Bread Financial Holdings, Inc. · NYSE:BFH
Bread Financial — Alliance Data Systems — Investor Day (May 2021)
34 slides from Bread Financial's investor day presentation, May 18, 2021
Slide 1: Alliance Data Investor Event May 18, 2021
Alliance DataInvestor Event May 18, 2021 Ralph AndrettaPresident & CEO Tim King EVP & CFO © 2021 ADS Alliance Data Systems, Inc. Exhibit 99.1
Slide 2: Agenda
Agenda Topic Speakers Welcome & Company Overview Ralph Andretta President & CEO State of the Industry & Strategy Ralph Andretta & John Grund Payment Services: Product Offerings & Experience Val Greer EVP & Chief Commercial Officer Break Credit Risk Management Tammy McConnaughey EVP, Operations & Cre
Slide 3: Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generally be identified by the use of words
Slide 4: Welcome & Company Overview
Welcome & Company OverviewRalph Andretta © 2021 ADS Alliance Data Systems, Inc.
Slide 5: Board of Directors
Board of Directors Roger Ballou John Gerspach Rajesh “Nat” Natarajan Timothy Theriault Laurie Tucker Sharen Turney Ralph Andretta Karin Kimbrough(Board Nominee) 5
Slide 6: Leadership Team
Leadership Team Ralph AndrettaPresident & CEO Val GreerEVP & Chief Commercial Officer Perry BebermanEVP & CFO(Effective July 6, 2021) Tammy McConnaugheyEVP, Operations & Credit Risk Nick BarnesSVP, Chief Info & Tech Officer Greg BetchkalSVP, Chief Risk Officer Jeff ChesnutSVP, Treasurer Calvin Hilto
Slide 7: Milestone Events
Milestone Events Ralph Andretta joins Alliance Data as CEO Launched the Comenity® Mastercard® Launched the Enhanced Digital Suite (EDS) Announced transition to Fiserv Acquired Bread Announced Bread / Fiserv strategic relationship Announced Bread / RBC strategic relationship 2020 2021 7
Slide 8: Recover, Rebuild, Regrow
Recover Readied the business for COVID-19 and beyond Rebuild Regrow Digital offerings, technology and talent Customer and product choice, profitable growth and shareholder value 8
Slide 9: Go-Forward Strategy
Offer broad product suite focused on customer's choice 1 Provide full-spectrum lending capabilities to drive sales 2 Enhance capabilities with an emphasis on digital 3 Drive sustainable, repeatable, profitable growth 4 Go-Forward Strategy 9
Slide 10: Vision
To think outside the bank as a leading tech-forward financial solutions provider, serving people in their everyday lives and passions. Vision
Slide 11: Payment Services: Product Offerings & Experience
Payment Services: Product Offerings & ExperienceVal Greer © 2021 ADS Alliance Data Systems, Inc.
Slide 12: Enhanced Digital Suite
EnhancecDigitalSuite. + € Bread -- Data and Analytics
Slide 13: Differentiated Product Suite
Differentiated Product Suite Expanding our product offering and creating a seamless customer experience Co-brand credit card Private label credit card Buy now, pay later Installment loan Budget/Cash Flow Rewards/Convenience Gen Z Millennial Gen X Baby boomer 13
Slide 14: Digital Capabilities
Digital Capabilities Continued progress in evolving digital experiences Apply Engage 14
Slide 15: Digital Capabilities
Digital Capabilities Continued progress in evolving digital experiences Engage Apply Pay 15
Slide 16: Digital Capabilities
Digital Capabilities Continued progress in evolving digital experiences Pay Engage 16
Slide 17: Bread Business Models
Direct Acquisition Distribution Technology Platform Merchant Acquirer Network / Platform(Always Bread) Issuer / Loan Originator(Owns consumer relationship) Value Pools Merchant feesFinance charges Merchant feesFinance charges Gateway feesServicing fees Bread Business Models Leading technology and wh
Slide 18: Total Addressable Market
Total Addressable Market $539B $3.6T $6.2T $7.7T Specialty Retail & Department Stores General + Specialty Retail & Total Retail Total Retail & E-commerce Total Consumer Spending Total Addressable Market Source: US Census Retail Sales, Nilson Report, Bureau of Economic Analysis $539B $3.6T $6.2T Spec
Slide 19: First Quarter 2021 Credit Sales
First Quarter 2021 Credit Sales Representative clients in sales category 19 © 2021 ADS Alliance Data Systems, Inc.
