ADS - Earnings call transcript Q2 2018 | Bread Financial Holdings, Inc.

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Operator

Good morning and welcome to the Alliance Data Second Quarter 2018 Earnings Conference Call. At this time, all parties have been placed in a listen-only mode.

Following today’s presentation, the floor will be open for your questions. [Operator Instructions] In order to view the Company’s presentation on their website, please remember to turn off your pop-up blocker on your computer. It is now my pleasure to introduce your host, Ms. Partners. AdvisIRy of Nakhla Vikki Thank you. floor yours. The is

Vikki Nakhla

operator. copy of you, By XXXX now, a received have should the release. you earnings Thank Company’s quarter second

haven’t, you please AdvisIRy at If call XXX-XXX-XXXX. Partners

and and Charles Chief we Ed today, call Data. of Horn, Officer the Data; Heffernan, Financial On President Alliance of Chief Alliance have Officer Executive

financial presented Also, statements. on subject will will like your the some and to call. of the believe the responses Relations turn the to Before information no would you investors. our has provide the in some Heffernan. call that, on useful the to over alliancedata.com. we information uncertainties speakers Ed begin, obligation on like of are posted of on Alliance SEC. website GAAP which certain release Ed? to the measures, at those today’s that may These measures contain risks and With Company’s to forward-looking questions for we to Data call, remind update with Investor to non-GAAP and I the the statements Reconciliation be comments today’s will made call described reference filings other I’d the earnings

Ed Heffernan

Vikki. morning, Thanks, everyone. Great. good And

about will update We plan Charles to is our me as minutes, update outlook. to XXXX I’ll and we XX today to Q&A. our so more And Joining time always, add keep on quarter then, prepared CFO, provide and results. Horn, can second he Charles? an the some remarks dedicate color the

Charles Horn

Ed. Thanks,

a and growth approximately Services. the $X.XX billion to benefit. foreign XXXX, onetime by second using Pro second for quarter the talk XX% EPS effective the $X.XX to approximately XX%, of results. to the Core increased XX% revenue slide Card effective led XXXX, one-time tax at forma XX% increased quarter to and tax X% the reduced Let’s LoyaltyOne excludes about rate which to of benefit, EPS GAAP four by $X.XX, increased double-digit second core rate foreign quarter. for turn which for tax the aided tax consolidated

on second of during our to the Lastly, spent XXXX X.Xx, while end the of X.Xx approximately our $XXX million leverage we X.Xx. dropping share ratio and compared QX to covenant corporate repurchases of quarter

the influence the talk areas. TDR? rates, X.X% essentially during payment holders about accounts the at designed with timeframe rate program interest get The program. minimum after rates accounts which and hurricane. delinquencies. chart, an to the to the quarter our expectations. can account miss and back Even delinquency slide last of event, The delinquency quarter, the improved an next is few a their program months It due the card quarter-end program of stay bounce help go suspends the the and Let’s as topic reduces fees. and are allowed though the on in shown The hardship XXXX was hot to of on late trends the What out feet of is our in was modified disaster as XX into FEMA-designated the maximum circumstances above extenuating such is from primarily during lowers is first not TDRs, to days, primarily

accounts the calculations the program accounts from which important a quarter noise of we are outcomes. in to create year. disasters number removed first is trends. can Because delinquency like there saw XX-Q, note delinquency are It not in you the As the added into last three following TDR Why? natural the

or third, over off. the removed two in ages aging the and payment three returns makes and from consecutive is misses the current XX bucket; to charge payments account The and second, stays first, payments to account the consecutive three the and program makes the existing payments status; months account

reserve feel to rate rate that higher XX%. As default. We these a program, at TDRs probability assuming debt for accounts there’s balances, Reserve is currently are added is good higher later is to allowance applied our a TDR adequate. of reserve bad the for

two about a accounts timing in to we the program little should who drag end important and do the third have will of there roll the Past recidivism. the expected. quarter. were the to of suggests It TDR of next have met than months. was In charge-offs by of the the so the several faster For in the resolve stages summary, to late experience wrong begun majority payment are not requirements June, delinquency takeaways. mid

future risk; we rate remain TDRs our to net rate be off pressure for tracking program recovery confident net any approximately second, TDR from The covers loss improving Accordingly, rates in we’re will X% that P&L loss a mitigated first, reserve to and rates. XXXX. for high by any the recidivism

pro to go segment revenue quarter, about Breaking forma the X% forma XXXX. increased pro LoyaltyOne, to slide increased million. of second Let’s Starting with the and MILES down the talk next revenue our quarter results. from $XXX AIR XX%

Montreal. of Importantly, increased quarter to bookings up double were prior the benefiting increased X% customer activity year. XXXX of from AIR as Bank issued MILES revenue by XX% XXXX, BrandLoyalty’s the of promotional the from the increased compared second digits second from quarter

