UPBOUND GROUP INC

Previous wording

This Quarterly Report on Form 10-Q includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could,” “may,” “aims,” “intends,” or “projects.” These forward-looking statements, include, without limitation, those relating to the impact of ongoing challenging macroeconomic conditions on our business, operations, financial performance and prospects, the future business prospects and financial performance of our Company as a whole and of our segments, our growth strategies, our expectations, plans and strategy relating to our capital structure and capital allocation, including any share repurchases under our share repurchase program, and other statements that are not historical facts.

Current wording

This Quarterly Report on Form 10-Q includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could,” “may,” “aims,” “intends,” or “projects.” These forward-looking statements, include, without limitation, those relating to the impact of ongoing challenging macroeconomic conditions on our business, operations, financial performance and prospects, the future business prospects and financial performance of our Company as a whole and of our segments, our growth strategies, our expectations, plans and strategy relating to our capital structure and capital allocation, including any share repurchases under our share repurchase program, the potential impact of the matters discussed in Note 12, and other statements that are not historical facts.

Previous wording

•our ability to achieve the benefits expected from our integrated virtual and staffed retail partner offering and to successfully grow this business segment;

Current wording

•our ability to achieve the benefits expected from our integrated virtual and staffed third-party retailer offering and to successfully grow this business segment;

Previous wording

•changes in estimates relating to self-insurance liabilities and income tax and litigation reserves, including in connection with the regulatory and litigation matters described in Note 11 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q;

Current wording

•litigation or administrative proceedings to which we are or may be a party to from time to time and changes in estimates relating to litigation reserves, including in each case in connection with the regulatory and litigation matters described in Note 12 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q;

Previous wording

•impacts from the enforcement of existing laws and regulations and the enactment of new laws and regulations adversely affecting our business, including in connection with the regulatory matters described in Note 11 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and any legislative or other regulatory enforcement efforts that seek to re-characterize store-based or virtual lease-to-own transactions as credit sales and to apply consumer credit laws and regulations to our business;

Current wording

•our compliance with applicable statutes and regulations governing our businesses, impacts from the enforcement of existing laws and regulations and the enactment of new laws and regulations adversely affecting our business, including in connection with the regulatory matters described in Note 12 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and any legislative or other regulatory enforcement efforts that seek to re-characterize store-based or virtual lease-to-own transactions as credit sales and to apply consumer credit laws and regulations to our business;

Previous wording

•our ability to maintain an effective system of internal controls;

Current wording

•our ability to maintain an effective system of internal controls; and

Previous wording

•Grow penetration with current Acima retail partners and build on our strength with small to medium size businesses while also adding new national and regional retail partners to our platform and expanding our direct-to-consumer channels;

Current wording

•Grow penetration with current Acima third-party retailers and build on our strength with small to medium size businesses while also adding new national and regional third-party retailers to our platform and expanding our direct-to-consumer channels;

Previous wording

•Upgrade and integrate technology platforms to allow for a more simplified and seamless consumer experience, retail partner and third-party waterfall integration and consumer transaction process and coworker efficiency;

Current wording

•Upgrade and integrate technology platforms to allow for a more simplified and seamless consumer experience, third-party retailer and waterfall integration and consumer transaction process and coworker efficiency;

Previous wording

Dividend. On June 5, 2024, we announced that our board of directors approved a quarterly cash dividend of $0.37 per share for the third quarter of 2024. The dividend was paid on July 9, 2024 to our common stockholders of record as of the close of business on June 18, 2024.

Current wording

Dividend. On September 19, 2024, we announced that our board of directors approved a quarterly cash dividend of $0.37 per share for the fourth quarter of 2024. The dividend was paid on October 22, 2024 to our common stockholders of record as of the close of business on October 1, 2024.

Previous wording

Rent-A-Center E-commerce revenue. In recent years, e-commerce revenues increased as a percentage of total rentals and fees revenue in our Rent-A-Center segment. For the six months ended June 30, 2024 and 2023, e-commerce revenues represented approximately 26% of total lease-to-own revenues. Due to recent trends in consumer shopping behaviors and expectations, we believe e-commerce solutions are an important part of our lease-to-own offering. However, we are unable to quantify the extent to which e-commerce revenues are incremental compared to what our overall revenues would have been in the absence of those e-commerce transactions. In addition, the profitability of e-commerce transactions can be impacted by different merchandise loss factors compared to traditional store-based transactions in the Rent-A-Center segment. Therefore, we are unable to determine with certainty whether the continuation of this trend toward increased e-commerce transactions will have a significant impact to our financial statements in future periods or be favorable or unfavorable to our financial results.

