BFH 8-K
Bread Financial Holdings, Inc. (BFH)
8-K
2021-01-28
For: 2021-01-28
View Original
Added on
April 10, 2026
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
(Exact Name of Registrant as Specified in Charter)
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(State or Other Jurisdiction
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(Commission
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(IRS Employer
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of Incorporation)
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File Number)
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Identification No.)
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(Address and Zip Code of Principal Executive Offices)
(614 ) 729-4000
(Registrant’s Telephone Number, including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following
provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading symbol
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Name of each exchange on which registered
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this
chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02 Results of Operations and Financial Condition.
On January 28, 2021, Alliance Data Systems Corporation (the "Company") issued a press release regarding its results of operations for the
fourth quarter and fiscal year ended December 31, 2020. A copy of this press release is furnished as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure.
On January 28, 2021, the Company issued a press release regarding its results of operations for the fourth quarter and fiscal year ended
December 31, 2020. A copy of this press release is furnished as Exhibit 99.1.
Attached as Exhibit 99.2 is a presentation to be given to investors and others by senior officers of the Company.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No.
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Document Description
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Press Release dated January 28, 2021 announcing the results of operations for the fourth quarter and fiscal year ended December 31, 2020.
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Investor Presentation Materials.
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| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
Note: The information contained in this report (including
Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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Alliance Data Systems Corporation
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Date: January 28, 2021
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By:
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/s/ Joseph L. Motes III
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Joseph L. Motes III
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Executive Vice President, Chief
Administrative Officer, General
Counsel and Secretary
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Exhibit 99.1
Investor Relations: Brian Vereb ([email protected]),
614-528-4516
Media Relations: Shelley Whiddon
([email protected]), 214-494-3811
Alliance Data Reports Full Year and Fourth Quarter 2020 Results
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•
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Full year net income of $214 million or $4.46 per diluted share demonstrated resilient
performance in a challenging business environment
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•
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Strategic initiatives, cost reductions, and attracting and retaining top talent position Alliance
Data for improved performance
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COLUMBUS, Ohio, January 28, 2021 – Alliance Data Systems
Corporation (NYSE: ADS), a leading provider of data-driven marketing, loyalty and payment solutions, today announced results for the year ended December 31, 2020.
“Alliance Data’s 2020 operating performance demonstrated resilience in a very challenging business environment, with key strategic initiatives undertaken
throughout the year that position us for ongoing improved performance,” said Ralph Andretta, president and chief executive officer of Alliance Data. “We adapted quickly to pandemic-related challenges and succeeded in achieving significant sequential
improvement in our results following the major impact of the pandemic in the first half of last year. At the same time, we made strategic investments in innovation and additional capabilities that have improved our competitive positioning and
enhanced cardmember experience. Specifically, our actions included the acquisition of Bread®, a technology-driven fintech company, our new outsourcing relationship with Fiserv, the launch of our Enhanced Digital
Suite, and the introduction of the Comenity CardSM, each of which is fully aligned with our transformation program.
“Our fourth quarter financial results reflected a continued gradual recovery in Card Services credit sales. Success in our beauty and health & wellness
verticals contributed to the 24% sequential increase in total credit sales in the seasonally strong holiday period. Credit metrics remained resilient and delinquency rates improved as a result of enhanced collection efforts, prudent credit line
management, the expansion of consumer relief programs in 2020, and stimulus payments. LoyaltyOne® activity improved from the third quarter, yet pressure remains from pandemic-related shutdowns throughout the world.”
Andretta continued, “Bread’s growth trajectory continues to accelerate as we onboard digital partners at an impressive rate and have an increasing pipeline of
quality prospects. Active cross-sell partner discussions continue with high levels of interest from our Card Services’ brand partners to augment existing programs with Bread’s white-label solutions. The combination of Bread’s innovative fintech
capabilities and Card Services’ funding, marketing, data & analytics, and underwriting expertise provides promising new opportunities for growth and synergies. We continue to invest in the expansion of our fintech business to capitalize on its
significant growth prospects. We are especially pleased by the recent Bread announcement with Royal Bank of Canada (“RBC”) and the growth opportunity related to this strategic partnership. Our technology partnership with RBC accelerates Bread's
platform growth and enables us to bring our next-generation payment and point-of-sale solutions to more consumers globally.
Alliance Data Systems Corporation
January 28, 2021
“Importantly, we added talent in key areas of our Card Services businesses, including business development, product, data & analytics, and digital innovation
which, accompanied by our strategic investments and plans for the future, give Alliance Data the foundation to drive long-term profitable growth. Also, we eliminated approximately $240 million of fixed cost from our 2019 expense base as we
right-sized our cost structure. We remain committed to prudent expense management and driving ongoing efficiency programs that reduce our cost to serve and enable additional investment in areas of strategic priority.
2021 OUTLOOK
“Looking ahead, we remain keenly focused on balancing growth and profitability to ensure the sustainable economics of our portfolio. In 2021, we expect our
credit sales to increase by high-single digits, with a net loss rate of approximately 6% in the first quarter of 2021, in line with a gradual economic recovery. Our improving credit outlook is a result of our prudent risk management and the actions
we took in 2020,” said Andretta. “Based on our current visibility, credit card and loan receivables at year-end 2021 are projected to be in line with year-end 2020 levels, although average normalized receivables are expected to be down mid- to
high-single digits for the year, reflecting the year-over-year pressure in the first half of 2021. We expect to resume high single-digit to low double-digit card receivables growth as we exit 2021. Total revenue is anticipated to be down low-single
digits compared to 2020 as the impact from lower receivables is partially offset by improving revenue from LoyaltyOne and the Bread acquisition. Expenses are expected to remain flat while we continue to fund initiatives to better position the
Company for future growth. For 2021, our expense forecast includes over $100 million of digital innovation and technology enhancement investment to support growth and the delivery of positive operating leverage in 2022.”
CONSOLIDATED RESULTS
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SUMMARY
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Quarter Ended
December 31,
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Year Ended
December 31,
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|||||||||||||||||||||||
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(in millions, except per share amounts)
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2020
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2019
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Change
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2020
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2019
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Change
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Revenue
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$
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1,110
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$
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1,461
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-24
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%
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$
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4,521
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$
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5,581
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-19
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%
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Income from continuing operations before income taxes (“EBT”)
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$
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146
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$
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167
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-13
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%
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$
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394
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$
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738
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-47
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%
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Income from continuing operations
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$
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93
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$
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130
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-28
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%
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$
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295
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$
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573
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-48
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%
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Net income
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$
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12
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$
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98
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-88
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%
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$
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214
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$
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278
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-23
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%
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Income from continuing operations per
diluted share |
$
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1.93
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$
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2.74
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-30
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%
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$
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6.16
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$
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11.24
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-45
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%
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|||||||||||||
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Net income per diluted share
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$
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0.25
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$
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2.05
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-88
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%
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$
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4.46
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$
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5.46
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-18
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%
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Diluted shares outstanding
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48.4
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47.6
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2
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%
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47.9
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50.9
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-6
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%
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**********************************
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Supplemental Non-GAAP Metrics (a):
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Pre-provision, pre-tax earnings
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$
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299
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$
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548
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-46
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%
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$
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1,661
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$
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1,926
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-14
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%
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Core earnings per diluted share (“core EPS”)
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$
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3.31
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$
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4.12
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-20
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%
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$
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9.39
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$
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16.77
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-44
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%
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(a) See “Financial Measures” for a discussion of non-GAAP
Financial Measures.