Revenue and World Epsilon. agency helped first Turing Similar million. consolidation As quarter. we and cuts. X% about than bookings from before, to to quarter, CPG losses XX% $XXX are budget FIFA more the have talked dropped some decreased in sector event-driven the due to the client Cup revenue to the second

quarter us and shift maintain the favorable XXXX. EBITDA Importantly, to adjusted same expense the EBITDA strong allowed in increase the level of and margins mix revenue management as second

XX that average billion, to And in $XXX increased loss XX% the adjusted second mid-teens quarter rate by in revenue as in consistent increased points Net with rates from in Lastly, million. quarter. the improved to basis rates Card recovery digits sequentially EBITDA receivables. high XX% card the growth first single $X.XX the to Services improved

the the rates range quarter the in improve With to that, second XXXX loss to should the drop net I’ll turn at of Ed. to over remainder the rate in reserve The quarter. high-X% fourth remained and it over and quarter range mid-X% X.X% the as third

Ed Heffernan

Unfortunately, comment Charles. probably operational slide turn posted in the Thanks, I quarter could the effectiveness quite overshadowed bit of future. was that the guess, delinquency that we help a that we’ve second would just best on I by and terms time. about front in quarter noise over the hopefully it the everyone can is If Charles to X, talked some today in communicate

the a decided run ago how back on the first where of LoyaltyOne, had we to since it’s laws years ever road So, in up couple around issues in been Parliament program. the Canada the we program change long

as past been And saw both half. revenue building, return we’ve so, And as European-based year over AIR finally, MILES includes businesses. LoyaltyOne QX, to we a in building, And building Canadian and BrandLoyalty pro our a forma double-digit the EBITDA. well business the really and

which largest the to key is so, return use news, essentially our and terms really it expansion double-double program. by kicker probably decided in big which MILES And or in the into the their added was and for really use was in the real to Montreal, quite Canada, AIR program the shoulder Bank first the of sponsor a put time some and client it people in incentives card of to additional

sign. the And time of issuance came above key big a has a couple it. issued, did back. was that’s ago. then, model good number So, year we miles a AIR the from the in for of MILES years appreciate break finally, which metric and a been ever first are vote very of of BMO been we question, And finally based since battle And since in QX get the in that issued that confidence long struggling into on positive with it’s we a fact and points and half, water couple a paid

now QX, momentum And look for that are is beginning good QX news. at the the growth, to is rebuilding which that past and stage as sort importantly, suggests the up. to -- More have I and of we outlook it pick returned

in announced if Telus, a U.S. also sponsor one Kroger take effective be and the a an deal We Canada programs in seeing big with players of at to telecom look would the additional loyalty in grocery BrandLoyalty our up then of

Okay.

see in we key second a And actually to back of accelerate from issued actually, down. the guide, AIR in and metric half the We expect slowing we second the results strong things half. the AIR For MILES MILES quarter. BrandLoyalty saw don’t we from both continuation see that

year. first quite that I would is saw that Frankly, overall, business. So, Epsilon, as as The result, a the for Revenue agency on those doing adjusted, was guided first its pass-through, primarily guidance well. that held we and you tracking mentioned, we’ve first to, this the half, softness suggest we for knew areas. and to down the feet And as we’re we want up half. LoyaltyOne the be X% mid-single-digit Charles low-margin is of of however back soft. But types there. the sort deemphasizing again, in would half

as additional last mentioned We’re using some year, various our additional dollars from tax windfall, we development for channels. digital in the

Second Conversant growth. the Epsilon businesses are that’s and get growth. half, of mid-single-digit CRM do other to revenue mid have stable big auto relatively and adjusted our flat, are decent that’s where And half or we EBITDA on Both revenue and we engines, visibility growth a and digits. the tracking double-digit probably single approximately the

to be businesses. more the in All we’ll QX other with so, talking right. along two begins And Epsilon as contribute

due in deposit mobile XX% plus rates spending of throughout a very to also the And move down as higher the as to and various our to as loss it’s QX. growth active Card the consumer, year, innovation loss minus and been moved I’ll XX% turn that little call really driven that’s slide tick year. bells soft another initiatives, dollars nine, building the well in are we them and revenue being average EBITDA then as funds get Let’s for almost platform. out half we we Services. reported. significant then, from XX% XX% whistles, to QX started growth. in Obviously, both X% bit. strong frictionless the a support consumer We’ve continuing And got growth on by first programs, rates the to receivable into

Our of similar growth of is continue again, the includes to up. the familiar debt, and which first bad second cost looked cost of be in to will half revenue receivable adjusted it very guide EBITDA very because half. terms going ramp to funds The the and the

in a caused range loss QX; guided QX, in in in The the did gone. second largely XX% as for the rates us came are is expense, give noise be mid-X currently We So, high-Xs will in And which the which in of XX in we that week nicely half. plus the X.X. the delinquency XX mentioned, in June. to and they and over X% up points ultimate a We the decline. QX and declined net hubbub driver we tracking in should in at minus April little to again the we credit fact so rates, were believe or the approximately X.X. mid-Xs we did is we to guided in year. in Charles And first from in XX QX; points at last They QX. we only up And came the the basis to X half high-X QX, better basis