Current wording

Rent-A-Center e-commerce revenue. In recent years, e-commerce revenues increased as a percentage of total rentals and fees revenue in our Rent-A-Center segment. For the nine months ended September 30, 2024 and 2023, e-commerce revenues represented approximately 26% of total lease-to-own revenues. Due to recent trends in consumer shopping behaviors and expectations, we believe e-commerce solutions are an important part of our lease-to-own offering. However, we are unable to quantify the extent to which e-commerce revenues are incremental compared to what our overall revenues would have been in the absence of those e-commerce transactions. In addition, the profitability of e-commerce transactions can be impacted by different merchandise loss factors compared to traditional store-based transactions in the Rent-A-Center segment. Therefore, we are unable to determine with certainty whether the continuation of this trend toward increased e-commerce transactions will have a significant impact to our financial statements in future periods or be favorable or unfavorable to our financial results.

Previous wording

The following discussion focuses on our results of operations and our liquidity and capital resources. You should read this discussion in conjunction with the condensed consolidated financial statements and notes thereto for the six months ended June 30, 2024 included in Part I, Item I of this Quarterly Report on Form 10-Q.

Current wording

The following discussion focuses on our results of operations and our liquidity and capital resources. You should read this discussion in conjunction with the condensed consolidated financial statements and notes thereto for the nine months ended September 30, 2024 included in Part I, Item I of this Quarterly Report on Form 10-Q.

Previous wording

Same Store Lease Portfolio Value: Represents the aggregate dollar value of the expected monthly rental income associated with current active lease agreements from our e‑commerce platform and Rent-A-Center stores that were operated by us for 13 months or more at the end of any given period. The Company excludes from the same store base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store base in the 30th full month following account transfer.

Current wording

Same Store Lease Portfolio Value: Represents the aggregate dollar value of the expected monthly rental income associated with current active lease agreements from our Rent-A-Center stores that were operated by us for 13 months or more at the end of any given period. The Company excludes from the same store base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store base in the 30th full month following account transfer.

Previous wording

The following briefly summarizes certain of our financial information for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

The following briefly summarizes certain of our financial information for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

During the first six months of 2024, consolidated revenues and gross profit increased by approximately $177.3 million and $48.5 million, respectively, primarily due to an increase in the Acima segment revenues described below. Operating profit increased by approximately $93.5 million, primarily due to a decrease in other gains and charges of $103.7 million in addition to the increase in gross profit noted above, partially offset by an increase in non-labor operating expenses of $39.9 million, general and administrative expenses of $12.2 million and operating labor of $5.9 million.

Current wording

During the first nine months of 2024, consolidated revenues and gross profit increased by approximately $267.0 million and $62.5 million, respectively, primarily due to an increase in the Acima segment revenues described below. Operating profit increased by approximately $105.5 million, primarily due to a decrease in other gains and charges of $104.5 million in addition to the increase in gross profit noted above, partially offset by an increase in non-labor operating expenses of $44.5 million, general and administrative expenses of $9.8 million and operating labor of $6.5 million.

Previous wording

The Acima segment revenues increased approximately $165.9 million for the six months ended June 30, 2024, due to increases in rentals and fees revenues and merchandise sales of $126.7 million and $39.2 million, respectively, resulting from higher GMV. Growth in GMV was primarily due to an increase in retail partner locations and productivity, which resulted in more leases per retail partner, and expanded direct-to-consumer offerings. Operating profit increased approximately $4.9 million for the six months ended June 30, 2024, primarily due to an increase in gross profit of $34.1 million, partially offset by an increase in non-labor operating expenses of approximately $32.7 million. See“Segment Performance” below for further discussion of Acima segment operating results for the six months ended June 30, 2024.

Current wording

The Acima segment revenues increased approximately $256.9 million for the nine months ended September 30, 2024, due to increases in rentals and fees revenues and merchandise sales of $193.9 million and $62.6 million, respectively, primarily resulting from higher GMV. Growth in GMV was primarily due to an increase in third-party retailer locations and productivity, which resulted in more leases per retailer, and expanded direct-to-consumer offerings. Operating profit increased approximately $10.8 million for the nine months ended September 30, 2024, primarily due to an increase in gross profit of $48.6 million and a decrease in other gains and charges of $8.3 million, partially offset by increases in non-labor operating expenses and operating labor costs of approximately $43.8 million and $2.0 million, respectively. See“Segment Performance” below for further discussion of Acima segment operating results for the nine months ended September 30, 2024.

