Q1 2024 Upbound Group Inc Earnings Call

Participants

Jeff Chesnut; Senior Vice President - Strategy & Corporate Development; Upbound Group Inc

Mitchell Fadel; Chief Executive Officer, Director; Upbound Group Inc

Fahmi Karam; Chief Financial Officer, Executive Vice President; Upbound Group Inc

Bobby Griffin; Analyst; Raymond James & Associates, Inc.

Brad Thomas; Analyst; KeyBanc Capital Markets Inc.

Hoang Nguyen; Analyst; Cowen Inc.

Derek Sommers; Analyst; Jefferies LLC

Alex Fuhrman; Analyst; Craig-Hallum Capital Group LLC

Anthony Chukumba; Analyst; Loop Capital Markets, LLC

Presentation

Operator

Good day and thank you for standing by, and welcome to the BAM Group earnings conference call. At this time, all participants are in a listen only mode. After the speakers' presentation there will be a question and answer session to ask a question. During this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jeff Chestnut.

Jeff Chesnut

Good morning, and thank you all for joining us to discuss the Company's performance for the first quarter of 2024. We issued our earnings release this morning before the market opened and the release and all related materials, including a link to the live webcast, are available on our website at investor.upbound.com.
On the call today from our bank group, we have Mitch Fadel or CEO. and family custom, our CFO. As a reminder, some of the statements provided on this call are forward looking and subject to factors that could cause actual results to differ materially and adversely from our expectations. These factors are described in our earnings release as well as in the Company's SEC filings. Up-down Group undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. This call will also include references to non-GAAP financial measures, please refer to today's earnings release, which can be found on our website for a description of the non-GAAP financial measures and the reconciliations to the most comparable GAAP financial measures. Finally, out-bound group is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties. Please refer to our website for the only authorized webcasts.
With that, I'll turn the call over to Mitch.

