ADS - Earnings call transcript Q3 2019 | Bread Financial Holdings, Inc.

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Operator

Good morning, and welcome to the Alliance Data Third Quarter 2019 Earnings Conference Call. At this time, all parties have been placed on a listen-only mode.

Following today's presentation, the floor will be opened for your questions. [Operator Instructions] In order to view the company's presentation on their Web site, please remember to turn off the pop-up blocker on your computer.

It is now my pleasure to introduce your host, Ms. Partners. AdvisIRy of Nakhla Vicky Ma'am, the is yours. floor

Vicky Nakhla

you, copy of By you XXXX now a received have should the release. Thank earnings Operator. company's quarter third

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

of Chief President and Executive and Chairman we Data. Robert today, and call Miller, Data; Tim Financial Vice Vice Alliance Charles of Chief the Vice Minicucci, King, Executive of On Officer Chairman Officer Executive of Horn, Alliance Melisa have and President Alliance President Data; Data; Alliance

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

turn to Miller. like would call I that, over to Melisa the With Melisa?

Melisa Miller

and will as and cover in results, making XXXX consolidated and the including is that with morning, an Services transformation, to XXXX update Thank are you, important and Tim the close business as Card Operator, journey then to like folks like the begin with to guidance. I'll our good progress reposition portfolio, our financial results. with our everyone. today, welcome the I'd I'd me well segment here on overall

today, was if should progress. We be to we time that agree indeed is message take are that our away necessary, now slide any can tangible all turn you that making Let's it and from there four. change

divestiture, tender that bumpy acknowledge are restructuring our offer, to Epsilon complete. to transition times, and at this for been stakeholders. lengthy, like and The corporate road I'd First, has

Within business brands you'll successfully verticals, progress expanded three Services normalized. in and Card Services, into healthy metrics have focus We've verticals. Card healthy see to areas. Our has shifted our and credit important

serve model our us to more We for to bring allow modern get digital to offerings, operating with streamlined to the the tools consumer value and will less, new do adding the continue and with paid table. we

we've health As I yet the been our A disruption, come business. leading and critical streamlined have pillars. can to so last efforts in of transformation we differentiated offer the about kept sustainable operating short-term our very we the long-term this model, call, touch mentioned and to in on three ensuring With decisions ultimately think deliver simple, on growth. making viability consistent, the value,

has portfolio, our Card makeup operating leaner, This lines examined executing with as considered emerged and of all business been has well. is transformation transition Services model Now, the we've against to strategy simpler while to various operating a the card each streamline companywide our structure. of models, its a broader We've globally effort.

is now from we estimated million. reductions That rate an Epsilon the announced year, in resulting divestiture. Earlier $XXX run corporate the

Additionally, a will $XXX underway. is incremental reduction contribute in well reductions than XXXX. savings companywide million initiative for cost These expense more

progress. includes and both delivery is our human workforce digital increasing which to approach global in Our capital, model

a exactly We our name. as expect are and brands fully leveraging offering and from to our consumers, automation would and company for what and self-service data you with artificial create is efficiencies intelligence expand this middle

other like space. not are any We in our player

marketplace. We different. we why win deliberately the And is that are differentiation

with will and structure us digital continue expense model operating modern to in deeply invest improved to consumer ensure An will and the win to space technology the and brands. more we allow in

and our we market the current loyalty expertise. in the have near-term, payments marketing result, strengthening As our expect solutions in products a and to incremental in-house

the in results together added we're when valuable larger to this programs more of deliver. known All

have Card walk Over beyond? moment growing spoken made. shift the what several past progress the vibrant to to position quarters, you about we through we've we've a and and So Services' I'll in that XXXX for verticals ourselves done and brands,

we how we testing our and the to and grow of that our full entering dozens new success, expand continue by will where on of brands Note emerging advantage taking markets, building new space.

in pipeline for market offer. brands, a healthy we business new new there's Our these solutions the that contemplates and the strong demand

making is portfolio. to our now turn some the time progress five. slide We'll on Let's in spend Card positioning

and within altered question of to made complexion On it's beginning and our uncertainty into investors, on question precisely to a Tim the the deliberate on in ourselves. we hear home it's be strategy, the more reach question time us, will why At It's given decision spend we time, I among a grow that expand continue outcomes specific asked for road we call we'll the a and fair we've eTail. impact our our to with XXXX. As visiting how brands and you new believe others, winning verticals retail? overall the about a often is goods, and our portfolio. today, include, beauty, We

on see of up healthier This accident. dark progressive attention than receivables. XXXX, by vibrant A/R here grouping each these the In way to of not each did or continues XX% new call follow a you that from a less came in you by our bar top verticals than Today, I concentration year. greater year your card in We if got build. the brands happen our half vintage newer and of to the signing verticals blue these And progressive the make far-left will our to the right card verticals. these bar chart. receivables all

bar that's longer we've far-left our We on growth card important XXXX, Essentially, newer of in the growing receivables just brands newer with growth bottom core than of Instead, coming coming from the in of vintages. see these at less that portfolio. four chart, vintages. XX% and verticals. all our our looking in programs but made And grown the our altered newer XX%. you'll no over Now, We rely intentionally. from deliberately future we've secured to slower-growing were is years our Today, our shift in short programs.

