Bread Financial Holdings, Inc.

Good morning and welcome to Alliance Data's third quarter 2021 earnings conference call. My name is Daisy and I'll be coordinating your call today. At this time, all parties have been placed on listen-only mode. Following today's presentation, the floor will be open for your questions. To register a question, please press star followed by one on your telephone keypads. It is now my pleasure to introduce Mr Brian Verrup from the Head of Investor Relations at Alliance Data. Sir, the floor is yours.

Thank you. Copy 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 Perry Biberman, 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?

Ralph Andretta Hey, Brian, thank you, and good morning, and thank you all for joining. I will start on slide three with the key takeaways for the quarter. Our performance demonstrated considerable operating progress as we continue to move forward with the transformation of the company. We are seeing the success of investments and strategic decisions we have made, and we continue working to position our company for strong, profitable, long-term growth. Our business development pipeline is robust, which is evidenced by the new signings and renewals during the quarter. I will highlight a few of these names on the coming slides. We continue to win new opportunities and will share our progress at the appropriate times. Earlier this week, we announced a new partnership with Sezzle. They will integrate with Bred's FinTech payments platform for installment lending on big ticket purchases. This is another example of the multiple ways we can drive new growth for Bred's versatile platform. Our investment in the Bred platform and our digital capabilities are ongoing and set the stage for sales scaled growth in 2022 and beyond. Our full suite of consumer lending products coupled with our expanded total addressable market has created new opportunities. These opportunities provide increased flexibility to optimize and balance our portfolio from a growth, margin, and responsible lending perspective. We are no longer as reliant on a few large partners or a single product to drive our success. The long-term growth we outlined at our May investor event remains in our sights. Our leadership team is focused on driving net partner growth while delivering industry-leading returns. Our credit performance remains strong as a result of our disciplined risk management and the government economic stimulus program. We anticipate that payment rate will continue to slow and credit metrics will moderate in 2022 as stimulus programs expire. Consumers have returned to omnichannel shopping, and we expect credit sales improvement to continue into the holiday season. The spinoff of our Loyalty One segment as Loyalty Ventures, Inc., is expected to be completed on November 5th, advancing our strategic transformation and furthering our ability to deliver long-term sustainable growth. The SPIN positions both Alliance Data and Loyalty Ventures to focus on the unique growth opportunities and is expected to strengthen Alliance Data's enterprise-level capital metrics and other key metrics. Alliance Data will retain 19% ownership interest and expects to receive a $750 million cash distribution from Loyalty Ventures, which we will use for deleveraging. We expect an approximately 300 basis point improvement in our TCE to TA ratio as a result of this spinoff in November. Slide four provides highlights of our key financial metrics for the third quarter. Total revenue for the quarter was $1.1 billion, and net income was $224 million. Revenue increased 5% year-over-year, while total expenses, excluding provision for loan loss, declined 3%. The allowance for loan loss remained nearly flat for the quarter, resulting in reported diluted earnings per share of $4.47. Credit sales were up 20% year-over-year to $7.4 billion. Our net loss rate, 3.9% for the quarter, which marks our lowest third quarter rate in the last 20 years. Slide five highlights select brand partner additions and renewals. We added Turino as a new retail card partner and signed renewals with GameStop and Petland. We continue to thoughtfully manage our new business and renewal opportunities to drive profitable growth and optimize our portfolio. Bread continues to successfully add new online merchants through its direct acquisition channel. A select few of the partners added to the platform are displayed on the right side of the slide. I would highlight the recent signing of our current retail card partner, Eldorado, onto Bread's payment platform. We continue to have positive dialogue with many existing and new retail card partners to enable Bread's digital offerings, and we are working to align with those partners' integration timelines. which vary by merchant. Bred's platform provides quick and flexible integration options with an exceptional customer experience that sets it apart from the competition. I will cover our exciting announcement with Cecil on the next slide. Slide six provides more details on the progress of each of our Bred business models. We continue to invest in Bred's modern platform as we have more than doubled the number of our digital engineers and continue to enhance our product and integration capabilities across the models. One area that we're very excited about is to roll out in-store capabilities in early 2022. This will expand our consumers' ability to use buy now, pay later products at physical locations and provide merchants the omni-channel acquisition FinTech platform to provide their consumers with more options to check out with the addition of Bread's flexible installment payment solutions. Alliance data will underwrite, service, and retain the receivable for the installment loans on our balance sheet. We continue to progress forward with our full launch across all of Pfizer's merchant acquiring platforms, including the Clover POS system in 2022. What distinguishes our relationship with Fiserv is that we are able to leverage Fiserv's vast sales force to promote and distribute our lending products across Fiserv's expansive merchant network, and the offering is integrated into their merchant dashboard. Also, we expect to initiate our in-store technology capabilities with Fiserv by the end of the year. Finally, we are seeing strong momentum in our technology platform offering with RBC in Canada. RBC's pay plan, pay over time solution powered by Bread is now live in EB Games, Best Buy, and The Source, and is the exclusive way to pay for Microsoft, Xbox, all access program in Canada. Additionally, there were several small to mid-sized merchants that launched in RBC's pay plan on Bread's platform during the quarter. The pipeline remains robust, and we expect to have additional launches with RBC in the fourth quarter prior to the holiday season. Let's turn to slide seven. I expect this to be the last time we will review the performance for the Loyalty One segment, which includes the Air Miles Rewards Program in Canada and the Netherlands-based Brand Loyalty Program. The spinoff of that business to Loyalty Ventures, Inc. is currently on track for completion on November 5th. The business is well positioned for success with a strong management team transitioning to lead loyalty ventures. I wish all our departing colleagues the best and appreciate all the hard work and dedication to Alliance data over the years. As displayed in the graph on the right, air miles, reward miles issued and redeemed improved in the quarter as flight bookings increased and merchandise redemption remained strong. We remain optimistic on the long-term outlook as travel rebounds and are excited about the relaunch and rebrand of Amiles in October, with enhanced benefits, a new logo, and digital properties. Brand loyalty had a strong initial campaign launches in September, with momentum continuing into the fourth quarter. Of course, we continue to closely monitor conditions throughout the world, including supply chain interruptions that have the potential to impact macroeconomic environment and our business. With that, I'll turn it over to Perry.