Upbound Q2 Earnings Meet Estimates, FY26 Revenue Outlook Down

During the quarter, Rent-A-Center expanded its customer services by launching Amazon package pickup and return services at 1,500 stores nationwide, while Brigit entered into a partnership with Experian to enhance its financial wellness platform. However, citing softer consumer demand, management narrowed its fiscal 2026 revenue guidance while reaffirming the adjusted EBITDA and earnings per share outlook.

UPBD Delivers Higher Profitability

Operating profit increased to $54.3 million from $50.7 million in the year-ago quarter, while the operating margin expanded 30 basis points to 4.7%. Net earnings rose 39.4% year over year to $21.6 million, lifting the net profit margin to 1.9% from 1.3%.

Adjusted EBITDA declined 4.6% year over year to $127 million, with the adjusted EBITDA margin contracting 60 basis points to 10.9%. Earnings per share improved to 37 cents from 26 cents in the prior-year quarter.

Upbound’s Brigit Extends Strong Growth Momentum

Brigit continued to drive Upbound’s digital expansion with strong subscriber growth and higher monetization. Segment revenues increased 37.1% year over year to $71.1 million and topped the Zacks Consensus Estimate of $65 million. Paying subscribers climbed 30.2% year over year to 1.72 million, while average monthly revenue per user (ARPU) rose 6.3% to $14.30, supported by greater adoption of Brigit’s Premium subscription tier, stronger marketplace engagement and higher expedited transfer revenues. However, the net advance loss rate increased 100 basis points to 3.6%.

The segment remained profitable despite higher credit costs. Brigit generated net earnings of $7.5 million, representing a 10.6% net profit margin. Adjusted EBITDA totaled $11.8 million, with an adjusted EBITDA margin of 16.6%.

UPBD’s Acima Improves Credit Quality & Margins

Acima delivered resilient profitability despite softer demand and continued underwriting discipline. Segment revenues declined 2.5% year over year to $603.5 million, while gross merchandise volume decreased 10.7% to $466.2 million. The Zacks Consensus Estimate for the Acima segment’s revenues was pegged at $594 million for the quarter. 

Acima's lease charge-off rate declined 50 basis points year over year to 8.8%. The segment generated net earnings of $73.4 million, down 10.4% year over year. The net profit margin declined 100 basis points year over year to 12.2%. Adjusted EBITDA increased 5.1% year over year to $98 million, with the adjusted EBITDA margin expanding 117 basis points to 16.2%.

Rent-A-Center Extends Positive Same-Store Sales Momentum

Rent-A-Center continued to post positive comparable sales despite modest revenue pressure. Company-owned same-store sales increased 1.6% year over year, while average portfolio value per store rose 4% to approximately $81,000. Segment revenues edged down 0.2% year over year to $466.4 million. The Zacks Consensus Estimate for the Rent-A-Center segment’s revenues was pegged at $464 million for the quarter.

Profitability moderated from the prior-year period. Net earnings declined 13.2% year over year to $54.7 million, while adjusted EBITDA decreased 7.6% to $63.2 million. Lease charge-offs for company-owned stores increased 30 basis points year over year to 5%.

Mexico Business Sustains Strong Growth

The Mexico segment continued to deliver strong growth, with revenues increasing 14.4% year over year to $22.4 million and beating the consensus estimate of $20.2 million. Adjusted EBITDA was $0.4 million in the second quarter.

UPBD Highlights Cash Flow & Balance Sheet Progress

The company ended the second quarter of 2026 with cash and cash equivalents of $105.3 million compared with $106.8 million in the year-ago quarter. Net debt was $1.33 billion at the end of the second quarter.

Net cash provided by operating activities totaled $123.3 million in the second quarter compared with $26.1 million in the prior-year period. Free cash flow improved significantly to $84 million. Capital expenditures were $15.5 million, while dividend payments totaled $22.9 million.

Management highlighted continued deleveraging and robust liquidity. Liquidity stood at approximately $487 million at quarter-end, while the net leverage ratio improved to 2.6x from 2.9x at fiscal 2025-end, moving closer to the company's long-term target of 2x. UPBD also maintained its quarterly dividend at 39 cents per share, or $1.56 annualized, while continuing to prioritize debt reduction, investments in the business and shareholder returns.

Upbound Narrows 2026 Sales View, Sets Q3 Outlook

Upbound reaffirmed its fiscal 2026 adjusted EBITDA and earnings guidance while narrowing the revenue outlook to reflect softer consumer demand. The company now expects fiscal 2026 revenues of $4.70-$4.85 billion compared with its prior outlook of $4.70-$4.95 billion. It continues to expect adjusted EBITDA of $500-$535 million and adjusted earnings per share of $4.00-$4.35.

For the third quarter of fiscal 2026, management projects revenues to be in the range of $1.05-$1.15 billion. Adjusted EBITDA is expected in the range of $105-$115 million, while adjusted earnings per share are anticipated between 85 cents and 95 cents.

Management said it remains focused on reinforcing underwriting discipline while investing in artificial intelligence, shared data platforms and a more connected, personalized customer experience to improve operating efficiency and support long-term profitable growth. The company reiterated its capital allocation priorities of investing in the business, strengthening the balance sheet and returning capital to shareholders while maintaining financial flexibility.

UPBD Stock Past Three-Month Performance

Image Source: Zacks Investment Research

Shares of this Zacks Rank #3 (Hold) company have risen 11.5% over the past three months mostly in line with the industry’s growth.

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