Upbound Group, Inc. · NASDAQ:UPBD
Upbound — Rent-A-Center — Investor Presentation (November 2002)
31 slides from Upbound's investor presentation, Nov 4, 2002
Slide 1: Investor Presentation Third Quarter 2002
Investor Presentation Third Quarter 2002 November 4, 2002
Slide 2: Key Investment Considerations
Key Investment Considerations n Leading rent-to-own operator in U.S. n Proven business model n Multiple growth drivers n Strong financial and operating results — Total revenue growth of 10.6% (3Q02) — Same Store Sales growth of 6.9% (3Q02) — Net Income rose 70% (3Q02) — Strong balance sheet - reduce
Slide 3: Leading RTO Operator in U.S.
Leading RTO Operator in U.S. n Largest rent-to-own operator in the U.S. — 28% market share based on store count (2,362 stores) — ColorTyme subsidiary represents an additional 4% market share n Broad selection of high quality goods through flexible rental agreements — Home electronics — Appliances —
Slide 4: Dominant Player in Fragmented Marketplace
Dominant Player in Fragmented Marketplace 8,300 Stores 3,000 2,691 3,500 + Stores 2,500 329 42% Number of Stores 2,000 2,362 7 largest Firms 1,500 58% 1,062 1,000 694 500 122 114 73 69 0 Rent-A-Center / Rent-Way (3) (3) Aaron Rainbow Ace TV Rent Rite Rental Bestway (4) (4) ColorTyme (2) (2) Rents (2
Slide 5: Leading National Footprint
Leading National Footprint 2,362 company-owned stores and 329 franchised stores 45 7 1 28 27 4 67 16 10 3 139 57 23 5 108 13 Estimated New Store 20 93 36 Openings 8 21 162 119 114 16 48 2002 2003 153 16 34 14 49 45 62 59 45 60-70 80-120 106 4 82 58 50 25 20 39 22 46 105 Acquisitions 2002 301 41 4 (S
Slide 6: Rent-to-Own is an Appealing Transaction…
Rent-to-Own is an Appealing Transaction… Flexible Rental Agreements Lifetime No Purchase Reinstatement Obligation Satisfies Return Short Term Merchandise Purchase Needs Anytime Same Day 18 – 24 Months Delivery Term to Ownership No Traditional No Down Credit Check Payment 5
Slide 7: …With Attractive Economics …
…With Attractive Economics … Total Rental Gross Monthly Revenue Stream Revenues COGS Margin Buy Upfront $800 400 50.0% Rent-To-Own $1,600 400 75.0% $1,780 400 77.5% Rent-To-Own (Average Contract Life) 0 2 4 6 8 10 12 14 16 18 20 22 Months 6
Slide 8: …Consistent Industry Growth…
…Consistent Industry Growth… 6 GR 6.2% CA $5.3 $5.6 $5.0 5 $4.7 $4.4 $4.1 $3.9 4 $ in billions 3 2 1 0 1995 1996 1997 1998 1999 2000 2001 Source: Source: APRO APRO 7
Slide 9: …In Any Economic Environment
…In Any Economic Environment Late 1990’s Economic Boom $0.60 $0.52 Thorn Integration $0.46 $0.41 $0.40 $0.34 $0.35 $0.29 $0.31 $0.30 $0.29 ($) $0.27 EPS ($) $0.25 $0.21 $0.22 EPS $0.19 $0.20 $0.15 $0.17 $0.00 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1996 1997 1998 1999 Only Revenue Only Curre
Slide 10: Serves the “Underbanked Working Family”
Serves the “Underbanked Working Family” n 92% of Customers Have Household Incomes Between $15,000 and $50,000(1) n 44MM Households With Household Incomes Between $15,000 and $50,000(1) n Industry Is Only Serving 2.8MM of These Households(2) n Great Market Opportunity Note: (1) America’s Research Gro
Slide 11: Proven Business Model
Proven Business Model Key Brands and Attractive Stores Systems Employee Training and Development Customer Relationship 10
Slide 12: Rent-A-Center Store Profitability vs. Peers
Rent-A-Center Store Profitability vs. Peers Monthly Revenue Gross Profit Margin $100,000 $100,000 % 100% 100% 520 bps $80,000 $80,000 41.1 $68,300 80% 80% 76.1% 76.1% $68,300 70.9% 70.9% $60,000 $60,000 60% 60% $48,400 $48,400 $40,000 $40,000 40% 40% $20,000 $20,000 20% 20% $0 0% 0% $0 Store Operati
Slide 13: Easily Accessible, Highly Visible Sites
Easily Accessible, Highly Visible Sites 12
Slide 14: Spacious Showroom Interior
Spacious Showroom Interior 13
Slide 15: High Quality, Brand-name Merchandise
High Quality, Brand-name Merchandise Electronics Furniture Appliances Computers 42% of Revenues 32% of Revenues 16% of Revenues 10% of Revenues Actual Actual data data for for the the twelve twelve months months ended ended September September 30, 30, 2002 2002 14
Slide 16: State-of-The Art Systems Capabilities
State-of-The Art Systems Capabilities Inventory InventoryAnalysis Analysis n Daily reports at all levels of BOR BOR&&Credit CreditAnalysis Analysis organization from store manager to Chairman/CEO Store StoreIncome IncomeAnalysis Analysis n Manage by exception philosophy Exceptions ExceptionsReport R
