Upbound Group, Inc. · NASDAQ:UPBD
Upbound — Rent A Center Inc DE — Proxy Contest (May 2017)
38 slides from Upbound's proxy contest presentation, May 17, 2017
Slide 1: Driving Value for Investors
MAY 2017 Driving Value for Investors
Slide 2: Safe Harbor Forward-Looking Statements
Safe Harbor Forward-Looking Statements This presentation and the guidance above contain forward-looking statements that involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "c
Slide 3: Rent-A-Center strategic roadmap
Rent-A-Center strategic roadmap Driving value for investors 1 2
Slide 4: Challenges are well understood and largely correctable
Unlike many other retailers today, the challenges RAC faces are well understood and largely correctable. Several pillars of our strategic plan represent a return to what has made us a strong franchise historically. The Board helped management create the plan and is already overseeing its execution.
Slide 5: RAC Holds a Strong Position in a Growing and Attractive Industry
RAC Holds a Strong Position in a Growing and Attractive Industry 2012-2015 industry CAGR of 4.1% RAC commands 1/3rd share of > $9bn industry Market leader in the growing RTO industry1 1 Association of Progressive Rental Organizations Large portion of recurring weekly/monthly revenue Ability to gener
Slide 6: RAC Has Two Strong Platforms Providing an Exceptional Value Proposition
RAC Has Two Strong Platforms Providing an Exceptional Value Proposition to Customers and Retailers No credit needed Serves nearly everyone Never goes on credit report No long-term obligation Delivery and service included at no additional cost Flexible payment options Low losses of ~3% 70% repeat cus
Slide 7: RAC's Value Proposition Delivers Customer Satisfaction and Ownership
RAC’s Value Proposition Delivers Customer Satisfaction and Ownership To believe in and empower those striving to enjoy the American dream, but have limited or no credit to get the big-ticket items they want, when they want, with the payment plans they need Purpose Access Affordability Flexibility Im
Slide 8: Pillars of the Strategic Plan
Enhance value proposition and facilitate ownership Optimize partner relationships Centralize account management Grow ANow unstaffed solutions Enhance decision engine Leverage technology investments Build digital capabilities to support omni-channel platform Expand ANow to new channels, customers and
Slide 9: Reestablished 2x2 matrix as foundational pricing strategy
Reestablished 2x2 matrix as foundational pricing strategy Most terms reduced by 30%, with additional term strategies for products with shorter lifecycles Adjusted previously rented product terms to better reflect value based on age, condition and lifecycle Improved early payout options to promote ow
Slide 10: Pillar #1: Optimize Inventory Mix
PILLAR #1: STRENGTHEN THE CORE Optimize Inventory Mix Targeting 65% of inventory mix made up of Better/Best products vs. 45% currently Results in higher ticket and improved economics Immediate opportunity within furniture category New assortments should drive towards fully optimized idle composition
Slide 11: Pillar #1: Stabilize and Upgrade Workforce
PILLAR #1: STRENGTHEN THE CORE Stabilize and Upgrade Workforce Initiatives Stabilization Rollout FLEX Rollout Hourly coworker mix by position Monthly employee turnover (annualized) Following a part-time labor initiative launched in 2015, the Core U.S. channel experienced elevated turnover throughout
Slide 12: Pillar #1: Improve Account Management
PILLAR #1: STRENGTHEN THE CORE Improve Account Management * Represents 2018-2019 estimated annual impact; Non-GAAP measure Run-rate EBITDA improvement: ~$35mm* Ensure coworkers follow proven processes to collect payments or products Lower delinquency rates by focusing on training, tools and incentiv
Slide 13: Pillar #1: Drive Efficiencies in-Store
Initiatives to improve underperforming stores Underperforming stores expected to show signs of a turnaround by the end of 2017 or will be evaluated for rationalization PILLAR #1: STRENGTHEN THE CORE Drive Efficiencies in-Store People Filling open positions and right-sizing number of employees in all
Slide 14: Pillar #1: Optimize Physical Footprint
