Bread Financial Holdings, Inc.

Good morning and welcome to AlliantStata's second quarter 2020 earnings conference call. At this time, all parties have been placed on a listen-only mode. Following today's presentation, the floor will be open for your questions. To ask a question via the audio, you will need to press star 1 on your telephone. Please be advised that today's call is being recorded. In order to view the company's presentation on the website, Please remember to turn off your pop-up blocker on your computer. It is now my pleasure to introduce your host, Ms. Vicki Nakula of Advisory Partners. Ma'am, the floor is yours.

Thank you, Sylvia. By now, you should have received a copy of the company's second quarter 2020 earnings release. If you haven't, please call Advisory Partners at 212-750-5800. On the call today, we have Ralph Andretta, President and Chief Executive Officer of Alliance Data, and Tim King, Executive Vice President and Chief Financial Officer of Alliance Data. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC. Alliance data has no obligation to update the information presented on the card. Also on today's call, our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors. Reconciliation of those measures to GAAP will be posted on the investor relations website at AllianceData.com. With that, I would like to turn the call over to Ralph Andretta.

Ralph? Thank you and good morning. Thank you for joining us to review our second quarter results. Since our last earnings report in April, which came merely weeks after COVID-9 was declared a global pandemic, our associates have continued to navigate exceptionally challenging conditions and rise to the occasion across every facet of our business. I continue to be inspired by the dedication of our leadership team and resilience of our associates, all of whom have successfully adjusted to new and different working environments while maintaining required client service levels, supporting each other, and doing what we can in our communities to show our support to people and organizations in need during this time. Likewise, we have done our part to support our card members, our collectors, and our retail partners. For our card members, we introduced a number of forbearance programs, which used by card members approximately 10% of our accounts receivable to relieve financial pressure during this difficult time. For our air miles collectors, as travel slowed, we pivoted our reward options to at-home and delivery, and service options and launched a digital redemption program. For our retail partners, we worked to support e-commerce and direct to consumer engagement. Brand Loyalty has used this time to support its retailers by leveraging digital channels for loyalty programs and increased engagement. In summary, for the second quarter, we are managing well in the COVID-19 environment, remaining profitable, and we believe we will have adequate liquidity to manage through this period of significant stress. Sales and credit were better than we anticipated. People are spending and meeting their credit obligations. They are engaged with us and our brand partners. And we are investing in our future with people, process, and technology. Turning to slide four, let's discuss the key takeaways from our second quarter results. On a consolidated basis, our results reflected the challenging environment. Revenue was down 27% year over year, and adjusted EBITDA net was down 50%. Loyalty One results were mixed. Air Miles benefited from a shift in focus to items that are more relevant for time at home. This combined with expense reduction led to 5% improvement over last year's constant currency adjusted EBITDA. Brand loyalty results were less favorable. With revenue and adjusted EBITDA both down, as clients in the grocery business deferred loyalty spending to later in the year. For card services, our second quarter sales activity progressively improved throughout the period as stores reopened. Sales ended 14% down as we exited June compared to last year. However, sales were down 36% to Q2 of last year. Although sales were down considerably, our products and offerings remain attractive. Within this challenging environment, our focus has been on managing what is within our control, our service levels, and our costs. In the second quarter, our cost reduction programs resulted in approximately $50 million of additional savings. Consistent with what we announced previously, we are on track to deliver $240 million of savings for 2020, meaning we expect to reduce expenses by another $100 million in the second half of this year. primarily attributable to additional procurement and operating efficiencies. We are positioning the business to be far leaner and more profitable once top line growth returns. Our credit metrics and payment activity were better than expected. I will highlight some of those metrics after Tim discusses our financial results. The majority of our card members continue to shop across all channels. Our card members, including those currently in forbearance programs, continued to make payments indicating continued engagement and responsiveness in managing their payment obligations. The positive performance together with lower sales volume led to lower accounts receivable and resulted in a modest reserve release this quarter. However, given the uncertainty around the macroeconomic environment for the remainder of the year, we are maintaining a robust allowance for loan loss exceeding 13% of our period end receivables. which is an increase of over 110 basis points from the previous quarter. Our loan loss reserve reflects a more conservative economic outlook than the first quarter, with a further reduction in GDP and a further increase in unemployment. Finally, we will continue to invest in our business. Technology and talent are at the top of our list. I will now turn the call over to Tim to cover the financials.