Bread Financial Holdings, Inc.

Good morning, and welcome to Bread Financial's first quarter 2022 earnings conference call. My name is Victoria, and I'll be calling to 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, press Start, followed by 1. It is now my pleasure to introduce Mr. Brian Verup, Head of Investor Relations at Bread Financial. Sir, the floor is yours.

Thank you. Copy of the slides we will be reviewing and the 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 Bread Financial and Perry Beaverman, Executive Vice President and Chief Financial Officer of Bread Financial. 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 FTC. Bread Financial 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 breadfinancial.com. With that, I would like to turn the call over to Ralph Andretta. Ralph?

Thank you, Brian, and thank you to everyone for joining the call this morning. Starting on slide three, we are excited to display our new logos and company name, Bread Financial. Our rebrand reflects the company's transformation to a tech-forward financial services company providing simple, personalized payment, lending, and saving solutions. After a multi-year corporate transformation, Bread Financial has emerged as a more modern, nimble, and streamlined company backed by technology and platform solutions that empower today's consumer. We will continue to build on our 30-year legacy of creating value for our brand partners, and as we transform, we will continue to invest in data and analytics, innovative technology, and digital capabilities. The Bread Financial brand will be prominently used with our core offerings including our private label and co-brand products with our brand partners. The Bread Cashback brand is used for our newly released direct-to-consumer Bread Cashback American Express credit card, which I will discuss in more detail in a moment. Bread Pay represents the payment and lending offerings on a versatile FinTech platform, which includes our Buy Now, Pay Later solutions and our strategic relationships with Fiserv, RBC, and Settle. The Bread Savings brand reflects the rebranding of our community direct consumer savings, providing high yield savings accounts and consumer certificates of deposit. Our new brands and offerings underscore our focus on delivering full spectrum innovative payment lending and saving solutions that customers need at every stage of their financial journeys. Slide four highlights our ongoing business transformation progress. We continue to develop our suite of lending products to provide consumers with a diverse set of payment options. Our product set, including private label, co-brand, and proprietary cards, installment lending, and split pay, unlocks graduation and optimization strategies that increase the lifetime value of a customer. Our variety of product offerings allow us to meet the needs of a diverse consumer base in a way that increases conversion while also allowing our brand partners to manage the product mix and optimize profitability. We continue to strategically invest in our digital platform, product innovation, marketing efforts, and technology modernization with our planned incremental investment of over $125 million in 2022. Also in 2022, we are scheduled to complete the conversion of our core processing system to Fiserv, which will allow us to be more nimble and leverage new capabilities to drive both revenue opportunities and operating efficiencies. Our capital ratios continue to improve as a result of growing retained earnings, providing flexibility to continue to support our possible growth and improve our ratios over time. Last but not least, as highlighted in our environmental, social and governance report, we have continued to refine and prioritize our ESG strategy with board level oversight. We have an outstanding board of directors that is focused on supporting our ability to make disciplined financial decisions to drive long term value for our stakeholders. At the bottom of the slide, we listed our key foundational elements, proactive risk management, prudent balance sheet management, and disciplined expense management. These three elements guide our strategic decision making as they are critical to creating sustainable long-term value for our stakeholders. Moving to slide five, I will highlight a few key updates from the quarter. We continue to make progress towards our long-term financial goals driven by our focus on responsible, profitable growth. In the first quarter, consumer activity remained strong, with credit sales up 14% from the first quarter of 2021, with particular strength from our beauty vertical and co-brand and proprietary travel and entertainment sales. Co-brand and proprietary sales now make up over 50% of our sales. Our loan growth balance continues to accelerate on a year-over-year basis, with end of period loans up 8%. We remain optimistic on continued growth with a robust business development pipeline, increasing engagement with existing brand partners, and the expansion of our brand financial direct to consumer offerings. Looking at the business environment, we are closely monitoring macro and geographical conditions, including longer term effects of persistent inflation, rising interest rates, and recessionary risks. However, our consumers' financial health remains incredibly resilient, buoyed by historically low unemployment, robust job offerings, and rising wages. We proactively scrutinize the performance of our cardholders across the credit risk spectrum, with special emphasis on performance by income and within our products. As expected, coming off 20-year lows, we are seeing some normalization materialize in risk and delinquency. That said, our cardholder's performance in the first quarter and into April continues to show both strong payment rates and strong spending. Given the nature of the macro risk, we especially focus on near prime and lower income cardholders. Here as well, we are seeing good payment rates, lower non-payment rates than pre-COVID, and healthier spending across discretionary needs, and needs-based spending categories. In short, we remain optimistic that the consumer demand will remain strong in 2022. And year to date, our results are slightly better than our expectations. While we are optimistic about the outlook in 2022, we will manage our risk strategies with real-time analytics, making adjustments as necessary in this dynamic environment. We are fortunate to have built a leadership team of industry veterans who have successfully managed through cycles and changing market conditions. As you would expect, we have a recessionary readiness playbook and will remain proactive in our approach. As part of our transformation, we have changed the underlying credit risk profile of our portfolio. We are a more balanced company with over one-third of our loans now on co-brand or proprietary cards, which more often than not come with a better consumer credit profile. As a result of our disciplined risk management approach and a more balanced product mix, our credit risk mix distribution has improved from where it was before the pandemic. Moving to slide six, I will highlight some of our business development activities and our new 2% cashback credit card. Earlier this month, we successfully launched the Bread Cashback American Express card. The Bread Cash Back Card offers industry-leading benefits and complements our existing suite of financial products as we continue to ensure our customers have access to robust solutions to serve their payment and savings needs at all stages of their financial lives. Cardholders receive unlimited 2% cash back, no annual or foreign transaction fees, and access to dining, travel, and entertainment offers. as well as a comprehensive purchase identity and travel protections. In particular, this proprietary card provides additional opportunity to drive acquisition and growth with an appealing value proposition, especially within the millennial and Gen Z consumer base, while providing further product mix diversification for our overall portfolio. Our plans include increased marketing investment, for the remainder of this year and into 2023 to drive profitable growth and adoption. Early feedback on this card has been positive, with consumers noting the simplicity of the instant mobile acquisition process and wallet provisioning. With our modernized response pre-fill application experience, customers go from application to tokenized card with their digital wallet in approximately 30 seconds. Also during the quarter, we announced the early renewal of our long-term agreement with Victoria's Secret, our largest and longest tenured brand partner with nearly 1,400 stores. As part of this renewal, we launched a new co-brand credit card. The new Victoria's Secret MasterCard complements the existing Victoria's Secret private label credit card, offering compelling rewards for purchases both at Victoria's Secret and anywhere card members shop. This car uses tap-to-pay technology, is compatible with all digital wallet, and offers increased anti-fraud security. We also renewed our relationship with Lending Club, which further extends the growth of our diversified verticals. With these new renewals, over 90% of our loan balances, excluding BJ's, are now secured through 2023, and nearly 75% through 2025. Building on our recent new business development success, we launched a pilot for a new Harley-Davidson private label credit card to provide promotional finance plans for general merchandise, parts and accessories, services, and more through participating Harley-Davidson dealers. Additionally, we continue to add new online brand partners on our Bread Pay platform, and we introduced our in-store checkout pilot with Fiserv on their Clover app. We are pleased to be awarded the FinTech Breakthrough Award for Best Consumer Payments Platform for our versatile Bread Paid platform. We continue to execute on our strategy and we are seeing the results of the team's dedicated work and focus. For example, last week we launched our NFL card with its tens of millions of fans just in time for today's draft. And Wayfair is now live on our Bread Paid platform. I will now turn it over to our CFO, Perry Biberman, to review the financials.