Importantly, some startup reach. were to our mature fully tremendous ramp tender these programs of programs, share newer has so

leave also where Important and core receivables. prior expect from bridge to receivables just slide, XX% wanted quarter QX largely cover down trends, are we to I increase to note, the in XX% we programs $XX.X today Generally, forecast, Now, to softness project with to to mentioned. the we normal billion end-of-period receivable. end-of-period map build we seasonal we we from a the projected before our card see QX roughly end-of-period this how to our be from the our due now receivables to year-end

billion QX by has end puts $XX.X making thought position, ending these XXXX of of that was range deliberate been past billion, Our it the shift year. important in We the spend few Card well the years. of to some on us the time $XX.X

moves I mentioned, intentional. As these were

We have core. that winning actions longer And verticals these caused some exited we noise. or admittedly, are have not no

However, room also more that and and is with And healthy entered have stronger, are are portfolio Ultimately, diversified verticals that new illustrated for we growth we a stability. growing. here. building evidence of

slide to six. consolidated move the results and Now, let's for attention turn to our QX

revenue $X and Let's EPS to begin billion on increased next line. will with Tim to the revenue speak per the $X.XX share. XX components decreased Revenue to slide. X% of the

these due the of primarily EPS retirement, EPS charges million share. $XX to $XX me combined numbers. So after-tax continuing two to from million was $X.XX declined decline businesses, the the operations in restructuring address effect our to of and related pre-tax debt charge let non-card per related a significantly pre-tax early items

$XXX funding. million one related In will expense approximately adjusted addition, in these was to two When a The share. expense slide adjusted increase had of impact combined, The EBITDA, large our EPS, this in the of net we eight. effect items which negatively $X.XX EBITDA A/R address after-tax build, card also and the $X.XX. business, item per on affected core provision Tim provision of was

from income, $X.XX to QX to Moving loss further positive tax operations net affected with $X.XX. a by dropped the our EPS in discontinued this connection a away sale. were of Epsilon expenses to the effect The item after we of related

had QX due of in additional We understand tax difficult XXXX quarter, I be and Finally, XX%. versus an saw events. the of number pressure. noisy causing to can $X.XX XX% the to reconcile higher a effective it rate a was how year-over-year of XXXX, one-time

to provide detail So to turn more over it you our results. Tim, let me on

Tim King

Thanks, Melisa, to good everyone. morning and

As Melisa improving. not just businesses mentioned, Well, in plan there underlying are are the metrics factors negatively the XXXX. impacting us ease, to on under

million reported rate for revenue see decreasing increased to to revenue $XXX for certain to Adjusting the the X% foreign So exchange the third presentation LoyaltyOne, revenue net X%. a unfavorable shift quarter. for starting products, and reward we with

important is businesses revenue with X%. an up was of revenue organic increase Services, AR, both Card And on note at in are the normalized it line in our that positive growth basis. Looking to

in mix, in number adjusted EBITDA, to Moving resulting an product were X% affected LoyaltyOne's decrease adjusted negatively EBITDA. by

to now eight. I'll move slide

So more on I'll go Card into Services. details

I in A/R. previous receivables. down QX, is normalized X% revenue lower turnaround versus yield important where is in up the we normalized prior in X%. the a As increase line we saw and average with This slide, revenue lower mentioned In had quarter, both

yields average up This are in stabilizing, and our revenue are growth. receivables resulting quarter positive

points. which our taken year, flat XXX negative largely efficiency. A/R $XXX by And increasing had operating quarter, our as cause In difference was year-over-year were Melisa Services the our to This in of provision trajectory. to expenses year-over-year. this steps the We by operating the outpaced have driven growth last Operating basis we performance. mentioned, compared million dramatic Card was almost entirely a revenue increase expenses growth

the P&L incremental million. reservable needed approximately In the Conversely, XXXX, third million. firm benefited quarter XXXX, approximately decline. me our provision the build In math. Let $XXX through decreased A/R XXXX, QX by $XXX in we increased reservable from you In the to for A/R. by walk XXXX, of benefit the our A/R

would for our now expense, need average bill. to back loan this have up As XXXX and with losses. we're line our post than to performance Without receivables slightly allowance our in book, quarterly better growing been we

slide to X% the was flat, metrics. are on I'll where prior from down QX, showing Starting where key and focus Compare Card quarters cards on we a A/R Now improvements sales, nine, turning the credit X% QX metrics. also we're in that to basis. are Services reported with up

as that Melisa million. year, but X% Specifically, $XX.X along QX, down QX was year-end, mentioned still earlier, now growth end-of-period expecting expectations in is and up in the in receivables for A/R we're our QX, robust to down X% X%

QX, While by negative, showing too year-over-year, we points. are are In to XXXX they negative were gross basis improvements. yields XX