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2
Alliance Data Systems Corporation
January 28, 2021
Full Year: Due to the impacts of COVID-19,
consolidated revenue decreased 19% to $4,521 million, compared to 2019. EBT decreased 47% to $394 million, while income from continuing operations decreased 48% to $295 million, or $6.16 per diluted share, all compared to 2019. Net income of $214
million was negatively impacted by an after-tax charge of $81 million in discontinued operations recorded in the fourth quarter of 2020 to indemnify Publicis for amounts agreed to be paid by Epsilon in resolution of a Department of Justice
investigation. Epsilon was sold by Alliance Data to Publicis in July 2019.
Fourth Quarter: Due to the continuing impacts
of COVID-19, consolidated revenue decreased 24% to $1,110 million, compared to the fourth quarter of 2019. EBT decreased 13% to $146 million, while income from continuing operations decreased 28% to $93 million, or $1.93 per diluted share, all
compared to the fourth quarter of 2019. Net income of $12 million was negatively impacted by the aforementioned after-tax charge of $81 million in discontinued operations.
SEGMENT RESULTS
Card Services: Revenue decreased 22% to $879
million, compared to the fourth quarter of 2019, primarily due to the decline in average receivables, reflecting lower sales volumes, and in part from interest rate cuts earlier in 2020. EBT increased 15% to $187 million, compared to the fourth
quarter of 2019, attributable to lower provision for loan loss. The fourth quarter of 2020 included $48 million of charges related to real estate optimization, including $25 million in accelerated depreciation expense. The net principal loss rate
was 6.0% in the fourth quarter of 2020, an improvement of 30 basis points from the prior year period, and the delinquency rate of 4.4% improved 140 basis points from the prior year period.
Credit sales decreased 18% to $7.7 billion, compared to the fourth quarter of 2019, due to the continuing impacts of COVID-19. On a sequential basis, credit
sales increased 24% over third quarter 2020 as consumer spending improved, while average receivables increased 3% due to the holiday season.
LoyaltyOne: Revenue decreased 31% to $231
million, compared to the fourth quarter of 2019, as a result of fewer short-term loyalty programs in market due to the impact of COVID-19, as well as the sale of Precima® in January 2020,
which accounted for $23 million of incremental revenue in last year’s fourth quarter. On a constant currency basis, revenue declined 34% to $218 million, compared to $332 million in the fourth quarter of 2019. BrandLoyalty revenue decreased 35%, or
$81 million, on a constant currency basis, due to a decline in programs with retailer delays related to the impact of COVID-19. AIR MILES revenue decreased 32%, or $33 million, compared to the fourth quarter of 2019 on a constant currency basis, due
primarily to the sale of Precima, as well as lower service and redemption revenue. LoyaltyOne adjusted EBITDA, net decreased 45% to $44 million, primarily due to the decrease in revenue.
Issuance of AIR MILES reward miles decreased 9%, compared to the fourth quarter of 2019, reflecting a decline in discretionary spending, including credit card
spend and delays in promotions by Sponsors. AIR MILES reward miles redemptions decreased 30%, compared to the fourth quarter of 2019, reflecting the impact of the pandemic on travel-related categories, offset in
part by strength from merchandise redemptions. On a sequential basis, AIR MILES reward miles issued and redeemed improved 9% and 22%, respectively, reflecting better business conditions than third quarter 2020.
3
Alliance Data Systems Corporation
January 28, 2021
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking statements give our expectations or forecasts of future events and can generally be identified by the use of words such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “project,” “plan,” “likely,” “may,” “should” or
other words or phrases of similar import. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Examples of forward-looking statements include, but are not
limited to, statements we make regarding, and the guidance we give with respect to, our anticipated operating or financial results, initiation or completion of strategic initiatives, future dividend declarations, and future economic conditions,
including, but not limited to, fluctuation in currency exchange rates, market conditions and COVID-19 impacts related to relief measures for impacted borrowers and depositors, labor shortages due to quarantine, reduction in demand from clients,
supply chain disruption for our reward suppliers and disruptions in the airline or travel industries.
We believe that our expectations are based on reasonable assumptions. Forward-looking statements, however, are subject to a number of risks and uncertainties that
could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, and no assurances can be given that our expectations will prove to have been correct. These risks and
uncertainties include, but are not limited to, factors set forth in the Risk Factors section in our Annual Report on Form 10-K for the most recently ended fiscal year, which may be updated in Item 1A of, or elsewhere in, our Quarterly Reports on Form
10-Q filed for periods subsequent to such Form 10-K. Our forward-looking statements speak only as of the date made, and we undertake no obligation, other than as required by applicable law, to update or revise any forward-looking statements, whether
as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.
Financial Measures
In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, the Company may present financial measures that are
non-GAAP measures, such as constant currency financial measures, pre-provision pre-tax earnings, adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA, net of funding costs, core earnings and core earnings per diluted share (core EPS). Constant
currency excludes the impact of fluctuations in foreign exchange rates. The Company calculates constant currency by converting our current period local currency financial results using the prior period exchange rates. Pre-provision pre-tax earnings
is calculated by adding the provision for loan loss to income before taxes. The Company uses adjusted EBITDA and adjusted EBITDA, net as an integral part of internal reporting to measure the performance and operational strength of reportable
segments and to evaluate the performance of senior management. Adjusted EBITDA eliminates the uneven effect across all reportable segments of non-cash depreciation of tangible assets and amortization of intangible assets, including certain intangible
assets that were recognized in business combinations, and the non-cash effect of stock compensation expense. In addition, adjusted EBITDA eliminates the effect of the gain (loss) on the sale of a business, strategic transaction costs, asset
impairments, restructuring and other charges, and the loss on the extinguishment of debt. Adjusted EBITDA, net is equal to adjusted EBITDA less securitization funding costs and interest expense on deposits. Similarly, core earnings and core EPS
eliminate non-cash or non-operating items, including, but not limited to, stock compensation expense, amortization of purchased intangibles, non-cash interest, gain (loss) on the sale of a business, strategic transaction costs, asset impairments,
restructuring and other charges, and the loss on the extinguishment of debt. The Company believes that these non-GAAP financial measures, viewed in addition to and not in lieu of the Company’s reported GAAP results, provide useful information to
investors regarding the Company’s performance and overall results of operations.
4
Alliance Data Systems Corporation
January 28, 2021
Reconciliation of Non-GAAP Financial Measures
Reconciliations to comparable GAAP financial measures are available in the accompanying schedules, which are posted as part of this earnings release in both the
News and Investors sections on the Company’s website (www.AllianceData.com). The events necessitating a non-GAAP adjustment are inherently unpredictable and may have
a material impact on the Company’s future results.
The financial measures presented are consistent with the Company’s historical financial reporting practices. Core earnings and core EPS represent performance
measures and are not intended to represent liquidity measures. The non-GAAP financial measures presented herein may not be comparable to similarly titled measures presented by other companies, and are not identical to corresponding measures used in
other various agreements or public filings.