Slide 20: Consumer Focus
Consumer Focus Seamless engagement and increased buying power Product Browsing Getting an Offer Finding a Product Financing the Product Loving the Product & Rewards 20 © 2021 ADS Alliance Data Systems, Inc.
Slide 21: Credit Risk Management
Credit Risk ManagementTammy McConnaughey
Slide 22: Profitable, Fair, and Responsible Full-Spectrum Lending
Profitable, Fair, and Responsible Full-Spectrum Lending Flexible technology & multiple scores Grow and expand approach Well-established risk appetite metrics 22
Slide 23: VantageScore 4.0 and Underwriting Investments
VantageScore 4.0 1 Platform upgrades 2 Future-focused data model 3 Underwriting Process Investments 23
Slide 24: Optimal Risk-Adjusted Return
Optimal Risk-Adjusted Return* Baseline 2.0x 2.4x 2.1x 1.9x Deep Sub-Prime *Risk-Adjusted Return equals accountholder revenue less gross losses as of 24 months on book per open account Targeted Segments Yield Higher Returns Sub-Prime Near Prime Prime Prime+ Super Prime 24 © 2021 ADS Alliance Data Sys
Slide 25: Emphasis Around Prime Enables Broad Growth
*Distribution of receivables based on VantageScore Emphasis Around Prime Enables Broad Growth, a Manageable Loss Rate, and Strong Profitability +900 bp -200 bp -700 bp 25
Slide 26: Product Mix and Balancing Risk and Reward
Product Mix Innovative Underwriting Fair Lending Steady Losses & Profitable Growth Consumer Friendly Meet Brand & Growth Needs Meet Evolving Consumer Needs Balancing Risk and Reward We facilitate payment solutions to meet customers’ needs while generating leading returns for our shareholders 26
Slide 27: Financial Outlook & Targets
Financial Outlook & TargetsRalph Andretta © 2021 ADS Alliance Data Systems, Inc.
Slide 28: Long-Term Financial Targets
Long-Term Financial Targets Targeting TCE and leverage ratios in-line with peers High-single-digit annual receivable growth Exceed $20 billion in 2023 Positive operating leverage In 2022 and beyond Net loss rate less than 6% Average through-the-cycle net loss rate target range Return on Equitymid-to
Slide 29: Building Momentum
Building Momentum Sales at inflection point for receivable growth Improving revenue yields- Bread yields above portfolio Appropriate expense management 29
Slide 30: Drivers of Receivable Growth
2 – 3% 2 – 3% 2 – 3% Drivers of Receivable Growth 30
Slide 31: Card Services Funding Mix & Costs
Card Services Funding Mix & Costs Secured Funding Retail Deposits Wholesale Deposits 31
Slide 32: Capital Allocation / Priorities
Capital Allocation / Priorities Improve enterprise capital metrics Organic growth Maintain dividend Future investments Efficient return of capital to shareholders 32
Slide 33: Strategic Initiatives
Focused investment to drive sustainable long-term shareholder value Prudent Balance Sheet Management Disciplined Expense Management Proactive Risk Management TechnologyInnovation Key Foundational Elements Product Diversification & Development DigitalAdvancement Data Science & Analytics Strategic Ini
Slide 34: Financial Measures
In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, the Company may present financial measures that are non-GAAP measures, such as constant currency financial measures, pre-provision earnings before taxes. Similarly, core earnings and core EPS e