Bread Financial Holdings, Inc.

Thank you for standing by. Welcome to the Bread Financial fourth quarter and full year 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Brian Verb, Head of Investor Relations at Bread Financial. Please go ahead, sir.

Thank you. Copies of the slides we will be reviewing and the earnings release can be found on the Investor Relations section of our website at breadfinancial.com. On the call today, we have Ralph Andretta, President and Chief Executive Officer, and Perry Bieberman, Executive Vice President and Chief Financial Officer. 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. With that, I would like to turn the call over to Ralph Vendretta.

Thank you, Brian, and good morning to everyone joining the call. Before I begin, I want to start by sending our thoughts to those impacted by the recent wildfires in California. To underscore our commitment to the customers and the communities we serve, we continue to provide financial support to the American Red Cross for emergency relief efforts. We remain committed to all of our customers impacted by the fires and are providing hardship assistance during this time. We wish the individuals and families affected as well as the first responders and those delivering relief aid continued safety. Now to our presentation, starting on slide two with our 2024 achievements. We are pleased with the progress we have made throughout the year. Our commitment to growing responsibly with our brand partners was evident as we added iconic partners like Hard Rock International, HP, and Saks Fifth Avenue while investing in our existing programs. With the addition of these new brand partners along with continued strong renewal rates, including seven renewals in 2024, we now have more than 85% of our loans secured through 2026 and nine out of our top 10 programs secured through at least 2028. We have continued to cultivate strong partner relationships and diversify both our product offerings and our industry verticals. These actions help to mitigate our risks and further ensure a solid run rate for performance in 2025. the macroeconomic and regulatory environments evolved throughout 2024. In turn, we effectively adapted to prolong inflationary pressures affecting our customers and uncertainty regarding regulatory outcomes. Our strategic proactive credit tightening actions during the year enabled us to maintain a stable credit risk distribution. Additionally, Although the outcome and timing of the CFPB late fee rule remain uncertain, we continue to execute our mitigation strategies to better position our company and offset any potential impact. Next, we made significant progress strengthening our balance sheet, executing our long-term funding plan, and growing shareholder value. We improved our capital levels and succeeded in reducing our parent-level debt including the repurchase of 97% of our outstanding convertible notes and achieving our double leverage ratio target of below 115%. These accomplishments underscore our disciplined approach to growing our business and allocating capital responsibly. Our strengthened balance sheet provides additional flexibility to further optimize our capital and debt stack as we discussed during our investor day in June of last year. Further, due to our progress, both Moody's and Fitch upgraded their rating outlooks to Bread Financial, moving from stable to positive just one year after obtaining our inaugural rating. Contributing to our success is our focus on operational excellence and technology advancement as we leverage innovation, best practices, and scale to gain efficiencies throughout the organization. We advance our technology platform anchored in customer centricity, resiliency, security, and growth. And as a result of our expense discipline and efficiency gains, we delivered on our positive operating leverage goal with lower expenses than our original 2024 full-year guidance. We achieved all of our 2024 full-year targets in spite of a more challenging than anticipated macroeconomic environment. Looking ahead, we expect to deliver solid financial results in 2025 fueled by our resilient business model, prudent capital allocation, and operational excellence initiatives. This will move us closer to achieving the medium-term financial targets we provided during our investor event. Moving to key highlights from the fourth quarter on slide three. We opportunistically repurchased an additional $44 million and principal amount of our convertible notes, leaving only $10 million of the original $360 million balance remaining. We also purchased 44 million of common shares in December, completing our board-authorized share repurchase plan. Additionally, our overall funding mix continued to improve, with strong growth in our direct-to-consumer deposits, which reached $7.7 billion at quarter end. we generated adjusted income from continuing operations of $21 million and adjusted diluted EPS from continuing operations of 41 cents. Both exclude the $13 million post-tax impact from the premium paid on our repurchased convertible notes. Tangible book value per share of $46.97 increased 7% year over year, while our common equity tier one capital ratio increased 20 basis points year-over-year to 12.4%. Further, we are pleased with our year-over-year positive fourth quarter credit sales growth, as beauty, sporting goods, and retail apparel, as well as millennial and Gen Z sales, showed signs of improvement. Spending continues to be more heavily weighted toward non-discretionary purchases, leading to strong loan growth in our co-brand and proprietary products during the holidays. While we continue to closely monitor ongoing economic and political uncertainties, including impacts from key legislative and monetary policies, we are cautiously optimistic that credit sales improvement will continue in 2025, driven by new and existing partner growth. Slide four depicts the results of our disciplined capital allocation strategy. While I have mentioned several of our accomplishments for the quarter and full year, it is worth looking at our improvements over a longer period of time to see the significant progress we have made. Our CET1 ratio has increased 210 basis points over the last three years to 12.4%. Since the fourth quarter of 2021, we have reduced our parent debt levels by 50%, paying down more than $1 billion and decreasing our double leverage ratio to 105%, achieving our targeted level. We have successfully increased our tangible book value over the past three years with an annual growth rate of 19%, resulting in a fourth quarter 2024 tangible book value of nearly $47. I will wrap up my initial remarks by sharing my sincere appreciation for the focus of the leadership team and the dedication of our thousands of talented associates throughout the year, without whom our position of strength heading into 2025 would not be possible. Bread Financial is a stronger, more resilient organization, and I am excited to continue our momentum, delivering on our commitments to key stakeholders. I will now turn it over to Perry to discuss the financials. Thanks, Ralph.