Conference Call
Alliance Data will host a conference call on Thursday, January 28, 2021 at 8:30 a.m. (Eastern Time) to discuss the Company’s fourth quarter and full year 2020
results. The conference call will be available via the Internet at www.alliancedata.com. There will be several slides accompanying the webcast. Please go to the website at least 15 minutes prior to the call to register, download and install any
necessary software. The recorded webcast will also be available on the Company’s website.
If you are unable to participate in the conference call, a replay will be available. To access the replay, please dial (800) 585-8367 or (416) 624-4642 and enter
“4252908”. The replay will be available at approximately 11:59 a.m. (Eastern Time) on Thursday, January 28, 2021.
About Alliance Data
Alliance Data® (NYSE: ADS) is a leading provider of data-driven marketing, loyalty and payment solutions serving large, consumer-based industries. The
Company creates and deploys customized solutions that measurably change consumer behavior while driving business growth and profitability for some of today's most recognizable brands. Alliance Data helps its partners create and increase customer
loyalty across multiple touch points using traditional, digital, mobile and emerging technologies. A FORTUNE 500 and S&P MidCap 400 company headquartered in Columbus, Ohio, Alliance Data consists of businesses that together employ over 8,500
associates at more than 50 locations worldwide.
Alliance Data’s Card Services business is a provider of market-leading private label, co-brand, general purpose and business credit card programs, digital
payments, including Bread®, and Comenity-branded financial services. LoyaltyOne® owns and operates the AIR MILES® Reward Program, Canada’s most recognized loyalty program, and Netherlands-based BrandLoyalty, a global
provider of tailor-made loyalty programs for grocers. More information about Alliance Data can be found at www.AllianceData.com.
Follow Alliance Data on Twitter, Facebook, LinkedIn, Instagram and YouTube.
5
Alliance Data Systems Corporation
January 28, 2021
ALLIANCE DATA SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
|
|
Three Months Ended
December 31,
|
Year Ended
December 31,
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||||||||||||||
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2020
|
2019
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2020
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2019
|
||||||||||||
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Revenue
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$
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1,109.9
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$
|
1,461.0
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$
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4,521.4
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$
|
5,581.3
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||||||||
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Operating expenses:
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||||||||||||||||
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Cost of operations
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635.2
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728.3
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2,183.0
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2,838.4
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||||||||||||
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Provision for loan loss
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152.5
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380.7
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1,266.2
|
1,187.5
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||||||||||||
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Depreciation and amortization
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63.5
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43.0
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183.8
|
176.1
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||||||||||||
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Loss on extinguishment of debt
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—
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—
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—
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71.9
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||||||||||||
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Total operating expenses
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851.2
|
1,152.0
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3,633.0
|
4,273.9
|
||||||||||||
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Operating income
|
258.7
|
309.0
|
888.4
|
1,307.4
|
||||||||||||
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Interest expense, net:
|
||||||||||||||||
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Securitization funding costs
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35.8
|
53.1
|
165.9
|
213.4
|
||||||||||||
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Interest expense on deposits
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47.4
|
61.3
|
219.5
|
225.6
|
||||||||||||
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Interest expense on long-term and other debt, net
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29.4
|
27.2
|
108.5
|
130.0
|
||||||||||||
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Total interest expense, net
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112.6
|
141.6
|
493.9
|
569.0
|
||||||||||||
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Income from continuing operations before income taxes
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$
|
146.1
|
$
|
167.4
|
$
|
394.5
|
$
|
738.4
|
||||||||
|
Income tax expense
|
52.8
|
37.0
|
99.5
|
165.8
|
||||||||||||
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Income from continuing operations
|
93.3
|
130.4
|
295.0
|
572.6
|
||||||||||||
|
Loss from discontinued operations, net of taxes
|
(81.3
|
)
|
(32.9
|
)
|
(81.3
|
)
|
(294.6
|
)
|
||||||||
|
Net income
|
$
|
12.0
|
$
|