Mitchell Fadel

Thank you, Jeff, and good morning to everyone on the call today. I'll begin with a review of the key highlights from the first quarter, then I'll hand it off to Fahmi for a more detailed review of our financial results and our financial outlook. After that, we'll take some questions. We are very pleased with the start to the year, which included revenues of nearly $1.1 billion, adjusted EBITDA of $109 million in non-GAAP earnings per share of $0.79. The trajectory of our business, which started accelerating last year, continued through the first quarter and into April as both segments grew the top line versus last year. Similar to the fourth quarter. These results were driven by strong execution across our strategic operating initiatives, namely growth in this theme of merchant count and performance of existing merchants, combined with disciplined underwriting decisions, diligent expense management efforts and our emerging direct to consumer e-commerce channels.
And before we dive into our route our segment results, let's discuss some of the enterprise-wide themes we've seen since the start of the year. First, I'd like to start with what we are seeing in the external environment with our consumers. Broadly speaking, the macroeconomic conditions across the quarter were stable with continued strength in employment metrics, but also with persistent inflation trends that continue to impact our customers' discretionary spending. In Evoltra, the market's expectations on the timing and size of potential rate cuts in 2024.
This quarter was also affected by tax season, which typically has a positive impact on merchandise sales from while the external conditions this quarter were characterized with puts and takes our consumers, our customers navigating uncertainty and have remained resilient through a variety of changes in the macro landscape over the past several years that resiliency and our focus on execution helped deliver profitable top line growth at least charge-off rates that were in line with our plans for the quarter. And looking ahead, we've discussed our durable business model can succeed in a variety of macroeconomic environments when metrics like employment and overall consumer spending are stronger, we expect consumer confidence to drive GMV growth and to support portfolio growth and positive payment behaviors.
Conversely, more difficult conditions introduce new consumers to our space through trade down when traditional lending solutions tightened availability of credit. While we continue to assume stable conditions across the year with elevated inflation persisting, we believe we are well positioned to adjust our business to the external environment and continue to grow.
Second, we're continuing to enhance our underwriting capabilities with new tools and datasets for around the center. We're now leveraging a seamless, more advanced proprietary fraud detection algorithm to better to drive better outcomes on our e-commerce channel which continues to grow as a portion of the segment's total revenue, representing over 26% of the segment's revenue for the quarter. As that channel grows, RentACenter will be better positioned to underwrite profitable outcomes and deliver higher customer service levels.
And at Sema, we continue to integrate our Acceptance Now merchants into the CMS decision engine, and we expect to approve more cohort to have stronger performing leases, thereby increasing GMV in improving losses at the same time. Overall, the integration of a now into a seam is nearing completion and should result in improvements in a seamless lease charge-off rate across the balance of the year as the prior higher loss in our originated portfolio winds down. Importantly, this unlocks new growth opportunity for a scene, but because we can accelerate our efforts in our differentiated staff model with a more robust decisioning platform and can introduce full online checkout capabilities of some of our larger retailers, something the Acceptance Now platform could not do before the transition.
And third, I'd like to reinforce our relentless focus on customer centricity, which for us means to stakeholders the consumer and the retailer for consumers. It's building relationships that start wherever we meet them, whether in one of our 2,400 Rent-A-Center stores are more than 600 staff to sema locations, the 35,000 virtual doors and assume a merchant partner location or even our variety of fully virtual channels in both segments.
Once their relationship is established, our goals to strengthen the connection over time and expand how we serve that customer while lowering our cost of service through our ongoing digital investment as their needs change, we can serve those needs through the channels I just mentioned, but also directly through our direct to consumer efforts such as the CMO marketplace and through our credit card partnership for consumers graduating to traditional credit for our retail partners is building relationships and customizing our process to meet their needs and ultimately drive more sales, whether in-store virtually in-store staff through their website or pure e-com retailers our goals to support our partners to drive incremental revenue while expanding access for underserved customers. So as we work to grow our share of market with new retailer additions and our share of mind with existing merchants with more leases per location. We also equally focused on increasing and new customers by offering more solutions that meet our customers' needs and increasing customer lifetime value.
Let's review the details behind our segment financial results on Slide 4. Starting with the theme, we achieved a strong double digit increase in GMV for the second consecutive quarter with an improvement of nearly 20% year over year. Excluding the stimulus period of 2021, we achieved the single largest first quarter GMV that Ixia has ever recorded this was powered by a number of factors. Our business development sales team delivered all-time high all-time highs for active merchant locations and helped drive more productivity per existing location that led to significant increases year over year in both applications and funded leases for our CMO business. On top of those efforts, we realized a full quarter of elevated activity from to our enterprise partners, namely Wayfair and actually dot-com channel after the realignment last year of their LTO partner relationships. As a result, we continue to find success in the furniture vertical for sema despite the broader challenges in that category from the pandemic related pull-forward.
Finally, our direct-to-consumer offerings continue to expand with applications on the assumed marketplace growing 68% year over year in the first quarter in GMV growing 51%, albeit working from a relatively small base as we further develop the channel. Collectively, these efforts resulted in Q1 revenues up 16% year over year. Average ticket size was down slightly in the quarter. So the top line lift was driven by expanded penetration as we continue to add merchants and grow our staffed and e-commerce businesses. We also have a robust pipeline of integrations planned for the remainder of the year, which we believe will be a tailwind for growth in 2024 and beyond.
We are pleased to recently announce another exclusive relationship with a top 50 furniture retailer in the quarter, which came online in late April. Overall the C-MAX in the first quarter with an open these count that was more than 24% higher versus last year is was sequentially higher than our seasonally I Q4 from an underwriting standpoint, we continue to take an active and vigilant approach to risk management. Our CMS segment loss rate was 9.6%, up 70 basis points from the year ago period, but down 30 basis points sequentially despite the volume of applications increasing 32% year over year. And all the strong growth numbers I've just been discussing seem accomplished all of that with an approval rate of 130 basis points below last year.
