Bread Financial Holdings, Inc 8-K, filed Oct 28, 2021
Bread Financial Holdings, Inc. (BFH)
8-K
2021-10-28
For: 2021-10-28
View Original
Added on
July 04, 2026
About this 8-K
Bread Financial Holdings, Inc filed this 8-K on October 28, 2021.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
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
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
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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 October 28, 2021, Alliance Data Systems Corporation (the "Company") issued a press release regarding its
results of operations for the third quarter ended September 30, 2021. A copy of this press release is furnished as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure.
On October 28, 2021, the Company issued a press release regarding its results of operations for the third quarter
ended September 30, 2021. 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 October 28, 2021 announcing the results of operations for the third quarter ended September 30, 2021.
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Investor Presentation Materials.
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104
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Cover Page Interactive Data File (embedded within the Inline XBRL document).
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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: October 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
Alliance Data Reports Third Quarter 2021 Results
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o
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Net income of $224 million, or $4.47 per diluted share
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o
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Third quarter credit sales up 20%, supporting expectations for continued receivables growth
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o
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Strategic transformation continues as spinoff of LoyaltyOne® segment as Loyalty Ventures
Inc. is expected on November 5th, significantly improving Alliance Data’s capital ratios and
other key metrics
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o
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Recent agreement with Sezzle leverages Bread’s fintech payments platform for installment
lending across Sezzle’s over 40,000 merchant network
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COLUMBUS, Ohio, October 28, 2021
– Alliance Data Systems Corporation (NYSE: ADS), a leading provider of data-driven marketing, loyalty and payment solutions, today announced results for the quarter ended September 30, 2021.
“Alliance Data’s third quarter performance demonstrates considerable operating progress. Net income improved year-over-year and pre-tax
pre-provision earnings increased substantially both year-over-year and sequentially, in line with strong credit sales and reduced expense levels,” said Ralph Andretta, president and chief executive officer of Alliance Data. “At the same time, we
continued to move forward with the transformation of our company and are demonstrating how the investments we have made and continue to make drive our future growth.”
“Credit sales remained strong in the third quarter as we saw improving performance across our brand partners, which more than offset a
previously announced portfolio sale in the third quarter. We saw positive momentum building in the LoyaltyOne segment as campaign activity picked up late in the quarter for BrandLoyalty, and AIR MILES® reward miles redeemed improved to
the highest level since the pandemic began.
“Our net loss rate was particularly low in the third quarter, and our delinquency rate remained below historic levels. We expect credit
metrics and payment rates to continue to moderate into 2022 as stimulus programs wind down. We continue to monitor uncertainties in the market and remain confident that our full suite of product offerings, combined with our disciplined risk management,
will enable us to drive responsible, profitable growth in the periods ahead.
“The upcoming spinoff of our LoyaltyOne segment concludes a multi-year Board initiative to simplify Alliance Data’s business model and
strengthen our enterprise-level capital metrics. At the spin-off date, which is expected to be November 5, 2021, Alliance Data will retain a 19% ownership in, and expects to receive a $750 million cash distribution from Loyalty Ventures Inc., which we
will use for deleveraging. The spin is expected to provide a significant improvement in Alliance Data’s capital metrics. Loyalty Ventures will have the opportunity to focus on its own unique strategic priorities and make meaningful investments to
drive growth and efficiencies. We are excited about the prospects for both businesses and the long-term potential of each of the companies.”
Mr. Andretta continued, “Our recently announced strategic relationship with Sezzle provides another way to capitalize on the versatility
of Bread’s fintech payments platform to open new opportunities for expansion outside of our direct distribution network. Sezzle’s over 40,000 merchants will be able to leverage our digital offerings to provide their consumers with additional flexible
installment payment solutions for big ticket purchases. We will continue to expand Bread’s direct merchant partners while enlisting existing Alliance Data retail card partners to launch on Bread’s platform. The business development pipelines across
our offerings remain robust, and our focus on portfolio optimization will continue to drive profitability and growth into 2022 and beyond.