QX, lower This will we that prior this be than programs. new the pressure year. is pressure we of we abated, year-over-year. QX, are positive By the coming and up basis expect from In ramping largely XX points to

As be bound gross to on we've guided yields full-year before, we a do expect slightly basis.

for the we saw adjusting after XXX of expenses, improvements mark-to-market and basis operating points. held-for-sale to Turning receivables, strong

improved number do on up of flat are this continue expect the our to the Both XXXX mentioned. will credit metrics Melisa the showing basis numbers and versus has as charge-off result improve improvement, we expect delinquency charge-off stability levels. rates We year, XX efforts a were of to quality for the points our our And slightly. remainder be of

As temporary, for see is in ROE. This a restructuring number to below temporary our we result but affected QX quarter. being the ROEs did on numbers XX% hits again, of expect lower some And the we is the and mark-to-market income do expenses. this by charges, on take a

mix reduction revenue summary, is and we've through. the credit But sales has yields, businesses it's noise, efforts underlying issues normalizing but causing generally business. corporate work executed to increasing up in is service And successfully some there stable stable metrics. organic Card in A/R, Product strong. we cost to are are the slightly. expenses need level. LoyaltyOne's large So improving some

XXXX who I to back to guidance will give now it and for XXXX. Melisa will speak

Melisa Miller

you. Thank of this one-time are Tim affecting a statement. there year's mentioned, as number factors And

we now the turn first, the not contemplate you If Fed lowering twice. XX prime did to rate slide

interest fact, like a In forecast rate in early our many environment. industry, predicted the rising

we Second, than markdown larger anticipated. are now previously receivables on our held-for-sale expecting a

with forward these clean of However, portfolios are moving the balance to our sheet. committed up to we sale

down in deterioration We receivable. fully accounts the leading our slightly slight with our Third, higher for programs average to which previous the we've is reset yields than in seen full-year. to exit core sales credit yet some a QX, XXXX expect still

now are XXXX. all guidance these our tackling are We disruptions for they in reflected fully and

targeting pro flat $XX.XX factors these the both guided reset, now to revenue $X.X at of a are $X.X we we EPS EPS, $XX.XX we are range to where we share. core On is combination believe revenues a The basis, we billion, be to will XXXX $XX.XX core On to and now forma a $XX targeting per of even driving EPS. of billion.

repositioning So, pieces, our business and that improving heard the Services in despite I made you some model progress portfolio. have hope Card we tangible

verticals be our doing more cost. implementing faster are new at lower and a growth to focus with and shifting We offerings will less

vitality ultimately will that and restore company efforts Our growth the will confident we're follow. of health and the

And streamlined business. we more to slide will XX, finally, enter moving focused, a on with XXXX

have we the single EPS. reality. this from We streamlined operating expect ensure is growth, in expenses put visibility, to digit revenue our building our Based significant model, We runway in place high mid- to- blocks current see on growth operating low our ahead. lower core and XX% future

the versus operating Core EPS. necessary stable we EPS Breaking by with per XXXX expect will will reduced Core structure to as adjustments digit it see segment, consistent a cost be in making performance. improve up high forma and single we be to performance are down LoyaltyOne,

our revenue single mid receivables up average to gross continue Services newer growth be total as vintages gain in Card expect and digit card yields. to to single-digit drive high We flat with

expected remain Credit stable. quality is to

and been we will to expect road this XXXX of near in year growth beginning. growth to a forward we in a more some at that positioned Our its to day profit. an be has And road XXXX, hosting look to new declare through times. been transition has we strong terms cleared detail. look us now investor forward discussing revenue This has are and initiatives bumpy And end. and working We early in we

be we will firmed as timing get So, up closer.

ask you. remarks, line up now that prepared our open the Thank concludes that Q&A. would for Operator, I we

Operator

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

Sanjay Sakhrani

guidance for context thinking the Thanks. and the wanted all market points I you rate that at morning, look of about and no the look I is for data year, maybe Good but reductions, clarify your both guess assuming just no further might like there we it when I you I your confidence into as two these assumption thank rate some expenses terms for next provided, point of to on reductions, in was revenues more segments, to more. three each one be is rate seems of

think EPS should how after. we one then Thank situation? the the and think if I putting as you. that going target capital capital also for should So, XXXX would And you forward to we that's of how follow-up range have about into risk XXXX? manage got ratios, also

Tim King

Hey, Sanjay.

start with question. me So, rate let the

action without Fed. the expect the So, contemplating any do we not yield compression further Fed, any by

if that Fed the lower put does would So on us rates. risk

So answer one. that's

yield Two, as to start you going flat. to guidance, thinking about back stay big the yields, we expect

very benefit to EPS, So, any going our be we also with and cost yields consistent and our is That's our revenues much expect going growth, EPS through with our therefore very are built course flow don't in our to savings. to our A/R yields line and from of meaning the A/R. the should degradation,

I to - but I the flow contemplated pro if use put So, X% on forma, pro if going easier, $XX.XX we because be switch in if back our use forma and to if to use am and to expense pro going -- reductions forma I as our that can just that it's would I up $XX.XX, expect we through X%. to we out forma pro

