Upbound Group (UPBD) Q3 2025: ASEMA Approval Rate Falls 280bps as Risk Tightens, Bridget Surges 27%
Upbound’s third quarter spotlighted a decisive risk recalibration at ASEMA, with approval rates down 280 basis points year-over-year and loss rates peaking, while Bridget delivered standout subscriber and revenue growth despite a stressed consumer backdrop. Segment divergence is clear: Rent-A-Center stabilized on operational execution, ASEMA prioritized portfolio health over growth, and Bridget’s digital-first model captured rising demand for liquidity solutions. With macro uncertainty persisting, Upbound’s focus is shifting to cost discipline, merchant network expansion, and leveraging digital innovation to underpin 2026’s growth ambitions.
Summary
- ASEMA Risk Reset: Approval rates dropped 280 basis points as management prioritized portfolio quality over GMV growth.
- Bridget Digital Momentum: Subscriber base soared 27% and new products are driving higher ARPU and engagement.
- Rent-A-Center Stabilization: Sequential improvements signal operational traction heading into the holiday quarter.
Performance Analysis
Upbound Group delivered a 9% year-over-year revenue increase to $1.16 billion, with adjusted EBITDA up 5.7% to $123.6 million. Segment divergence was pronounced: ASEMA’s GMV grew 11%, but this came with a 50 basis point increase in lease charge-off rates and a 130 basis point drop in EBITDA margin, reflecting the impact of tighter underwriting and a shift toward lower-margin jewelry leases. Bridget’s revenue jumped 40% year-over-year, supported by a 27% rise in paid subscribers and robust ARPU expansion, though higher marketing spend compressed margins slightly.
Rent-A-Center’s revenue fell 4.7% year-over-year, but operational execution drove sequential improvement in same-source sales and margin expansion. The segment’s lease charge-off rate improved both sequentially and year-over-year, reflecting the benefits of prior underwriting adjustments and a more disciplined inventory approach. Free cash flow generation remained strong, with $167 million year-to-date, bolstered by tax benefits and disciplined capital allocation.
- ASEMA Margin Pressure: Gross margin erosion driven by higher charge-offs and a mix shift to jewelry, which carries lower margins due to early purchase options.
- Bridget ARPU and Scale: Marketplace and premium tier adoption fueled ARPU growth to $13.74, with 1.4 million paid subscribers.
- Rent-A-Center Efficiency: Operational improvements and new digital initiatives lifted conversion rates and reduced delinquencies, positioning the segment for holiday strength.
Upbound’s capital allocation remained conservative, with excess free cash flow directed toward deleveraging, while maintaining optionality for opportunistic M&A or buybacks as market conditions warrant.
Executive Commentary
"Our business is organized around a simple but powerful statement, which is to elevate financial opportunity for all… As we accelerate the pace of innovation and capitalize on our differentiated strengths, it's critical that we have the right people to help us deliver on our missions."
Fami Cutham, Chief Executive Officer
"Our business has generated approximately $167 million of free cash flow year-to-date, up notably from approximately $122 million in the prior year. Due to recent changes in tax policy, upbound near-term liquidity should be supplemented by about $150 million in savings from cash tax payments."
Hal Khoury, Chief Financial Officer
Strategic Positioning
1. ASEMA: Risk Management Over Growth
ASEMA, Upbound’s lease-to-own platform, responded to macro uncertainty by tightening underwriting, lowering approval rates by 280 basis points, and deploying enhanced identity validation tools. This shift prioritized portfolio health and limited GMV growth in the near term, with management signaling a return to high single-digit or low double-digit growth as macro conditions stabilize and new merchant wins ramp up. The mix shift toward jewelry, while intentional for diversification, reduced margins due to higher early purchase rates.
2. Bridget: Digital-First Expansion and Product Innovation
Bridget, Upbound’s digital liquidity and financial wellness platform, continued to scale rapidly, with new product pilots such as a line of credit up to $500 and a broadened marketing mix. The business is leveraging its data-driven underwriting to maintain low single-digit loss rates while expanding its subscriber base and ARPU. Bridget’s success is also enabling cross-segment synergies, including in-store marketing through Rent-A-Center and Acima locations.
3. Rent-A-Center: Operational Discipline and Digital Enablement
Rent-A-Center, Upbound’s core lease-to-own retail arm, demonstrated sequential improvement in same-store sales and margin recovery, driven by digital upgrades (refer-a-friend, loyalty revamp), inventory optimization, and a push to convert online leads to in-store activity. The segment is now positioned for a strong holiday quarter, with new inventory supporting conversion rates and delivery volumes.