Alliance Data Systems Corporation
October 28, 2021
2021 FULL-YEAR OUTLOOK
“For full-year 2021, we expect our credit sales to increase at a double-digit growth rate providing positive receivables growth momentum
into 2022. Based on our current visibility and payment rate expectations, receivables at year-end 2021 are projected to be in line with year-end 2020 levels. We expect to resume high-single- to low-double-digit average receivables growth in 2022,”
said Mr. Andretta. “Given the continued strength of our credit metrics, we now expect a net loss rate in the high 4% range for the year. Total revenue for the year is anticipated to be down low-single-digits compared to 2020 driven by lower
receivables. As a result of lower expenses in the third quarter, partially driven by improved credit and collections efficiencies, we now expect total expenses, excluding provision for loan loss, to be flat to modestly down year-over-year while we
continue to fund initiatives to position the Company for future growth. In 2021, we are investing over $100 million in digital innovation and technology enhancements and plan to continue to invest in 2022.”
CONSOLIDATED RESULTS
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SUMMARY
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Quarter Ended September 30,
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(in millions, except per share amounts)
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2021
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2020
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Change
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||||||||||
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Revenue
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$
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1,099
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$
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1,050
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5
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%
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Income before income taxes (“EBT”)
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$
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291
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$
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176
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65
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%
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Net income
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$
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224
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$
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133
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68
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%
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Net income per diluted share
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$
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4.47
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$
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2.79
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60
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%
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Weighted average shares outstanding – diluted
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50.0
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47.8
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Supplemental Non-GAAP Metrics (a):
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Pre-tax pre-provision earnings (“PPNR”)
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$
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452
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$
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384
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18
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%
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See “Financial Measures” for a discussion of non-GAAP Financial Measures.
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Third Quarter:
Consolidated revenue increased 5% to $1,099 million compared to the third quarter of 2020, resulting from the ongoing consumer recovery from pandemic lows. PPNR increased $68 million, or 18%, as a result of the increase in revenue and lower interest
expense in the quarter. EBT increased 65% to $291 million, impacted by a lower provision for loan loss during the third quarter of 2021 versus prior year. Net income was $224 million, or $4.47 per diluted share.
2
Alliance Data Systems Corporation
October 28, 2021
SEGMENT RESULTS
Card Services:
Revenue increased 7% to $930 million compared to the third quarter of 2020, primarily due to the negative impact from the pandemic on gross revenue yields in the third quarter of 2020. EBT increased $102 million to $314 million compared to the third
quarter of 2020, attributable to the improvement in revenue, lower interest expense, and a lower provision for loan loss. The net principal loss rate was 3.9% in the third quarter of 2021, an improvement of 190 basis points from the prior year period,
while the delinquency rate of 3.8% improved 90 basis points from the prior year period.
Credit sales increased 20% to $7.4 billion compared to the third quarter of 2020, as consumer spending recovers.
LoyaltyOne:
Segment revenue declined 8% to $169 million compared to the third quarter of 2020. BrandLoyalty revenue decreased 18%, or $21 million, due to a decline in retailer programs associated with the continuing impact of COVID-19. AIR MILES revenue
increased 9%, or $6 million, compared to the third quarter of 2020, due in part to higher redemptions, as well as the impact of favorable currency exchange rates. EBT for the LoyaltyOne segment increased 143% to $45 million due to lower cost of
redemptions and amortization expense.
Issuance of AIR MILES reward miles decreased 7% compared to the third quarter of 2020, reflecting certain promotional activity in the prior
year not present in the current year. AIR MILES reward miles redeemed increased 30% compared to the third quarter of 2020, reflecting an improvement in travel-related categories.