Importantly, April the delinquencies through points well We basis delinquency from QX. do to have in to XX results in take did improvement back bodes year-over-year to in XX actual the covered. up a narrowed circle guide basis Charles that more improvement prior the basis concern early The points a and significant to to minutes points June. June little show want future. during to year stage bit in over talk did XX I rates delinquency two June, which

were we normal accounts would back We at the While are fully XX year. hardship the still reserved neither year delinquency points not of cured entire nor results. XX than in a about better to that quarter of only that higher the improvement, number basis this been in first for in simple roughly importantly, was than X% accounts And by guided This first rate in portfolio. placed in of reason written thus, reserve prior less the this the remain, points. the year. have rate do these And distinction? -- had off. the hardship the overstated a do make those they higher factor versus we rate for XX quarter our Why basis is, XX% Well, probably, the XX% fact even significant June run

QX. So, And QX. in This was out portion P&L of to means in been write it’s already expense. the that they off of were completely some off and delinquency, accounts flow covered taken covered hit in whenever already these

since bit it’s the for internal our out they’re little X% portfolio, we get oranges. as a viewed do you So, compare to versus internally, when XX% hard we of apples accounts, carve reserve analyses, when the these and reserve noise, since a

starting page credit at to portfolio you the into little I’d do your as loss quality rates the detail bottom on poor quite and QX bit these continues looks internal is Frankly, nicely The to XX, right. as analysis recoveries the try are bunch to down for trending with can the to Xs, ramped. high-Xs credit metrics forward do within predicted communicate strategically plan. then high Page items. more however, to like to at, look nicely the mid-Xs from Our business, we’re in to support is is are good losses stepping XX. of What communication fully mid-Xs leisure. complicated the of All predicted that apologize will I going and when over trying the on the do get to and that line, what which down

the the clients, if a are Virgin Let’s the that liquidation liquidating Even clients, healthy not are Ton, sales. look when clients Gander during quarter. active X%, only at talk it sales though growth or you up was masked those been credit and at And was Mountain XX% in credit very just have the Bon printed our are about credit half look first you terminated. by sales bankruptcy of And those or America. active files the

apparel who sales the the of where this to shift is and are And up very of the is, think shift represent means that of fairly with do clients, we left lot a and strategy So, focus off-mall. new if well. And of in those the the now soft a account And ‘XX, as business, heavily between place is vintages, essentially remarkable. within XX% most in concerns this the really the important approximately you strategic decision for it traditional shift over the good have of quite quarter entire We whole size doing or frankly, that should this made our over the new XXXX the to will of here is what item, of that the represented result, is two dissipate signed new off-mall. a that’s and by concentrations this a strategic we half what’s unfolds. they years. think year-over-year, file which that the over obviously clients on quarter credit growth probably is at Probably roughly

you much making So, see the we’re for a stronger business going it And can forward. numbers. behind

to that now receivable story same bankruptcy. those also in for Turning not growth, are accounts or liquidation

You’ll the vintages; almost that up sort actually year-over-year. of off-mall prior XX% is are versus up that strategy, XXX% And our accounts newer active are year. again from see they

where to again, So, growth strategy the is. shifting is the

move something it’s acceleration an that that forward. as will think, I you see we in

Okay.

we And rates so, since finally the are here. end move getting now, we loss will to near

rate, time what target, time went the what is, question the run cetera say of that we recession, about plus optimal the what rate. loss portfolio run X% our rates, of to XX And like right process ROEs a above-industry loss I the the do sort that averages found you sort if this would overall to I minus. in loss at percent generate long is the of all of back sort long a of get file et to the Finally, terms pre-great and normalizing plus ROAs we to at of have you level or

is over-earning below qualified the fewer went were and as era, trended about for where space this credit. recession fewer frankly then, great X%, of there people trend to sort who and that post-recession During up losses

normalization, and saw take of last you ‘XX, to the to at back end that this marketplace, this started which finishing just the to ‘XX, is it returned out the doing for the had we’re we we we’re place XX people trend year. ‘XX, all returning As And years.

talk guidance when perspective, billion; at we’re to XX% so, to And up about that thankfully. expect about from we be we EPS, the a pro core that, the up forma from you we doubled $X.X And to well. end and earnings XX%. expect revenue jump quickly rate move XX% from and very XX% Growth as revenue QX see somewhere QX XX% will to big quarters, by between as of