Extra delinquencies that seamless rate in the first quarter was down 80 basis points from a year ago and flat sequentially to the fourth quarter of last year. These results were all in line with our expectations for the first quarter and with the Acceptance Now integration into a seamless decision engine. We remain confident in our risk management outlook for the year. Brendan finished finished the first quarter with a same-store leased portfolio value that was slightly positive year over year, we were particularly pleased to see positive same-store sales growth of 80 basis points for Rent-A-Center, which represented the first increase in same-store sales in eight quarters.
Going back to the stimulus period to 2021. In addition, we saw slight year over year increases in our customer count in our open lease count is our ongoing omnichannel marketing efforts in digital investments drove higher consumer engagement and outcomes. As I mentioned earlier, Renaissance web channel volume continues to grow and represented more than 26% of revenue in the first quarter, which was an increase from both the year-ago and sequential periods. These elements help deliver revenue growth of 20 basis points, which represent the highest segment revenues since mid 2022 for Rent-A-Center And well, while Renaissance top line was up slightly, we realized a nearly 9% lift in segment adjusted EBITDA due to strength on the gross profit line.
This also helped us expand our adjusted EBITDA margins by 140 basis points. Our continued emphasis on underwriting and account management arenas winter resulted in a lease charge-off rate of 4.7% for the quarter, down 10 basis points from the first quarter of last year. Our past due rate, which is an early indicator of potential future lease charge-offs was 3.1%, which was up 10 basis points from a year ago period, but flat sequentially. As the tax season runs off, we expect our improvement in the second quarter, similar to trends in 2023 and consistent with our guide last quarter as Redfin, a core consumer continues to deal with higher inflation and pressure on payment behavior.
Our account management efforts will be an increasingly important element of customer connectivity in the near to medium term to help us maintain our delinquency and charge-off rates in our target ranges. Overall we're very pleased with our operating and financial results in the first quarter. Both segments successfully anticipated anticipated and met our customers and merchants expectations, enabling us to achieve that 20% GMV growth with sema along with positive same-store sales growth at Rent-A-Center. These results, along with the momentum we've already seen in the early April results, give us confidence that we're tracking well towards achieving our full year targets.
On slide 5, let's discuss the progress we've made on strategic priorities we outlined when we last spoke in sema. We're committed to strong top line growth through our business development efforts with small or medium-sized businesses, our enterprise sales initiative for super-regional national accounts and our direct to consumer channel. While our enterprise client team continues to build presence and relationships with the largest retailers. Our SMB team continues their local and regional merchants as partners on our virtual leasing platform.
This quarter, we realized a 9% lift in active locations year over year, while adding merchants and capabilities to our online direct to consumer marketplace as well. We're also refining and enhancing the ways in which we work with our existing merchants and consumers with the goal of driving customer retention in more active leases per merchant location per month. So this will be driven by a combination of our service first mindset as well as our investments in the digital tools to help us outperform expectations. And by way of example, we replaced an LTO competitor and added the large regional furniture retailer last year that was realizing around $100,000 in lease activity per month with stronger collaboration and leveraging our integration tools, e-commerce capabilities and best practices.
We drove a meaningful difference to their sales. In fact, in the first quarter, we've partnered with them to achieve a significant increase to nearly $1 million of lease activity per month, showcasing that we can elevate results exceed expectations for our partners and our customers it Rennardson. And we continue to invest in our online e-com experience, both web and mobile to help meet our customers when and where they want to interact with us. We also executed a variety of marketing campaigns and promotions across the quarter to engage our customers and boost our value proposition, which which helped deliver the top line and same-store sales growth that we booked this quarter relative to the year-ago period.
Additionally, we continue to rollout our new rental center point of sale system known internally as rack pad, which will enhance the productivity of our store base coworkers and provide more centralized visibility and reporting for our regional and district leaders has been architected for flexibility and additional scalability, enabling it to accommodate the evolving needs of our shore-based footprint. Our outbound team is committed to creating a shared services environment unifies and amplifies our capabilities across the organization, things like underwriting information, technology, collections and operations.
To that end, this quarter rolled out an additional network of collection points for Astemo merchandise. It leverages Rent-A-Center locations for returns and customer service. We believe this will drive improvements in a seamless lease charge, operate and make it easier for customers to interact with us while simultaneously providing select Rent-A-Center locations with additional merchandise to offer for rent. Additionally, we continue to build out our partnership with Concur as we explore the nonprime consumer credit adjacency to our current LTL space.
We're now beginning the ramp-up phase for the CMO private label credit card, which can be used with any assume a partner location. And we assume a general-purpose credit card, which can be used anywhere MasterCard is accepted. As we expressed previously, we believe we can leverage our substantial in-house knowledge of non-prime consumers, extensive customer base and our brand awareness offer white label credit products that can help our customers build their credit history for shopping for the products and services they need for themselves and their families over time. We believe the nonprime consumer credit adjacency will represent an important and growing contributor to our bottom line.
Finally, I'd like to share my perspective on our capital allocation philosophy. After investing in the business will support our dividend first, with with a focus on deleveraging. After that, as we work to reduce our leverage ratio to less than two turns, our share repurchase strategy will be a tertiary goal one that's opportunistic rather than programmatic. So before I hand it off to family, I'd like to manage to acknowledge the collective work of our whole team because they're the reason we're able to deliver these strong results and their commitment and passion has helped deliver deliver these terrific results in a terrific start to the year.
And with that, I'll turn it over to Fahmi.

