Upbound Group, Inc. (NASDAQ:UPBD) Q2 2023 Earnings Call Transcript

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So trade-down to help a little bit. But basically, at this point, we’re happy with the progress we’ve made. We just have to continue to work on the underwriting, and I think we can get it back to where it was next year. Just call it, 4 instead of 4.5.

Fahmi Karam: And maybe I’ll just add to that real quickly, Brad. We talked about the health of the consumer and they’ve been very resilient. They’ve had to adjust, but they’re still under a lot of pressure from inflation. Inflation has cooled a little bit over the last couple of months. But if you think about it compared to where we were two years or three years ago, it’s still a multiple of what it was. So it is definitely a balanced approach that we have to take between the underwriting and maintaining the portfolio, especially in this kind of macro backdrop where the consumer is still under pressure from inflation.

Bradley Thomas: That’s really helpful. Thanks so much.

Mitchell Fadel: Thanks.

Operator: Thank you. [Operator Instructions] And I show our next question comes from the line of Alex Fuhrman from Craig-Hallum Capital Group. Please go ahead.

Alex Fuhrman: Hey. Thanks guys for taking my question and congratulations on a strong quarter. I was hoping you could talk a little bit more about the Genesis partnership. It seems like with the big increase, the guidance for the year, sort of highlighting the value of the lease-to-own model. Can you talk a little bit about what you hope to achieve with the Genesis partnership and who you might be offering other types of credit to?

Mitchell Fadel: Sure. So yes, we are – Alex, as you said, early on, early stages of kind of working on the product and launching it. And as I referenced earlier, it’s two-fold, right, a general-purpose credit card, where we leverage our past customers and our existing customers and offering them a chance at a traditional lending product using our customer history. And so that is an opportunity for them to get a small balance credit card. So I think that’s one way where we can further enhance our customers’ value proposition. And then on the retail side, if you think about where we focus our efforts today on the small and medium-sized business, a lot of those merchants do not have access to the second-look credit card providers.

And so having our own waterfall, if you will, between a second-look and the lease-to-own product, we think is a huge advantage for us to go into these merchants and I’ll talk about one integration and getting two products. So the feedback that we’ve gotten on the initial kind of pilot stores that we’re hopefully launching in the third quarter has been extremely positive in their ability to see the incremental sales that the two products together can achieve for them. As far as the guide goes for this year, there’s not any benefit to it. If anything, I would say there’s probably more expense as we get the project and some of the IT integration up and running in the third and fourth quarter.

Alex Fuhrman: Okay. That’s really helpful. Thank you very much.

Mitchell Fadel: Thanks, Alex.

Operator: Thank you. I’m showing no further questions in the queue. At this time, I would like to turn the call back to Mitch Fadel for closing remarks.

Mitchell Fadel: Thank you. Thank you, everyone, for joining us this morning. It’s always a pleasure to report our earnings to you. We are pretty excited about the progress we’ve made from our lowest level. So if you want to call it first quarter or last year in the fourth quarter, some trough levels when it comes to revenue or GMV growth or both, any of the growth metrics. So we’re certainly on the right trajectory there. The underwriting changes we’ve made in both segments, obviously, are working very well. We’ll continue to tweak them every day, but they’re working really well when you look at delinquencies and losses in either segment. So growth is in the right direction and the underwriting side. We understand it’s an uncertain market out there though, and our customer still faces a lot of headwinds. So we’ll continue to be prudent with the way we manage the business and look forward to reporting back to you next quarter. Thank you, everyone.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.

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