Contacts:
Investor Relations: Brian Vereb (brian.vereb@alliancedata.com), 614-528-4516
Media Relations: Shelley Whiddon (shelley.whiddon@alliancedata.com), 214-494-3811
Rachel Stultz (Rachel.stultz@alliancedata.com),
614-729-4890
3
Alliance Data Systems Corporation
October 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 including the proposed spinoff of our
LoyaltyOne segment, 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 pre-tax pre- provision earnings. Pre-tax pre-provision earnings is calculated by adding the provision for loan loss to income before taxes. 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
October 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. 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, October 28, 2021 at 8:30 a.m. (Eastern Time) to discuss the Company’s third
quarter 2021 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 (866) 813-9403 or (929) 458-6194 and enter “859154”. The replay will be available at
approximately 11:59 a.m. (Eastern Time) on Thursday, October 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. Headquartered in Columbus, Ohio, Alliance Data is an S&P MidCap 400 company that consists of businesses that together
employ approximately 8,000 associates at more than 45 locations worldwide.
Alliance Data’s Card Services business is a comprehensive 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
October 28, 2021
ALLIANCE DATA SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2021
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2020
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2021
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2020
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||||||||||||
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Revenue
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$
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1,099.3
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$
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1,050.5
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$
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3,196.5
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$
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3,411.5
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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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523.7
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511.7
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1,559.7
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1,547.9
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||||||||||||
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Provision for loan loss
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161.1
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207.7
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180.3
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1,113.7
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||||||||||||
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Depreciation and amortization
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31.7
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40.1
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97.2
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120.3
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||||||||||||
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Total operating expenses
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716.5
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759.5
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1,837.2
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2,781.9
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||||||||||||
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Operating income
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382.8
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291.0
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1,359.3
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629.6
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||||||||||||
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Interest expense, net:
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||||||||||||||||
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Securitization funding costs
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26.0
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37.5
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89.9
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130.1
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||||||||||||
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Interest expense on deposits
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37.3
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52.9
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124.7
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172.1
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||||||||||||
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Interest expense on long-term and other debt, net
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28.8
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24.7
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87.9
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79.1
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||||||||||||
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Total interest expense, net