PILLAR #1: STRENGTHEN THE CORE Optimize Physical Footprint Brick-and-mortar network provides foundation for omni-retailing practices to drive growth at store level and across other channels Key areas of focus Strategically, the B&M store footprint provides critical support to RAC’s ANow and eCommerc
Slide 15: Pillar #2: Enhance Value Proposition
Initiatives PILLAR #2: GROW ANow Enhance Value Proposition Rationale Shorten terms to reduce time to ownership and risk of transaction fatigue Calibrate early purchase option structures to support retention and incentivize ownership Implement more granular pricing to account for product category dif
Slide 16: Pillar #2: Optimize Key Retail Partner Relationships
PILLAR #2: GROW ANow Optimize Key Retail Partner Relationships Better align ANow relationship investment with partner expectations Ensure that ANow has access to 100% of RTO segment within retail partner Pair higher degree of program customization with superior high-service staffed model to create p
Slide 17: Pillar #2: Focus on Growth-Enabling Capabilities
PILLAR #2: GROW ANow Focus on Growth-Enabling Capabilities Centralized collections and a revitalized unstaffed model will allow the business to pursue both new partner growth and the optimization of its existing locations Ensures consistent process execution and creates path for rapidly improving ef
Slide 18: Pillar #2: Enhance Decision Engine and Risk Analytics
PILLAR #2: GROW ANow Enhance Decision Engine and Risk Analytics Enhancements to business rules, fraud triggers and approval amounts Reduce losses and increase ownership Key benefits Recent enhancements Reduced losses Consistent risk assessment policies and strategies across all Acceptance Now locati
Slide 19: Pillar #3: Leverage Technology Investments
Data landscape PILLAR #3: EMBRACE TECHNOLOGY & CHANNEL EXPANSION Leverage Technology Investments Invest in operations infrastructure that is secure, stable and sufficiently flexible E-commerce Launching an improved enterprise data platform over the next 12 months Enhances data access and shared func
Slide 20: Pillar #3: Build Digital Capabilities to Support Omni-Channel Platform
PILLAR #3: EMBRACE TECHNOLOGY & CHANNEL EXPANSION Build Digital Capabilities to Support Omni-Channel Platform Investments in digital capabilities that will enable a seamless customer experience across channels, markets, retailers, products, and brands Cloud-based POS and account management platforms
Slide 21: Pillar #3: Expand to New Channels, Customers and Products
Opportunities PILLAR #3: EMBRACE TECHNOLOGY & CHANNEL EXPANSION Expand to New Channels, Customers and Products Leverage approval capabilities and digitally-driven customer engagement platform across verticals RTO offering can compete dynamically for the business of higher credit score individuals wh
Slide 22: Challenges are well understood and largely correctable
Unlike many other retailers today, the challenges RAC faces are well understood and largely correctable. Several pillars of our strategic plan represent a return to what has made us a strong franchise historically. The Board helped management create the plan and is already overseeing its execution.
Slide 23: Rent-A-Center strategic roadmap
Rent-A-Center strategic roadmap Driving value for investors 1 2
Slide 24: Executing on a Strategic Plan to Improve Operations and Drive Value
Rent-A-Center is Executing on a Strategic Plan to Improve Operations and Drive Value for All Stockholders On April 10, 2017, Rent-A-Center announced a comprehensive strategic plan to restore long-term growth, drive improved profitability and maximize value for all stockholders. The plan aims to driv
Slide 25: The Strategic Plan Offers a Clear Path to Value Creation
The Strategic Plan Offers a Clear Path to Value Creation Metric* 2018 Target range 2019 Target range Revenue growth Low single digits Mid single digits EBITDA margin 7.5% - 8.5% 9.5% - 10.5% Free cash flow $70 - $90 million $110 - $130 million EPS $1.20 - $1.40 $2.00 - $2.25 In conjunction with the
Slide 26: Q1 2017 sequential improvements