We QX, move performance. very as expect, we into strong another

earnings that think talking first X.X we’ve we about. have quarter into the move third quarter, second handle, it, If the the were bucks you And we of as about then X acceleration that’s in quarter a have and X move again, been handle. into

things of side, there. on revenue the couple On going

back. are softer a $XXX impact Usually, bankruptcy and into original which these We running and accounts an Ton, go and then occurs in million can already Bon much cash bit or everything Essentially, went flow. profits Ton Bon Card that thought. But, in and go, was that accounts which top to severely prepackaged, factors the faster zero expect hits We’ve Services, two means come runoff they’re must into file. than our it we the line. expense the obviously, liquidation, line. offset

our margin anything taking So, verticals or from There half, full-year already XX% CPG agency of the just our deemphasizing EPS shouldn’t we’re just to but core tough certain proactive big vertical frankly, be really margin and And the as you no is where the a are we’re now we’re a are don’t the impact cash through. perspective, in of up At guidance EPS past margin core a XX% business, at there. a I primarily flow have have move really on there. real first there won’t do XX%. or is focusing is. obviously, Overall, change that from think, is unlike looking the result, sense Epsilon packaged cash that the now goods only in we the at years flowing flow Epsilon, right a good right you are where revenue the in that move couple it profits. back-end And good is verticals some approach because the a low

So, that years. backend people we get don’t have bet in concerned prior big the would about

comfortable And good, say, questions. and that, and it the go so, guidance we’re probably and with increasingly up ahead would think I it in visibility think we’ll I And we the of the Charles hopefully QX. I for with open tweak will to

Operator

comes [Operator Sakhrani Sanjay with first from question the KBW. Your line Instructions] of

Sanjay Sakhrani

respect of provision about I higher talk But, impact Charles, how morning. that noise, the you Good already. the hit provision you’ve clarify we’re most said Thanks. I the can heard from taken on forward? you TDR the going guys you thinking offset about that recovery also rates.

looking we when it provisioned your averaging that impact about true less that losses? going for think So, about rate for charge-off because provisioning of already then ahead, year, the some be the forward would X% is you’ve those than

Charles Horn

Yes.

up. So, there at with of provision start will the what a to yes, it. couple ways already is which look set saying, is I is, off you’re

I and put talked we about, against a Ed XX% accounts. both As up those reserve

going more we cover than that’s comfortable So, feel us. to

second experience of the and out will sometimes about guard. how The point fall estimating the have off, which think TDR fall they with what where program quickly many out good off is little to caught us really we how bit we’re is

tell we’re in that terms for So, rates. loss our estimates would good us QX history shape in

to up QX; about to recoveries, close rates, recovery than the points for in noise QX; digit year-over-year that quarter. XX guiding see coming QX; fourth high north QX, that’s XX%, and of further the the We’re and teens, talked improvement high-Xs drop basis you the QX. then could to be TDRs in accommodate -- we should through should On from mid go single that up more

the loss mitigate keep as for rate of our could pressure rates, us comfortable that’s year. better for recovery loss rates gross your put that on and the approximate loss principal it track X% the with So rate reason on little part but we’re guidance they

Sanjay Sakhrani

And second on is Okay. then, question leverage.

go-forward times how that -- of just more guess, you where You and or I think a X.X much should on mentioned, the also but the it on level capital to you variety especially what’s think capital drop need to about by about the the reasons, for get year. expectations all fell can leverage, expectations management? talk you the when be end to Maybe and the aggressive go-forward optimality I management, you Xs different you next on could maintain year? of the

Ed Heffernan

Yes. It’s Ed.

we buyback I that will the participate to capital continue Services the front, you think, also as in on area. mentioned, Card supporting

is going X tend -- leverage to X year. significant the with. get a end What So, X. want it capital want you for by keep, going whether be items us. even close there doing between may we or to for that, requires that That’s the X% about pretty file additional called forward out to there We leverage to yes, times to the of do conservative we we want fluctuate a and deal we’re as any to other that optimality,

I see Sanjay, us think X. to I back really So, don’t heading

could X.X there of I think, work capital there. very the very gives it, or you big powder X out of and as management, seems the to if us call dry and reasonable type put on files we is certainly a that either couple quickly,

Sanjay Sakhrani

of couple there, a there the Are sorry. pipeline? I’m you’re as at looking big files And out

Ed Heffernan

Yes.