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92.1
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115.1
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302.5
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381.3
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Income before income tax
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$
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290.7
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$
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175.9
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$
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1,056.8
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$
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248.3
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Income tax expense
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67.0
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42.6
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273.4
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46.6
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Net income
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$
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223.7
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$
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133.3
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$
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783.4
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$
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201.7
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Per share data:
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Weighted average shares outstanding – basic
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49.8
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47.7
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49.7
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47.7
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||||||||||||
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Weighted average shares outstanding – diluted
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50.0
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47.8
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50.0
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47.7
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Basic – Net income
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$
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4.50
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$
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2.79
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$
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15.75
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$
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4.23
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Diluted – Net income
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$
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4.47
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$
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2.79
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$
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15.68
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$
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4.23
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Pre-tax pre-provision earnings:
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Income before income tax
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$
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290.7
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$
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175.9
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$
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1,056.8
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$
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248.3
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||||||||
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Provision for loan loss
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161.1
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207.7
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180.3
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1,113.7
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||||||||||||
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Pre-tax pre-provision earnings
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$
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451.8
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$
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383.6
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$
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1,237.1
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$
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1,362.0
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6
Alliance Data Systems Corporation
October 28, 2021
ALLIANCE DATA SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
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September 30,
2021
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December 31,
2020
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|||||||
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Assets
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||||||||
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Cash and cash equivalents