Sanjay Sakhrani

And are rate like the and for into expenses does Okay. betas card? have what I liability if and guess that revenues asset how further flow you cuts,

Tim King

are we side on the question. rate I side? Are versus liability the how am asking sensitive your following you not asset

Sanjay Sakhrani

Yes.

we impact? how like rates As the go should down, think about

Tim King

Yes.

reductions, to It months reset our XX% about up about liabilities. our the are to for to t rate six We our on XX% variable liabilities book. meaning rate catch takes

the quickly. as our up asset liabilities for about in or and catching start more So, four exposure essence, reset months did obviously three have we

Sanjay Sakhrani

and affect relevance stepping ValueAct more path how is X-K it capital and and of like with down sort board, some maybe think on the the but that management talk the that guys follow-up doesn't my about are And of we might I company, forward? you an And should about how from can from ratios. disagreements maybe Okay. Kelly then that that the color there question also saw seem is Barlow

corporate say you off with table? Does or up also, done Melisa, that you. further I sales divestures the the you are guys that mean are any heard I thought And restructuring. Thank

Tim King

ratio, I'll turn any as about Kelly, further to and talk capital so far he's to as switch we'll we'll right, here Rob take All over Melisa the back since strategic conversations. then to

have the So the about Sanjay, in we ratios, balance very I healthy; about distinct on enough capital I three that cash sheet, making really is think sure buckets. that think very balance sheet. balance the obviously sheet

far do as doing repurchases. of shore also And continue anything investment course, We of businesses grown at up at obviously so some stock looking or of card LOB to finally, strategic type those other in think look we investment, to might then businesses. as any the or we type about those

and out. look three at the So three just we different balance we those them buckets of

Melisa Miller

Sanjay, also we actually the we so strategy, hand-in-hand. separate overall strategy that, they're they to -- business And go don't if I might them, capital consider with not add the

as ensure making influence we business then the going after And I'll where look back will together. allocate right and restructure that so pick on forward how we corporate we capital. question, We the Rob, and see the And you. are that up into investments them

Robert Minicucci

With as year named that us on week a earlier Kelly continues the Sanjay, respect the informed fund. problems. ValueAct Barlow was that he environmental in master ValueAct, focuses fund partner co-portfolio and of in new Kelly of a of this manager social took responsibilities. a on to He new He

and changes. strategy and raising Board. pivot to our effective financial Kelly the are differential has very differential, terms our our management -- operating perspectives. in no said He it been in your of You and issues or strategy contributor comments; was in There changing significant a the

more at time with think defined, new devote now he's going ValueAct. his I to path role so to our And

for the and we're his grateful So, wish service, best. clearly him

Melisa Miller

And around giving in Sanjay, to was might Epsilon appreciate come I articulate restructure that if actions on with What follow-up. were we I me the complete. a corporate connection were back attempting sale you restructure to chance corporate question. the the

would reevaluate future, of say review, and that strategic would anything we under answer in what that number the we there would mentioned is that if what still Does where be be that initiatives previously course, were really So a had would we question? today. We of are we your required.

Sanjay Sakhrani

Yes, Yes. much. very thank you

Melisa Miller

you. Thank

Operator

Wolfe Research. Darrin next question with Peller your And comes from

Darrin Peller

Hey guys, thank you.

you with what XXXX start to of much contemplating do actually be the have move from either And retailers, we off overall should Just of might be to how into how more portfolio? portfolios on acquisitions types portfolio flexibility or type portfolio helpful? would growth with just also maybe held-for-sale, acquisitions regard you guide to and in be health different expecting is the then the any of

Melisa Miller

Darrin. morning, Good

In guide does terms acquisition, contemplate large any our acquisitions. currently XXXX of not portfolio scale

that So, upside an could be opportunity.

which our We available forward, plan, next long-range be is do we healthy the that Moving to expect evaluating would signing a be year. in however certainly very vintage market. new

why of there some that with there know that are like, then committed be up today. that what today our be We'll year next non-renewal, with up in those looks forward XXXX that's to here always year, sitting and in we clearing moving coming the will to And those is largely we And about. portfolios, selective and isn't but one respect this guidance. are balance sheet really we and fully contemplated strategic also have we did that programs signed a that held-for-sale

Darrin Peller

Okay.

expecting when credit I as as that And types the between tradeoff follow-up is same? XX%. get to on should with yield think profile the of the loans the get back we want and well quick north it you the I those to new of vintages to the of we imagine those ROE that, to for basically the about yield a quality Just of credit. be mean respect

Melisa Miller

as from really startup great of you're credit newer with a time scale a would say some we program and question improvement three-and-a-half take the depends. would a expect to yields. If stable. rest versus quality time, know, time have book, actually are course get it bit years-ish A the the the vintages And of and have about it They an a state just steady we spool the of right conversion productivity be of seeing well would but exact you the we where to same at full away. we we perspective, looking the by answer that up, we over is, over a in

add to anything there? Tim,

Darrin Peller

Thanks.

breakdown this or I'm just Now it guide it sorry reiterate you to trying you there I but specifically could on may revision was earlier, sure that? was the question, from and said missed earlier, I if just the I just have mean this to I'm find I held-for-sale. could year, if the find but EPS

Tim King

Two, blank? going reset, our am obviously our specific be and that outlined is then is Melisa lower average I be a caused Darrin, three held-for-sale receivable, items -- third going One drawing And slightly Sure. the to to reset. why a the mark.