Previous wording

Revenues in our Rent-A-Center segment increased approximately $9.5 million for the six months ended June 30, 2024 due to an increase in same store sales of 1.6% driven by an increase in rentals and fees revenues of $12.5 million, partially offset by a decrease in merchandise sales of $1.1 million. Operating profit decreased approximately $6.1 million for the six months ended June 30, 2024, primarily due to an increase in non-labor operating expenses and other gains and charges of $6.6 million and $6.5 million, respectively, partially offset by an increase in gross profit of approximately $10.2 million. See“Segment Performance” below for further discussion of Rent-A-Center segment operating results for the six months ended June 30, 2024.

Current wording

Revenues in our Rent-A-Center segment increased approximately $14.6 million for the nine months ended September 30, 2024 due to an increase in same store sales of 1.9% driven by an increase in rentals and fees revenues of $16.7 million, partially offset by a decrease in merchandise sales of $1.2 million. Operating profit decreased approximately $0.9 million for the nine months ended September 30, 2024, primarily due to an increase in operating labor and other gains and charges of $3.2 million and $7.0 million, respectively, partially offset by an increase in gross profit of approximately $9.7 million. See“Segment Performance” below for further discussion of Rent-A-Center segment operating results for the nine months ended September 30, 2024.

Previous wording

The Mexico segment revenues increased by 15.5% for the six months ended June 30, 2024, contributing to an increase in gross profit of 16.9%, or $4.3 million, primarily due to a 7.4% increase in same store sales driven by an increase in rentals and fees revenues of $5.1 million. Operating profit increased $1.0 million for the six months ended June 30, 2024, primarily due to the increase in gross profit described above, partially offset by an increase in general and administrative expenses and operating labor costs of approximately $1.6 million and $1.4 million, respectively. See“Segment Performance” below for further discussion of Mexico segment operating results for the six months ended June 30, 2024.

Current wording

The Mexico segment revenues increased by 8.9% for the nine months ended September 30, 2024, contributing to an increase in gross profit of 10.2%, or $4.0 million, primarily due to a 7.6% increase in same store sales driven by an increase in rentals and fees revenues of $4.6 million. Operating profit increased $0.7 million for the nine months ended September 30, 2024, primarily due to the increase in gross profit described above, partially offset by increases in general and administrative expenses and operating labor costs of approximately $2.1 million and $1.3 million, respectively. See“Segment Performance” below for further discussion of Mexico segment operating results for the nine months ended September 30, 2024.

Previous wording

Revenues for the Franchising segment decreased $3.7 million for the six months ended June 30, 2024, primarily due to a decrease in merchandise sales of $3.8 million. See“Segment Performance” below for further discussion of Franchising segment operating results for the six months ended June 30, 2024.

Current wording

Revenues for the Franchising segment decreased $9.4 million for the nine months ended September 30, 2024, primarily due to a decrease in merchandise sales of $9.6 million. See“Segment Performance” below for further discussion of Franchising segment operating results for the nine months ended September 30, 2024.

Previous wording

Cash flow from operations was $60.5 million for the six months ended June 30, 2024. As of June 30, 2024, we held $82.5 million of cash and cash equivalents and had outstanding indebtedness of $1.3 billion.

Current wording

Cash flow from operations was $166.7 million for the nine months ended September 30, 2024. As of September 30, 2024, we held $85.1 million of cash and cash equivalents and had outstanding indebtedness of $1.3 billion.

Previous wording

Revenue. Total revenues increased by $97.3 million, or 9.9%, to $1,076.5 million for the three months ended June 30, 2024, from $979.2 million for the three months ended June 30, 2023. This increase was primarily due to an increase of approximately $88.4 million in the Acima segment, as discussed further in the section “Segment Performance” below.

Current wording

Revenue. Total revenues increased by $89.8 million, or 9.2%, to $1,068.9 million for the three months ended September 30, 2024, from $979.1 million for the three months ended September 30, 2023. This increase was primarily due to an increase of approximately $91.0 million in the Acima segment, as discussed further in the section “Segment Performance” below.

Previous wording

Cost of Rentals and Fees. Cost of rentals and fees consists primarily of depreciation of rental merchandise. Cost of rentals and fees for the three months ended June 30, 2024 increased by $46.9 million, or 16.1%, to $338.6 million as compared to $291.7 million for the three months ended June 30, 2023. The increase was primarily attributable to an increase of approximately $42.6 million and $3.8 million in the Acima and Rent-A-Center segments, respectively, driven by an increase in rentals and fees revenues. Cost of rentals and fees expressed as a percentage of rentals and fees revenue was 38.2% for the three months ended June 30, 2024, as compared to 36.1% for the three months ended June 30, 2023.

