Bread Financial Holdings, Inc.

Good morning and welcome to Bread Financial's second quarter earnings conference call. My name is Emily and I'll be coordinating your call today. 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 register a question, please press start followed by one. It is now my pleasure to introduce Mr. Brian Verab, Head of Investor Relations at Bread Financial. The floor is yours.

Thank you. Copies of the slides we'll 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 Biberman, 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 material posted on our investor relations website at BredFinancial.com. With that, I would like to turn the call over to Ralph Vendretta.

Thank you, Brian. Good morning to everyone joining the call. I'd like to start the call today by welcoming Joyce St. Clair, a veteran financial services senior executive to our board of directors. Joyce most recently completed a successful 30-year tenure with Northern Trust. We are thrilled to have her serve as a member of our board, as well as on our board's compensation and human capital and risk committees. We look forward to the value she brings to the board through her extensive insights, perspectives, and experience. Starting with the key highlights for the quarter on slide three, we achieved another major milestone towards our long-term financial goals in the second quarter, refinancing and reducing our parent unsecured debt by more than $500 million. Our management team has made it a priority to reduce our leverage and the company took another meaningful step forward this quarter in that regard. Tangible book value per share exceeded $38 at quarter end. Importantly, we continue to deliver improved tangible book value for our shareholders with growth of 23% versus the same period a year ago. Earlier today, we announced we will provide a private label credit program for Dell Technologies a leading technology provider with the industry's broadest technology and services portfolio. The definitive agreement to acquire Dell's consumer portfolio is expected to close in the fourth quarter of this year. The Dell Pay program will include a broad suite of payment solutions and expands our position in the consumer technology market. We will continue to leverage our deep financial services industry expertise, upgraded technology, and sophisticated data analytics capabilities to drive value for our partners. Moving to the economy. Numerous macroeconomic headwinds, including prolonged high inflation, rapidly rising interest rates, and a tightening job market have weighed on our consumers and influenced a slowdown in credit sales. These headwinds tend to disproportionately impact moderate to low income Americans, including our customers' spending decisions. In certain areas like beauty and travel and entertainment, we are seeing continued strong year-over-year growth. However, in other areas like specialty apparel, spending has softened, declining year-over-year. Given the ongoing macroeconomic pressures facing consumers, we continue to proactively and responsibly tighten our underwriting and credit line management. Even prior to the pandemic, we proactively managed our exposure by tightening approval rates, pausing line increases, and implementing line decreases where prudent. We will continue to closely monitor consumer health and spending behaviors and adjust to changing economic conditions. Turning to slide four, our current focus areas for 2023 are growing responsibly, strengthening our balance sheet, optimizing data and technology, and strategically investing in our business. Our management team is committed to driving sustainable, profitable growth that will deliver long-term shareholder value. We continue to selectively pursue new partnership opportunities that will be accretive to our business, considering both de novo and partners with existing portfolios. Enhancing our balance sheet remains a top priority and is integral to our long-term strategy. As I mentioned, we have made additional progress building capital and reducing our parent unsecured debt in the second quarter. Coupled with strong free cash flow generation, our balance sheet management actions further enhance our financial resilience, and provide additional flexibility for capital utilization, including supporting continued business growth, debt reduction, and future capital distribution. We will continue to build our capital position, refine and improve our funding structure, and proactively manage our credit, liquidity, and interest rate risk to build our balance sheet strength. On the data and technology front, we continue to leverage innovative capabilities gained from our platform conversion, system enhancements, and expanded product portfolio. We have successfully utilized machine learning for many years to build strong credit risk models to enhance underwriting, line management, and collections. We will continue to invest in a range of technology innovations from data and customer analytics to self-service and digital capabilities as we continually strive to deliver exceptional value and experiences for our customers. Our goal is to continuously generate expense efficiency to reinvest in our business to support responsible growth and achieve our targeted returns. Slide five includes financial highlights resulting from the prudent balance sheet management actions over the past three years since I've joined the company. Starting with funding, we have diversified our base with direct to consumer deposits growth of $4.8 billion since the first quarter of 2020, as we have reached $6 billion in consumer deposits at quarter end. We remain confident in our ability to efficiently fund our long-term growth objectives and further broaden our funding base with continued growth from direct to consumer deposits going forward. As mentioned previously, We have made great progress executing our parent debt plan in the second quarter. Steps included successfully refinancing our term loan and revolving line of credit, completing our convertible notes offering, executing our tender offer, and receiving bank board approval for a $500 million dividend to the parent company to facilitate debt reduction. As a result, since 2020, we have reduced our parent level debt by 55%. paying down more than $1.7 billion. Additionally, since the first quarter of 2020, we have more than tripled our TCE to TA ratio. Finally, while our reserve rate remained steady till the last quarter, we expanded our credit loss absorption capacity with a reserve rate 300 basis points higher than our CECL day one rate in 2020. These significant accounts over the past three years demonstrate our success and strengthening our balance sheet and managing our business responsibly to deliver long-term value for shareholders. Overall, we are pleased with our second quarter results and the progress we have achieved. Our associates continue to navigate through a changing environment with confidence and tenacity in achieving our goals, winning new partners, strengthening our balance sheet, gaining efficiencies, and providing a positive customer experience. Our leadership team appreciates their hard work and their dedication on behalf of our many stakeholders. Together, we remain focused on driving our performance to achieve sustainable, profitable growth that builds shareholder value over time. Now I'll turn it over to Perry to discuss the financials for the quarter.