Bread Financial Holdings, Inc.

Good morning and welcome to Bread Financial's fourth quarter earnings conference call. My name is Charlie 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 keypad. It's now my pleasure to introduce Mr. Brian Verab, Head of Investor Relations at Bread Financial. 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 Bread Financial and Perry Beiberman, 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 based on management's current expectations and assumptions and are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC. 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 are included in our quarterly earnings materials posted on our investor relations website at BredFinancial.com. With that, I would like to turn the call over to Ralph Andretta.

Thank you, Brian, and good morning to everyone joining the call. We set ambitious goals in 2022, and I am extremely proud of our associates for moving our company forward by executing on our initiatives to achieve these goals. I'll begin on slide three. which highlights several major accomplishments achieved in 2022 as part of our ongoing business transformation. To begin, we rebranded from Alliance Data Systems to Bread Financial, a tech forward financial services company providing simple, personalized payment, lending, and saving solutions to consumers. Following our multi-year corporate transformation, Bread Financial has emerged as a more modern, nimble, and streamlined company backed by leading technology and custom platform solutions that empower today's consumer. Coinciding with our rebrand, we launched our direct-to-consumer Bread Cashback American Express credit card and rebranded our Buy Now Pay Later platform to Bread Pay, which offers installment lending and split-pay solutions through an omnichannel approach. We also rebranded our retail deposit platform to Bread Savings. These enhanced products Enhanced products provide industry-leading benefits and complement our existing suite of financial offerings, ensuring our customers across generational segments have access to payment and savings solutions. We continue to sign new iconic brand partners, including AAA and the NFL, while renewing valued long-term relationships like Victoria's Secrets. We have secured renewals with brand partners representing approximately 85% of our year-end 2022 credit card balances through 2025, after adjusting for the anticipated sale of the BJA's portfolio. We also saw success with de novo program launches in 2022, such as B&H Photo, which exceeded our initial performance and growth projections for the year. We look forward to working with our new and existing brand partners to drive incremental sales growth and customer loyalty through our sophisticated data and analytics capabilities, enhanced value propositions, and comprehensive product suite. In 2022, we invested more than $125 million in technology modernization, digital advancement, marketing, and product innovation. Major achievements included transitioning our credit card processing services to Fiserv, converting to the cloud, and integrating Alveria, a state-of-the-art solution that enhances the productivity of our customer care and collections efforts. Our digital advancement continued to progress as well as we expanded mobile and web-based customer servicing capabilities and launched a virtual card with web-to-wallet provisioning to provide our customers a more simplified user experience. These upgrades supported our transformation enhance our strategic differentiation, and are essential to driving operating efficiencies and innovation. We remain committed to ongoing technology investment with a focus on further digital advancement. As part of our investments, we increased our marketing investment in 2022 to bolster spend through joint marketing campaigns with our brand partners. Developing strong collaborative relationships with our partners has underpinned our decades of successful growth as these investments build loyalty with both our partners and their customers, as well as expand sales opportunities. Additionally, by leveraging our sophisticated data and analytics capabilities and efficient targeting channels, we were successful in driving new acquisition and engagement with our Bread Cashback American Express credit card, Bread Pay, and Bread Savings offerings. We will continue to invest for the future to deliver value for our brand partners, customers, and shareholders. Finally, I'm proud to announce that Bread Financial was recognized for a prioritization of environmental, social, and governance across our entire business, earning a spot on Newsweek's 2023 list of America's most responsible companies. Our commitment to advancing our ESG strategy, objectives, and accountability is evident through the organization and remains core to our sustainable business practices. Turning to slide four. We are pleased to have achieved our 2022 financial targets, driven by organic growth from our existing brand partners, as well as addition of our new brand partners and product offerings. Average loans grew 13% compared to 2021. Revenue growth exceeded average loan growth at 17% year over year. Pre-tax, pre-provision earnings increased 19% versus 2021, highlighting the quality of the growth we are generating and the underlying value we are creating. We remain disciplined, generating more than 200 basis points of positive operating leverage for the year as we manage our expenses in alignment with our revenue and growth outlook while continuing to invest in our future. Our net loss rate of 5.4% remain within our full year guidance range and below our historic average of approximately 6%. Along with accomplishing our 2022 targets, we significantly strengthen our balance sheet and bolstered our financial resilience through greater product and funding diversification. We increased loss absorption capacity and growth in capital and tangible book value. Retail deposits on our bread savings platform increased to $5.5 billion or 72% year over year. We plan to build on these achievements in 2023 through continued execution of our long-term strategy. Moving to slide five, I'll highlight some of our most recent business development success. I am pleased to announce that we have signed a new long-term credit card relationship with Hard Rock International, a well-recognized hotel, casino, and restaurant operator. Hard Rock attracts a broad demographic given its diverse offerings, further expanding our reach across generations. We will offer Hard Rock customers a new way to pay while incenting loyalty and brand affinity through our co-brand credit card. During the quarter, we announced a new agreement with the New York Yankees. This exciting relationship rewards Yankees fans for their purchase and provides enhanced benefits through our New York Yankees co-brand credit card, while further diversifying our brand partner base. Also during the fourth quarter, we signed a multi-year renewal with long-term partner Helzberg Diamonds, underscoring our strong market share position in the jewelry space. Helzberg Diamonds has more than 100 years of diamonds expertise and operates online at over 200 stores nationwide. We will continue to leverage our advanced data and analytics to enhance the shopping experience to Helzberg's customers. Turning to BreadPay, we continue to add new brand partners to our platform, and importantly, we have now extended nearly 50% of our current loan origination volume with new long-term renewals. Because these contracts historically have been short-term in nature, having long-term extensions will reduce volatility and promote long-term sustainable growth. Additionally, our strategic relationship with Sezzle continued to outpace our expectations with now more than 200 live merchants and installment loan origination volume exceeding our initial goal. We are pleased with our many accomplishments in 2022 and plan to build on this momentum in 2023. Our business development pipeline remains strong, and we are confident in our ability to grow responsibly in 2023, despite a more challenging macroeconomic landscape. As always, we remain vigilant in responsibly driving sustainable, profitable growth. Perry will outline our specific 2023 financial targets, which include continued strategic investments aligned with quality loan and revenue growth. Our 2023 outlook assumes continued inflationary pressures and gradually rising unemployment levels. Headwinds that we expect will result in a full year net loss rate above our long-term historic average of approximately 6%. This corresponds with our expectations that net loss rates will hover above our historic average during more challenging economic periods and drop below our historic average during more favorable economic periods. With three decades of experience, our differentiated and tested underwriting and credit risk modeling is purposely structured to navigate the full range of economic scenarios, focused on producing positive annual earnings and a strong risk-reward margin, even during periods of economic stress. With the changes we have made over the past three years to strengthen our credit profile, we remain confident in our long-term guidance of the through-the-cycle average net loss rate below our historic average of 6%. Our seasoned leadership team is experienced in managing through credit cycles, and every cycle is different. Some factors, like inflation, are impacting all consumers and cannot be fully controlled or mitigated. We will manage what we can control. In these instances, we run our business with a long-term focus, as we have done effectively in previous downturns. We have and will continue to proactively adjust our underwriting and credit line management to account for the anticipated challenges faced by consumers. We manage our business with strong governance and controls intact and remain aligned and confident on our objective to deliver long-term value for our stakeholders. With that, I will turn it over to Perry Beaverman, our CFO, to review the financials.