Current wording

Cost of Rentals and Fees. Cost of rentals and fees consists primarily of depreciation of rental merchandise. Cost of rentals and fees for the three months ended September 30, 2024 increased by $45.6 million, or 15.4%, to $342.4 million as compared to $296.8 million for the three months ended September 30, 2023. The increase was primarily attributable to an increase of approximately $43.4 million and $2.4 million in the Acima and Rent-A-Center segments, respectively, driven by an increase in rentals and fees revenues. Cost of rentals and fees expressed as a percentage of rentals and fees revenue was 39.0% for the three months ended September 30, 2024, as compared to 36.8% for the three months ended September 30, 2023.

Previous wording

Cost of Merchandise Sold. Cost of merchandise sold represents the net book value of rental merchandise at time of sale. Cost of merchandise sold increased by $26.7 million, or 17.5%, to $179.4 million for the three months ended June 30, 2024, from $152.7 million for the three months ended June 30, 2023, primarily attributable to an increase of $25.9 million in the Acima segment, driven primarily by higher merchandise sales. The gross margin percent of merchandise sales decreased to (22.7)% for the three months ended June 30, 2024, from (22.4)% for the three months ended June 30, 2023.

Current wording

Cost of Merchandise Sold. Cost of merchandise sold represents the net book value of rental merchandise at time of sale. Cost of merchandise sold increased by $36.0 million, or 23.0%, to $191.9 million for the three months ended September 30, 2024, from $155.9 million for the three months ended September 30, 2023, primarily attributable to an increase of $33.1 million in the

Previous wording

Operating Labor. Operating labor includes all salaries and wages paid to operational employees and district managers, together with payroll taxes and benefits. Operating labor increased by $4.3 million, or 2.8%, to $156.2 million for the three months ended June 30, 2024, as compared to $151.9 million for the three months ended June 30, 2023, primarily due to an increase of $2.6 million and $1.2 million in the Rent-A-Center and Acima segments, respectively. Operating labor expressed as a percentage of total revenue excluding franchise merchandise sales and royalty income and fees was 14.9% for the three months ended June 30, 2024, as compared to 16.0% for the three months ended June 30, 2023.

Current wording

Operating Labor. Operating labor includes all salaries and wages paid to operational employees and district managers, together with payroll taxes and benefits. Operating labor increased by $0.5 million, or 0.4%, to $152.6 million for the three months ended September 30, 2024, as compared to $152.1 million for the three months ended September 30, 2023, primarily due to an increase of $0.7 million in the Acima segment. Operating labor expressed as a percentage of total revenue excluding franchise merchandise sales and royalty income and fees was 14.6% for the three months ended September 30, 2024, as compared to 16.0% for the three months ended September 30, 2023.

Previous wording

Non-Labor Operating Expenses. Non-labor operating expenses include LCOs, occupancy, delivery, advertising, selling, insurance, travel and other operating expenses. Non-labor operating expenses increased by $22.8 million, or 12.6%, to $203.9 million for the three months ended June 30, 2024, as compared to $181.1 million for the three months ended June 30, 2023, due to an increase of $15.0 million in the Acima segment, primarily attributable to an increase of $12.7 million in merchandise losses. Non-labor operating expenses expressed as a percentage of total revenue excluding franchise merchandise sales and royalty income and fees was 19.4% for the three months ended June 30, 2024, compared to 19.1% for the three months ended June 30, 2023.

Current wording

Non-Labor Operating Expenses. Non-labor operating expenses include LCOs, occupancy, delivery, advertising, selling, insurance, travel and other operating expenses. Non-labor operating expenses increased by $4.5 million, or 2.4%, to $196.0 million for the three months ended September 30, 2024, as compared to $191.5 million for the three months ended September 30, 2023, due to an increase of $11.1 million in the Acima segment, primarily attributable to an increase of $9.4 million in LCOs and other merchandise losses, partially offset by a decrease of $5.9 million in the Rent-A-Center segment, primarily attributable to the net gain on refranchise sale of approximately $3.1 million. Non-labor operating expenses expressed as a percentage of total revenue excluding franchise merchandise sales and royalty income and fees was 18.8% for the three months ended September 30, 2024, compared to 20.2% for the three months ended September 30, 2023.

Previous wording

General and Administrative Expenses. General and administrative expenses include all corporate overhead expenses related to our headquarters such as salaries, payroll taxes and benefits, stock-based compensation, occupancy, administrative and other expenses, as well as salaries and labor costs for our regional directors, divisional vice presidents and executive vice presidents. General and administrative expenses increased by $4.8 million, or 9.9%, to $53.6 million for the three months ended June 30, 2024, as compared to $48.8 million for the three months ended June 30, 2023, primarily due to increases in overhead labor costs. General and administrative expenses expressed as a percentage of total revenue was 5.0% for both the three months ended June 30, 2024 and 2023.

