Slide 1: Full Year & Fourth Quarter 2020 Results
Alliance Data Full Year & Fourth Quarter 2020 Results January 28, 2021 Ralph Andretta – President & CEO Tim King – EVP & CFO ©2021 ADS Alliance Data Systems, Inc.
Slide 2: Forward-Looking Statements
Forward-Looking Statements This 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: 2020 Key Takeaways
2020 Key Takeaways • Resilient performance in a challenging operating environment • Reduced our fixed cost base and de‐risked our balance sheet • Optimized our physical real estate footprint • Invested in key talent and expanded our products and capabilities ©2021 ADS Alliance Data Systems, Inc. 3
Slide 4: Business Investment Highlights
Business Investment Highlights Product and technology enhancements to support growth and digital acceleration Fintech acquisition adds a new white‐label Selected Fiserv’s flexible processing platform to gain point‐of‐sale technology platform and products new capabilities and operational efficiencies
Slide 5: 2020 Fourth Quarter Financial Highlights
2020 Fourth Quarter Financial Highlights Continued progress in core underlying performance Diluted EPS from $1.1B Revenue $1.93 Continuing Ops. Net Income from $93MM Continuing Ops. $0.25 Diluted EPS • Net income of $12 million impacted by a loss from discontinued operations of $81 million after tax
Slide 6: Card Services Performance Highlights
Card Services Performance Highlights Gradual recovery in credit sales continues from pandemic lows • Credit sales declined 18% year‐over‐year in 4Q20 with active* program sales down 7% • Credit sales improved 24% sequentially from 3Q20 (vs. 19% in the same period last year) • Online sales remained o
Slide 7: Partnership Highlights
Partnership Highlights Added 60+ online merchants in the fourth quarter, bringing our total to over 500 New Partnerships Technology Partnership Exclusive online technology platform provider of digital payment products for RBC Partner Renewal Furniture & Home Décor Partner since 2002 Enhanced omni‐ch
Slide 8: LoyaltyOne Performance Highlights
LoyaltyOne® Performance Highlights Sequential 25% revenue improvement over third quarter 2020 • Reward miles issued and redeemed • With the potential return of COVID‐ improved vs 3Q20; however, the year‐ 19‐related lockdowns in Europe, over‐year impact of lower discretionary many retailers continue
Slide 9: Areas of Focus
Areas of Focus Deliberate and thoughtful progress balancing the pandemic and future growth Recover Rebuild Regrow • Associate safety & health • Expand digital offerings • Focused investment Enhanced Digital Suite Align with recovery trend • Recession readiness plan POS payment solutions • Furt
Slide 10: Financial Results – Consolidated
Financial Results – Consolidated 4Q % FY % ($ in millions, except per share) 4Q20 4Q19 FY20 FY19 Change Change Total revenue $1,110 $1,461 (24)% $4,521 $5,581 (19)% Total operating expenses, 699 771 (9) 2,367 3,086 (23) excl. provision for loan loss Provision for loan loss 152 381 (60) 1,266 1,188 7
Slide 11: Financial Results - Segments
Financial Results ‐ Segments ($ in millions) 4Q % FY % 4Q20 4Q19 FY20 FY19 Change Change LoyaltyOne $231 $332 (31)% $765 $1,033 (26)% Card Services 879 1,128 (22) 3,757 4,548 (17) Corporate/Other ‐ ‐ nm ‐ ‐ nm Total revenue $1,110 $1,461 (24)% $4,521 $5,581 (19)% LoyaltyOne $22 $58 (62)% $111 $103 8
Slide 12: Key Business Metrics
Key Business Metrics Improving sales and stable yield drove sequential revenue improvement • Revenue growth of 6% on a sequential basis was aided by the seasonal increase in receivables and a relatively stable gross yield • Total operating expenses excluding provision for loan loss increased sequent
Slide 13: Credit Quality and Allowance
Credit Quality and Allowance Continued decline in delinquency rate a positive indicator for 2021 performance Net loss rate Reserve rate ($ in millions) CECL $2,151 $2,096 $2,081 Max net loss rate since 2005: 10.0% $2,008 7.6% 7.0% 6.3% 5.8% $1,171 Avg net loss rate since 2005: ~6.0% 13.3% 13.3% 6.0%
Slide 14: Capital and Liquidity Update
Capital and Liquidity Update Sufficient corporate liquidity; Banks remain well‐capitalized Parent Level • Liquidity at 12/31 of $1.1 billion, consisting of cash on hand plus revolver capacity • Approximately $343 million in cash and cash equivalents, $750 million in unused revolver Bank Level • Bank
Slide 15: 2021 Financial Outlook
2021 Financial Outlook Full Year 2021 Commentary Normalized average • Sequential decline in 1Q21 & 2Q21 receivables Down mid‐ to • Flat year‐over‐year in 2H21 (Receivables plus held‐for‐sale) high‐single digits • Expect year‐end receivables to be in line with year‐end 2020 2020 = $16,468 million • C
Slide 16: Strategic Initiatives
Strategic Initiatives Focused investment to drive sustainable long‐term shareholder value Product Technology Digital Data Science and Diversification and Innovation Advancement Analytics Development Evolution in intelligent Leverage technology Expand our product Deliver an advanced automation and as
Slide 17: Questions & Answers
Questions & Answers ©2021 ADS Alliance Data Systems, Inc.