Melisa Miller

Primary.

Tim King

Primary, you. thank

each So, those are of and about each. the third

Darrin Peller

Okay, Thanks guys. very all right, much.

Operator

And comes of Blair. with Bob Napoli line from your next William question the

Bob Napoli

for Thank and you growth -- this I long-term, the do mean on -- you. you rate think the is? over I some what you earnings can give right what have guess model color the the business right is Melisa, revenue

Melisa Miller

of with long-term different and or growth single of upon conversion if and us have terms a at it, and it's because best all revenue us many really many we of depending both not gain. our that's and it's forward growth for short-term not is I'm growth what costs, have It great Bob, Yes, back question, business, long-term, be for the we digits glad a course for long-range year you viability would in deliberately because as startups. our that high in A/R plan, is you a slightly the the throughput, asked throttle sales we say bring would

Tim King

too, go we things and end that's we hurting certainly certainly some single-digit, fine, have know. we don't organization. presented the number, start When Yes, us, factors there're we our in to opportunistic other some if growing if you up slightly Bob, over high and that

have capital to a need requirements. place, have up need to organization with sure we that. infrastructure that have make Certainly to we put compliance keep in we we We

long-term start we see. opportunities So thinking little we single the on around depending digits, high it'll where bounce a

Melisa Miller

ahead, of Part our enthusiasm please. -- go

Bob Napoli

if you double-digit some leverage that at earnings and growth, do expenses, growth return operating then EPS No, on drives the is was model that -- look mean growth, going to with your or strong ROE, you capital single-digit and and high low get I revenue I that is like say

Tim King

So, that is model. our

If to the I when at I you P&L, high A/R single be you revenue get line with expect go down start in my obviously the looking digits; growth the that.

We are not seeing any degradation in our yields at all.

As our you very so operating of pickup we are funds, pressure cost little we'll is which abating been very a last few in Charge go years have expenses of certainly to get there. our in offs now. there, down our offs and A so stable. stable, little expense pushing bit the efficiencies charge been have provision

through the that's get that, you're a A/R. you yes, by So time your should down growth you flow-through have better than on

Bob Napoli

but the that shift you mix, question presentation out not on I Okay, the know choppy guess I which customers -- the could be just guess mean retailers I that going you adding to at performing with there. active as market have still still you Some your portfolio sure larger that I'm not would a do at in risk and I in significant all customer fallout? stable as that exactly mean, guess, model confident, that I are, are guys look would cylinders follow-up appreciate my not more you're your -- long-term converting get at it's How and customers or retail that still -- going And or I is very that risk. you're you some in even of

Melisa Miller

few observation. just we'd forward. a fair a that And that's bring Yes, thoughts

last de-risk when our there or financial watch form portfolio. and particularly about carefully at helped that it look list to of EBT the is closely to divestitures, the in the that organization, consider. think a But that of we against of some First, we risk we Bob, risk. we And really the list a viability actually executed We the the those monitor year health. course

will we in make we've that will what guidance that done our long-range that percentage it, as and so long-range plan have that brands assumed guide our we contemplated plan. be And and is XXXX fully not of for built there some have XXXX is and our our

Bob Napoli

I you there's like why And do think think, I with the you'd wait at some little a until them, Why more I'm you sorry. the clean-up business the if a understanding buyback to the that bit control the your I when do way sneak the point in. and did, did, did, go, and and I guess would? quarter. to you one need knowing that buyback, you you guidance more raised and or had last buyback over you not that little did

Tim King

nice buy tender. more about share $XXX, of to shares little close $XXX a than at market a actually below executed were The like we you, we to the able our So, we when lot what way million was the we shareholders, that the stock that different I'll board to options, five of price a at time, the return and and think with some X looked right tell stock trading was options, best felt at a the variety executed we working successfully is, a tender as of to considering we people return return to executed now, of the where obviously, with as a view seems that if us of the lot far when it shareholders. with Dutch shareholders was felt tender at the our judging that to circumstances Dutch auctions versus is the best variety we back to that get you but and look

Bob Napoli

you Thank much. very it. Appreciate

Operator

question next line from David Scharf your of comes And the with JMP Securities.

