel (27% of lease-to-own revenues), reflecting a broader industry trend of shifting consumer preferences towards online shopping, similar to how traditional retailers like Best Buy or Walmart have adapted their digital presence.
• Brigit's entry into the financial health technology space with EWA and credit builder products places it in direct competition with established fintech players like Earnin, PayActiv, or Credit Karma, which also target financial wellness for underserved populations.
• The increase in legal accruals to $72.0 million highlights the significant regulatory and litigation risks inherent in the subprime consumer finance and lease-to-own industries, a common challenge for companies operating in this space, such as past regulatory actions against payday lenders or other alternative financial service providers.

Management Changes

Corporate Governance

Legal Proceedings

• **Multistate and District of Columbia Attorneys General Investigations**: Ongoing investigation by a coalition of 43 state Attorneys General and a separate demand from the District of Columbia into Acima's business practices. A non-binding agreement in principle was reached with the District of Columbia in September 2025, and a similar agreement is nearing with the Multistate. Potential settlement includes monetary relief, reporting, and injunctive relief regarding Acima's business.
• **New York Attorney General Litigation**: Lawsuit filed by the NYAG against Acima in August 2024, alleging violations of consumer financial protection laws, seeking injunctive relief, unspecified monetary relief, and civil penalties. Acima has filed a motion to dismiss.
• **McBurnie Litigation Pending Settlement**: Certified class action lawsuit against the company's former Acceptance Now business in California, alleging unreasonable processing and expedited fees. An agreement in principle to settle for a cash payment of $14.0 million was reached in late July 2025, fully reserved as of December 31, 2025, but remains subject to final court approval.
• **FlexShopper Settlement**: Patent infringement lawsuit filed by FlexShopper, Inc. against Upbound Group, Inc. and its Acima subsidiaries in September 2024, alleging infringement related to Acima's e-commerce technology. The lawsuit was settled confidentially in December 2025 with a cash payment, without admission of liability.
• **Brigit FTC Settlement**: In November 2023, Brigit entered into a Stipulated Order for Permanent Injunction, Monetary Judgment, and Other Relief with the FTC, settling allegations related to subscription practices and EWA product marketing. The $18 million monetary penalty has been satisfied, but ongoing injunctive requirements continue for up to 15 years.
• **Unclaimed Property Audits**: The company is subject to routine unclaimed property audits by states, with potential for assessments including interest and penalties for failure to timely report and remit.

Stakeholder Impact

• **Shareholders**: Potential for reduced earnings and stock price volatility due to declining operating profit, increased legal accruals, and macroeconomic headwinds. Dividends are subject to Board discretion and debt restrictions.
• **Employees**: Management changes at the executive level, ongoing training and competitive compensation efforts. The Brigit acquisition may impact employees through integration challenges and retention efforts.
• **Customers**: Continued access to lease-to-own products and financial health solutions (EWA, credit builder) for underserved consumers. Potential impact from regulatory changes on product offerings or pricing.
• **Third-Party Retailers (Acima)**: Growth in Acima's GMV and retailer locations indicates positive impact, but increased competition and regulatory scrutiny on virtual lease-to-own could pose challenges.
• **Franchisees (Rent-A-Center)**: Subject to operational standards and potential disputes, but also benefit from brand licensing and merchandise sales.
• **Creditors**: Significant indebtedness ($1.6 billion) and restrictive covenants in debt agreements pose risks, but cash flow from operations is expected to be sufficient for debt service in the next 12 months.
• **Regulatory Authorities**: Increased scrutiny and ongoing legal proceedings (FTC, NYAG, Multistate AGs) indicate a heightened focus on compliance and consumer protection.

Next Steps

• Grow penetration with current Acima third-party retailers and add new national and regional retailers.
• Expand Acima's direct-to-consumer channels.
• At Brigit, continue to grow Earned Wage Access (EWA), credit builder, and other existing products, and increase the product portfolio.
• At Rent-A-Center, accelerate the shift to e-commerce, improve the omni-channel customer experience, and expand product categories.
• Leverage data analytics capabilities to attract new customers, approve more customers, and mitigate risk.
• Execute on market opportunities and enhance competitive position across lease-to-own solutions, and implement complementary products and services.
• Upgrade and integrate technology platforms for a simplified consumer experience, third-party retailer integration, and coworker efficiency.
• Actively discuss potential resolution of Multistate and District of Columbia Attorneys General matters with the objective of finalizing settlement agreements in the near term.
• Continue to vigorously defend against the New York Attorney General lawsuit.
• Evaluate and modify estimated legal accruals in future periods based on developments.
• Assess the impact of new accounting pronouncements (ASU 2024-03, ASU 2025-01, ASU 2025-05, ASU 2025-06, ASU 2025-11) on financial statements and disclosures.

Key Dates

Recommendation

Upbound Group presents a mixed financial picture. While the Brigit acquisition and Acima segment show promising revenue growth and strategic expansion into financial health technology, the significant decline in overall operating and net profit, coupled with a substantial increase in legal accruals and ongoing regulatory challenges, introduces considerable uncertainty. The company is navigating a complex macroeconomic environment and integrating a major acquisition, which carries inherent risks. A "hold" recommendation allows investors to observe how the company manages these challenges, integrates Brigit, and resolves its legal matters, while benefiting from potential future growth in its strategic segments.

Keywords

Lease-to-own, Fintech, Financial health technology, Earned Wage Access (EWA), Credit builder, Acima, Rent-A-Center, Brigit, SEC filing, 10-K, Financial services, Consumer finance, Retail, Corporate governance, Risk management, Acquisition, Debt, Regulatory compliance, Cybersecurity, Macroeconomic conditions