Current wording

General and Administrative Expenses. General and administrative expenses include all corporate overhead expenses related to our headquarters such as salaries, payroll taxes and benefits, stock-based compensation, occupancy, administrative and other expenses, as well as salaries and labor costs for our regional directors, divisional vice presidents and executive vice presidents. General and administrative expenses decreased by $2.4 million, or 4.5%, to $51.5 million for the three months ended September 30, 2024, as compared to $53.9 million for the three months ended September 30, 2023, primarily due to decreases in overhead labor costs. General and administrative expenses expressed as a percentage of total revenue was 4.8% for the three months ended September 30, 2024, compared to 5.5% for the three months ended September 30, 2023.

Previous wording

Other Gains and Charges. Other gains and charges decreased by $2.9 million, or 10.3%, to $24.9 million for the three months ended June 30, 2024, as compared to $27.8 million for the three months ended June 30, 2023. The decrease in other gains and charges was driven primarily by a decrease of $9.3 million in stock compensation expense related to the vesting of a portion of the equity consideration issued in connection with the acquisition of Acima Holdings for the three months ended June 30, 2024, as compared to the prior year period. The decrease in other gains and charges was also due to a decrease of $3.3 million in depreciation and amortization of acquired software and intangible assets, partially offset by $5.4 million in lease impairment charges and fixed asset disposal, $1.7 million in accelerated stock compensation expense related to our letter agreement with the Company's Chief Executive Officer and $1.5 million in accelerated software depreciation for the three months ended June 30, 2024.

Current wording

Other Gains and Charges. Other gains and charges decreased by $1.0 million, or 3.1%, to $28.1 million for the three months ended September 30, 2024, as compared to $29.1 million for the three months ended September 30, 2023. The decrease in other gains and charges was driven primarily by a decrease of $9.4 million in stock compensation expense related to the vesting of a portion of the equity consideration issued in connection with the acquisition of Acima Holdings for the three months ended September 30, 2024, as compared to the prior year period. The decrease in other gains and charges was also due to a decrease of $3.3 million in depreciation and amortization of acquired software and intangible assets, decrease of $4.6 million in accelerated software depreciation partially offset by an $11.1 million increase in legal settlement reserve and legal expenses, $1.7 million in accelerated stock compensation expense related to our letter agreement with the Company’s Chief Executive Officer for the three months ended September 30, 2024 and $3.1 million in interest income earned on tax refunds related to prior year returns received in the third quarter of 2023.

Previous wording

Operating Profit. Operating profit decreased by $3.3 million, or 4.0%, to $80.7 million for the three months ended June 30, 2024, as compared to $84.0 million for the three months ended June 30, 2023, primarily due to the increase in non-labor operating expenses, partially offset by an increase in gross profit as described above. Operating profit expressed as a percentage of total revenue was 7.5% for the three months ended June 30, 2024, compared to 8.6% for the three months ended June 30, 2023.

Current wording

Operating Profit. Operating profit increased by $12.0 million, or 20.7%, to $70.1 million for the three months ended September 30, 2024, as compared to $58.1 million for the three months ended September 30, 2023, primarily due to an increase in gross profit and a decrease in general and administrative expenses, partially offset by an increase in non-labor operating expenses, as described above. Operating profit expressed as a percentage of total revenue was 6.6% for the three months ended September 30, 2024, compared to 5.9% for the three months ended September 30, 2023.

Previous wording

Income Tax Expense. Income tax expense decreased by $89.9 million to $12.5 million for the three months ended June 30, 2024, as compared to $102.4 million for the three months ended June 30, 2023, primarily due to a lower effective tax rate for the three months ended June 30, 2024, attributable to a lower tax impact of stock compensation expense related to stock consideration issued to the former owners of Acima Holdings, compared to the prior year period, as well as a favorable adjustment related to foreign deferred tax assets. Income tax expense further decreased as a result of lower earnings before income taxes for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

Income Tax Expense. Income tax expense decreased by $13.8 million to $13.3 million for the three months ended September 30, 2024, as compared to $27.1 million for the three months ended September 30, 2023, primarily due to a lower effective tax rate for the three months ended September 30, 2024, attributable to a lower tax impact on stock compensation expense related to stock consideration issued to the former owners of Acima Holdings, compared to the prior year period, as well as a favorable adjustment related to foreign deferred tax assets.