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$
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3,172.2
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$
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3,081.5
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||||
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Credit card and loan receivables:
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||||||||
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Credit card and loan receivables
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15,689.9
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16,784.4
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||||||
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Allowance for loan loss
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(1,644.8
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)
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(2,008.0
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)
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||||
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Credit card and loan receivables, net
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14,045.1
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14,776.4
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||||||
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Redemption settlement assets, restricted
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734.0
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693.5
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Right of use assets - operating
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208.0
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233.2
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||||||
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Intangible assets, net
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64.1
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81.7
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||||||
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Goodwill
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1,342.7
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1,369.6
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||||||
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Other assets
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2,691.2
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2,311.2
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||||||
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Total assets
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$
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22,257.3
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$
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22,547.1
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||||
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Liabilities and Stockholders’ Equity
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||||||||
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Deferred revenue
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$
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1,020.9
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$
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1,004.0
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||||
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Deposits
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9,885.5
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9,792.6
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||||||
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Non-recourse borrowings of consolidated securitization entities
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4,588.7
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5,709.9
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||||||
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Long-term and other debt
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2,733.9
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2,805.7
|
||||||
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Operating lease liabilities
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271.8
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300.0
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||||||
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Other liabilities
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1,510.9
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1,413.3
|
||||||
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Total liabilities
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20,011.7
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21,025.5
|
||||||
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Stockholders’ equity
|
2,245.6
|
1,521.6
|
||||||
|
Total liabilities and stockholders’ equity
|
$
|
22,257.3
|
$
|
22,547.1
|
||||
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Shares of common stock outstanding
|
49.8
|
49.7
|
||||||
7
Alliance Data Systems Corporation
October 28, 2021
ALLIANCE DATA SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
|
|
Nine Months Ended
September 30,
|
|||||||
|
|
2021
|
2020
|
||||||
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|
||||||||
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Cash Flows from Operating Activities:
|
||||||||
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Net income
