Bread Financial Holdings, Inc. · NYSE:BFH
Bread Financial — Alliance Data Systems — FY2016 Earnings Presentation
19 slides from Bread Financial's earnings presentation, Jan 26, 2017
Slide 1: Alliance Data Full Year 2016 Results
Alliance Data NYSE: ADS Full Year 2016 ResultsJanuary 26, 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 Fourth Quarter and Full Year Consolidated ResultsSegment Results2016 Wrap-Up2017 Outlook 1 3
Slide 4: Fourth Quarter and 2016 Consolidated Results
Fourth Quarter and 2016 Consolidated Results(MM, except per share) 2 1 Before $242 million or $3.13 from cancellation of time-based expiry. 2 Before $0.65 in regulatory settlement charges. 4
Slide 5: LoyaltyOne
LoyaltyOne® (MM) Quarter Ended December 31, Year Ended December 31, 2016 2015 % Change 2016 2015 % Change Revenue $247 $364 -32% $1,338 $1,353 -1% Adjusted EBITDA $ 74 $ 86 -14% $ 314 $ 302 4% Non-controlling interest 0 -13 nm -5 -31 nm Adjusted EBITDA, net $ 74 $ 73 -% $ 309 $ 271 14% Adjusted EBIT
Slide 6: Epsilon
Epsilon® (MM) Core revenue increased 4 percent for 2016, offset by a 3 point drag from non-core businesses Drag from non-core should abate in 2017Adjusted EBITDA returned to growth during the fourth quarter due to cost initiatives Quarter Ended December 31, Year Ended December 31, 2016 2015 % Change
Slide 7: Card Services
Card Services (MM) Quarter Ended December 31, Year Ended December 31, 2016 2015 % Change 2016 2015 % Change Revenue $988 $785 26% $3,675 $2,974 24% Operating expenses 341 291 17% 1,311 1,0861 21% Provision for loan losses 290 206 40% 941 668 41% Funding costs 59 42 40% 210 151 40% Adjusted EBITDA, n
Slide 8: Card Services Key Metrics
Card Services (MM) Gross yields increased 10 bps in Q4Operating expenses improved 60 bps expressed as a percentage of average card receivables in Q4Delinquency rate trends tracking to the “wedge” Key Metrics: Quarter Ended December 31, Year Ended December 31, 2016 2015 Change 2016 2015 Change Credit
Slide 9: 2016 Wrap-up
2016 Wrap-up 7 9 Revenue +7.14 bn ↑11 percent, core EPS +16.92 ↑12 percent Revenue +7.38 bn ↑15 percent excluding expiry resetApproximately $175 mm of AIR MILES revenue pull-forward from 2017 to 2016 due to ‘run on the bank’ in Q3 and Q4Run-rate revenue: +7.2 bn ↑12 percentDouble-digit revenue and c
Slide 10: LoyaltyOne 2016 Wrap-up
8 10 Revenue ↑17 percent (before $242 mm reduction for expiry breakage reset), adjusted EBITDA ↑4 percentRevenue included ~ $175 mm in pull-forward from 2017 into 2016 due to elevated redemption activity in advance of now cancelled 12/31 expiration dateAdjusted numbers: revenue ↑4 percent, adjusted
Slide 11: Epsilon 2016 Wrap-up
Revenue ↑1 percent, adjusted EBITDA ↓6 percentCore (92 percent of total revenue >100 percent of profit)Revenue ↑4 percent including -4 percent drag from Technology Platform businessIndia office ended year at full scale run-rate: ~ 1,000 associatesCompleted Part 1 of 2 for Platform turnaround: expens
Slide 12: Card Services 2016 Wrap-up
Revenue ↑24 percent, average receivables ↑24 percent, and adjusted EBITDA, net ↑14 percentResults include absorbing ~ 60 bps increase in principal loss ratesApproximately -$165 mm EBITDA drag or -$1.85 per share = 12 point drag on core EPSCredit “normalization” on-track to complete latter part of 20
Slide 13: 2017 Outlook Consolidated
2017 Outlook Consolidated 2016 2017 Revenue Prior Guidance $7.2 bn, +12% $7.9 bn, +10% LoyaltyOne pull-forward 0.2 -0.2 New Guidance $7.4 bn, +15% $7.7 bn, +5% Core EPS $16.92 $18.50, ~10 percent 13 2017 growth rates Q1 Q2 Q3 Q4 Reported revenue High-single Mid-single Mid-single Low-teens Core EPS F
Slide 14: 2017 Outlook LoyaltyOne
2017 Outlook 14 LoyaltyOne 2017: - All segments contributing - Solid growth while absorbing final credit normalization2018: - “Slingshot” (stable principal loss rates = higher growth rates) Consolidated
Slide 15: 2017 Outlook Epsilon
15 2017 Outlook 2016 2017Revenue Core $2.0 bn +4% $2.1 bn +5% Total $2.16 bn +1% $2.24 bn + 4%Adjusted EBITDA $480 mm -6% $500 mm +4%Technology Platform (26 percent of total revenue): Step 1: significantly lower expense base → done Step 2: standardize product, faster time to market → 2017Non-core pe
Slide 16: Card Services 2017 Outlook
Card receivables growth: $2.4 bn, +15 percent in 2017 compared to $2.7 bn, +20% in 2016Pipeline: remains robust; expect another $2 bn vintage yearGross yields: stableOperating expenses (excludes loan loss provision and funding costs): ~20 bps of leverageCredit normalization on-track - delinquenciesQ
Slide 17: 2017 Outlook – Closing The 'Wedge'
Delinquency rates have strong seasonality (Sep-Oct peak), but are very predictable.Delinquency rates are 90% correlated with net loss rates that come 3-6 months later (an account becomes a p&l loss after 180 days delinquent).2017 delinquency rates should narrow and become flat by the third quarter.
Slide 18: Financial Measures
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 EBITDA,
Slide 19: Q & A
Q & A 19