Slide 17: Strategic Objectives
Strategic Objectives n Improve store level profitability n Open new stores n Acquire existing rent-to-own stores n National branding 16
Slide 18: Improved Store Level Profitability - 3Q Review
Improved Store Level Profitability - 3Q Review Revenue Gross Profit $700 $550 % $600 10.6 $500 $494.6 $500 $447.1 $450 11.3% $400 $400 $369.5 $300 $350 $332.1 $200 $300 3Q'01 3Q'02 3Q'01 3Q'02 $120 EBITA $60 Net Income(1) 6% $100 $50 52. $85.6 3 .6 % $41.4 6 $80 $40 $56.1 $25.3 $60 $30 $40 $20 3Q'01
Slide 19: Significant Market Opportunity
Significant Market Opportunity 16,000 6,000 14,000 New 12,000 Number of Stores Store Opportunity 10,000 3,500+ 8,000 Mom & Pop 6,000 2,134 4,000 2,691 Top 6 Competitors 2,000 0 Current Landscape 18
Slide 20: Strong New Store Economics
Strong New Store Economics n Start-up investment of approximately $450,000 (2/3 for inventory) n Begin turning a monthly profit in approximately nine months n Cumulative break even within 18–24 months (1) (1) n Internal Rate of Return of approximately 50% Year 1 Year 2 Year 3 Year 4 Revenues $400,00
Slide 21: Enhancing National Brand – “Get The Good Stuff”
Enhancing National Brand – “Get The Good Stuff” John Madden National Advertising Spokesperson n Solidify reputation as leading provider of quality merchandise n Educate consumers about RTO alternative n Strong image identification n Multi-cultural appeal 20
Slide 22: Experienced Management Team
Experienced Management Team n Senior management team is most experienced in RTO industry — CEO Mark Speese has nearly 25 years RTO experience — President Mitch Fadel has over 19 years of RTO experience — Senior executives average over 10 years of RTO experience n Attracting the best personnel with i
Slide 23: Financial Overview
Financial Overview
Slide 24: Strong, Consistent Sales Growth
Strong, Consistent Sales Growth $1,967 2,000 GR CA 1 .5% 1 $1,808 Combined Revenue ($MM) 1,800 $1,602 1,600 $1,417 1,400 1,200 1,000 1999 2000 2001 LTM 09/30/02 Store Revenue Franchise Revenue 23
Slide 25: Consistent Growth in Same Store Sales
Consistent Growth in Same Store Sales 2,500 2,400 2,362 2,335 # of Stores 2,300 2,281 2,284 2,200 2,158 8.0 7.7 6.6 6.9 2,100 2,071 12.6 7.7 2,000 1999 2000 2001 1Q02 2Q02 3Q02 # of Stores Same Store Sales Growth % 24
Slide 26: Current Capital Structure
Current Capital Structure Dec 31 % of Book Sept 30 % of Book 2001 Capital 2002 Capital Cash & Equivalents $108.0 N/A $110.3 N/A Senior Credit Facilities 428.0 30.6% 260.0 19.4% Subordinated Notes 274.5 19.6% 273.3 20.3% Total Debt 702.5 50.2% 533.3 39.7% Shareholders’ Equity 697.3 49.8% 809.4 60.3%
Slide 27: Substantial Free Cash Flow to Reduce Debt & Repurchase Common Stock
Substantial Free Cash Flow to Reduce Debt & Repurchase Common Stock Sept 2002 Cash Flow Generation YTD Net Income $ 127.0 Amortization of Intangibles 3.2 Amortization of Financing Fees 5.5 Depreciation of Property Assets 28.5 Net Investment in Rental Merchandise 43.5 Change in Other Assets/Liabiliti
Slide 28: 2003 Recurring Free Cash Flow Estimate
2003 Recurring Free Cash Flow Estimate EBITDA $415MM - $435MM Less: Interest $ 55MM CAPEX $ 40MM l l $35MM Maintenance l l $5MM New Stores Working Capital $ 60MM Taxes $120MM Total $275MM Free Cash Flow Before Financing Activities $140MM - $160MM 27
Slide 29: Guidance
Guidance 2002 2003* Growth Total Revenue $1.988-1.993BN $2.085-2.093BN 4.5-5.5% Diluted EPS $4.79-$4.82 $5.30-$5.45 10-14% * Does not include Acquisitions 28
Slide 30: Key Investment Considerations
Key Investment Considerations n Leading rent-to-own operator in U.S. n Proven business model n Multiple growth drivers n Strong financial and operating results — Total revenue growth of 10.6% (3Q02) — Same Store Sales growth of 6.9% (3Q02) — Net Income rose 70% (3Q02) — Strong balance sheet - reduce
Slide 31: Forward-looking statements
These materials contain forward-looking statements that involve risks and uncertainties. Although the Company believes that the expectations reflected in such forward looking statements will prove to be correct, the Company can give no assurance that such expectations will prove to have been correct
Rent-A-Center — Investor Presentation (November 2002) on 6ix