97.5
|
$
|
213.7
|
$
|
278.0
|
||||||||
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Per share data:
|
||||||||||||||||
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Weighted average shares outstanding – basic
|
48.3
|
47.1
|
47.8
|
50.0
|
||||||||||||
|
Weighted average shares outstanding – diluted
|
48.4
|
47.6
|
47.9
|
50.9
|
||||||||||||
|
Basic – Income from continuing operations
|
$
|
1.93
|
$
|
2.73
|
$
|
6.17
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$
|
11.25
|
||||||||
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Basic – Loss from discontinued operations
|
(1.68
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)
|
(0.70
|
)
|
(1.70
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)
|
(5.89
|
)
|
||||||||
|
Basic – Net income
|
$
|
0.25
|
$
|
2.03
|
$
|
4.47
|
$
|
5.36
|
||||||||
|
Diluted – Income from continuing operations
|
$
|
1.93
|
$
|
2.74
|
$
|
6.16
|
$
|
11.24
|
||||||||
|
Diluted – Loss from discontinued operations
|
(1.68
|
)
|
(0.69
|
)
|
(1.70
|
)
|
(5.78
|
)
|
||||||||
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Diluted – Net income
|
$
|
0.25
|
$
|
2.05
|
$
|
4.46
|
$
|
5.46
|
||||||||
6
Alliance Data Systems Corporation
January 28, 2021
ALLIANCE DATA SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
|
December 31,
2020
|
December 31,
2019
|
|||||||
|
Assets
|
||||||||
|
Cash and cash equivalents
|
$
|
3,081.5
|
$
|
3,874.4
|
||||
|
Credit card and loan receivables:
|
||||||||
|
Credit card and loan receivables
|
16,784.4
|
19,463.1
|
||||||
|
Allowance for loan loss
|
(2,008.0
|
)
|
(1,171.1
|
)
|
||||
|
Credit card and loan receivables, net
|
14,776.4
|
18,292.0
|
||||||
|
Credit card receivables held for sale
|
—
|
408.0
|
||||||
|
Redemption settlement assets, restricted
|
693.5
|
600.8
|
||||||
|
Right of use assets - operating
|
233.2
|
264.3
|
||||||
|
Intangible assets, net
|
81.7
|
153.3
|
||||||
|
Goodwill
|
1,369.6
|
954.9
|
||||||
|
Other assets
|
2,311.2
|
1,947.1
|
||||||
|
Total assets
|
$
|
22,547.1
|
$
|
26,494.8
|
||||
|
Liabilities and Stockholders’ Equity
|
||||||||
|
Deferred revenue
|
$
|
1,004.0
|
$
|
922.0
|
||||
|
Deposits
|
9,792.6
|
12,151.7
|
||||||
|
Non-recourse borrowings of consolidated securitization entities
|
5,709.9
|
7,284.0
|
||||||
|
Long-term and other debt
|
2,805.7
|
2,849.9
|
||||||
|
Operating lease liabilities
|
300.0
|
314.3
|
||||||
|
Other liabilities
|
1,413.3
|
1,384.6
|
||||||
|
Total liabilities
|
21,025.5
|
24,906.5
|
||||||
|
Stockholders’ equity
|
1,521.6
|
1,588.3
|
||||||
|
Total liabilities and stockholders’ equity
|
$
|
22,547.1
|
$
|
26,494.8
|
||||
7
Alliance Data Systems Corporation
January 28, 2021
ALLIANCE DATA SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
|
|
Year Ended
December 31,
|
|||||||||
|
|
2020
|
2019
|
||||||||
|
Cash Flows from Operating Activities:
|
||||||||||
|
Net income
|
$
|
213.7
|
$
|
278.0
|
||||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||
|
Depreciation and amortization
|
183.8
|
249.3
|
||||||||
|
Deferred income taxes
|
(222.8
|
)
|
(186.1
|
)
|
||||||
|
Provision for loan loss
|
1,266.2
|
1,187.5
|
||||||||
|
Non-cash stock compensation
|
21.3
|
54.8
|
||||||||
|
Amortization of deferred financing costs
|
36.5
|
43.4
|
||||||||
|
Gain on sale of business
|
(13.7
|
)
|
(512.2
|
)
|
||||||
|
Loss on extinguishment of debt
|
—
|
71.9
|
||||||||
|
Asset impairment charges
|
63.7
|
52.0
|
||||||||
|
Change in operating assets and liabilities, net of acquisitions and sales of businesses
|
282.9
|
(261.9
|
)
|
|||||||
|
Other
|
51.1
|
241.0
|
||||||||
|
Net cash provided by operating activities
|
1,882.7
|
1,217.7
|
||||||||
|
Cash Flows from Investing Activities:
|
||||||||||
|
Change in redemption settlement assets
|
(40.7
|
)
|
(9.5
|
)
|
||||||
|
Change in credit card and loan receivables
|
1,783.5
|
(2,586.8
|
)
|
|||||||
|
Proceeds from sale of businesses
|
26.7
|
4,409.7
|
||||||||
|
Payments for acquired businesses, net of cash and restricted cash
|
(266.8
|
)
|
(6.7
|
)
|
||||||
|
Sale of credit card portfolios
|
289.5
|
2,061.8
|
||||||||
|
Purchase of credit card portfolios
|
—
|
(924.8
|
)
|
|||||||
|
Capital expenditures
|
(54.0
|
)
|
(142.3
|
)
|
||||||
|
Other
|
36.1
|
59.4
|
||||||||
|
Net cash provided by investing activities
|
1,774.3
|
2,860.8
|
||||||||
|
Cash Flows from Financing Activities:
|
||||||||||
|
Borrowings under debt agreements
|
1,150.0
|
3,111.3
|
||||||||
|
Repayments of borrowings
|
(1,194.5
|
)
|
(5,981.8
|
)
|
||||||
|
Net (decrease) increase in deposits
|
(2,370.0
|
)
|
355.6
|
|||||||
|
Non-recourse borrowings of consolidated securitization entities
|
2,419.2
|
4,851.8
|
||||||||
|
Repayments/maturities of non-recourse borrowings of consolidated securitization entities
|
(4,095.7
|
)
|
(5,219.0
|
)
|
||||||
|
Payment of debt extinguishment costs
|
—
|
(46.1
|
)
|
|||||||
|
Payment of deferred financing costs
|
(18.8
|
)
|
(45.4
|
)
|
||||||
|
Purchase of treasury shares
|
—
|
(976.1
|
)
|
|||||||
|
Dividends paid
|
(60.6
|
)
|
(127.4
|
)
|
||||||
|
Other
|
3.9
|
(14.6
|
)
|
|||||||
|
Net cash used in financing activities
|
(4,166.5
|
)
|
(4,091.7
|
)
|
||||||
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
14.6
|
3.6
|
||||||||
|
Change in cash, cash equivalents and restricted cash
|
(494.9
|
)
|
(9.6
|
)
|
||||||
|
Cash, cash equivalents and restricted cash at beginning of period
|
3,958.1
|
3,967.7
|
||||||||
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
3,463.2
|
$
|
3,958.1
|
||||||
8
Alliance Data Systems Corporation
January 28, 2021
ALLIANCE DATA SYSTEMS CORPORATION
SUMMARY FINANCIAL HIGHLIGHTS
(In millions)
(Unaudited)
|
Three Months Ended
December 31,
|
Year Ended
December 31,
|
||||||||||||||||||||||||
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
||||||||||||||||||||
|
Segment Revenue:
|
|||||||||||||||||||||||||
|
LoyaltyOne
|
$
|
230.9
|
$
|
332.4
|
(31
|
)%
|
$
|
764.8
|
$
|
1,033.1
|
(26
|
)%
|
|||||||||||||
|
Card Services
|
879.0
|
1,128.4
|
(22
|
)
|
3,756.5
|
4,547.8
|
(17
|
)
|
|||||||||||||||||
|
Corporate/Other
|
—
|
0.2
|
nm*
|
0.1
|
0.4
|
nm*
|
|||||||||||||||||||
|
Total
|
$
|
1,109.9
|
$
|
1,461.0
|
(24
|
)%
|
$
|
4,521.4
|
$
|
5,581.3
|
(19
|
)%
|
|||||||||||||
|
Segment Earnings Before Taxes:
|
|||||||||||||||||||||||||