David Scharf

I'm did to away rate about the base kind And for can are us other might now, comments these years, forth the a a retailers. had percentage that's that perhaps echo recently. retailer into sense and those in the coming net, A/R as are the Hi, companies perhaps, rapid deeper the give the of in dive these expressing Can mean, of lengths questions. XXXX such portfolio up Melisa, And high thanks us retention bit. you renewals. of some for wondering pivot from from traditional XX% experienced newer necessarily all you've of challenges if, the those of so we is that what a a remarkably renewal contract newer of over on lot mall-based start, you think these timing A/R since taking these, that sense Canada, of a good my not a there's Alta little give of one that like verticals. things that and appreciation XXXX? but as I notwithstanding for follow-up the all to and has secular among the traditional a of hallmarks morning, lot be want startups, I'll for shift. for I growth

Melisa Miller

Great good and question, you, thank morning.

again, our for any consider that contemplate for or up would fully we forth, renewal. bring XXXX programs guidance would So

on label, vertical, type, that are ensure would the on question? a and there want because programs years, to co-brand to play. a product average, that it's there depend we would And on to driven that are be it largely answer but So depend vertical whether we your five like into, that's years a program us, private it important. or seven by it's few does the and a does XX anywhere that which Does

David Scharf

in that's It No, necessarily helpful. Oh, renewals months? or XX imminent the isn't like bubble any sounds of there next no, yeah. XX

Tim King

the term. over spread They're

we this say So make in nice them, don't at of we look big renewals on our have spread than We because look butter, for don't They're all terms, have at bubble at you eight look at, any just, we for we consistently the and don't the fairly is XXXX small look we term XXXX. start eight-year, I'd don't other often average any thinking or have big at of seven risk is sure the over we don't to over PLC's, risk a of fairly years. -- big look year. which renewals, city it's in like it's given co-brand peanut renewals the we better lack seven-year, years,

Melisa Miller

we What brand renewal down, about of retain. appreciate to remarkable And the want we on put to office going acknowledgement, David, that wall. that XXX% the I that rate. to I we I'm retain comment our have and appreciate the partnerships wrote actually

are because and the program. really parting So disconnect we a a and there's if ways situation of we it is viability how value we in the fundamental view where are the

David Scharf

that's a follow-up. Got to good and my helpful, segue that's it,

As calculate the year. of the timing. Is the potentially that about to in but have ago ratio, the that it markdown my valuation at of that any X.X%, million. your just by $XX the Can held-for-sale, the quarter of to disposed relates timing? on there I down of us on on kind implications, not I has by seem my that efficiency held-for-sale this notes OpEx obviously expectation update give was based held-for-sale thoughts would in most jotted calculation, be latest calendar on the end that a you

Tim King

right actively clean-up would we're year. something economically XX, would silly that the sake sheet by to we're we balance portfolios this end but be Yes, negotiating like obviously, do for to of the on going now. the very Clearly, not December the much of

David Scharf

much. it. you Thank Got very

Operator

we and one Andrew question from Jeffrey one to comes limiting with follow-up. questions are question now SunTrust, next the with your And

Andrew Jeffrey

and with pieces, your to know can with what that understand are lot Hi, of outlook morning. thanks investors but at you can how into peers help I of might us are question, Tim, the ADS strikes lot are make all a GAAP, core your GAAP all? for EPS taking there comparable with more waiting to you it good me translate us at moving a help earnings

Tim King

my as same Yes, my type my be this go the GAAP versus there's as of I'm not this a difference quickly my GAAP from difference GAAP should in core should in down improvement. I you improvement can be I get so if head, but in to my walk core, doing no EPS, there my from big

Andrew Jeffrey

forward? a we a and as be, expect the certainly what of portfolio sort Okay, to helpful, what's like reconcile change bit just bit, going to but the this I grows, follow-up, may when growth trying how we're sounds little the with and going step CECL reserve as in here dig that catch-up stair XQ and want to there a little would sort that I dynamic of the then recognize understand again that's on in pattern? see why build, that should I'm

Tim King

cost a for got year. build that's in million the have on of QX $XX provision benefit I hence year, rate declined end-of-period we rate just rates, there million decrease for what We I credit million this a comparing the our audience, $XXX earnings on have higher reserve lower even last between of $XXX difference math nothing, I standard there's This last before, XXXX, put the in issues receivables any is when million just the I I credit, receivable was which ridiculous, and Andrew. got that is comparing year-over-year. to $XX year a call. a rate XXXX, year we so as of didn't XXXX to I'm $XXX million issue we to stable normal I I there, because is you QX had also dollars, Don't stable the but receivables. going billion to I increased rates, understand year again, realized million and have I but reserve receivables. was it's Yes, better rates to XXXX and year This lower there's a the last exercise last got it, was lower you very no difference based talked year, I'm be $XXX know an and difficult course of XXX% go the

Andrew Jeffrey

thanks. Okay,

Tim King

helps? That

Andrew Jeffrey

Yes.