Previous wording

Revenue. Total revenue increased by $177.3 million, or 8.9%, to $2,172.5 million for the six months ended June 30, 2024, from $1,995.2 million for the six months ended June 30, 2023. The increase was primarily due to increases of approximately $165.9 million and $9.5 million in the Acima and Rent-A-Center segments, respectively, as discussed further in the section “Segment Performance” below.

Current wording

Revenue. Total revenue increased by $267.0 million, or 9.0%, to $3,241.3 million for the nine months ended September 30, 2024, from $2,974.3 million for the nine months ended September 30, 2023. The increase was primarily due to increases of approximately $256.9 million and $14.6 million in the Acima and Rent-A-Center segments, respectively, as discussed further in the section “Segment Performance” below.

Previous wording

Cost of Rentals and Fees. Cost of rentals and fees for the six months ended June 30, 2024 increased by $76.9 million, or 13.1%, to $665.7 million, as compared to $588.8 million for the six months ended June 30, 2023. The increase was primarily attributable to an increase of approximately $76.1 million in the Acima segment, driven by an increase in rentals and fees revenues. Cost of rentals and fees expressed as a percentage of rentals and fees revenue increased to 37.9% for the six months ended June 30, 2024, as compared to 36.5% for the six months ended June 30, 2023.

Current wording

Cost of Rentals and Fees. Cost of rentals and fees for the nine months ended September 30, 2024 increased by $122.4 million, or 13.8%, to $1,008.1 million, as compared to $885.7 million for the nine months ended September 30, 2023. The increase was primarily attributable to increases of approximately $119.5 million and $2.1 million in the Acima and Rent-A-Center segments, respectively, driven by an increase in rentals and fees revenues. Cost of rentals and fees expressed as a percentage of rentals and fees revenue increased to 38.2% for the nine months ended September 30, 2024, as compared to 36.6% for the nine months ended September 30, 2023.

Previous wording

Cost of Merchandise Sold. Cost of merchandise sold increased by $56.0 million, or 16.6%, to $392.9 million for the six months ended June 30, 2024, from $336.9 million for the six months ended June 30, 2023, primarily attributable to an increase of $55.7 million in the Acima segment, driven primarily by higher merchandise sales. The gross margin percent of merchandise sales decreased to (20.6)% for the six months ended June 30, 2024, from (17.1)% for the six months ended June 30, 2023.

Current wording

Cost of Merchandise Sold. Cost of merchandise sold increased by $91.9 million, or 18.7%, to $584.8 million for the nine months ended September 30, 2024, from $492.9 million for the nine months ended September 30, 2023, primarily attributable to an increase of $88.8 million in the Acima segment, driven primarily by higher merchandise sales. The gross margin percent of merchandise sales decreased to (22.7)% for the nine months ended September 30, 2024, from (18.7)% for the nine months ended September 30, 2023.

Previous wording

Gross Profit. Gross profit increased by $48.5 million, or 4.8%, to $1,061.0 million for the six months ended June 30, 2024, from $1,012.5 million for the six months ended June 30, 2023, due primarily to increases of $34.1 million and $10.2 million in the Acima and Rent-A-Center segments, respectively as discussed further in the section “Segment Performance” below. Gross profit as a percentage of total revenue decreased to 48.8% for the six months ended June 30, 2024, as compared to 50.7% for the six months ended June 30, 2023.

Current wording

Gross Profit. Gross profit increased by $62.5 million, or 4.1%, to $1,572.1 million for the nine months ended September 30, 2024, from $1,509.7 million for the nine months ended September 30, 2023, due primarily to increases of $48.6 million, $9.7 million and $4.0 million in the Acima, Rent-A-Center and Mexico segments, respectively, as discussed further in the section “Segment Performance” below. Gross profit as a percentage of total revenue decreased to 48.5% for the nine months ended September 30, 2024, as compared to 50.8% for the nine months ended September 30, 2023.

Previous wording

Operating Labor. Operating labor increased by $5.9 million, or 1.9%, to $314.3 million for the six months ended June 30, 2024, as compared to $308.4 million for the six months ended June 30, 2023, primarily due to an increase of $3.2 million in the Rent-A-Center segment. Operating labor expressed as a percentage of total revenue excluding franchise merchandise sales and royalty income and fees was 14.8% for the six months ended June 30, 2024, as compared to 15.9% for the six months ended June 30, 2023.

Current wording

Operating Labor. Operating labor increased by $6.5 million, or 1.4%, to $467.0 million for the nine months ended September 30, 2024, as compared to $460.5 million for the nine months ended September 30, 2023, primarily due to increases of $3.2 million and $2.0 million in the Rent-A-Center and Acima segments, respectively. Operating labor expressed as a percentage of total revenue excluding franchise merchandise sales and royalty income and fees was 14.8% for the nine months ended September 30, 2024, as compared to 16.0% for the nine months ended September 30, 2023.