Fahmi Karam

Thank you, Mitch, and good morning, everyone. I'll start today with a review of the first quarter results and then discuss our outlook for the rest of the year. After which we will take questions.
Beginning on Page 6 of the presentation. Consolidated revenue for the first quarter was up 7.9% year over year for the Sema up 16% and rental center up 20 basis points. Rentals and fees revenue were up 8.2%. Merchandise sales revenues increased 10.3%, reflecting higher GMV at a CMO and a larger portfolio at Rent-A-Center coming into the year, consolidated gross margin was 48.3% and decreased 150 basis points year over year for the 190 basis point decrease in the CMS segment, partially offset by 110 basis point increase in the Rent-A-Center segment.
Consolidated non-GAAP operating expenses, excluding lease charge offs and depreciation and amortization were up mid single digits, led by mid 10s increase in general and administrative costs, which was a result of corporate investments in technology and people in addition to an increase in nonlabor operating expenses led by investments to support a similar application growth. The consolidated lease charge-off rate was 7.4%, a 30 basis point increase from the prior year period and in line with our expectations. On a sequential basis, the consolidated lease charge-off rate decreased 10 basis points due to a 30 basis point sequential improvement at SCE putting the pieces together, consolidated adjusted EBITDA of $109.1 million decreased 2.2% year over year as higher RentACenter segment EBITDA was offset by lower seamless segment EBITDA and higher corporate costs.
Adjusted EBITDA margin of 10% was down approximately 100 basis points compared to the prior year period with approximately 140 basis points of expansion for Rent-A-Center, offset by approximately 260 basis points of margin contraction for a CMO and a 20 basis point increase in corporate costs as a percentage of revenue. I will provide more detail on segment results in a moment.
Looking below the line, first quarter, net interest expense was approximately $29 million compared to 28 million in the prior year due to approximately 80 basis points of year-over-year increase in variable benchmark rates that affected our variable rate debt, which is approximately $862 million at quarter end. The effective tax rate on a non-GAAP basis was 26% compared to 27.4% for the prior year period. The diluted average share count was 55.8 million shares in the quarter.
Gaap earnings per share was $0.5 in the first quarter compared to earnings per share of $0.84 in the prior year period after adjusting for special items that we believe do not reflect the underlying performance of our business. Non-gaap diluted EPS was $0.79 in the first quarter of 2024 compared to $0.83 in the prior year period. During the first quarter, we generated $33.6 million of free cash flow, which decreased from $95.9 million in the prior year period, primarily due to a CMO GMV growth. We distributed a quarterly dividend of $0.37 per share, an increase from $0.34 per share in the prior year. We finished the first quarter with a net leverage ratio of approximately 2.7 times unchanged from the fourth quarter.
Drilling down to the segment results, starting on page 7 for sema double digit year over year. Gmv growth continued in the first quarter after returning to growth with a 19% year-over-year increase in the fourth quarter of 2023. Gmv increased nearly 20% year over year in the first quarter of 2024. Gmv growth was above our expectations and was driven by year-over-year growth in key underlying drivers with active merchant locations up over 9% year over year, more productivity per merchant and a full quarter of the enterprise e-com partners Mitch mentioned earlier, which resulted in overall applications increasing over 30%. Those tailwinds were partially offset by lower approval rates across all major categories.
As we remain disciplined in our underwriting approach as inflation continues to impact our core consumer base, the asset value of inventory under lease was up mid 10s year over year. Revenue increased 16% year over year, including a 16.3% year-over-year increase in rental and fees revenue and a 15.2% increase in merchandise sales revenue due to a larger beginning portfolio in 2024 compared to last year. These charge offs for the seamless segment were 9.6%, 70 basis points higher year over year and 30 basis points lower sequentially. The year-over-year increase in assumed the lease charge offs was slightly better than our expectation as the A. Now leases originated on the legacy decision engine will now begin to wind down. The conversion will strengthen our underwriting capabilities and should reduce lease charge-off rates at least cohorts from the legacy system wind down throughout the year.
Operating costs excluding lease charge offs were up approximately $7 million in the first quarter, which was flat as a percentage of revenue. Adjusted EBITDA of 64.9 million was down 5.4% year over year, primarily due to a 19.3% increase in cost of goods sold. That was partially offset by a 16% increase in revenue adjusted EBITDA margin of 11.6% decreased approximately 260 basis points year over year, while gross margins contracted approximately 190 basis points. The decrease in margins were due to a few factors, including a growing portfolio where revenue lags higher incentive labor and underwriting costs, an increase in merchandise sales in the quarter from a dollar perspective due to a larger portfolio entering tax season than last year and the performance of the legacy.
Now portfolio, all of which is in line with our expectations for the Rent-A-Center segment at quarter end, the same-store lease portfolio value was slightly up year over year, while same-store sales increased 80 basis points year over year, improving from a 1.6% decrease in the fourth quarter of 2023. Total segment revenues returned to growth in the first quarter, increasing 20 basis points year over year, improving from a 1.7% decrease in the fourth quarter. The increase in revenues was driven by an 80 basis point increase in rental and fees revenue. First quarter merchandise sales revenue decreased 3.6% due primarily to fewer customers electing early purchase options compared to the prior year period and represented an improvement of 12.2% decline in the fourth quarter.
Fleet charge-offs improved year over year, driven by ongoing underwriting and account management efforts decreasing 10 basis points to 4.7%. 30 days past due rates averaged 3.1% for the first quarter, up 10 basis points from the prior year period and flat sequentially. Adjusted EBITDA margin for the fourth first quarter increased 140 basis points year over year to 16.6%, primarily due to higher gross margins. In addition to a 10 basis point year-over-year decrease in the ratio of non-GAAP operating expenses, excluding lease charge offs as a percent of revenue. Adjusted EBITDA margin increased 210 basis points from the fourth quarter, reflecting the effect of higher revenues on less variable costs for the Mexico segment adjusted EBITDA was higher year over year, and the franchise segment's adjusted EBITDA was lower due to timing of operating expenses compared to last year. Non-gaap corporate expenses were approximately 12% higher compared to the prior year, primarily due to additional investments in technology and people.
Shifting to the financial outlook, considering the trajectory of our business and the latest projections for the macroeconomic environment, we believe that we are well positioned to achieve the targets we shared for 2024 in our previous earnings call. As a reminder, the forecast assumes a stable macro environment with durable goods demand remaining under pressure, continued disciplined underwriting and no additional material benefit from trade down.
With that backdrop, we'd like to share a bit more of on a quarterly cadence of our performance. Note that references to growth or decreases in generally refer to year-over-year changes unless otherwise stated at a female, we expect to see a similar increase in GMV in the second quarter, continuing the trend we have experienced the last two quarters, including a strong April for the year. We are updating GMV guidance from up mid to high single digits to double digit growth. Rent-a-center's portfolio should be up slightly in the second quarter from the first quarter based on what we saw in April from a consumer demand perspective for both SMA and RentACenter.
We expect the second quarter revenue to fall the same sequential pattern as in 2023, with a slight step back in line with typical seasonal patterns coming off tax season and lower merchandise sales. We expect losses to remain within our previous guidance commentary with Rent-A-Center improving in the second quarter from the first quarter and to be in the 4.5% range for the year, flat to last year, assuming losses are expected to improve in the second half of the year as a legacy now portfolio winds down to finish the year also relatively flat to 2023.
In terms of adjusted EBITDA margins for the second quarter, the Rent-A-Center and corporate segments should track the first quarter with a similar realizing an improvement driven by a pickup at the gross margin line coming off tax season, we are assuming a fully diluted average share count of 55.9 million shares for the quarter with no share repurchases assumed in our guidance. Interest expense and our tax rate are expected to be similar to the first quarter, resulting in a non-GAAP EPS range for the second quarter of $0.95 to $1.5.
Although part of the GMV growth is most likely benefiting from some of the trade down, we are not including any material benefit in our forecast. So we continue to monitor the consumer credit profiles we receive via retailer waterfalls. Additionally, the CFPB recently enacted new rules, reducing credit card late fees, which are currently facing legal challenges from industry participants seeking an injunction. We are waiting to see what impact, if any, the rule changes may ultimately have on credit card approval rates and approval amounts, which could drive trade down to the LTO industry.
In terms of capital allocation, I will reiterate Mitch's earlier comments we have a proven business model that generates strong operating cash flows over time and an experienced management team to allocate those cash flows in support of our strategic priorities.
Our first priority continues to be supporting innovative ideas that will improve our customer interactions and merchant outcomes. Concurrently, we will focus on enhancing shareholder value by maintaining our commitment to our dividend program. And being opportunistic regarding share repurchases. Based on the strength of our year-end results and our outlook for 2024, we raised our dividend in the fourth quarter by $0.03 per quarter, and we distributed our first dividend at the increased rate in the first quarter. We expect the balance of our free cash flow this year will go towards deleveraging as we progress towards a net leverage ratio of under two times and our long-term target of 1.5 times.
We ended the first quarter at 2.7 times, which included $19 million of debt paydown in the quarter and an increase in working capital needs to support GMV growth. The strength of our balance sheet gives us confidence in our ability to execute against multiple priorities. As of quarter end, we carried over $0.5 billion of available liquidity, which positions us well for both defensive and offensive posture depending on future macroeconomic circumstances circumstances. Looking ahead, we'll monitor market conditions for opportunities to optimize our debt capital stack to best support our growing business.
Finally, on slide 11, the first quarter was a promising start to the year for the Company. Our team's focus on execution and expense management as well as our strategic investments in key growth drivers resulted in operational and financial performance that was at the high end of our expectations. Our first quarter results and our strong competitive position give us confidence that we have the tools and team in place to continue producing strong risk-adjusted returns at each of our business segments. Going forward, we will continue to execute against our day-to-day priorities to serve our customers and boost our retail partners' businesses while pushing forward with the innovations that help us achieve our long-term growth plans.
Thank you for your time this morning. Operator, you may now open the line for questions.