Slide 18: Financial Measures
Financial Measures In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, the Company may present financial measures that are non‐GAAP measures, such as constant currency financial measures, pre‐provision earnings before taxes, adjusted EBITDA, adj
Slide 19: Appendix
Appendix ©2021 ADS Alliance Data Systems, Inc. 19
Slide 20: Key Business Metrics
Key Business Metrics 4Q20 vs 4Q20 vs 4Q20 4Q19 3Q20 4Q19 3Q20 LoyaltyOne (in millions) AIR MILES reward miles issued 1,355 1,486 (9)% 1,240 9% AIR MILES reward miles redeemed 838 1,199 (30)% 687 22% Card Services ($ in millions) Credit sales $7,657 $9,297 (18)% $6,152 24% Average receivables $15,759
Slide 21: Additional Metrics and Ratios
Additional Metrics and Ratios Combined Banks Capital Ratios 1Q20 2Q20 3Q20 4Q20 Common equity tier 1 capital ratio 15.9% 18.3% 18.8% 18.4% Tier 1 capital ratio 15.9% 18.3% 18.8% 18.4% Total risk based capital ratio 17.3% 19.7% 20.1% 19.7% Tier 1 leverage capital ratio 12.8% 14.2% 16.1% 17.1% ©2021 A
Slide 22: Financial Results – Quarterly
Financial Results – Quarterly ($ in millions, except per share) 4Q19 1Q20 2Q20 3Q20 4Q20 FY19 FY20 Total revenue $1,461 $1,382 $979 $1,050 $1,110 $5,581 $4,521 Total operating expenses, 771 562 555 552 699 3,086 2,367 excl. provision for loan loss Provision for loan loss 381 656 250 208 152 1,188 1,
Slide 23: Financial Results – Segments by Quarter
Financial Results – Segments by Quarter ($ in millions) 4Q19 1Q20 2Q20 3Q20 4Q20 FY19 FY20 LoyaltyOne $332 $198 $151 $185 $231 $1,033 $765 Card Services 1,128 1,184 828 866 879 4,548 3,757 Corporate/Other ‐ ‐ ‐ ‐ ‐ ‐ ‐ Total revenue $1,461 $1,382 $979 $1,050 $1,110 $5,581 $4,521 LoyaltyOne $58 $47 $
Slide 24: Card Services Sales Data
Card Services Sales Data Active program credit sales by product 19% 19% 16% 19% 19% $1.6 $1.4 $ in billions 37% 37% 38% 41% $1.1 46% $3.7 $1.1 $3.1 $0.7 $2.2 $2.1 $1.6 44% 47% 44% 41% 35% $2.9 $2.5 $3.1 $2.4 $2.0 4Q19 1Q20 2Q20 3Q20 4Q20 4Q19 1Q20 2Q20 3Q20 4Q20 Co‐Brand PLCC Big Ticket Co‐Brand PLC
Slide 25: Card Services Sales Data – Digital Engagement
Card Services Sales Data – Digital Engagement Active program digital sales as % of Active program new digital accounts as total active program sales % of total active program new accounts 54% 59% 40% 42% 33% 36% 33% 34% 28% 27% 4Q19 1Q20 2Q20 3Q20 4Q20 4Q19 1Q20 2Q20 3Q20 4Q20 ©2021 ADS Alliance Dat
Slide 26: Monthly Net Loss Rate Trend
Monthly Net Loss Rate Trend Consumer relief program caused timing‐related volatility in monthly loss rate* • The COVID‐related customer relief program represented 3% of total card receivables as of December 31, 2020 as the balance continues to decline • 72% of enrollees made a payment in 4Q20, in li