Bread Financial Holdings, Inc. · NYSE:BFH
Bread Financial — Alliance Data Systems — Q3 2017 Earnings Presentation
18 slides from Bread Financial's earnings presentation, Oct 19, 2017
Slide 1: Alliance Data Q3, 2017 Results
Alliance Data NYSE: ADS Q3, 2017 ResultsOctober 19, 2017
Slide 2: Forward-Looking Statements
Forward-Looking StatementsThis presentation 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
Slide 3: Agenda
Agenda Speakers: Ed Heffernan President and CEO Charles Horn EVP and CFO Third Quarter 2017 Consolidated ResultsSegment ResultsFull Year 2017 Outlook and 2018 Guidance 1 2
Slide 4: Third Quarter 2017 Consolidated Results
Third Quarter 2017 Consolidated Results(MM, except per share) Quarter Ended September 30, 2017 2016 % Change Revenue $ 1,912 $ 1,886 +1% Net Income $ 233 $ 208 +12% EPS $ 4.20 $ 3.55 +18% Core EPS $ 5.35 $ 4.74 +13% Adjusted EBITDA $ 622 $ 566 +10% Adjusted EBITDA, net $ 550 $ 512 +7% Diluted shares
Slide 5: LoyaltyOne
LoyaltyOne® (MM) BMO, our largest AIR MILES® sponsor, signed a multi-year renewal during the third quarter.AIR MILES issued decreased 7 percent due to reduced promotional activity.Expect improvement in fourth quarter. BrandLoyalty’s results consistent with expectations.Expect double-digit top and bo
Slide 6: Epsilon
Epsilon® (MM) Technology Platform offering continues to improve : revenue -13 percent in Q4, 2016 → -7 percent in Q1, 2017 → -3 percent in Q2, 2017 → +1 percent in Q3, 2017.Transitory change in revenue mix pressured adjusted EBITDA margins during the quarter. Quarter Ended September 30, 2017 2016 %
Slide 7: Card Services
Card Services (MM) Quarter Ended September 30, 2017 2016 % Change Revenue $ 1,055 $ 966 +9% Operating expenses 382 330 +16% Provision for loan loss 205 251 -19% Funding costs 71 54 +33% Adjusted EBITDA, net $ 397 $ 331 +20% Adjusted EBITDA, net % 38% 34% +4% 5 Hurricanes temporarily depressed credit
Slide 8: Card Services
Card Services (MM) Allowance for loan loss reserve is 6.35 percent of $16.3 billion in reservable card receivables at September 30.Equivalent to 12 months forward coverage. Quarter Ended September 30, Key metrics: 2017 2016 Change Credit sales $ 7,352 $ 6,986 +5% Average card receivables $15,950 $13
Slide 9: Delinquency Wedge
Delinquency Wedge Delinquency Rates 5.5% lator 5.0% 45% 4.0% 3.5% 3.0% Jan Feb = Mar = Apr = May —sun—sul, Ss Aug. Sep-Oct’ «Ss Now — De
Slide 10: Full Year 2017 Outlook Consolidated
9 Full Year 2017 Outlook Consolidated:Reiterate guidance of $7.8 billion in revenue and $18.10 in core EPS“Slingshot” remains on trackDelinquency wedge is expected to close in fourth quarterGross losses have already moved from up 75 basis points in the first half of 2017 to flat in the third quarter
Slide 11: Full Year 2017 Outlook Epsilon
10 Epsilon:Original guidance: $2.24 billion in revenue and $500 million in adjusted EBITDARepresents 4 percent top/bottom growthYear-to-date: running ahead on revenue but behind on adjusted EBITDA primarily due to product mixTechnology Platform (~25 percent of Epsilon revenue)Revenue -13 percent in
Slide 12: Full Year 2017 Outlook LoyaltyOne
Full Year 2017 Outlook Loyalty One:Canada: no change to guidance$760 million in revenue, $180 million in adjusted EBITDASolid progress on re-tooling model – margins running in the mid 20’s rangeSponsors – no attritionCollectors – returned to within 1 percent of active collector levels versus down 6
Slide 13: Full Year 2017 Outlook Card Services
Full Year 2017 Outlook Card Services:Card receivables growth of 15 percentSigned new $2 billion vintageGross yields down in third and fourth quarters due to hurricanes and on-boarding of Signet portfolio~40 bps of operating leverage (operating expenses/average receivables) Credit normalization neari
Slide 14: 2018 Guidance Consolidated
Consolidated: 2017 2018 Revenue $7.8bn $8.7bn +12% Core EPS $18.10 $21.50 +19% 10 year average Revenue +13% Adjusted EBITDA +12% Core EPS +17% 2018 Guidance 13
Slide 15: 2018 Guidance by Segment
2018 Guidance Epsilon:Mid-single-digit revenue and adjusted EBITDA growthTechnology Platform offering returns to modest growthConversant CRM and Auto remain fastest growing offeringsLoyaltyOne:Canada: model fully retooled3 to 5 percent revenue and adjusted EBITDA growth3 percent growth in AIR MILES
Slide 16: 2018 Guidance: Net Loss Rate
2018 Guidance Net loss rate flat to down compared to 2017: Four primary reasons:Private label peaks in growth and loss rates before bankcards during a typical credit cycleOur normalization: 2016 – 2017Bankcard normalization: 2017 – 2018Delinquency wedge is expected to close in fourth quarterBest pre
Slide 17: Financial Measures
13 16 Financial MeasuresIn 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, adjusted EBITDA, adjusted EBITDA margin, adjusted EB
Slide 18: Q & A
Q & A 17
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