Slide 1: Third Quarter 2020 Results
Alliance Data Third Quarter 2020 Results October 29, 2020 Ralph Andretta – President & CEO Tim King – EVP & CFO ©2020 ADS Alliance Data Systems, Inc. Confidential and Proprietary
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: Key Highlights
Key Highlights • Strong financial results across key metrics • Continued progress on strategic priorities • Investment in initiatives to drive long‐term growth ©2020 ADS Alliance Data Systems, Inc. Confidential and Proprietary 3
Slide 4: 2020 Third Quarter Financial Highlights
2020 Third Quarter Financial Highlights Strong results across key metrics $1.1B Revenue $133MM Net income $2.79 Diluted EPS $250MM Adj. EBITDA, net • Credit sales of $6.2 billion in 3Q20 represented a 28% increase versus 2Q20 • Average receivables declined 5% versus 2Q20 due to the continued impact
Slide 5: Card Services Performance Highlights
Card Services Performance Highlights Encouraging credit sales trends emerging across channels and verticals • Credit sales improved 28% from 2Q20 as retailers continued reopening & consumer spend improved – Credit sales from diversified verticals* represented 65% of sales in 3Q20 vs 55% in 2019 – Be
Slide 6: Card Services Performance Highlights
Card Services Performance Highlights Focus on driving sustained, profitable growth Partner Renewals New Vertical Growth Customer Expansion • Renewal of key partner • Market leader in fast‐growing • Strategically offering the new relationships including: specialty retail verticals, including Comenity
Slide 7: LoyaltyOne Performance Highlights
LoyaltyOne® Performance Highlights Better business conditions lead to sequential 22% revenue improvement over 2Q20 • Reward miles issued and redeemed • Revenue improved 37% vs 2Q20 as improved vs 2Q20; however, the year‐ business conditions strengthened over‐year impact of lower discretionary • With
Slide 8: Doubling Down on Digital Engagement
Doubling Down on Digital Engagement Continue to grow and accelerate our next generation of digital experiences Digital Presentment Digital Application presents financing and rewards Frictionless user experience with earlier in the buying experience 65% pre‐filled customer data 45% 70% of sales are m
Slide 9: Investment Highlights
Investment Highlights Product and technology enhancements to support growth and digital acceleration • Point of sale technology platform • Modern and scalable platform • Full digital payments solution which further enhances our digital • Flexible platform enables seamless including real‐time financi
Slide 10: Strategic Acquisition
Strategic Acquisition Expands digital capabilities with installment loan and buy now, pay later products Consideration • $450 million of estimated consideration, of which approximately $100 million is Alliance Data common stock Financial • Accelerates ADS growth profile, particularly in rapidly grow
Slide 11: 2020 Action Items
2020 Action Items Deliberate and thoughtful progress balancing the pandemic and future growth Recover Rebuild Regrow • Associate safety & health • Expand digital offerings • Focused investment Enhanced Digital Suite Align with recovery trend • Recession readiness plan POS payment solutions • F
Slide 12: Third Quarter 2020 Results
Third Quarter 2020 Results ($ in millions, except per share) 3Q20 3Q19 % Change LoyaltyOne $185 $246 (25)% 18% Card Services $866 $1,192 (27)% (1) Revenue Corporate/Other ‐ ‐ nm 82% Total Revenue $1,050 $1,438 (27)% 8% LoyaltyOne $18 $(5) nm 8% Card Services $212 $300 (29)% Earnings (1) Corporate/Ot
Slide 13: Key Business Metrics
Key Business Metrics Improving sales and rebound in yield drove sequential revenue improvement • Credit sales improved on a sequential basis providing optimism that pressure on receivables is subsiding as we move towards the typical fourth quarter seasonal step‐up in receivable balances • Revenue gr
Slide 14: Cardmember Payment Behavior
Cardmember Payment Behavior Payment trends remain favorable with 84% of accounts making a payment in 3Q • Consumer payments remain strong with increasing payment rates and payments made in full during the quarter • The COVID‐related customer relief program now represents 3% of total card receivables
Slide 15: Credit Quality and Allowance
Credit Quality and Allowance Credit metrics remain resilient Net loss rates Reserve rate ($ in millions) CECL $2,151 $2,096 $2,081 Max net loss rate since 2005: 10.0% 7.6% 7.0% 6.3% 5.8% 5.6% $1,171 Avg net loss rate since 2005: ~6.0% $1,065 13.3% 13.3% Reserve rate 12.1% maintained Min net loss rat
Slide 16: Balance Sheet Management
Balance Sheet Management Prudent actions to opportunistically extend, diversify, and de‐risk Actions taken since 9/30/19: • Completed two offerings of senior notes, for $850 million & $500 million maturing in 2024 & 2026, respectively Repaid $1.33 billion of term loan • Extended the credit facilit
Slide 17: Capital and Liquidity Update
Capital and Liquidity Update Sufficient corporate liquidity; Banks remain well‐capitalized Parent Level • Liquidity at 9/30 of $1.2 billion, consisting of cash on hand plus revolver capacity • Approximately $430 million in cash and cash equivalents, $750 million in unused revolver • Fully paid down
Slide 18: 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 19: Questions & Answers
Questions & Answers ©2020 ADS Alliance Data Systems, Inc. Confidential and Proprietary
Slide 20: 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 21: Appendix
Appendix ©2020 ADS Alliance Data Systems, Inc. Confidential and Proprietary 21
Slide 22: Third Quarter 2020 Consolidated Results
Third Quarter 2020 Consolidated Results (in millions, except per share) 3Q20 3Q19 % Change Revenue $1,050 $1,438 (27)% Income from continuing operations $133 $122 10% Income from continuing operations per diluted share (EPS) $2.79 $2.41 16% Core EPS $3.45 $5.05 (32)% Adjusted EBITDA $340 $481 (29)%
Slide 23: Key Business Metrics
Key Business Metrics 3Q20 vs 3Q20 vs 3Q20 3Q19 2Q20 3Q19 2Q20 LoyaltyOne (in millions) AIR MILES Reward Miles Issued 1,240 1,344 (8)% 1,053 18% AIR MILES Reward Miles Redeemed 687 1,078 (36)% 608 13% Card Services ($ in millions) Credit Sales $6,152 $7,824 (21)% $4,799 28% Average Card Receivables $
Slide 24: Bank Capital Ratios
Bank Capital Ratios 1Q20 2Q20 3Q20 Combined Banks Common Equity Tier 1 Capital Ratio 15.9% 18.3% 18.8% Tier 1 Capital Ratio 15.9% 18.3% 18.8% Total Risk Based Capital Ratio 17.3% 19.7% 20.1% Tier 1 Leverage Capital Ratio 12.8% 14.2% 16.1% ©2020 ADS Alliance Data Systems, Inc. Confidential and Propri