|
LoyaltyOne
|
$
|
22.0
|
$
|
57.8
|
(62
|
)%
|
$
|
111.0
|
$
|
103.1
|
8
|
%
|
|||||||||||||
|
Card Services
|
187.0
|
161.9
|
15
|
501.5
|
991.7
|
(49
|
)
|
||||||||||||||||||
|
Corporate/Other
|
(62.9
|
)
|
(52.3
|
)
|
20
|
(218.0
|
)
|
(356.4
|
)
|
(39
|
)
|
||||||||||||||
|
Total
|
$
|
146.1
|
$
|
167.4
|
(13
|
)%
|
$
|
394.5
|
$
|
738.4
|
(47
|
)%
|
|||||||||||||
|
Segment Adjusted EBITDA, net:
|
|||||||||||||||||||||||||
|
LoyaltyOne
|
$
|
44.3
|
$
|
80.3
|
(45
|
)%
|
$
|
186.2
|
$
|
244.5
|
(24
|
)%
|
|||||||||||||
|
Card Services
|
259.8
|
209.6
|
24
|
667.0
|
1,119.7
|
(40
|
)
|
||||||||||||||||||
|
Corporate/Other
|
(21.8
|
)
|
(12.1
|
)
|
81
|
(81.7
|
)
|
(92.9
|
)
|
(12
|
)
|
||||||||||||||
|
Total
|
$
|
282.3
|
$
|
277.8
|
2
|
%
|
$
|
771.5
|
$
|
1,271.3
|
(39
|
)%
|
|||||||||||||
|
Key Performance Indicators:
|
|||||||||||||||||||||||||
|
Credit sales
|
$
|
7,657
|
$
|
9,297
|
(18
|
)%
|
$
|
24,707
|
$
|
30,987
|
(20
|
)%
|
|||||||||||||
|
Average receivables
|
$
|
15,759
|
$
|
18,096
|
(13
|
)%
|
$
|
16,367
|
$
|
17,298
|
(5
|
)%
|
|||||||||||||
|
Normalized average receivables (1)
|
$
|
15,759
|
$
|
19,368
|
(19
|
)%
|
$
|
16,468
|
$
|
18,942
|
(13
|
)%
|
|||||||||||||
|
End of period receivables
|
$
|
16,784
|
$
|
19,463
|
(14
|
)%
|
$
|
16,784
|
$
|
19,463
|
(14
|
)%
|
|||||||||||||
|
Card Services gross yield
|
22.3
|
%
|
23.3
|
%
|
(1.0
|
)%
|
22.8
|
%
|
24.0
|
%
|
(1.2
|
)%
|
|||||||||||||
|
Net principal loss rate
|
6.0
|
%
|
6.3
|
%
|
(0.3
|
)%
|
6.6
|
%
|
6.1
|
%
|
0.5
|
%
|
|||||||||||||
|
Delinquency rate
|
4.4
|
%
|
5.8
|
%
|
(1.4
|
)%
|
4.4
|
%
|
5.8
|
%
|
(1.4
|
)%
|
|||||||||||||
|
AIR MILES reward miles issued
|
1,355
|
1,486
|
(9
|
)%
|
4,964
|
5,511
|
(10
|
)%
|
|||||||||||||||||
|
AIR MILES reward miles redeemed
|
838
|
1,199
|
(30
|
)%
|
3,128
|
4,416
|
(29
|
)%
|
|||||||||||||||||
(1) Normalized receivables includes held-for-sale receivables
* nm-not meaningful
9
Alliance Data Systems Corporation
January 28, 2021
ALLIANCE DATA SYSTEMS CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In millions, except per share amounts)
(Unaudited)
|
|
Three Months Ended
December 31,
|
Year Ended
December 31,
|
|||||||||||||||
|
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
Adjusted EBITDA and Adjusted EBITDA, net:
|
|||||||||||||||||
|
Income from continuing operations
|
$
|
93.3
|
$
|
130.4
|
$
|
295.0
|
$
|
572.6
|
|||||||||
|
Income tax expense
|
52.8
|
37.0
|
99.5
|
165.8
|
|||||||||||||
|
Total interest expense, net
|
112.6
|
141.6
|
493.9
|
569.0
|
|||||||||||||
|
Depreciation and other amortization
|
42.4
|
20.1
|
98.5
|
79.9
|
|||||||||||||
|
Amortization of purchased intangibles
|
21.1
|
22.9
|
85.3
|
96.2
|
|||||||||||||
|
Stock compensation expense
|
5.2
|
0.5
|
21.3
|
25.1
|
|||||||||||||
|
Gain on sale of business, net of strategic transaction costs (1)
|
—
|
—
|
(8.0
|
)
|
—
|
||||||||||||
|
Strategic transaction costs (2)
|
9.1
|
6.7
|
15.9
|
11.7
|
|||||||||||||
|
Asset impairments (3)
|
29.4
|
—
|
63.7
|
—
|
|||||||||||||
|
Restructuring and other charges (4)
|
(0.4
|
)
|
33.0
|
(8.2
|
)
|
118.1
|
|||||||||||
|
Loss on extinguishment of debt (5)
|
—
|
—
|
—
|
71.9
|
|||||||||||||
|
Adjusted EBITDA
|
$
|
365.5
|
$
|
392.2
|
$
|
1,156.9
|
$
|
1,710.3
|
|||||||||
|
Less: Funding costs (6)
|
83.2
|
114.4
|
385.4
|
439.0
|
|||||||||||||
|
Adjusted EBITDA, net of funding costs
|
$
|
282.3
|
$
|
277.8
|
$
|
771.5
|
$
|
1,271.3
|
|||||||||
|
Core Earnings:
|
|||||||||||||||||
|
Income from continuing operations
|
$
|
93.3
|
$
|
130.4
|
$
|
295.0
|
$
|
572.6
|
|||||||||
|
Add back: non-cash/ non-operating items:
|
|||||||||||||||||
|
Stock compensation expense
|
5.2
|
0.5
|
21.3
|
25.1
|
|||||||||||||
|
Amortization of purchased intangibles
|
21.1
|
22.9
|
85.3
|
96.2
|
|||||||||||||
|
Non-cash interest (7)
|
9.9
|
10.7
|
36.5
|
39.9
|
|||||||||||||
|
Gain on sale of business, net of strategic transaction costs (1)
|
—
|
—
|
(8.0
|
)
|
—
|
||||||||||||
|
Strategic transaction costs (2)
|
9.1
|
6.7
|
15.9
|
11.7
|
|||||||||||||
|
Asset impairments (3)
|
29.4
|
—
|
63.7
|
—
|
|||||||||||||
|
Restructuring and other charges (4)
|
(0.4
|
)
|
33.0
|
(8.2
|
)
|
118.1
|
|||||||||||
|
Loss on extinguishment of debt (5)
|
—
|
—
|
—
|
71.9
|
|||||||||||||
|
Income tax effect (8)
|
(7.2
|
)
|
(8.1
|
)
|
(52.0
|
)
|
(81.4
|
)
|
|||||||||
|
Core earnings
|
$
|
160.4
|
$
|
196.1
|
$
|
449.5
|
$
|
854.1
|
|||||||||
|
Weighted average shares outstanding – diluted
|
48.4
|
47.6
|
47.9
|
50.9
|
|||||||||||||
|
Core earnings per share – diluted
|
$
|
3.31
|
$
|
4.12
|
$
|
9.39
|
$
|
16.77
|
|||||||||
|
Pre-provision pre-tax earnings:
|
|||||||||||||||||
|
Income from continuing operations before income taxes
|
$
|
146.1
|
$
|
167.4
|
$
|
394.5
|
$
|
738.4
|
|||||||||
|
Provision for loan loss
|
152.5
|
380.7
|
1,266.2
|
1,187.5
|
|||||||||||||
|
Pre-provision pre-tax earnings
|
$
|
298.6
|
$
|
548.1
|
$
|
1,660.7
|
$
|
1,925.9
|
|||||||||
|
(1)
|
Represents gain on sale of Precima in January 2020, net of strategic transaction costs. Precima was included in the Company’s LoyaltyOne segment.
|
|
(2)
|
Represents costs for professional services associated with strategic initiatives.
|
|
(3)
|
Represents asset impairment charges related to certain deferred contract costs, fixed assets and right of use assets. Note: This does not include
$24.7 million in accelerated depreciation expenses associated with the Company’s real estate optimization plan.
|
|
(4)
|
Represents costs associated with restructuring and other exit activities. In 2020, the amounts consist of adjustments to our liability associated
with restructuring and other charges recorded for cost saving initiatives executed in 2019.
|
|
(5)
|
Represents loss on extinguishment of debt resulting from the redemption price of the senior notes and the write-off of deferred issuance costs
related to the July 2019 extinguishment of $1.9 billion outstanding senior notes and a mandatory payment of $500.0 million of the Company’s revolving credit facility.
|
|
(6)
|
Represents interest expense on deposits and securitization funding costs.
|
|
(7)
|
Represents amortization of debt issuance costs.
|
|
(8)
|
Represents the tax effect including the related non-GAAP measure adjustments using the effective tax rate.