Question and Answer Session

Operator

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name. To be announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. Our first question comes from Bobby Griffin at Raymond James.

Bobby Griffin

I guess the first thing I want to talk about it seemed a little bit more of a high-level question. The Gym, the pickup there has been very impressive and seems like it's balanced between new merchants as well as some organic growth and understand there's a timing lag between the revenue in some of the cost. But can you talk about what the what you see kind of now that you've got a good handle on that business as the incremental flow through and there and I'm kind of just really talking in context of EBITDA was slightly down despite all the growth. And there's that timing factor, but what should the flow-through be over a more consistent period of time think about on an annual basis or something like that?

Fahmi Karam

As we commented on the prepared remarks, we expected the first quarter this year to have a pretty tough comp from both a margin standpoint, gross profit margin standpoint as well as an EBITDA margin standpoint. So the results for sema are very much in line with our expectations. And as you know, the revenue does lag the GMV probably by a couple of months, maybe even a full quarter.
But looking out for the full year, we still expect the margins to pick back up in the second quarter seasonally and then and where we've targeted the margins to be for the SME segment in the low 10s to mid 10s range. So we haven't changed our guidance there at all for the seamless segment. So we expect the flow through to be very similar to what we saw in 2023, just with higher revenues coming off the two quarters in a row of 20 for almost 20% growth from a GMV standpoint. So so very consistent with what we saw in 2023 and very consistent with the guide that we had coming into the year.

Mitchell Fadel

And I'd add to that and add to that, Bobby, that that not only does the revenue lag a little bit. But so too, I mean, some of the expenses are upfront. When you think about all that growth and underwriting expenses and and you pay, you pay some rebates on that and the growth depending on the retail partner and things like that and those are all those are all paid on the GMV that instantly underwriting on and what was it 30,000 more applications or something like that?
So with all that growth you get not only is revenue lag a little bit, but the expenses are upfront. But yes, as the year goes on sales, EBITDA margins coming up. And of course, the the tax season of how it affects the first quarter. When you think year over year there was a little more there was a little more margin deterioration based on the from tax season than the first early payouts on the same as cash or the cash option stuff, but it is seamless, similar, we're similar to pre-pandemic levels, but it was higher than last year, the impact of that. So those are all the factors that are going into.

Bobby Griffin

And I guess secondly, permitting and this is more industry type question and maybe it's across both businesses. But you know, we haven't it doesn't seem like people are that the industry wants to call it a lot of trade down yet. It's incremental signs of it I think is getting reference and I don't know the exact wording everybody is using. But so with your GMED. GMV growth, is it all just market share shifts going on in between all the players. And since we're not really seeing a major impact of trade down where we had actually, if that does materialize, you could see even further upside. I'm just trying to unpack kind of the organic growth here because it does seem notable without any major trade down or significant trade down.

Mitchell Fadel

Yes, I think that's a good point, I think I think yes, trade down, this is a hard thing to quantify and put your finger on as why nobody wants to talk about how much is trade down but I agree with the point I think you're making there's got to be some trade down in there right now. How material it is a question you get different answers from different people. But certainly half of our GMV growth when you have 9% merchant growth is coming from there. We're certainly taking share in the market, but there's trade down in there.
I think I think I can't tell you how much but straight down, but there's certainly some if you listen to that, if you listen to lenders above us in the stack you here. I'm talking about tightening. So yes, they're straight, certainly trade down in there that quite honestly, I think there's more to come later news, not in our forecast, but I think there's going to be more to come. Obviously, the the credit card fee issue, you know, could could cause even more tightening above us and so forth. So I think there's some in there, and I think there's more to come.

