Bread Financial Holdings, Inc. · NYSE:BFH
Bread Financial — Alliance Data Systems — Q3 2018 Earnings Presentation
19 slides from Bread Financial's earnings presentation, Oct 18, 2018
Slide 1: Third Quarter 2018 Results
Alliance Data NYSE: ADS Third Quarter 2018 ResultsOctober 18, 2018
Slide 2: Forward-Looking Statements
11 2 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 generall
Slide 3: Agenda
Agenda Speakers: Ed Heffernan President and CEO Charles Horn EVP and CFO Consolidated ResultsSegment Results & OutlookGuidance2019: A look Ahead 1 3
Slide 4: Third Quarter 2018 Consolidated Results
Third Quarter 2018 Consolidated Results(MM, except per share) 2 4 Quarter Ended September 30, 2018 2017 % Change Revenue $1,947 $1,912 +2% Pro forma revenue1 $2,016 $1,912 +5% Net income $297 $233 +27% EPS $5.39 $4.20 +28% Core EPS $6.26 $5.35 +17% Adjusted EBITDA $662 $622 +7% Adjusted EBITDA, net
Slide 5: Third Quarter 2018 Segment Results
Quarter Ended September 30, 2018 2017 % Change Revenue: LoyaltyOne® $260 $305 ASC 606 adjustment 69 -- Change to net revenue presentation Pro forma 329 305 +8% Epsilon® 538 559 -4% Card Services 1,163 1,055 +10% Other (14) (7) $2,016 $1,912 +5% Adjusted EBITDA, net: LoyaltyOne $63 $61 +4% Epsilon 12
Slide 6: LoyaltyOne Q3
Q3: Growth in both pro forma revenue and adjusted EBITDA for 2nd consecutive quarterKey metric – AIR MILES issued - positive and increasing (+3 percent in Q3 v. +2 percent in Q2)BrandLoyalty: double-digit growth in revenue and adjusted EBITDA for 2nd consecutive quarterOutlook: Solid pro forma reven
Slide 7: Epsilon Q3
Epsilon Q3: Revenue down 4 percent compared to down 5 percent in 1st half of 2018Still soft and below expectationsMix of growing, stable and declining product offeringsChallenges:Agency and Site-Based Display (old Valueclick) platforms Several client bankruptciesOutlook: Revenue expected to be down
Slide 8: Card Services Q3
Card Services Q3: New signings exceptionally strongContinues aggressive strategy to diversify away from mall-based specialty apparelBon-Ton receivables moved to held-for-saleYTD:IKEA – home décorWyndham – hospitalityAcademy Sports – sporting goodsFloor & Decor – home décorAdorama – consumer electron
Slide 9: Card Services: Q3 Receivables Growth
Card Services: Q3 Receivables Growth 9 Reported growth of +10%Includes impact of discontinued programsActive client growth of +17%Pivot to healthier verticals successfulClients signed 2015–2018: ~25% of total receivables vs. ~14% last yearGrowth of 90% year-over-year +17% Active Clients: + Discontin
Slide 10: Card Services: Q3 Credit Sales Growth
Card Services: Q3 Credit Sales Growth 6 Active clients’ credit sales up 11 percentTotal credit sales growth masked by discontinued programsNew clients’ credit sales (2015-2018 signings) up ~70 percent and now represent ~25 percent of credit sales compared to 16 percent in prior year +11% Active Clie
Slide 11: Active client receivables growth in mid-teens range
Active client receivables growth in mid-teens rangeNon-strategic clients (liquidating, bankrupt or in decline due to M&A) will be aggressively moved out of the portfolioReported growth slows and then recovers during 2019; active client growth remains strong throughout 2019Frees up capital and makes
Slide 12: Card Services: Principal Loss Rates
6 12 Card Services: Principal Loss Rates 2005 - 2007~ 6% At Trend Below Trend 2016~ 5% 2017 ‐ 2018~ 6% At Trend Loss rates have now returned to trend
Slide 13: Card Services: Average Card Receivables Growth
Card Services: Average Card Receivables Growth 7 year CAGR: 20% Billions 2011 2012 2013 2014 2015 2016 2017 2018E $5.0 $5.9 $7.2 $8.8 $11.4 $14.1 $16.2 $17.5 13 2018EROE: 30% +
Slide 14: Card Services: Strategic Objectives
Move recovery process in-houseHeadwind in 1st half of 2018 → tailwind in 2nd half of 2018Aggressively prune portfolio of non-strategic clientsLiquidations, bankruptcies, M&AFully support remaining core clients (mobile app, e-commerce, frictionless transactions)Aggressively pivot portfolio towards st
Slide 15: 2018 Guidance
RevenueAdjusting revenue guidance to approximately $7.9 billion and pro forma revenue to approximately $8.2 billionSoftness at EpsilonAggressive pruning of non-strategic Card Services’ clients will dampen Q4 revenueMaintaining core EPS guidance of $22.50 - $23.00 +16 – 19 percentYear-to-date: +20 pe
Slide 16: Strategic Efforts: Card Services
Strategic Efforts: Card Services Aggressively continue effort to reposition client portfolio into strongest, high growth verticalsEffort started in 2015Receivables reflects only $4.5 billion of $11 billion vintage signed since 2015Pipeline for new business remains exceptionally strong“Tell me about
Slide 17: Strategic Efforts: Non-Card
Strategic Review of BusinessesWe believe current stock price does not reflect intrinsic value of our businessWe are evaluating which assets could thrive under a different steward, while also unlocking value for stockholdersWe will have a crystallized game plan of “what & how” before year-end and wil
Slide 18: Financial Measures
12 18 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 19: Q & A
Q & A 19
Alliance Data Systems — Q3 2018 Earnings Presentation on 6ix