|
10
Alliance Data Systems Corporation
January 28, 2021
|
Three Months Ended December 31, 2020
|
||||||||||||||||
|
|
LoyaltyOne
|
Card
Services
|
Corporate/
Other
|
Total
|
||||||||||||
|
Operating income (loss)
|
$
|
21.7
|
$
|
270.2
|
$
|
(33.2
|
)
|
$
|
258.7
|
|||||||
|
Depreciation and amortization
|
21.1
|
41.8
|
0.6
|
63.5
|
||||||||||||
|
Stock compensation expense
|
1.5
|
1.7
|
2.0
|
5.2
|
||||||||||||
|
Strategic transaction costs
|
—
|
0.3
|
8.8
|
9.1
|
||||||||||||
|
Asset impairments
|
—
|
29.4
|
—
|
29.4
|
||||||||||||
|
Restructuring and other charges
|
—
|
(0.4
|
)
|
—
|
(0.4
|
)
|
||||||||||
|
Adjusted EBITDA
|
44.3
|
343.0
|
(21.8
|
)
|
365.5
|
|||||||||||
|
Less: Funding costs
|
—
|
83.2
|
—
|
83.2
|
||||||||||||
|
Adjusted EBITDA, net
|
$
|
44.3
|
$
|
259.8
|
$
|
(21.8
|
)
|
$
|
282.3
|
|||||||
|
Three Months Ended December 31, 2019
|
||||||||||||||||
|
|
LoyaltyOne
|
Card
Services
|
Corporate/
Other
|
Total
|
||||||||||||
|
Operating income (loss)
|
$
|
57.4
|
$
|
276.3
|
$
|
(24.7
|
)
|
$
|
309.0
|
|||||||
|
Depreciation and amortization
|
20.5
|
20.9
|
1.6
|
43.0
|
||||||||||||
|
Stock compensation expense
|
0.8
|
(0.5
|
)
|
0.2
|
0.5
|
|||||||||||
|
Strategic transaction costs
|
0.7
|
—
|
6.0
|
6.7
|
||||||||||||
|
Restructuring and other charges
|
0.9
|
27.3
|
4.8
|
33.0
|
||||||||||||
|
Adjusted EBITDA
|
80.3
|
324.0
|
(12.1
|
)
|
392.2
|
|||||||||||
|
Less: Funding costs
|
—
|
114.4
|
—
|
114.4
|
||||||||||||
|
Adjusted EBITDA, net
|
$
|
80.3
|
$
|
209.6
|
$
|
(12.1
|
)
|
$
|
277.8
|
|||||||
|
Year Ended December 31, 2020
|
||||||||||||||||
|
|
LoyaltyOne
|
Card
Services
|
Corporate/
Other
|
Total
|
||||||||||||
|
Operating income (loss)
|
$
|
110.2
|
$
|
886.9
|
$
|
(108.7
|
)
|
$
|
888.4
|
|||||||
|
Depreciation and amortization
|
78.0
|
102.8
|
3.0
|
183.8
|
||||||||||||
|
Stock compensation expense
|
5.5
|
7.0
|
8.8
|
21.3
|
||||||||||||
|
Gain on sale of business, net of strategic transaction costs
|
(8.0
|
)
|
—
|
—
|
(8.0
|
)
|
||||||||||
|
Strategic transaction costs
|
0.4
|
0.3
|
15.2
|
15.9
|
||||||||||||
|
Asset impairments
|
—
|
63.7
|
—
|
63.7
|
||||||||||||
|
Restructuring and other charges
|
0.1
|
(8.3
|
)
|
—
|
(8.2
|
)
|
||||||||||
|
Adjusted EBITDA
|
186.2
|
1,052.4
|
(81.7
|
)
|
1,156.9
|
|||||||||||
|
Less: Funding costs
|
—
|
385.4
|
—
|
385.4
|
||||||||||||
|
Adjusted EBITDA, net
|
$
|
186.2
|
$
|
667.0
|
$
|
(81.7
|
)
|
$
|
771.5
|
|||||||
|
Year Ended December 31, 2019
|
||||||||||||||||
|
|
LoyaltyOne
|
Card
Services
|
Corporate/
Other
|
Total
|
||||||||||||
|
Operating income (loss)
|
$
|
105.4
|
$
|
1,430.7
|
$
|
(228.7
|
)
|
$
|
1,307.4
|
|||||||
|
Depreciation and amortization
|
80.1
|
89.3
|
6.7
|
176.1
|
||||||||||||
|
Stock compensation expense
|
7.2
|
9.3
|
8.6
|
25.1
|
||||||||||||
|
Strategic transaction costs
|
1.0
|
—
|
10.7
|
11.7
|
||||||||||||
|
Restructuring charges
|
50.8
|
29.4
|
37.9
|
118.1
|
||||||||||||
|
Loss on extinguishment of debt
|
—
|
—
|
71.9
|
71.9
|
||||||||||||
|
Adjusted EBITDA
|
244.5
|
1,558.7
|
(92.9
|
)
|
1,710.3
|
|||||||||||
|
Less: Funding costs
|
—
|
439.0
|
—
|
439.0
|
||||||||||||
|
Adjusted EBITDA, net
|
$
|
244.5
|
$
|
1,119.7
|
$
|
(92.9
|
)
|
$
|
1,271.3
|
|||||||
11
Exhibit 99.2
Alliance Data Full Year & Fourth Quarter 2020 ResultsJanuary 28, 2021Ralph Andretta – President
& CEOTim King – EVP & CFO
Forward-Looking StatementsThis presentation contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generally be identified by the use of words such as
“believe,” “expect,” “anticipate,” “estimate,” “intend,” “project,” “plan,” “likely,” “may,” “should” or other words or phrases of similar import. Similarly, statements that describe our business strategy, outlook, objectives, plans,
intentions or goals also are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding, and the guidance we give with respect to, our anticipated operating or financial
results, initiation or completion of strategic initiatives, future dividend declarations, and future economic conditions, including, but not limited to, fluctuation in currency exchange rates, market conditions and COVID-19 impacts related to
relief measures for impacted borrowers and depositors, labor shortages due to quarantine, reduction in demand from clients, supply chain disruption for our reward suppliers and disruptions in the airline or travel industries.We believe that
our expectations are based on reasonable assumptions. Forward-looking statements, however, are subject to a number of risks and uncertainties that could cause actual results to differ materially from the projections, anticipated results or
other expectations expressed in this presentation, and no assurances can be given that our expectations will prove to have been correct. These risks and uncertainties include, but are not limited to, factors set forth in the Risk Factors
section in our Annual Report on Form 10-K for the most recently ended fiscal year, which may be updated in Item 1A of, or elsewhere in, our Quarterly Reports on Form 10-Q filed for periods subsequent to such Form 10-K. Our forward-looking
statements speak only as of the date made, and we undertake no obligation, other than as required by applicable law, to update or revise any forward-looking statements, whether as a result of new information, subsequent events, anticipated or
unanticipated circumstances or otherwise.