Operator

Perlin next question from your And Capital of the Markets. line comes Dan with RBC

Dan Perlin

you would versus of to just Thanks. then growing get this again this remind and underperformance get back would be calculus the I'm us the as I asked trying how rid of it? for trigger of plays how kind to just of kind all business? But was that of to about out a position for about question long-term of Can like think plan you cost you require kind to the what help know assets. story I rationalization this its picture mean, get you

Tim King

it at model, you comes to MILES, think miles of issues. first couple it if back AIR Dan, to a I look know down the we really Yes, things comes

We've drops, recognition. cash future issue revenue flow drops miles So had some major client renewals.

major issue of renewal have We of Montreal. with Bank a

us get will we get actually also improve them rate more I and of and reductions think that back is burn where getting going On some and collectors more to several Canada, can increase we active, made that drive the position driving to ways our for growth looking had engaged then help more top top it, the profitability our on to which issued. a line. to With proposition standpoint. will degree, us in the value miles cost promotional structure to get really to to them we're that

improvements with the XXXX. MILES for board AIR looking are we So across in

put there're improvements further drive loyalty, brand based be we engagement. revised three basically, frank. digital let's with XXXX. in cost just believe this think we rollout terms the to be some going the there EBITDA, we're could down further year, market, that's I be upon We've EBITDA cost we see year-over-year We still looking to do. a reposition terms up will of in changes good several structure the client frankly up do structure, to but is where situation brand loyalty a it into be With revenue in of going the place. in it It's in made as that rough of been still some will years, performance, initiatives terms year-over-year and to

Dan Perlin

happen, Bimo to that, I in hear yet you Did renewal that want my but I the to clarify you XXXX? that is was still Okay. happened follow-up, say

Tim King

QX. Yes,

Dan Perlin

it's to, portfolio, QX, Yes, bifurcated. right, as and pretty then Great, Melisa, kind of okay. the talked you the so second question,

opportunity of You got this clients. great new

struggling. with of have some got the that drive to trying conversation legacy growth. these of to them you clients I'm You kind understand

legacy growth this got their this, that of versus what to opportunity, also you've And of but is trying conversation Thank I where guess clients like change lot real story sustain, I'm you. telling? ways, rate wondering you're in through is process. that help them you're So a actually today which

Melisa Miller

great every partner brand question, Dan, course, of a different. that's is Yes,

You would however, core of individually, by programs those not look one double debt They some growing, within cases our are single, and of because that at high have are brands are there are year-after-year. partners that dozens to low growing. the almost each in file massive

spend it's place more extra campaigns make trip and us, for the sure consumers spend when are trip. making more that the that right they an in all often make have about So, we a to getting

partners number In do word, our spend of buyers listen our and bad be spot. sales. it's us much and fact, if non-cardholder. our up, retention card weak one large, by count program there our you partners on brand for either trip up, they many three bright That's year-over-year our our so little them is dependent, the flat half up, but rate. look do a brand, at as When to per to metrics, times a in for to a has partners of for cards during spend as the one of someone and of these The good times is times wrong

very very, to serve. the we are partners programs card these So valuable

Dan Perlin

Thank you.

Operator

line the And your next question Eric from comes Wasserstorm UBS. with of

Eric Wasserstorm

for in a creation. value relative the struggling just that think I little Melisa, the question, the a taking is lending that repurchase, now model to I growth, one share and Historically, largely but of the course, metric. was emphasis are earnings you double-leverage my which on of contemplates adjusted valuation historical. you to predominantly Thank to ADS accelerated ADS, is book relates high a Committee on bit And with the emphasis disruptive think understanding and of things go-forward Investment my question was how which and value value, resulted book growth economic and an relevant is earnings company EPS

very your You as on is expensive optically look even low. book, very PE

maybe just measure you a we can basis, go understand help about forward at on So, and should creation value us how think ADS?

Tim King

take Eric, that, Melisa I'll okay will Sure, it's jump in. and if

high value a you book clearly our you straight very obviously, EPS, by earnings having go said, just going institution book having financial earnings, book my my creation going shareholder single back creation, and like, so to on if to digits, straight well, much XX%, my return per you're value flow concerned overall, growing leverage right you operating by but through second, go through the book and getting expenses, is that value, increasing that my as the my as the I'll as and your I'm XX%, go in then thinking about boy, the to saying, metric. revenue my I'm to to get So far revenue increasing to with X%, a top share, my then value

assets all book would my obviously We didn't I is were look of not a the still going are receivables. we would looking have institution value then have divisions, quoting currently, quoting book go say much trying and our I'm tangible that what back an tangible core if say I'm to that's EPS, we think to and who value, do value I'd we start we that carried, at course, ever GAAP EPS, other but is are we our still to be two very to and of at those, come the at they function

That have think ROEs higher peers are dramatically how growth receivables yield, comparison. are, I you fair Our value dramatically higher when versus don't at and are returns. that's given looking our start a book our

I trade should a performance. think obviously we multiple given at our higher just

you tangible metrics assets land with you that, as if So helped? happy I am the underlying That are boy value what to like are. book the of because with through kind values you walk more of of in would opposed to

Eric Wasserstorm

or for one just debt continue point, accelerate follow-up incremental can on you to leverage in what your through leverage us understand and that, to No, repurchases? -- just Okay. you your is -- whether position, for share priority to you yes, respect the fact help with thank to reduce thank to

Tim King

think that's card we going working cash shares with the the sure repurchase flows I obviously debt Well, am debt are balancing. say newbie thinking than about about repurchases. the conversation -- little start days. bit that clearly when to and I making we XXX a board am we the repurchases take of

through working are we So that.