|
$
|
783.4
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$
|
201.7
|
||||
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Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
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Depreciation and amortization
|
97.2
|
120.3
|
||||||
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Deferred income taxes
|
20.0
|
(157.7
|
)
|
|||||
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Provision for loan loss
|
180.3
|
1,113.7
|
||||||
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Non-cash stock compensation
|
24.6
|
16.2
|
||||||
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Amortization of deferred financing costs
|
23.5
|
26.6
|
||||||
|
Asset impairment charges
|
—
|
34.2
|
||||||
|
Change in operating assets and liabilities, net of sale of business
|
25.4
|
121.6
|
||||||
|
Other
|
53.6
|
12.0
|
||||||
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Net cash provided by operating activities
|
1,208.0
|
1,488.6
|
||||||
|
Cash Flows from Investing Activities:
|
||||||||
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Change in redemption settlement assets
|
(47.3
|
)
|
(31.3
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)
|
||||
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Change in credit card and loan receivables
|
87.9
|
3,107.8
|
||||||
|
Proceeds from sale of business
|
—
|
26.7
|
||||||
|
Purchase of credit card portfolios
|
(99.5
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)
|
—
|
|||||
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Sale of credit card portfolio
|
512.2
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289.5
|
||||||
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Capital expenditures
|
(58.8
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)
|
(37.9
|
)
|
||||
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Other
|
(13.8
|
)
|
10.0
|
|||||
|
Net cash provided by investing activities
|
380.7
|
3,364.8
|
||||||
|
Cash Flows from Financing Activities:
|
||||||||
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Borrowings under debt agreements
|
38.0
|
1,150.0
|
||||||
|
Repayments of borrowings
|
(114.1
|
)
|
(1,194.5
|
)
|
||||
|
Net increase (decrease) in deposits
|
88.4
|
(2,012.0
|
)
|
|||||
|
Non-recourse borrowings of consolidated securitization entities
|
2,767.5
|
435.0
|
||||||
|
Repayments/maturities of non-recourse borrowings of consolidated securitization entities
|
(3,891.2
|
)
|
(3,380.0
|
)
|
||||
|
Payment of deferred financing costs
|
(13.0
|
)
|
(16.2
|
)
|
||||
|
Dividends paid
|
(31.6
|
)
|
(50.5
|
)
|
||||
|
Other
|
(1.1
|
)
|
3.9
|
|||||
|
Net cash used in financing activities
|
(1,157.1
|
)
|
(5,064.3
|
)
|
||||
|
Effect of exchange rate changes on cash, cash equivalents and restricted
cash
|
(4.2
|
)
|
3.7
|
|||||
|
Change in cash, cash equivalents and restricted cash
|
427.4
|
(207.2
|
)
|
|||||
|
Cash, cash equivalents and restricted cash at beginning of period
|
3,463.2
|
3,958.1
|
||||||
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
3,890.6
|
$
|
3,750.9
|
||||
8
Alliance Data Systems Corporation
October 28, 2021
ALLIANCE DATA SYSTEMS CORPORATION
SUMMARY FINANCIAL HIGHLIGHTS
(In millions)
(Unaudited)
|
Three Months Ended September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||||||||||
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
|||||||||||||||||||
|
Segment Revenue:
|
||||||||||||||||||||||||
|
LoyaltyOne
|
$
|
169.3
|
$
|
184.8
|
(8
|
)%
|
$
|
496.7
|
$
|
533.9
|
(7
|
)%
|
||||||||||||
|
Card Services
|
930.0
|
865.7
|
7
|
2,699.8
|
2,877.5
|
(6
|
)
|
|||||||||||||||||
|
Corporate/Other
|
—
|
—
|
nm*
|
—
|
0.1
|
nm*
|
||||||||||||||||||
|
Total
|
$
|
1,099.3
|
$
|
1,050.5
|
5
|
%
|
$
|
3,196.5
|
$
|
3,411.5
|
(6
|
)%
|
||||||||||||
|
Segment Earnings Before Taxes:
|
||||||||||||||||||||||||
|
LoyaltyOne
|
$
|
44.5
|
$
|
18.3
|
143
|
%
|
$
|
100.7
|
$
|
88.9
|
13
|
%
|
||||||||||||
|
Card Services
|
314.2
|
212.1
|
48
|
1,128.5
|
314.5
|
259
|
||||||||||||||||||
|
Corporate/Other
|
(63.9
|
)
|
(54.5
|
)
|
17
|
(168.3
|
)
|
(155.1
|
)
|
9
|
||||||||||||||
|
Eliminations
|
(4.1
|
)
|
—
|
nm*
|
(4.1
|
)
|
—
|
nm*
|
||||||||||||||||
|
Total
|
$
|
290.7
|
$
|
175.9
|
65
|
%
|
$
|
1,056.8
|
$
|
248.3
|
326
|
%
|
||||||||||||
|
Key Performance Indicators:
|
||||||||||||||||||||||||
|
Credit sales
|
$
|
7,380
|
$
|
6,152
|
20
|
%
|
$
|
20,825
|
$
|
17,050
|
22
|
%
|
||||||||||||
|
Average receivables
|
$
|
15,471
|
$
|
15,300
|
1
|
%
|
$
|
15,512
|
$
|
16,570
|
(6
|
)%
|
||||||||||||
|
End of period receivables
|
$
|
15,690
|
$
|
15,599
|
1
|
%
|
$
|
15,690
|
$
|
15,599
|
1
|
%
|
||||||||||||
|
Card Services gross revenue yield
|
24.0
|
%
|
22.5
|
%
|
1.5
|
%
|
23.2
|
%
|
23.0
|
%
|
0.2
|
%
|
||||||||||||
|
Net principal loss rate
|
3.9
|
%
|
5.8
|
%
|
(1.9
|
)%
|
4.7
|
%
|
6.8
|
%
|
(2.1
|
)%
|
||||||||||||
|
Delinquency rate
|
3.8
|
%
|
4.7
|
%
|
(0.9
|
)%
|
3.8
|
%
|
4.7
|
%
|
(0.9
|
)%
|
||||||||||||
|
AIR MILES reward miles issued
|
1,155
|
1,240
|
(7
|
)%
|
3,406
|
3,609
|
(6
|
)%
|
||||||||||||||||
|
AIR MILES reward miles redeemed
|
896
|
687
|
30
|
%
|
2,436
|
2,289
|
6
|
%
|
||||||||||||||||
* nm- not meaningful
9
Alliance DataThird Quarter 2021 Results Perry BebermanEVP & CFO © 2021 ADS Alliance Data Systems,
Inc. October 28, 2021 Ralph AndrettaPresident & CEO Exhibit 99.2