4. Capital Allocation: Conservative Stance with Optionality
Upbound’s capital allocation strategy remains disciplined, prioritizing deleveraging and business reinvestment, with opportunistic flexibility for tuck-in acquisitions or share buybacks. Tax legislation tailwinds are expected to free up over $150 million in cash through 2026, supporting both strategic investments and balance sheet strength.
5. Leadership and Digital Transformation
New executive hires, including a CFO with deep non-prime lending experience and a Chief Growth Officer with a digital transformation track record, signal a step-change in Upbound’s data and AI capabilities. The company is accelerating the rollout of AI-powered decisioning and customer experience enhancements, aiming to drive smarter underwriting, operational efficiency, and cross-platform engagement.
Key Considerations
This quarter marked a turning point for Upbound’s risk appetite and digital strategy, with visible effects across all segments. Investors should weigh the following:
Key Considerations:
- ASEMA Growth Path: Merchant network expansion and direct-to-consumer channels are critical to offsetting slower approval rates and supporting 2026’s growth rebound.
- Bridget’s Profitability Leverage: Sustaining subscriber growth and ARPU while balancing marketing spend will determine margin durability as the business scales.
- Rent-A-Center Holiday Execution: Inventory position and digital engagement initiatives must convert into top-line stabilization and margin lift through peak season.
- Capital Deployment Flexibility: Tax-driven cash flow tailwinds provide Upbound with optionality, but management is signaling caution amid macro volatility.
- AI and Data Initiatives: The pace and impact of digital transformation will be a key differentiator in underwriting, customer acquisition, and retention across platforms.
Risks
Macroeconomic uncertainty remains a persistent headwind, with core customers facing wage stagnation, inflation, and low confidence. ASEMA’s tightened risk posture may limit near-term growth, while any further deterioration in consumer health could pressure loss rates and margins. Competitive intensity in digital lending and lease-to-own models is rising, placing a premium on innovation, data analytics, and operational agility. Regulatory changes or shifts in tax policy could also alter Upbound’s capital allocation calculus.
Forward Outlook
For Q4, Upbound guided to:
- ASEMA GMV growth in the mid-single digits, with loss rates peaking near 10% before improving in 2026.
- Rent-A-Center revenue declining low to mid-single digits, but with stable or improving lease charge-off rates.
- Bridget revenue up high single digits sequentially, with EBITDA margins in the low double digits as marketing spend ramps.
For full-year 2025, management adjusted guidance to:
- Revenue of $4.6 billion to $4.75 billion
- Adjusted EBITDA of $500 million to $510 million
- Non-GAAP EPS of $4.05 to $4.15
Management emphasized a cautious stance, with a focus on underwriting discipline, merchant expansion, and digital product innovation as key levers for 2026 growth and profitability improvement.
Takeaways
Upbound’s Q3 demonstrated a willingness to sacrifice near-term growth for portfolio quality, especially at ASEMA, while Bridget’s digital model proved resilient and Rent-A-Center stabilized on operational execution.
- Risk Management Prioritized: ASEMA’s underwriting tightening and lower approval rates signal a conservative approach amid macro stress, with a focus on long-term margin and loss rate containment.
- Digital Scale Advantage: Bridget’s rapid subscriber and ARPU growth highlight the potential for digital-first models to capture demand and cross-sell opportunities even in a tough environment.
- Execution Watchpoint: Investors should monitor Rent-A-Center’s holiday performance and the ramp-up of AI and digital initiatives as indicators of Upbound’s ability to drive sustainable, multi-segment growth into 2026.
Conclusion
Upbound’s third quarter was defined by risk recalibration, digital growth, and operational discipline across its portfolio. The company enters the holiday season with a stabilized core, a conservative capital stance, and a clear focus on digital innovation and merchant expansion to drive the next phase of growth.
Industry Read-Through
Upbound’s results underscore a broader industry pivot toward risk management over aggressive growth in non-prime lending and lease-to-own models, as consumer stress and macro volatility persist. Digital-first platforms like Bridget are capturing share by offering liquidity and financial wellness tools, suggesting continued disruption of traditional credit and retail finance. Merchant network breadth, data-driven underwriting, and AI-enabled customer engagement are emerging as key competitive differentiators, with implications for peers across fintech, specialty finance, and retail services as the industry navigates an uncertain macro landscape.