Operator

comes next Baird. of line Jeff with question from Meuler Your the

Jeff Meuler

Thank Yes. you.

get in in the to either June, impact. what -- non-hurricane love just clarify a the roughly on if QX Outside you trying hurricane a up FEMA versus delinquencies year-over-year basis, or number impacts zones, the the that? are better to have of Just to

Charles Horn

slide, what attributable XX tried that points, to went basis points XX into that’s which one which is the provide on the to TDR. we is of the basis So, you zones, FEMA

you up a tell call, migration XX natural year-over-year. Ed would that the we about as rate it’s So, run points or would basis

You it about Ed the couple see early as of talked in improvement really the in can stage delinquencies. ways, a

of the you are new aging were or new terms and and in trust, you for lower trends loss ‘XX natural are to If some than at in The accounts they to moving slower see loss the look what are ‘XX. account ‘XX information beneficial the of delinquency. will

is the we we That’s as the You’ll the hardship into had get little meeting profile coming year. about. expectations the overall bit of talked -- to program, from up the noise

points we said about would be be XX what it June. basis at So, would

Jeff Meuler

early on somewhat percentish points basis there there. that I basis basis-point up I just guess XX would it’s TDR still XX impact wouldn’t Is points? X the And on in me. going XX there, Is get that color think that’s or improving, be there to any I a rate, material stage, on but -- what’s sill a sounds

Charles Horn

put I’d way. improvements tell There’s to you, it to very I it Well, certain this period direction. but things time takes was. through, substantial that what It of the TDR. we’d of right much just for work a attribute from wouldn’t it’s heading in

Jeff Meuler

then, Okay. benefit? clarify assuming since QX tax And a just the finally, you what you’re in full-year you. there guidance, rate just can was Thank

Charles Horn

for around half on year XX.X% initially was We So, core, year rate. the first guided starting a of it XX. the

could it core our Did I year. low XX. meant around XX. XX the My which of the in to come higher us EPS toward XX? push say, as bad. estimate. as definitely So, We would guided favorable for come could end I It in

Operator

Deutsche the with from Ashish of Bank. Sabadra comes question next line Your

Ashish Sabadra

bit the about than recovery more even Does ramping around a My affect of assumption question today that any levered in was he the recovery? with back. consumer up your recovery rate, The house rates. is years two was

Ed Heffernan

I and around what quarter. digits the then, almost you to were first is that on. needed brought recession, Then, second collectors did become time. more high up. We that’s unfolds. productive to it’s themselves, curve train way bang and the the vintages, time once ready various the Ashish with in-house do in as how all And in obviously, of why single The more compared right quarter like up spool curve hundreds the after them guess we to way And ended they great get we recovery the the XX%. took your we rates much works to looks And has we it go the

rate. as with with run QX, do group to that consumer it’s and full So to do the having we more the reaching QX, productivity internal head into less really and

recoveries And without so, creep the continue should up, in our consumer. even factoring to

Ashish Sabadra

maybe on That’s question helpful. And Epsilon. a

of the look CRM the half, have crop any things anything as of growth watch going in that you affect the there forward. and profile auto half there you the headwinds So, could the definitely at But strength, first but that or in year. which second effected out areas the are agency for? else So, -- unexpected are half potential back could is to up,

Ed Heffernan

Well, everyone question. as mean, been I knows. that’s certainly we’ve surprised in a good the past,

hit So, back it’s now, the half. on now. side we’re What be at right that’s built agency book really looking we’re to it fairly our is is as passing digit on mid the if Epsilon back us figure know, based a pop and we’re like in And sorry, goes could that result, the that, And should looks on rate. or going just being try cautious going great, that right CPG its anniversary. hey, we single to to higher than commentary growth -- than not Other everything that, you that. out, softness

just their of it should levels, back sort on what to hit single mid digit pop anniversary just QX. strictly based We’re saying, and by

Operator

of comes Jaffray. question the line with from next Jason You Piper Deleeuw

Jason Deleeuw

like The for to receivables growth the taking for looks questions. Thanks about XX%. be it’s the now it going file,

you walk for just through the why details think for in Can slower? year. come it originally growth’s kind the of a So, mid-teens bit the I was little

Ed Heffernan

Yes, sure.

the did liquidation, would out, be bankruptcy, into and the $XXX itself. a tried it very again you’re what to most and retailers almost They file. the prepackaged lay to out is those in What XX% between based was And taking big nothing difference place Bon And result, the of the portfolio the number by reported the from XX% went receivables true one. I more attrition do, Ton they $XXX as of we million. be Bon are active a the files active client on in the end slow number. the The at two. Ton initially, difference other business assumed think XX% from looking a $X.X the to is we growth that And between that come liquidations is active causes a year. the different sort -- are itself, as clients. that and million in going we said. billion than as

Jason Deleeuw

is Thanks credit portfolio shift seeing signings; XXXX seeing want growth off-mall growth growth about there; compete the for addressable than I just and just shift opportunity, we just you sales for and you. what new or on bigger And how just can for receivables on XXXX is the or any then on worse there of ADS just us there. then, do any better after this the to What there well that. strategic or as before? touch Thank you give and competes clients, strategic the smaller it the you should had commentary receivables help kind think to strong on category, And And you that? clients color is active the the like any complete? feel market