Eric Wasserstorm

Okay, very great. much. Thanks

Operator

question with Vincent Caintic And from your the of next Stephens. line comes

Vincent Caintic

Good guys. Hi, morning. thanks. Hey,

the know shares, right? but $XX because quick first high of numbers, XXXX a $XX.XX of I lot the clarification to XXXX is EPS teens that are there that's Just to outlook, on just mid based a core

Tim King

Yes.

to to we are range core you XX, code. high that are range. XXs, XX we the was XX in core -- so going use to XX XXXX, EPS guiding and if That's in to EPS XX, So call - had go call core mid zip

Vincent Caintic

the year-over-year I core forma the the number core the –- is And per because just know this. XX Okay. -- it's not

okay. pro versus Your $XX.XX forma the of core,

Tim King

the forma, X. Sanjay, answered the switched pro I to that's X when I question for When said when Yes. I to

So X. use then $XX.XX to $XX.XX, to be X it a forma to pro you want would

Vincent Caintic

got Okay, you.

And to you. the like broader that so And Thank the all investor are are helpful. seems all that appreciate I things question people very lot my look detail. day, it forward and is because think evolving. the think Okay, things changing I a of

different a in similar growth receivables wondering of kind it's have to the but still is so take to just active got So question similar some the maybe mid you of teens other range.

we Thank that You might go you when have some you -- your total shrinking. accounts should XXXX? business? then of got is there portfolio your into pre broadly How When expect And how think think renewing struggling, maybe buybacks your you I think part the now about of about these just XXX guess stocks be about that do you. that versus market. indicating

Tim King

Clearly, me growth. let are average the at receivables talk we looking receivables about growth. So,

to of dramatically. use look last earnings period that of the or X%, back if if we end are X% down and QX, You XX.X the taking position reported to call year, then period. a up the we trajectory are in was period going we you And on guide end basis. to QX, we hence versus you the will at back then getting are just see flat, go showing the X%. QX, end up of of are down But

growth part -- grow OpEx to grow trying what all the working we obviously and charge-off the is we are with in flat different meaning in A/R, A/R. your business we EPS. XXXX, will what model are that. our your your are through into selling And are we revenue portfolios we done convey you then back keep in our And yields yields, translate way fairly in we your commiserate simple, pretty because get our That then are back growth your your that should to our that's too profile are some and a think we a we that is that things The from those trying leverage perspective all all your so, have takeaway is keep with and hope growth A/R. to obviously you convey here. in of And folks translate

Vincent Caintic

Okay, Day. great. the much forward very Thanks I Thanks. Investor look and to

Tim King

Thanks lot. Okay. a Yes.

Operator

of And your from final Jamie Susquehanna. comes the Friedman with line question

Jamie Friedman

just verticals Melisa, that. will the of like the for to to all that point excited, vintage; second, ask two One, just detail. that you I to wanted just if And thanks you I the vertical related vintage. the share are Hi, cases. noticeably the more out. why looks distinction could want before sure you to ask versus had the regard in some with used voice upfront, questions I making go your understand I was you, just I make sequencing X Slide more enthusiastic. it

retail about in be remarks, rather talked will cases. prepared some but your the goods, home then so, and the vertical helpful, You versus and more vintage Thank building e-tail the used you.

Melisa Miller

Sure.

it growing the there tried So that that is back huge we is to changing we to what the go reason if bring the two years we or we part of is found demand to place. but consumer, the not the modern the that we we be in for -- to then are from three is with to if going vintage not first, the the now have vertical same separate itself table, marketplace

consumers stay. and wining market tested deliberately into there's want categories we believe are going to the So are we where what to

Another children. be example could

that that of children do do. is we on always we us the those had parents, So, thing that that be we before sure are to the our are want phone one

example but a a going is vertical would that is So all that Not vertical. of endure. another winning, that are to

when go you viable, first vertical that will through a on looking an XX-month a go conclude at before selling are vintages, to candidates, is that revenue. time you then you if the healthy we journey, the of about down you get dollar that boarding and the So you of develop list timeframe by

that or vertical shift lack almost So lagged always that's why you the see vintage the will vertical shift shift.

answer that Does question? the

Jamie Friedman

that's really Yes, you. helpful. Thank

Tim King

you. thank Okay,

Jamie Friedman

Thank you.

Operator

are time, at there And no further questions. this audio

for speaker the to remarks. back go will closing We

Melisa Miller

acknowledge want here we is understand I want time this our XXXX. it will there that asked certainly that long that you point we this peaces you were for to number again know of sure we to moving many been and to year consider. a thank that to phone that and road off are the goal confident today, has are We making for making are jumping a messages today. and everyone's for progress I we strong will finish on that we Well, and the make be that

So, thank you everyone. will And talk we next quarter.

Operator

conference. This And thank for participation. you. concludes you today's Thank your

hold You may moment. disconnect. now Presenters, please

Bread Financial (BFH) 24 Oct 192019 Q3 Earnings call transcript