Bobby Griffin

Thank you. That answered my follow-up as well. So I appreciate I'll jump back in the queue. Best of luck going forth.

Mitchell Fadel

Thanks, Bob.

Operator

Thank you. One moment for our next question. Our next question comes from Brad Thomas at Key.

Brad Thomas

Thank you. Good morning, Mitch, and finally, I wanted to follow up first on Sema and ask a little bit about what has been working for you in terms of these wins. Tom, can you share a little bit more about the dynamics behind perhaps where your approval rates may be different on any sort of kickback to retailers that you're using? What is it that you think has changed here that's helping to drive it's frustrating.

Mitchell Fadel

Yes, I think it's a good question. I think it's a there's quite a few things. Actually, our sales team is hitting on all cylinders, even without any of the biggest name brands coming in from a national account standpoint, regional account wins, the SMB account wins. The sales team has done a great job both in the field and our inside sales teams and so forth. Our direct to consumer team, the people that do the programming for that are are doing a great job adding adding merchants to that in always looking at different friction points and any kind of any kind of marketplace you're always looking at that.
We obviously do have some nice national accounts that we've got 100% of national accounts. Now like actually corporate come in Wayfair last year due to repositioning of LTL providers and so forth, companies like Rooms To Go and Bob's Discount Furniture. So so national accounts are performing very strong forces as well. But the combination of the sales team and then it's the differentiation, I think in some of the things that differentiate us from our competition brands where we from an integration standpoint, we believe were the easiest to integrate with with different with all with different partners, our e-com processes that we compared to everybody else is not only easier to integrate, but works works very, very well.
And we have an ability others don't have to leverage our China center when it comes to large partners and how we work together. We have the staff, the option that really drives revenue. And when you take a 30 or 40 store regional player and you so probably don't have enough volume in every store to justify a subject matter expert. He and his team of subject matter expert in the store to supplement their sales team. But if you, let's say you do it in 10 out of the 40 in, of course, you're you're going to get exclusivity for spending the money on the staff, not only in those 10 stores.
But all of 14 that examples I think are staffed option is a differentiator. And when I talk about that sales team out there doing such a great job, they also it's not just signing people up, but also the ongoing training in this where you get some of that organic sales, organic increases by going back in and constantly doing that they're training. You can you can sign people up with this. We can sign people up with a smaller team, but you won't get the organic growth. If you're not going back in those stores and depending on the partner monthly or quarterly in making sure new salespeople know how to how to how to sell the transaction within their retailer and stuff like that. So I think it's a combination of of all those things.
Sales underwriting. I mean, our approval rates were lower than they were last year. I don't hear differences among in approval rates between us and competition. I think those are those are pretty consistent. You think about losses within the industry is pretty is pretty consistent throughout the partners, obviously are so ours will get better as the year goes on as the legacy now accounts wind down. But I don't think if it's approval rates or buying the business, I think your other part of your question you asked about if we rebase, we all offer some rebates depending on the size of the account. Those haven't really changed over the years. They're not they're not any higher now than they were before. So I think it's really the other stuff I just mentioned.

Brad Thomas

And that's really helpful. And if I could ask a follow-up on the Rent-A-Center side of the business and just congratulations on getting same-store sales back to positive territory and after the two years of declines, I guess if you could just talk to your confidence that we're past a more difficult period here for the segment revenue side of things. I know that in the first quarter, there can be some time sometimes some abnormalities with early buyouts and tax refund season. How are you feeling about that customer and the outlook to keep same-store sales positive here for the year?

Mitchell Fadel

Yes, certainly, certainly optimistic when it comes to VOD, first of all, do you think about I assume when you think about trade down, the same thing happens at RentACenter does come a little slower, though because they're not any they're not in a waterfall stack within a retailer. So when consumer credit tightened to the eventually helps run the same, but not as quickly as I can help with sema through for probably was a obvious reasons, but run the center.
Yes, I think we mentioned in the prepared comments that even as we looked at April, the portfolios looking looking looking good. So we would expect the at least slightly positive same-store sales for the whole rest of the year. We are not going to start turning five and 8% and 10% same-store sales numbers, but certainly slightly slightly positive numbers should which is great for that could be a mature business. The website continues to grow the resiliency that customer to tear back to maybe the core of your question that certainly certainly proven over the years, you go back to the Great Recession and so forth in that in the customers very resilient when when you have really strong consumer confidence, you know that business grows even better.
And when you have when things get tight out there, you do see trade down so it's been very resilient over the years is continue. It's nice to be in the positive territory. We'd like it to be even a little higher as we go through the year and that team is certainly working hard to do that very encouraged by the growth with the in the e-com channel a lot. A lot of new customers come in that way their delinquencies in line as far as the pressures on the customer to their losses came down a little bit year over year in their their delinquencies. As you saw in the presentation, as we mentioned, are flat. So the customers performing the other teams performing there, and we've continued to kick we'd expect to continue at least slow low single-digit comps positive comps the rest of the year pretty much.

Brad Thomas

Thanks.

Operator

Hoang Nguyen, TD Cowen.