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 including the proposed spinoff of our LoyaltyOne segment, 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. 2 Forward-Looking Statements 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 pre-tax pre-provision earnings. Pre-tax pre-provision earnings is calculated by adding the provision for loan loss to income before taxes. 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. Financial Measures
Streamlining businesses through spinAdvances our strategic transformation to deliver long-term,
sustainable growthPositions both companies to focus on their unique growth opportunitiesSpin will strengthen Alliance Data’s balance sheet and improve key ratiosSpin expected to be completed 11/5/21 Business development and product
updateStrong pipeline and robust business development activitiesBalanced mix of portfolios and productsContinued investment in Bread/Digital to scale for growth in 2022Announced new Sezzle strategic business relationship Credit sales and
performance remain strongCredit sales improvement impacted by non-renewalCredit performance reflective of disciplined risk management & environmentPayment rates remain elevated, but expected to lessen over time Third Quarter 2021 Key
Takeaways 3
Third Quarter 2021 Financial Highlights 4 Revenue increased 5% year-over-year, while total expenses
excluding provision for loan loss declined 3%Net Income of $224 million was up 68% year-over-yearCredit sales of $7.4 billion were up 20% year-over-yearAverage receivables were up 1% year-over-year Credit metrics remained strong with a net loss
rate of 3.9% for the quarter $1.1BN Revenue $224MM Net Income $4.47 Diluted EPS
Brand Partner Highlights 5 New Bread Strategic Relationship Select New Brand Partners Brand
Partner Renewals Select New Bread Direct Acquisition Partners
Direct Acquisition Distribution Partners Platform-as-a-Service Select new brand partners include El
Dorado and NikonNearly 30 new direct partners signed within 30 days New relationship with Sezzle on Bread platform to offer installment lendingFiserv in-store capabilities and full roll-out in early 2022 RBC/Bread launched with Xbox All
Access at Best Buy and The SourceRBC/Bread went live with several new SME partners Bread Business Update 6 +
LoyaltyOne® Performance Highlights 7 AIR MILES® reward miles issued and redeemed increased versus 2Q21
as airline bookings improved and merchandise redemptions remained strongWe remain optimistic on the long-term outlook as travel returns to steady-state levelsRebranded and relaunched AIR MILES to the marketplace with enhanced benefits, new logo
and digital properties BrandLoyalty had strong initial campaign launches in September with momentum continuing into the fourth quarterConsumers are actively engaged in loyalty campaigns with particular success in products focused on the home
Financial Results – Consolidated 8 ($ in millions, except per share) 3Q21 3Q20 % Change Total
revenue $1,099 $1,050 5 % Total operating expenses, excl. provision for loan loss 555 552 1 Interest expense, net 92 115 (20) Total expenses excl. provision for loan
loss 647 667 (3) % Pre-tax pre-provision earnings (PPNR) $452 $384 18 % Provision for loan loss 161 208 (22) Total earnings before tax (EBT) $291 $176 65 % Income tax 67 43
57 Net income $224 $133 68 % Net income per diluted share $4.47 $2.79 60 % Weighted average shares outstanding – diluted 50.0 47.8 See “Financial Measures” in earnings press release for a
discussion of non-GAAP Financial MeasuresTotals may not sum due to rounding
Financial Results – Segments 9 3Q21 total revenue* 3Q21 total earnings before tax* * Percentages
based on Card Services and LoyaltyOne segments combined as reported excluding Corporate/Other and intersegment eliminations. Totals may not sum due to rounding; nm = not meaningful ($ in millions) 3Q21 3Q20 % Change
LoyaltyOne $169 $185 (8) % Card Services 930 866 7 Corporate/Other - - nm Total revenue $1,099 $1,050 5 % LoyaltyOne $45 $18 143 % Card Services 314 212 48 Corporate (64) (55) 17
Eliminations (4) - nm Total earnings before tax (EBT) $291 $176 65 %
Key Business Metrics 10 Card Services gross revenue yield and cost of funds Average receivables and
credit sales($ in billions) *Revenue divided by average receivables and held-for-sale receivables
Credit Quality and Allowance 11 Reserve rate ($ in Millions) Net loss rate Delinquency rate 5 year
Max rate: 7.6% 5 year Min rate: 3.9% 5 year Avg rate: ~6.0% Historic quarterly range for the last five years * Net loss rate impacted by pandemic-related consumer relief program. ** Calculated as a percentage of allowance for loan loss to
end of period credit card and loan receivables Revolving Credit Risk Distribution ________________Receivables: $19.5B ALLL: $1.8BReserve rate: 9.3% CECL Day 1: 1/1/20
Full Year 2020Actuals Full Year 2021Outlook Commentary Average receivables $16,367 million Down
mid-single-digits Flat year-over-year in 2H21Expect year-end receivables to be in line with year-end 2020Credit sales up double-digits in 2021 Total revenue$4,521 million Down low-single-digits LoyaltyOne full year revenue growth in
20211Q21 Card Services revenue suppressed with receivable balances rebuilding from pandemic-related reductionsCard Services gross revenue yield remains steady Total expenses*(Excludes provision for loan loss)$2,861 million Flat to
down Includes accelerated digital investment and an increase in marketing spend from depressed levels in 2020Impacted by Bread® & Fiserv investment transition expenses Net loss rate2020 = 6.6% High 4% range Credit performance reflective
of disciplined risk management and environment 2021 Financial Outlook 12 * Total expenses represent total operating expenses excluding provision for loan loss plus total interest expense, net