2020 Key Takeaways 3 Resilient performance in a challenging operating environmentReduced our fixed
cost base and de-risked our balance sheetOptimized our physical real estate footprintInvested in key talent and expanded our products and capabilities
Selected Fiserv’s flexible processing platform to gain new capabilities and operational efficiencies
Business Investment HighlightsProduct and technology enhancements to support growth and digital acceleration 4 Fintech acquisition adds a new white-label point-of-sale technology platform and products Launched scalable, full digital
payments solution Technology Advancement Digital Journeys Product Expansion New proprietary credit card, Comenity CardSM
$0.25 Diluted EPS $1.1B Revenue $93MM Net income of $12 million impacted by a loss from
discontinued operations of $81 million after taxCredit sales of $7.7 billion in 4Q20 represented a 24% increase versus 3Q20Normalized average receivables* increased 3% versus 3Q20Credit metrics remained in line with historic levels with a net
loss rate of 6.0% for the quarter**AIR MILES® reward miles issued and redeemed improved 9% and 22% respectively versus 3Q20 5 2020 Fourth Quarter Financial HighlightsContinued progress in core underlying performance * Normalized
receivables includes held-for-sale receivables** Net loss rate impacted by pandemic-related consumer relief program. See slide 26 in the appendix for more information $1.93 Diluted EPS from Continuing Ops. Net Income from Continuing Ops.
Card Services Performance HighlightsGradual recovery in credit sales continues from pandemic
lows 6 Active program sales Total sales Year-over-year credit sales improving at a modest pace for total & active program sales Credit sales declined 18% year-over-year in 4Q20 with active* program sales down 7%Credit sales improved
24% sequentially from 3Q20 (vs. 19% in the same period last year)Online sales remained over 40% of total in 4Q20 * Includes programs with active contracts as of December 31, 2020 and Comenity card balances
Partnership HighlightsAdded 60+ online merchants in the fourth quarter, bringing our total to over
500 7 Partner Renewal New Partnerships Furniture & Home DécorPartner since 2002Enhanced omni-channel customer experience Technology Partnership Exclusive online technology platform provider of digital payment products for RBC
LoyaltyOne® Performance HighlightsSequential 25% revenue improvement over third quarter 2020 Reward
miles issued and redeemed improved vs 3Q20; however, the year-over-year impact of lower discretionary spend continuesAIR MILES continues to pivot the rewards portfolio to emphasize more non-travel options, driving higher merchandise
redemptions in 4Q20 8 AIR MILES program performance With the potential return of COVID-19-related lockdowns in Europe, many retailers continue to push promotional programs into 2021Revenue improved 36% vs 3Q20 in part due to seasonality
Expand digital offeringsEnhanced Digital SuitePOS payment solutionsTechnology flexibility &
upgradesCore processing platformEnhance data & analyticsPrudent balance sheet management Associate safety & healthRecession readiness planRight-size expense baseDisciplined risk management Review partner economics 9 Areas of
FocusDeliberate and thoughtful progress balancing the pandemic and future growth Rebuild Recover These action items aim to restore profitable growth & drive enhanced long-term shareholder value Focused investmentAlign with
recovery trendFurther digital enhancementsSustained, profitable growthExpense flexibility and disciplineDrive shareholder value Regrow
Financial Results – Consolidated 10 ($ in millions, except per share) 4Q20 4Q19 4Q %
Change FY20 FY19 FY % Change Total revenue $1,110 $1,461 (24)% $4,521 $5,581 (19)% Total operating expenses, excl. provision for loan loss 699 771 (9) 2,367 3,086 (23) Provision for loan
loss 152 381 (60) 1,266 1,188 7 Interest expense 113 142 (20) 494 569 (13) Total earnings before tax (EBT) $146 $167 (13)% $394 $738 (47)% Income tax 53 37 43 99
166 (40) Income from continuing operations $93 $130 (28)% $295 $573 (48)% Income from continuing operations per diluted share $1.93 $2.74 (30)% $6.16 $11.24 (45)% Diluted shares
outstanding 48.4 47.6 47.9 50.9 Pre-provision, pre-tax $299 $548 (46)% $1,661 $1,926 (14)% Core EPS –
diluted $3.31 $4.12 (20)% $9.39 $16.77 (44)% ******************************************************************************************** (Including discontinued operations) Net
income $12 $98 (88)% $214 $278 (23)% Net income per diluted share $0.25 $2.05 (88)% $4.46 $5.46 (18)% Totals may not sum due to rounding
Totals may not sum due to rounding; nm = not meaningful Financial Results - Segments FY20 total
revenue* FY20 total earnings before tax* 11 * Percentages based on Card Services and LoyaltyOne segments combined as reported excluding Corporate/Other and intersegment eliminations ($ in millions) 4Q20 4Q19 4Q %
Change FY20 FY19 FY % Change LoyaltyOne $231 $332 (31)% $765 $1,033 (26)% Card Services 879 1,128 (22) 3,757 4,548 (17) Corporate/Other - - nm - - nm Total
revenue $1,110 $1,461 (24)% $4,521 $5,581 (19)% LoyaltyOne $22 $58 (62)% $111 $103 8% Card Services 187 162 15 501 992 (49) Corporate/Other (63) (52) 20 (218) (356) (39) Total earnings
before tax (EBT) $146 $167 (13)% $394 $738 (47)%
12 Key Business MetricsImproving sales and stable yield drove sequential revenue improvement Revenue
growth of 6% on a sequential basis was aided by the seasonal increase in receivables and a relatively stable gross yield Total operating expenses excluding provision for loan loss increased sequentially as a result of the previously announced
nearly $50 million of real estate optimization costs, an approximately $40 million increase in marketing, and an approximately $30 million increase in cost of redemptions in our LoyaltyOne business * Normalized receivables includes
held-for-sale receivables Card Services yield remained stable in 4Q20 Credit sales improved sequentially($ in billions) 24%
CECL adoption impact of $644 million on 1/1/20Allowance of $2.0 billion is down slightly from 3Q20 and
nearly double 4Q19 CECL 13 Credit Quality and AllowanceContinued decline in delinquency rate a positive indicator for 2021 performance Max net loss rate since 2005: 10.0% Min net loss rate since 2005: 3.8% Avg net loss rate since 2005:
~6.0% Delinquency rate Net loss rate Reserve rate ($ in millions) * Net loss rate impacted by pandemic-related consumer relief program. See slide 26 in the appendix for more information** Calculated as a percentage of allowance for loan
loss to end of period credit card and loan receivables ** - - - includes historic quarterly range from 2005-4Q20 * *
Parent Level Liquidity at 12/31 of $1.1 billion, consisting of cash on hand plus revolver capacity
Approximately $343 million in cash and cash equivalents, $750 million in unused revolverBank LevelBanks finished the quarter with $2.7 billion in cash and $2.6 billion in equityTotal risk based capital ratio at 19.7% - approximately double
the 10% threshold to be considered well-capitalized; CET1 at 18.4%Funding readily available with heavy demand for FDIC-insured deposit products – both direct-to-consumer and brokered 14 Capital and Liquidity UpdateSufficient corporate
liquidity; Banks remain well-capitalized
15 2021 Financial Outlook Full Year 2021 Commentary Normalized average receivables(Receivables
plus held-for-sale)2020 = $16,468 million Down mid- to high-single digits Sequential decline in 1Q21 & 2Q21 Flat year-over-year in 2H21Expect year-end receivables to be in line with year-end 2020Credit sales up high-single digits in