Ed Heffernan

essentially are question. frankly actually the the a new addressable it’s get this have shift else, a No, spend a market the growth marketing, and We in in we individual targeted would data-driven, handle lot that verticals And be to the the market, the again, found addressable market a has XX% believe file everything the into our grown. rate radio TV which is years. next for in Sure. opinion strategy personalized customer. of plus good shifting trying the traditional several We spend of dollars and out and on that traditional

is in the and Build.com, a and so that the a have exist take the I SKU ecom which that certain run information for of That’s fast whole marketing that in, and to more you of pure before, market the into programs, verticals players didn’t and announce see think that us Wayfair.com, So, then, it all and number if those million sandbox that you’ll of growing -- traditional a are dice good. slice add want new level more sort fall. you big the us even play we

the Additional which verticals marketing. world Cruises such this interest as had huge they Viking the it all something really of the that had IKEAs of and a in wasn’t we world before, personalized the frankly never

that store store And those the you’re us. know, captured finally, store, well department too don’t it certainly so, verticals for the use are new then, are coming department I as if you brands is know department but which cards, those card of the store trouble number department that the their in the And a with way and store of are death as that having the prominent so-called, base call very portfolios as in. therefore I’d department the these were big

not And play. brands they’re so, with establishing a ecom boutiques now needing base and big are anymore that these

growing And so, into crazy. into then, Ulta there’s beauty there. probably be stores around XX were most or things are And people before such another XX as frankly beauty the Beauty, weren’t even the clients sector, and they going the which sector like finally, counters, when department those would

that And to I ecosystem, surprising. replicate of overall billion needs everyone who think, business probably we which matter there unless the is -- that you what somewhere dollars it. very, sounds at this fact more a out $XX and at was $XX have But can’t bought know initially to are which the So, which certain around model thought in player, exists need at a the point you very level. I think market, billion you is, is, billion SKU to large very, do the I down $XX the you

doing all so, what we’re of for these retailers. And that’s

Operator

Your with next of question Andrew line Jeffrey is the from SunTrust.

Andrew Jeffrey

to -- Just Is in three as and past portfolio see years’ Jason’s performance, right helpful about faster active what is you up? pool vintages, far and newer past, customers those that. on the that how it’s question, this do say Can vintage to thank prior how to performance? a or this as you have and compare that, as a the mobile, weather for you initiatives this follow-up is ramp, in for contribute seen

Charles Horn

going that three-year private and period. programs We a go new the that to to from Andrew, I label plus is quicker XX To XXX eight, would Ed new private window. it, we’re nine in receivables over receivables are go ramp. back programs would adding in years, the assessment that correct I label your are X answer and three-year would now program from adding we much million X are you’re you way million guess, say over

goods So, group bias. retailer. have same a we’re soft of definitely quicker. the much in It’s ramping It bringing different --

profile said So, label than is what a for historically new growth startup. nicer the we private much would’ve

Ed Heffernan

across say, the Andrew, And cuts all great Yes. question. also and a verticals. I this would it’s

ecosystem price it find what online, level, the of to up, right? that one somewhat clients where believe, is a to can down the just there, It’s like urgency I sense offline my individual wouldn’t recognize different. who purchased extra would this There otherwise. than fear you trigger get got not is of own I’ve of catch and to it’s So, being they out points that per sale the I’ve got year

with to well. has career execs, the of the of which probably it probably So, life sort the various urgency, shrinking with do of comes life or something sense as

Andrew Jeffrey

a or those lenders, TDRs zones? seeing forbearance like on the the seeing your impact maybe the what’s in asserts, investor seeing other going hurricanes, what you How you’re FEMA hey, follow-up, And if an businesses just it -- looks maybe Alliance of other and from card-based address than is there? the asks some as me impact from in greater versus

Ed Heffernan

Yes.

has started -- I think, do about big I talking in unfreeze zone. last to zone, it’s we December a did our this a think, we in still take in FEMA year; the accounts is And we and clients. question frankly, the approach who game. the and why froze is we October everyone it’s fair November We them FEMA lot how We question that and to we’re way what took and everyone hurricanes those with we’re or bleed which hardship P&L? it reach those the around change curing change they’re reserved off. expense? And of. pong No. out taken what against between needed first writing our out programs these us, quarter, to already that now put off. it, care Does it’s folks, January. into No. it To we Does once to then, ping it that been could going there going tail were to and who a It’s was exists needs to is

but bit numbers So, for. on it this way it delinquency general little to as label may point, hit bit a a the or we could to these label, want been if and call, be all or harder reserved at already freeze purpose that the blanket you -- be FEMA-related, noise private got do opposed that cards, a more that’s co-brands, consumer we’re in friendly. private it’s But

this nonissue really it’s So, point. a at

Operator

with next Your from David the Evercore of ISI. line Togut question comes

David Togut

same-store quantify you in credit QX? Could sales

Ed Heffernan

as Well, the you of a of newer have advantages well. David, in lot there, ramp-ups the

So, program, we’re retailer could a X% know, ramping but growth as up the when a you we’re be starting doing card program.

then, say So, retailers. on that. or the X% they’re we’re would retailers, it could doing probably XX% probably growth And those be I some comps mature X% more doing of -- at

up that high and moving in like something the new quickly, ramping very, probably You into the very -- the retailers throw you’re digits, are single into that.