Hoang Nguyen

Hi, team. Congratulations on the quarter. And I just wanted to touch base on maybe the guidance and looks like business trends are pretty strong and, you know, has improved since the last quarter. And I mean the guidance is maintained, right? So I guess my question is, what would you what would it take for you for you guys to get more constructive on the guidance going forward. And maybe if you could give us some color on some of the strong and weak categories within ICMA. during the quarter, it would be helpful. And I have a follow-up.

Fahmi Karam

Thank you, morning, and thanks for the thanks for the question. Yes, look, I think as far as the guidance for the rest of the year, we're very pleased with the first quarter results, obviously at the high end of our range. So we're very pleased with the performance. We're pleased with the momentum we built into both businesses, but a seamless specifically with another strong quarter from a GMV standpoint, which we look to continue for the rest of the year.
As far as the guidance goes, as I said in the quarter came in line with exactly where our expectations were maybe slightly towards the higher end. So still early in the year, no point to change at this point to for the rest of the year. But as we progress, if we get the margin pickup, we expect we continue to do the GMV growth that we expect.
Will we revisit the outlook at DO at the appropriate time. But we feel really good with our results that we've been able to do in April has been a continuation of the first quarter as far as what we saw from a strength or weakness standpoint on a same, I'm guessing your question is really around GMV performance, loss performance really strong across the board. If I look at all the different categories. We talked a little bit about furniture, even though furniture has been under pressure. Furniture and mattresses have been under pressure as well as a category.
Our ability to add some of those merchants that Mitch has mentioned has made that category for us as a growth category even in this environment. So between furniture, auto, jewelery, some of those bigger categories for us. We're really up across the board on all of those categories. Performance has been in line with our expectations of the A. Now conversion is still putting a little bit of headwinds on our loss rates. But early indications of the merchants who've converted over to the CMO platform have been really, really strong, both from a GMV standpoint and from a early read on performance.

Mitchell Fadel

So across the board, all categories being able to grow GMV at the level that we've been growing it with with tighter underwriting and lower approval rates is a great story for us and should be a tailwind for us for the rest of the year at the end of that family in Hong the well, maybe we'll maybe lost you a little bit as you think about the commentary family, given the second quarter of when we went through all the different different components of it and came up on a range between $0.95 and $1.5. So if you just use the midpoint of that range, $1?
Yes, the when the first quarter $0.79 $1. I mean that's not that's not enough and then increase from $0.79 to $1. And when you think about how that sequences in the comparables that sequence that and people say, well, when's that going to flow through I mean, $0.79 going up to $1. That doesn't always happen in this industry. But when you look at our numbers or anybody else has. So that's a there's a strong trajectory there. So So don't lose sight of that. I guess my point.

Hoang Nguyen

Got you. And I saw that you guys commented on the early buyout trends for Rent-A-Center, but I mean, can you give the same I mean, can you give comment on the Sema buyout early about trend as well, I mean, I think merchandise sales in sema was a little bit elevated this quarter. So just want to get some color on that.

Fahmi Karam

Thank you. Sure. Yes, as we mentioned on the the early purchase option we think is pretty much normalized to pre-pandemic levels. What we saw this year. If you look at each of the vintage and monthly vintages for the last six, seven months. They've come in flat to last year, if not slightly lower from us a percentage, but outcome standpoint of the 90-day buyouts. So we continue to normalize there.
And for the quarter coming into the year with the kind of mid 10s higher portfolio, you're going to have higher merchandise sales from $1 perspective. And we saw that play out in the first quarter. So merchandise sales were up year over year, and that obviously has an impact to our to our gross profit margin. But when we look at it on a vintage by vintage basis, it's very normal to pre-pandemic levels and actually slightly better than it was this time last year. So that trend has continued.

Hoang Nguyen

Got you. Thank you very much.

Operator

Our next question comes from Derek Somers at Jefferies.

Derek Sommers

Hey, good morning, everyone. Kind of touched on it a little bit. Your commentary on the theme of growth, but just wondering if you could touch on kind of yield product category mix at Rack as well and then kind of trends in average ticket price across both rack and industry?

Mitchell Fadel

Yes. On the ticket prices, it was actually down a little bit. I see mom and not surprising that in this economy. And of course, there's a little bit of deflation out there to be more on the electronics side. But even in furniture, there's there's some So down a little, which is just probably makes the growth that that much more impressive because it's not ticket, but they didn't drop a lot, but it is down a little bit. The mix is, as was mentioned earlier, is all across the board in sema with with between furniture and in jewelry, electronics, appliances and wheel and tire, and same with same with around the center, rather finish ticket struggling a little higher in the first quarter year over year.
That's a lot of the mix we carry and so forth and what we put in the stores of. But it is only slight. So we're not getting a lot of that ticket is getting a lot of new customers and it's pretty much across the board. We did see some you know, we get asked a lot about the furniture category. And of course, that had the biggest pull-forward of demand during the during the pandemic. But we've seen in the first quarter, some of our larger partners a couple of them have turned positive comps year over year.
Car shows after two years of negative comps, but at least they've turned positive. So we're starting to see well, we're talking about, they actually have culled some green shoots in there about starting to see some positive. You may have seen the report of Wayfair report this morning was was pretty positive on the furniture side of things, I think we're seeing some similar results in furniture where where that seems to be coming back. It certainly has at least stabilized and isn't dropping anymore. I would say it, if anything, it's actually coming back a little bit.

Derek Sommers

Great. Helpful color there. And then just one more quick one for me. Kind of on the Acceptance Now charge-offs. And just based on your integration commentary there onto a schema, is it fair to assume that charge-offs headwind is going to abate over the next quarter or two quarters from now and that that headwind will be gone?