Same store sales Core U.S. same store sales improved by 140 bps sequentially in Q1 2017 ANow same stores sales improved by 120 bps sequentially in Q1 2017 Inventories Core U.S. held for rent inventory declined 9.5% sequentially in Q1 2017, demonstrating progress on moving older, promotional inventor
Slide 27: Independent Research Analysts Support the Strategic Plan
Independent Research Analysts Support the Strategic Plan and Believe Mr. Speese and the Board are the Right Team to Execute Strategy “We believe Rent-A-Center’s better-than-expected 1Q-2017 results demonstrate the company’s turnaround is progressing nicely under recently installed Chairman and CEO M
Slide 28: Mr. Speese is Committed to Leading the Company Forward
Mr. Speese is Committed to Leading the Company Forward 1 Represents the total stockholder return from Rent-A-Center’s (RCII) IPO on 1/25/95 to the end of each year indicated 66.2% 7.9% 3.2% 1.6% CAGRs Rent-A-Center S&P 500 +2,571% during Mr. Speese’s time in management Core U.S. National RTO platfor
Slide 29: Engaged Capital is a Short-Term Focused Activist Hedge Fund
Engaged Capital is a Short-Term Focused Activist Hedge Fund with a History of Destroying Stockholder Value Engaged Capital is a short-term focused activist Average holding period of just ~13 months for the ten prior activist campaigns from which Engaged has exited1 Engaged Capital has a consistent t
Slide 30: Engaged Capital's only proposal is an opportunistic sale process
Engaged Capital’s only proposal is to pursue an opportunistic, self-serving sale process at a time when Rent-A-Center’s shares are trading at multi-year lows and the Company is undergoing a significant operational transformation Engaged Capital has not proposed any plans to improve operations at Ren
Slide 31: Engaged has Demonstrated No Understanding of the Business
Engaged has Demonstrated No Understanding of the Business and Has Offered No Operating Plan Rent-A-Center has a comprehensive turnaround plan focusing on all aspects of the business Plan was created via a deliberative, introspective process that involved the input of the entire Board and senior mana
Slide 32: Engaged Director Nominees: Jeffrey J. Brown
Current position: Chief Executive Officer and Founding Member of Brown Equity Partners Age: 56 Previous experience: Lead Director of Medifast since 2015 Director of Outerwall for five months in 2016 Director of RCS Capital Corp. from 2014 until 2016 Founding Partner of Forrest Binkley & Brown, a ven
Slide 33: Engaged Director Nominees: Mitchell E. Fadel
Mitchell E. Fadel Engaged Capital’s Director Nominees do not Bring Incremental Expertise or Experience to the Rent-A-Center Board (cont’d) Spearheaded several implementation and operational missteps Smartphone rollout / purchasing mismanagement Inventory misalignment toward “Good” vs. “Better / Best
Slide 34: Engaged Director Nominees: Christopher B. Hetrick
Current position: Director of Research at Engaged Capital Age: 38 Previous experience: Associate Analyst / Senior Consumer Analyst at Relational Investors from 2002 until 2012 Engaged Capital’s Director Nominees do not Bring Incremental Expertise or Experience to the Rent-A-Center Board (cont’d) Chr
Slide 35: Rent-A-Center's Nominees Offer a Diverse Mix of Skills
Rent-A-Center Director since 1990 Founder of the Company CEO since January 2017 Previously served as CEO from 2001-2014 President from 1990-1999, COO from 1994-1999 Owns approximately 2.6% of Rent-A-Center’s shares outstanding Rent-A-Center Director since 2006 Chairman and CEO of RadioShack Corporat
Slide 36: Rent-A-Center's Remaining Directors
Rent-A-Center’s Remaining Directors Consist of Independent, Highly Qualified Individuals with Skills that Support the Strategy Rent-A-Center Director since 2005 Chair of the Nominating and Corporate Governance Committee Member of the Compensation Committee 30 years of marketing and management experi
Slide 37: Please Vote FOR the Rent-A-Center Board Slate on the WHITE Proxy Card
PLEASE VOTE FOR THE SUPERIOR RENT-A-CENTER BOARD SLATE ON THE WHITE PROXY CARD TODAY and discard any proxy card sent by Engaged Capital Rent-A-Center’s Board and Management Represent Best Path Forward to Drive Value for ALL Stockholders The comprehensive strategic plan outlined by Rent-A-Center’s Bo
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