David Togut

specific then, to traditional Got are the the retailers season corner, let’s as say, more you just all implement at initiatives can retail them QX with a there it. successfully? get through And online around mall-based follow-up marketing any important holiday help your

Ed Heffernan

great Yes. That’s a question. Yes.

We of a base, you, amount huge holiday that the is are sure season is there -- tell a I interest, good obviously can client to one. make from that

that back information type a of channel. the call in so behavioral so, item up for are in accessory, for dollars, likely way retailers still follow-up and digital are, most we are now, online. an store their information reach price, them, programs level loading on lot will that you these significant want at of and run hundred online of we now we our with about getting offer find a to you come will SKU Right if to went right front And the an bought campaign, XX% if you and couple it an to we’re of use are a into a or you the sales capacity right the you

sales vast the over what to running do driving are are follow-up sale are incremental retailer. that campaigns we XX% the of these type of our online, bulk that’s the We meaning

during assume yet you can we’ll So, expect, you if this be you that holiday, haven’t been year. last flooding flooded

Operator

the Your Wolfe line question from Peller of with Darrin is Research. next

Darrin Peller

Just -- now tell just now? clarify clear, or as non-core new there the be no non-core I right can see portfolios just or to of on you you become question far all. problematic first will is first is to that non-active, right that want as

Ed Heffernan

correct. That’s

far I Ton think one in is the by big the Bon XX.

Darrin Peller

quarter should we CDRs be expect everything with be quarter make would the want that this -- into we pass-through exactly. to to know what really all late to at timing third then, fourth And clean sure expect we just that point, your I results. get opinion clean

Charles Horn

third Darrin, by cleared of would Yes. end say the pretty well quarter, have should it that history through. the

Darrin Peller

shift to more me a let then, of And question. a strategic

as you business, there the side back think I some Epsilon performing would expected well aren’t the have there ago. years is On couple assets of going that as of

might sold start on there and prove follow-up with Board’s then mind be maybe further off, whole before you need that? you you strategic you be areas if you’d either decide are in the your initiatives around could could to any other giving just timeline that with and revisiting when Epsilon, on yourselves mind the actually for think long just the how so, the stock and or strategic execute And And -- Company? restructuring that touch potentially could

Ed Heffernan

Epsilon’s at last picked ago. overall think careful And need Yes. a performance that can I to I fairly the tell several Board discussions the right been last year. level have up frankly. But years, position in started Obviously, think be now, I dramatically how than that over over it. that years have there I say, you couple they the has needless to been anticipated softer

that not back think are by more so, around And we pressure go. that’s more far as And can do with the be sitting there the modest, into strategy. the as at we as perspective, will I is, something. a assets from performance basis. to That’s the looking performance. now as about I Company all and we look we there, is my hope the If intensive half of great. guess are -- our move And that on performance at If probably is only the

Operator

Stephens. next question of Caintic Your from line Vincent is with the

Vincent Caintic

win win when renew wondering accounts And accounts retailer just margins Thanks. the also some could that you new also the been competitive sales And morning, thanks. environment. for total how noticed issues I conversely I in card And That’s that to very lots switching you for active of and forward? you of for going or discuss accounts the Hey, helpful. retailers the wins want then details account I when upon are partnerships. guys. of terms with accounts, new and might and peers there’s getting renewal the been with and some on card you’ve Good then, if thanks clients. was

Ed Heffernan

question. Yes. It’s fair

I co-brand, which from already If accommodations vintages scratch, lot XX% really our label client need and think, are that cards had there. effective are our is big a programs. And Visa, the clients over the big to One the a co-brands, two label, that markets it’s that level new who the banks number there significance to on ongoing very is sort of of period we really to of is signed out the $X,XXX small. a it of spot. MasterCard, that clients probably, the store What card. sort are of is big to that’s that that Again, would means and would have There those that is doesn’t have say for starting which time. less suspicion is almost competitive And our it’s single ones balance, are what, $XXX the of of that’s of you And so the to frankly, high. proved keep kind are move years. every a that there from year if likely, be XX% is If I quite that up requires that big portfolios that two private of exclusively confined it the a be co-brands a plus basis. we move to a And of big longer ramp that every because large a And at patience you sweet multibillion-dollar means to that most going. nothing buying renewal the requires have sort are bringing for the to less And ourselves an needle. very are talk. is balance to done Also that over there. are have has attractive balances my dozen they bank are grabs portfolios players, banks out time interest a a the needle big are banks. private versus

already But that’s out X% an case, there’s or is to option would co-brand just we that arena. don’t think purpose going there the I the competition card the opposed as XX% run maybe that that tough the extra customer private like get label. into have base we’re the in since co-brand, label, private So of the general the we to

what story long as as focus we sandbox So, and we then shape. short, we’re can I think on do, long stay our good in in

we’re nurturing As frankly, soon going, I files, going co-brand multibillion is to dollar more as venturing into an just don’t just think we account start be our about It these competitive. is uniqueness cetera us et getting going, the the of to it which getting product allows prospecting cetera. behalf conversant the the zero, from data do on getting on layering campaigns client et going,

So, different. it’s or just a it’s whether different better worse, know it’s world right don’t just I now.