Previous wording

Non-Labor Operating Expenses. Non-labor operating expenses increased by $39.9 million, or 10.6%, to $417.7 million for the six months ended June 30, 2024, as compared to $377.8 million for the six months ended June 30, 2023, primarily due to an increase of $32.7 million in the Acima segment, including an increase of $24.0 million in merchandise losses. Non-labor operating expenses expressed as a percentage of total revenue excluding franchise merchandise sales and royalty income and fees was 19.7% for the six months ended June 30, 2024, as compared to 19.5% for the six months ended June 30, 2023.

Current wording

Non-Labor Operating Expenses. Non-labor operating expenses increased by $44.5 million, or 7.8%, to $613.8 million for the nine months ended September 30, 2024, as compared to $569.3 million for the nine months ended September 30, 2023, primarily due to an increase of $43.8 million in the Acima segment, including an increase of $33.4 million in LCOs and other merchandise losses. Non-labor operating expenses expressed as a percentage of total revenue excluding franchise merchandise sales and royalty income and fees was 19.4% for the nine months ended September 30, 2024, as compared to 19.7% for the nine months ended September 30, 2023.

Previous wording

General and Administrative Expenses. General and administrative expenses increased by $12.2 million, or 12.6%, to $108.7 million for the six months ended June 30, 2024, as compared to $96.5 million for the six months ended June 30, 2023, primarily due to increases in overhead labor. General and administrative expenses expressed as a percentage of total revenue were 5.0% for the six months ended June 30, 2024, compared to 4.8% for the six months ended June 30, 2023.

Current wording

General and Administrative Expenses. General and administrative expenses increased by $9.8 million, or 6.5%, to $160.2 million for the nine months ended September 30, 2024, as compared to $150.4 million for the nine months ended September 30, 2023, primarily due to increases in overhead labor. General and administrative expenses expressed as a percentage of total revenue were 4.9% for the nine months ended September 30, 2024, compared to 5.1% for the nine months ended September 30, 2023.

Previous wording

Other Gains and Charges. Other gains and charges decreased by $103.7 million to $51.7 million for the six months ended June 30, 2024, as compared to $155.4 million for the six months ended June 30, 2023. The decrease in other gains and charges was driven primarily by a decrease of $113.8 million in stock compensation expense recognized for the six months ended June 30, 2023, related to restricted stock issued in connection with the Acima Holdings acquisition. The decrease in other gains and charges was also due to a decrease of $4.9 million in depreciation and amortization of acquired software and intangible assets, partially offset by $6.1 million in accelerated software depreciation and $6.0 million in lease impairment charges and fixed asset disposal for the six months ended June 30, 2024.

Current wording

Other Gains and Charges. Other gains and charges decreased by $104.5 million to $79.9 million for the nine months ended September 30, 2024, as compared to $184.4 million for the nine months ended September 30, 2023. The decrease in other gains and charges was driven primarily by a decrease of $123.2 million in stock compensation expense recognized for the nine months ended September 30, 2024, related to restricted stock issued in connection with the Acima Holdings acquisition. The decrease in other gains and charges was also due to a decrease of $8.3 million in depreciation and amortization of acquired software and intangible assets, partially offset by increases of $11.7 million in legal settlement reserve and legal expenses, $6.0 million in lease impairment charges and fixed asset disposal, $3.4 million in accelerated stock compensation expense related to our letter agreement with the Company’s Chief Executive Officer, $1.5 million in accelerated software depreciation for the nine months ended September 30, 2024, and $3.1 million in interest income earned on tax refunds related to prior year returns received in the third quarter of 2023.

Previous wording

Operating Profit. Operating profit increased by $93.5 million to $142.4 million for the six months ended June 30, 2024, as compared to $48.9 million for the six months ended June 30, 2023, primarily due to the decrease in other gains and charges and increase in gross profit, partially offset by increases in non-labor operating expenses and general and administrative expenses, as described above. Operating profit expressed as a percentage of total revenue was 6.6% for the six months ended June 30, 2024, compared to 2.5% for the six months ended June 30, 2023.

Current wording

Operating Profit. Operating profit increased by $105.5 million to $212.5 million for the nine months ended September 30, 2024, as compared to $107.0 million for the nine months ended September 30, 2023, primarily due to the decrease in other gains and charges and increase in gross profit, partially offset by an increase in non-labor operating expenses, as described above. Operating profit expressed as a percentage of total revenue was 6.6% for the nine months ended September 30, 2024, compared to 3.6% for the nine months ended September 30, 2023.

