Bread Financial Holdings, Inc.

Good morning and welcome to Alliance Data's full year and fourth 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 during that time, please press star followed by the number one on your touchstone phone. In order to view the company's presentation on the website, please remember to turn off the pop-up blocker on your computer. It is now my pleasure to introduce Mr. Brian Virb, Head of Investor Relations at Alliance Data. Sir, the floor is yours.

Thank you, Casey. Copies of the slides we will be reviewing and the earnings release can be found on the Investor Relations section of our website. 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 call. 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, Brian, and thank you all for joining the call this morning. I will start on slide three with the key takeaways from 2020 for Alliance Data. First, we believe that the company's results show reflected significant resilience in what was a very difficult business environment, thanks to our ability to respond quickly and effectively to the changes brought on by the COVID-19 crisis. At the same time, we were able to reduce our fixed cost base by approximately $240 million in 2020 compared to where we stood in 2019. We optimized our workforce and our physical real estate footprint and gained operating efficiencies through process improvements, including automation as part of our transformation program. Even more important than the progress we demonstrated in 2020 are the investments we made and the strategic actions we took to position Alliance data for sustainable long-term future growth. We invested in top-tier talent to transform our card services business, added digital innovation expertise, and strengthened our partner management and product development capabilities. Turn to page four. I will cover key investments we made in 2020. But before I get there, I do want to mention our international Loyalty One businesses as they continue to adopt and invest in better positioning themselves for the new marketplace through new offerings. First, turning to air miles, the team has pivoted its rewards portfolio to emphasize more non-travel options such as stay-at-home type merchandise to drive higher customer redemption rates during the pandemic. Borean Loyalty has developed a number of new concepts for programs based on pandemic-related themes like Bring the World to Your Home, and health and hygiene, and is providing sustainability-focused offers using 100% recycled plastic for rewards like luggage and kids' promotions. Moving to the slide, you can see the major products and technology enhancements we've made in 2020 to improve our client experience and drive future growth. Our acquisition of Bread opens up new opportunities to leverage our digital offerings to capture incremental point-of-sale opportunities and to build strategic technology platform partnerships. Bread offerings and integration capabilities enhance the growth prospects of our card services verticals and increase the addressable market of small and medium-sized merchants. At the same time, Bread offers our existing partners a broader digital product suite and additional white-label product solutions. With the transition of card services core processing to Fiserv, We will improve our brand partner conversions and speed to market, including the ability to quickly and seamlessly add new products and capabilities that benefit our partners and card members. The platform enables efficient integration and use of mobile wallets and virtual accounts, while supporting our data and analytic capabilities and improving operational efficiencies. We will also benefit from capital expenditure savings, which will be redeployed to fund growth initiatives. In 2020, we also announced the launch of our enhanced digital suite. This digital application helps our brand partners capitalize on accelerated growth of e-commerce by attracting and bringing through more qualified applicants a higher average purchase value and a higher credit sales conversion rate. The suite creates a seamless process for customers to adapt, apply for, and use our payment options. We are seeing improved year-over-year growth from our digital channels, and would expect this trend to continue as our partners and card members benefit from our digital solutions. Finally, we were pleased with the response to the launch of our new proprietary credit card, the Comenity Card in 2020. We continue to see strong activation rates, engagement, and cross-category shopping, especially among millennials. The Comenity Card allows Alliance Data to retain card member relationships and drive increased credit sales. These investments together with our streamlined cost structure underpin our confidence in Alliance Data's future prospects. Slide five provides the financial highlights for the fourth quarter. We reported diluted EPS of 25 cents, including discontinued operations. Net income from continuing operations was $93 million, or $1.93 per diluted share. Total revenue for the quarter was over $1.1 billion. Credit sales improved 24% sequentially, and both air miles, reward miles issued and redeemed improved from the third quarter of 2020. Overall, during the quarter, we saw a pickup in our business due to holiday seasonal shopping and improved consumer spending. Moving on to slide six, you can see the continued gradual recovery in credit sales for our credit card services business. Active program sales, which provide a clearer view of underlying sales trends, improved from a 14% decline year-over-year in the third quarter to a 7% decrease in the fourth quarter of 2020. Also, 24% sequential total sales improvement from the third quarter of 2020 was better than the same period last year, showing continued progress while adjusting for seasonal holiday increases. We continue to see more purposeful spending. While in-store traffic was down versus a year ago, when consumers shop in-store, they are spending more. Also, I want to highlight the success we saw in our beauty, health, and wellness verticals, as both had an excellent holiday season with strong online adoption and sales performance. Online sales made up 42% of total sales in the fourth quarter, up from the low 30s for the fourth quarter of last year. Please note that we include additional details in our sales by channel in the appendix of this deck. Slide 7 highlights select partner additions and renewals, and our new strategic technology partnership with RBC. In the fourth quarter, we added over 60 new online merchants and now have over 500 online merchants. Bred's innovative fintech approach and platform capabilities combined with card services funding, marketing, data and analytics, and underwriting expertise provides new opportunities for growth and synergies. Our pipeline of digital partners is growing at an impressive rate as a result of bringing our two companies together. In addition, Active cross-sell partner discussions continue with high levels of interest from our existing card services brand partners to augment existing programs with bread solutions. We expect the integration of existing partners to start in the latter part of the first quarter. I would also highlight the addition of famous footwear, which will be fully integrated with the enhanced digital suite to take advantage of our digital capabilities through a single API integration. The strategic agreement that we have announced this morning with World Bank of Canada leverages Bred's leading platform technology and digital offerings in new ways. RBC is now utilizing Bred's white-label platform to expand its payment solutions for its Canadian merchants. This accelerates Bred's platform growth and enables us to continue to bring next-generation payments and checkout solutions to more consumers globally. Let's turn to Slide 8 to review the performance for Loyalty 1, which includes Air Miles Rewards Program in Canada and Netherlands-based Brand Loyalty. The segment's fourth quarter revenue benefited in part from higher seasonal spend when compared to the previous quarter. As I mentioned earlier, and as displayed in the graph on the bottom of the slide, Air Miles, Reward Miles issued and redeemed continued to improve in the quarter, driven in part by the success of the expanded merchandise portfolio. Customer engagement continues to improve with the new offerings. Once travel resumes, the new offerings combined with travel options should provide a substantial growth opportunity. Brand loyalty revenue improved 36% sequentially, yet remains down versus the prior year. We continue to closely monitor the pandemic infection rates, especially in Europe and certain countries, as they implement stricter informed measures. Moving to slide nine. Our areas of focus remain consistent. With the recovery actions behind us, we remain focused on the rebuild and regrow elements of our plan. We will execute on these efforts in 2021 to position Alliance data for sustainable, profitable, and long-term growth. I will now turn the call over to Tim to cover the financials.