Vincent Caintic

a And finer that. on point just put to

are you new those relatively what relationships, of on the would renewals off that you unchanged, these the So economics the are say? getting

Ed Heffernan

Yes. But use. can’t that we I running to I good figure return Charles, XX? would our are on be get would -- I on ROEs, a equity, specifics. what About into XX% obviously, mean, say

Vincent Caintic

switching And gears, just one. a maybe but quick

your not actually big impact or for but X% an your hurricanes size how portfolio of of it’s or about actually a this the So, portfolio be all TDR of this hurricanes. -- how know, is related Could big it’s these to big of only, if conversation you deal. TDRs the don’t the is X% because might actually, I

you if is just could this to much actual of up would that -- impact great. the an is Thank if be how you. portfolio So, there size

Charles Horn

you the That’s it our where see the end we Vincent, XX-Quarter, delineates of and rate X% think it in quarter our less it We’ve page you first QX first it delineates put the the and amount. reserve you where XX was quantified I out can of was for quarter there is restructuring, receivables, accounts not modified the the dollars to of the can discuss but XX%. see So, do, go what AR. number at QX, than overall can you can

But that, would now We best information end that at have QX. XX% it’s surrounding of disclosed the the Vincent. that give you

Operator

questions. time, we allotted this for have reached At time the

from be RBC Markets. will question with Capital last Your Dan Perlin

Dan Perlin

just when of reconciling what you tax, the tax look everything only I and for So, trying sounds XX%, I’m outperformance and question, in appreciate was lot is quarter? put said, to this play is better, sounds are understand and better, in is my I just in similar do make loyalty pressure the cadence quarter, is couple I but a to Ed, you third what likely just third items it hear some And is actually stay understand the a to mid-teens a year you Because the that better, just should are in to better. it first to at of all charge-offs going this how get saying units. sure to out. the Epsilon you’re

Ed Heffernan

losses running. -- let in, and the with that jump in you started but had the that the sense QX; as the right think I acceleration QX, segment you’re Charles came directionally you I’ll down and in LoyaltyOne hit ground

move QX, LoyaltyOne you have we now again losses contribute, have and As continue are into to down and Epsilon. are to you to to come going going going

do should about in QX did QX; So, you a in X you it is dollar faster. QX. QX; did you fact even perspective, X.X will in that a would seem bucks The handle X from bucks be

will difference last QX this QX acceleration. be rates that higher QX year from than getting in of year were So, perspective, is lower a QX. only you’re dollar certainly that whereas The loss than type

helped sales rates the QX, we I a think in, lower we number in Charles, QX last did I that think, jump had that year. of

Charles Horn

Correct.

So, rate X in went was QX. up to last loss in year, X.X QX, the

reserve This QX, really methodology. to year, comes in it down QX. we’re mid-Xs in So, saying high-Xs

kind year. just flipped reserve you prior the of So, from the pattern

Dan Perlin

Okay.

little a that model that the trued expense. so we sure So, that have provision quarter last is good we given that optionality the from the saw bit there you later a change? locked the that to for what third is year, up cadence is guys that maybe hurricane provisioning, or Is from given make up, have to results in release doesn’t just over for in off a reserve year, stuff, and

Charles Horn

your you’re an up putting growing allowance call a receivables still because and for. wouldn’t I release you’re reserve it necessarily

though You could the fall. allowance see rates

trends drop and Based in reserve little loss to we the in rates, see bit reserve further X.X QX, So, upon I would QX X.X QX. QX. drop expect in a to were in we the rate

bill a would you just would you’re it So, have still up be a had than what bill, otherwise. putting lesser

Dan Perlin

just And I the in is wanted could my to that on The sake be fourth time, last I little significant your ARs one just know. pretty one expense but a that then suspicion for quantify leverage quarter, of bit. operating

you that If help would be great.

Charles Horn

point. work need what Yes. at That’s we can probably about talk Dan. model to with that offline, We your just

Ed Heffernan

Okay.

that’s I it. think

So, up you thank quarter. you, And we’ll next to everyone. catch

Operator

Thank today’s concludes you. conference. This

disconnect. may You now

Bread Financial (BFH) 19 Jul 182018 Q2 Earnings call transcript