Fahmi Karam

Yes, I think it's going to be more the second half of the year than it is next quarter. If we guided or guided to a better second half than the first half. And so second quarter loss rate will be similar to the first quarter and then you'll start to see a trend down, we still think for the year will end up pretty flat to where we ended in 2023, somewhere in between the 9.9% and 9.5% range for the year. So look forward to start winding down now that it's pretty much fully converted and probably closer to the second half of the year.

Derek Sommers

Perfect. Thank you. That's all for me.

Mitchell Fadel

Thanks, Derek.

Operator

Our next question comes from Alex Fuhrman at Craig-Hallum Capital Group.

Alex Fuhrman

Hey, guys. Thanks for taking my question. Really nice to see the very strong GMV growth that has seen, especially in spite of lower approval rate here. Can you give us a little bit more color on what's been driving the lower approval rate and if you were to see more meaningful trade down and later this year or even next year, especially on perhaps as a knock-on effect, if the credit card fee, if you go through, would you start to see approval rate for then start?

Mitchell Fadel

Yes, good question, Alex. It certainly could depending how much the trade down happens because yours is certainly going to be improving. Does that come in at the top of the top of the funnel, so to speak? So it certainly could. And of course, that all of that. When you think about underwriting, all varies depending on the category, depending on the retail partner, we're very targeted when we when we look at think look at underwriting in our underwriting committee, which is which includes all the way up to family and myself.
So it is, I guess, every other, maybe one retailer foreseeing more more trade down. They might have had a higher approval rate in the first quarter than last year. That's accumulation of everybody them single would we say, of down 130 basis points. The approval rate. So it's never all across the board. It's very targeted, have a process and certainly where we have the ability to target down every single store.
So in our underwriting team is so good that it's that target is not a blanket, certainly on the seamless side. That's part of all that benefit we're going to get from a C month and those Acceptance Now conversion. So but certainly more more trade down. I hope that number performance, you know, of the customer as payments come in that, that that affects the to the customer performance, not just trade down or how well we're collecting on our on our current portfolio impacts and so forth.
So think of all of that will matter. And we'll just we'll be diligent. It's always a balance of we've got plenty of demand, but we need to keep our and certainly we could add higher T and B, if we were kind of running wide open, so to speak, will we wouldn't do that. So it's a balance.

Alex Fuhrman

Okay. Thank you very much. Appreciate that.

Operator

Thank you. One moment for our next question. Our last question comes from Anthony Chukumba of Loop Capital Markets.

Anthony Chukumba

Good morning. Thanks for squeezing my question in. So I was just looking back at your original guidance for 2020 for what you've reiterated and certainly seems like you're off to a pretty good start and you are anticipating three Fed rate cuts now it looks like that's certainly probably not going to happen. Maybe you don't even get any. Does that give you any sort of pause on, you know, given that it really looks like inflation is sort of higher for longer we may not get the Fed rate cuts. How do you think about that?

Fahmi Karam

Yes, good morning. Thanks for the question. The new version of our forecast doesn't include three rate cuts any longer and pretty consistent with how the market is feeling after the last few data points. But given that we've given a $0.5 range to our EPS guide, we didn't feel that we needed to adjust for it's up $0.08 from an EPS standpoint of having three rate cuts a 25 basis points a piece. So so nothing really there from an EPS standpoint, as far as interest expense goes, we can we can definitely absorb it inside our range as far as any impact to kind of interest rates being higher for longer. I think the consumer, as we stated, has been very resilient to the environment today. So so we expect them to continue to be resilient going forward.

Anthony Chukumba

Going back to maybe the last question from Alex, on why approval rates are a little bit on the lower end. We're very mindful of the environment we're in and the uncertainty in the environment, and we're being very cautious in our approach. And the great part about it is we're able to grow GMV by 20% and still have that cautious approach. So so the consumer is very resilient and we expect them to continue to be resilient funding.

Mitchell Fadel

I think I'd answer that, Anthony, is that, yes, that the range is wide enough to absorb any sense without any rate cuts as well as the start we got off to and in the in the first quarter as well, obviously helps offset that.

Anthony Chukumba

Got it. Okay. And so, you know, it's about just can you just remind us like what percentage of your debt is floating rate debt? I am just looking to adjust your got your guide to $105 million to $150 million thousand net.

Fahmi Karam

Yes, but that remains the same.

Anthony Chukumba

So yes, what percentage is floating rate?

Fahmi Karam

Thanks to about $850 million of the variable to add a little bit higher than that of the $1.3 billion.

Anthony Chukumba

Got it. That's helpful. Thank you. Congrats on the strong start to the year and good luck with the remainder of the year.

Operator

Thank you. This concludes the question and answer session. I would now like to turn it back to Mitch for closing remarks.
Thank you very much, operator, and thank you to everyone who joined us today for an update on our on our first quarter performance and further in our outlook for the remainder of the year shortly. Certainly, I'm grateful for the collective efforts of our team and our merchants who helped deliver such strong GMV and and the positive same-store sales results for the quarter. So a very grateful to everyone the hard work, our coworkers and certainly thankful for your interest and support as well. And we look forward to updating you on two more towards the middle of the year and our continued progress towards our near mid and long-term goals. So have a great day, everyone. Thank you.