Previous wording

Income Tax Expense (benefit). Income tax expense increased by $25.1 million to $17.4 million for the six months ended June 30, 2024, as compared to $(7.7) million for the six months ended June 30, 2023, primarily due to the increase in earnings before income taxes for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, and a lower effective tax rate for the six months ended June 30, 2024, driven by a lower tax impact of stock compensation expense related to stock consideration issued to the former owners of Acima Holdings, compared to the prior year period, as well as a favorable adjustment related to foreign deferred tax assets.

Current wording

Income Tax Expense. Income tax expense increased by $11.3 million to $30.7 million for the nine months ended September 30, 2024, as compared to $19.4 million for the nine months ended September 30, 2023, primarily due to the increase in earnings before income taxes for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, and a lower effective tax rate for the nine months ended September 30, 2024, driven by a lower tax impact on stock compensation expense related to stock consideration issued to the former owners of Acima Holdings, compared to the prior year period, as well as a favorable adjustment related to foreign deferred tax assets.

Previous wording

Revenues. The increase in revenues for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, were primarily due to increases in rentals and fees revenues of $67.2 million and $126.7 million, respectively, and increases in merchandise sales revenue of $21.0 million and $39.2 million, respectively, resulting from higher GMV. Growth in GMV was primarily due to an increase in retail partner locations and productivity, which resulted in more leases per retail partner, in addition to expanded direct-to-consumer offerings.

Current wording

Revenues. The increase in revenues for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, were primarily due to increases in rentals and fees revenues of $67.3 million and $193.9 million, respectively, and increases in merchandise sales revenue of $23.4 million and $62.6 million, respectively, resulting from higher GMV. Growth in GMV was primarily due to an increase in third-party retailer locations and productivity, which resulted in more leases per retailer, in addition to expanded direct-to-consumer offerings.

Previous wording

Gross Profit. Gross profit increased for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, driven primarily by the increase in revenues described above. Gross profit as a percentage of segment revenues decreased to 32.5% and 31.3% for the three and six months ended June 30, 2024, compared to 34.4% and 33.2% for the three and six months ended June 30, 2023, primarily due to the conversion of Acceptance Now locations to the Acima platform, and an increase in merchandise sales resulting from a larger portfolio at the beginning of 2024 compared to 2023.

Current wording

Gross Profit. Gross profit increased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, driven primarily by the increase in revenues described above. Gross profit as a percentage of segment revenues decreased to 30.7% and 31.1% for the three and nine months ended September 30, 2024, compared to 33.5% and 33.3% for the three and nine months ended September 30, 2023, primarily due to an increase in merchandise sales as a percent of total revenue, and the conversion of Acceptance Now locations to the Acima platform.

Previous wording

Operating Profit. Operating profit as a percentage of segment revenues decreased to 12.7% and 10.9% for the three and six months ended June 30, 2024 compared to 13.6% and 12.3% for the three and six months ended June 30, 2023. The decrease in operating profit was primarily due to increases in non-labor operating expense of approximately $15.0 million and $32.7 million for the three and six months ended June 30, 2024, respectively, partially offset by the increases in gross profit described above. Merchandise losses in our Acima locations due to LCOs, expressed as a percentage of revenues, were approximately 9.6% for both the three and six months ended June 30, 2024, compared to 8.9% for both the three and six months ended June 30, 2023. Merchandise losses in our Acima locations due to other merchandise losses, expressed as a percentage of revenues, were negligible for the three and six months ended June 30, 2024 and 2023.

Current wording

Operating Profit. Operating profit as a percentage of segment revenues decreased to 11.3% and 11.1% for the three and nine months ended September 30, 2024 compared to 12.2% and 12.3% for the three and nine months ended September 30, 2023. The decrease in operating profit margin was primarily due to increases in non-labor operating expense of approximately $11.1 million and $43.8 million for the three and nine months ended September 30, 2024, respectively, and decreases in gross profit margin described above. The increases in non-labor are primarily attributable to increases of $9.4 million and $33.4 million in LCOs and other merchandise losses for the three and nine months ended September 30, 2024, respectively. Merchandise losses in our Acima locations due to LCOs, expressed as a percentage of revenues, were approximately 9.2% and 9.5% for the three and nine months ended September 30, 2024, respectively, compared to 9.4% and 9.1% for the three and nine months ended September 30, 2023, respectively. Merchandise losses in our Acima locations due to other merchandise losses, expressed as a percentage of revenues, were 0.3% and 0.2% for the three and nine months ended September 30, 2024, respectively, and were negligible for the three and nine months ended September 30, 2023. Other merchandise losses include unrepairable and missing merchandise and loss/damage waiver claims.