Our Business Transformation Continues Expanding our Product Suite Improving our Leverage and Capital
Ratios Simplifying our Business Model Enhancing our Core Technology & Advancing Digital Capabilities 13 Changing the Way We Work Leveraging our Bread Fintech Platform & Developing Strategic
Relationships Attracting Top Talent, Activating DE&I Strategy, Driving Inclusive Culture Increased Prioritization of ESG Strategy, in Alignment with Business Transformation
Appendix
Key Business Metrics 15 3Q21 3Q20 3Q21 vs 2Q21 3Q21 vs 3Q20 2Q21 LoyaltyOne (in
millions) AIR MILES reward miles issued 1,155 1,240 (7)% 1,139 1% AIR MILES reward miles redeemed 896 687 30% 800 12% Card Services ($ in millions) Credit
sales $7,380 $6,152 20% $7,401 -% Average receivables $15,471 $15,300 1% $15,282 1% End of period receivables $15,690 $15,599 1% $15,724 -% Total gross revenue yield % 24.0% 22.5% 1.5% 22.5% 1.5% Cost of
funds 1.6% 2.4% (0.8)% 1.9% (0.3)% Principal loss rate 3.9% 5.8% (1.9)% 5.1% (1.2)% Reserve rate 10.5% 13.3% (2.8)% 10.4% 0.1% Delinquency rate 3.8% 4.7% (0.9)% 3.3% 0.5% Return on
equity 37% 14% 23% 36% 1%
Key Business Metrics – Quarterly 16 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 LoyaltyOne
(in millions) AIR MILES reward miles issued 1,344 1,486 1,316 1,053 1,240 1,355 1,112 1,139 1,155 AIR MILES reward miles redeemed 1,078 1,199 994 608 687 838 739 800 896 Card
Services ($ in millions) Credit sales $7,824 $9,297 $6,099 $4,799 $6,152 $7,657 $6,043 $7,401 $7,380 Year-over-year change 6% 4% -3% -36% -21% -18% -1% 54% 20% Average
receivables $17,449 $18,096 $18,294 $16,116 $15,300 $15,759 $15,785 $15,282 $15,471 Year-over-year change -1% 8% 9% -4% -12% -13% -14% -5% 1% End of period
receivables $17,928 $19,463 $17,732 $15,809 $15,599 $16,784 $15,537 $15,724 $15,690 Year-over-year change 3% 9% 5% -10% -13% -14% -12% -1% 1% Total gross revenue yield
% 24.7% 23.3% 25.5% 20.4% 22.5% 22.3% 23.0% 22.5% 24.0% Cost of funds 2.4% 2.4% 2.4% 2.5% 2.4% 2.1% 2.0% 1.9% 1.6% Principal loss rate 5.6% 6.3% 7.0% 7.6% 5.8% 6.0% 5.0% 5.1% 3.9% Reserve
rate 5.9% 6.0% 12.1% 13.3% 13.3% 12.0% 11.9% 10.4% 10.5% Delinquency rate 5.9% 5.8% 6.0% 4.3% 4.7% 4.4% 3.8% 3.3% 3.8% Return on equity 28% 23% 18% 15% 14% 16% 27% 36% 37%
Financial Results – Quarterly 17 ($ in millions, except per
share) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 Total revenue $1,438 $1,461 $1,382 $979 $1,050 $1,110 $1,085 $1,012 $1,099 Total operating expenses, excl. provision for loan loss 836 771 562 555
552 699 548 553 555 Interest expense, net 140 142 139 128 115 113 109 102 92 Total expenses excl. provision for loan loss 976 913 701 683 667 812 657 655 647 Pre-tax pre-provision earnings
(PPNR) $462 $548 $681 $297 $384 $299 $428 $358 $452 Provision for loan loss 297 381 656 250 208 152 33 (14) 161 Total earnings before tax (EBT) $164 $167 $25 $47 $176 $146 $394
$372 $291 Income tax 43 37 (5) 9 43 53 108 98 67 Income from continuing operations $122 $130 $30 $38 $133 $93 $286 $273 $224 Income from continuing operations per
diluted share $2.41 $2.74 $0.63 $0.81 $2.79 $1.93 $5.74 $5.47 $4.47 Weighted average shares outstanding –
diluted 50.4 47.6 47.7 47.7 47.8 48.4 49.8 50.0 50.0 ************************************************************************************************************************************************************************************************** (Including
discontinued operations) Net income (loss) $(108) $98 $30 $38 $133 $12 $286 $273 $224 Net income (loss) per diluted share $(2.13) $2.05 $0.63 $0.81 $2.79 $0.25 $5.74 $5.47 $4.47 Totals may not sum due to
rounding
Financial Results – Segments by Quarter 18 ($ in
millions) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 LoyaltyOne $246 $332 $198 $151 $185 $231 $177 $151 $169 Card Services $1,192 1,128 1,184 828 866 879 908 861 930
Corporate/Other - - - - - - - - - Total revenue $1,438 $1,461 $1,382 $979 $1,050 $1,110 $1,085 $1,012 $1,099 LoyaltyOne $(5) $58 $47 $24 $18 $22 $32 $24 $45 Card
Services 300 162 32 70 212 187 410 404 314 Corporate/Other (131) (52) (53) (47) (55) (63) (47) (57) (64) Eliminations - - - - - - - - (4) Total earnings before tax
(EBT) $164 $167 $25 $47 $176 $146 $394 $372 $291 Totals may not sum due to rounding
Funding, Capital and Liquidity 19 Combined Banks Capital
Ratios 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 Common equity tier 1 capital ratio 15.5% 14.5% 15.9% 18.3% 18.8% 18.4% 21.0% 22.1% 22.6% Tier 1 capital
ratio 15.5% 14.5% 15.9% 18.3% 18.8% 18.4% 21.0% 22.1% 22.6% Total risk based capital ratio 16.8% 15.8% 17.3% 19.7% 20.1% 19.7% 22.3% 23.4% 23.9% Tier 1 leverage capital
ratio 13.4% 12.5% 12.8% 14.2% 16.1% 17.1% 17.8% 19.2% 19.5% Parent LevelLiquidity at 9/30 of $1.1 billion, consisting of cash on hand plus revolver capacity Approximately $332 million in cash and cash equivalents, ~$750 million in
unused revolver9/30 TCE/TA ratio of ~4.0%. Expect ~300 basis point improvement in TCE/TA as a result of the spinBank LevelBanks finished the quarter with $2.8 billion in cash and $3.3 billion in equityTotal risk based capital ratio at 23.9% -
over double the 10% threshold to be considered well-capitalized; CET1 at 22.6%Funding readily available with heavy demand for FDIC-insured deposit products – continued strategic focus on retail growth Funding Mix
Card Services Sales Data 20 In-store vs. digital sales Digital includes all non-store new accounts and
Bread $ in billions In-store vs. digital new accounts in millions