2021 Total revenue2020 = $4,521 million Down low-single digits LoyaltyOne full year revenue growth in 2021Revenue pressure for Card Services as balances rebuild from pandemic-related reductionsGross card yields remain steady Total
expenses*(Excludes provision for loan loss)2020 = $2,861 million Flat Includes increased digital investment and a ramp up in marketing spend from depressed levels in 2020Impacted by Bread® & Fiserv related transition expenses Net loss
rate2020 = 6.6% Expect net loss rate to remain near the historic average of 6% in the first quarter of 2021 * Total expenses represent total operating expenses less provision for loan loss plus total interest expense, net
16 Leverage technology as a competitive advantage with continued innovation and a focus on reducing
our cost to serve TechnologyInnovation Expand our product base to offer a suite of financial solutions that empowers today’s consumers Product Diversification and Development Deliver an advanced digital experience for our brand partners
and consumers DigitalAdvancement Evolution in intelligent automation and analytical sciences to drive incremental insights, retention, and operating leverage Data Science and Analytics Strategic InitiativesFocused investment to drive
sustainable long-term shareholder value Active risk management Prudent balance sheet management Disciplined expense management Key Foundational Elements
Questions & Answers
Financial MeasuresIn addition to the results presented in accordance with generally accepted accounting
principles, or GAAP, the Company may present financial measures that are non-GAAP measures, such as constant currency financial measures, pre-provision earnings before taxes, adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA, net of
funding costs, core earnings and core earnings per diluted share (core EPS). Constant currency excludes the impact of fluctuations in foreign exchange rates. The Company calculates constant currency by converting our current period local
currency financial results using the prior period exchange rates. The Company uses adjusted EBITDA and adjusted EBITDA, net as an integral part of internal reporting to measure the performance and operational strength of reportable segments
and to evaluate the performance of senior management. Adjusted EBITDA eliminates the uneven effect across all reportable segments of non-cash depreciation of tangible assets and amortization of intangible assets, including certain intangible
assets that were recognized in business combinations, and the non-cash effect of stock compensation expense. In addition, adjusted EBITDA eliminates the effect of the gain (loss) on the sale of a business, strategic transaction costs, asset
impairments, restructuring and other charges, and the loss on extinguishment of debt. Adjusted EBITDA, net is equal to adjusted EBITDA less securitization funding costs and interest expense on deposits. Similarly, core earnings and core EPS
eliminate non-cash or non-operating items, including, but not limited to, stock compensation expense, amortization of purchased intangibles, non-cash interest, gain (loss) on the sale of a business, strategic transaction costs, asset
impairments, restructuring and other charges, and the loss on extinguishment of debt. The Company believes that these non-GAAP financial measures, viewed in addition to and not in lieu of the Company’s reported GAAP results, provide useful
information to investors regarding the Company’s performance and overall results of operations. 18
Appendix 19
* Normalized receivables includes held-for-sale receivables**Revenue divided by normalized
receivables 4Q20 4Q19 4Q20 vs 3Q20 4Q20 vs 4Q19 3Q20 LoyaltyOne (in millions) AIR MILES reward miles issued 1,355 1,486 (9)% 1,240 9% AIR MILES reward miles redeemed 838 1,199 (30)% 687
22% Card Services ($ in millions) Credit sales $7,657 $9,297 (18)% $6,152 24% Average receivables $15,759 $18,096 (13)% $15,300 3% Normalized average
receivables* $15,759 $19,368 (19)% $15,356 3% End of period receivables $16,784 $19,463 (14)% $15,599 8% Total gross yield %** 22.3% 23.3% (1.0)% 22.5% (0.2)% Cost of
funds 2.1% 2.4% (0.3)% 2.4% (0.3)% Principal loss rate 6.0% 6.3% (0.3)% 5.8% 0.2% Reserve rate 12.0% 6.0% 6.0% 13.3% (1.3)% Delinquency rate 4.4% 5.8% (1.4)% 4.7% (0.3)% Return on
equity 16% 23% (7.0)% 14% 2.0% Key Business Metrics 20
Additional Metrics and Ratios 21 Combined Banks Capital Ratios 1Q20 2Q20 3Q20 4Q20 Common equity
tier 1 capital ratio 15.9% 18.3% 18.8% 18.4% Tier 1 capital ratio 15.9% 18.3% 18.8% 18.4% Total risk based capital ratio 17.3% 19.7% 20.1% 19.7% Tier 1 leverage capital ratio 12.8% 14.2% 16.1% 17.1%
Financial Results – Quarterly 22 ($ in millions, except per
share) 4Q19 1Q20 2Q20 3Q20 4Q20 FY19 FY20 Total revenue $1,461 $1,382 $979 $1,050 $1,110 $5,581 $4,521 Total operating expenses, excl. provision for loan loss 771 562 555 552 699 3,086 2,367 Provision for
loan loss 381 656 250 208 152 1,188 1,266 Interest expense 142 139 128 115 113 569 494 Total earnings before tax (EBT) $167 $25 $47 $176 $146 $738 $394 Income tax 37 (5) 9 43 53
166 99 Income from continuing operations $130 $30 $38 $133 $93 $573 $295 Income from continuing operations per diluted share $2.74 $0.63 $0.81 $2.79 $1.93 $11.24 $6.16 Diluted shares
outstanding 47.6 47.7 47.7 47.8 48.4 50.9 47.9 Pre-provision, pre-tax $548 $681 $297 $384 $299 $1,926 $1,661 Core EPS –
diluted $4.12 $0.75 $1.86 $3.45 $3.31 $16.77 $9.39 ******************************************************************************************************* (Including discontinued operations) Net
income $98 $30 $38 $133 $12 $278 $214 Net income per diluted share $2.05 $0.63 $0.81 $2.79 $0.25 $5.46 $4.46 Totals may not sum due to rounding
Financial Results – Segments by Quarter 23 ($ in
millions) 4Q19 1Q20 2Q20 3Q20 4Q20 FY19 FY20 LoyaltyOne $332 $198 $151 $185 $231 $1,033 $765 Card Services 1,128 1,184 828 866 879 4,548 3,757 Corporate/Other - - - - - - - Total
revenue $1,461 $1,382 $979 $1,050 $1,110 $5,581 $4,521 LoyaltyOne $58 $47 $24 $18 $22 $103 $111 Card Services 162 32 70 212 187 992 501 Corporate/Other (52) (53) (47) (55) (63) (356) (218) Total
earnings before tax (EBT) $167 $25 $47 $176 $146 $738 $394 Totals may not sum due to rounding
Card Services Sales Data 24 $ in billions Active program credit sales by product $ in
billions Normalized average receivables balance by product Totals may not sum due to rounding
Card Services Sales Data – Digital Engagement 25 Active program digital sales as % of total active
program sales Active program new digital accounts as % of total active program new accounts
26 Monthly Net Loss Rate TrendConsumer relief program caused timing-related volatility in monthly loss
rate* Expectation for 1Q21 losses to be in the range of 2H20 average loss rate of ~6% Given the monthly volatility, the 2H20 average net loss rate of 5.9% provides a better indicator for near-term future loss expectations The
COVID-related customer relief program represented 3% of total card receivables as of December 31, 2020 as the balance continues to decline72% of enrollees made a payment in 4Q20, in line with 3Q20 * In response to the COVID-19 pandemic, the
Company offered COVID‐related customer relief programs to affected cardholders. Those accounts receiving relief may not have advanced to the next delinquency cycle in the same timeframe that would have occurred had the relief not been
granted, thus impacting delinquency and net charge-off rates and their timing.