Alliance DataThird Quarter 2021 Results Perry BebermanEVP & CFO © 2021 ADS Alliance Data Systems, Inc. October 28, 2021 Ralph AndrettaPresident & CEO Exhibit 99.2
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generally be identified by the use of words such as "believe," "expect," "anticipate," "estimate," "intend," "project," "plan," "likely," "may," "should" or other words or phrases of similar import. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding, and the guidance we give with respect to, our anticipated operating or financial results, initiation or completion of strategic initiatives including the proposed spinoff of our LoyaltyOne segment, future dividend declarations, and future economic conditions, including, but not limited to, fluctuation in currency exchange rates, market conditions and COVID-19 impacts related to relief measures for impacted borrowers and depositors, labor shortages due to quarantine, reduction in demand from clients, supply chain disruption for our reward suppliers and disruptions in the airline or travel industries.We believe that our expectations are based on reasonable assumptions. Forward-looking statements, however, are subject to a number of risks and uncertainties that could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, and no assurances can be given that our expectations will prove to have been correct. These risks and uncertainties include, but are not limited to, factors set forth in the Risk Factors section in our Annual Report on Form 10-K for the most recently ended fiscal year, which may be updated in Item 1A of, or elsewhere in, our Quarterly Reports on Form 10-Q filed for periods subsequent to such Form 10-K. Our forward-looking statements speak only as of the date made, and we undertake no obligation, other than as required by applicable law, to update or revise any forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise. 2 Forward-Looking Statements In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, the Company may present financial measures that are non-GAAP measures, such as pre-tax pre-provision earnings. Pre-tax pre-provision earnings is calculated by adding the provision for loan loss to income before taxes. The Company believes that these non-GAAP financial measures, viewed in addition to and not in lieu of the Company’s reported GAAP results, provide useful information to investors regarding the Company’s performance and overall results of operations. Financial Measures
Streamlining businesses through spinAdvances our strategic transformation to deliver long-term, sustainable growthPositions both companies to focus on their unique growth opportunitiesSpin will strengthen Alliance Data’s balance sheet and improve key ratiosSpin expected to be completed 11/5/21 Business development and product updateStrong pipeline and robust business development activitiesBalanced mix of portfolios and productsContinued investment in Bread/Digital to scale for growth in 2022Announced new Sezzle strategic business relationship Credit sales and performance remain strongCredit sales improvement impacted by non-renewalCredit performance reflective of disciplined risk management & environmentPayment rates remain elevated, but expected to lessen over time Third Quarter 2021 Key Takeaways 3
Third Quarter 2021 Financial Highlights 4 Revenue increased 5% year-over-year, while total expenses excluding provision for loan loss declined 3%Net Income of $224 million was up 68% year-over-yearCredit sales of $7.4 billion were up 20% year-over-yearAverage receivables were up 1% year-over-year Credit metrics remained strong with a net loss rate of 3.9% for the quarter $1.1BN Revenue $224MM Net Income $4.47 Diluted EPS
Brand Partner Highlights 5 New Bread Strategic Relationship Select New Brand Partners Brand Partner Renewals Select New Bread Direct Acquisition Partners
Direct Acquisition Distribution Partners Platform-as-a-Service Select new brand partners include El Dorado and NikonNearly 30 new direct partners signed within 30 days New relationship with Sezzle on Bread platform to offer installment lendingFiserv in-store capabilities and full roll-out in early 2022 RBC/Bread launched with Xbox All Access at Best Buy and The SourceRBC/Bread went live with several new SME partners Bread Business Update 6 +
LoyaltyOne® Performance Highlights 7 AIR MILES® reward miles issued and redeemed increased versus 2Q21 as airline bookings improved and merchandise redemptions remained strongWe remain optimistic on the long-term outlook as travel returns to steady-state levelsRebranded and relaunched AIR MILES to the marketplace with enhanced benefits, new logo and digital properties BrandLoyalty had strong initial campaign launches in September with momentum continuing into the fourth quarterConsumers are actively engaged in loyalty campaigns with particular success in products focused on the home
Financial Results – Consolidated 8 ($ in millions, except per share) 3Q21 3Q20 % Change Total revenue $1,099 $1,050 5 % Total operating expenses, excl. provision for loan loss 555 552 1 Interest expense, net 92 115 (20) Total expenses excl. provision for loan loss 647 667 (3) % Pre-tax pre-provision earnings (PPNR) $452 $384 18 % Provision for loan loss 161 208 (22) Total earnings before tax (EBT) $291 $176 65 % Income tax 67 43 57 Net income $224 $133 68 % Net income per diluted share $4.47 $2.79 60 % Weighted average shares outstanding – diluted 50.0 47.8 See “Financial Measures” in earnings press release for a discussion of non-GAAP Financial MeasuresTotals may not sum due to rounding
Financial Results – Segments 9 3Q21 total revenue* 3Q21 total earnings before tax* * Percentages based on Card Services and LoyaltyOne segments combined as reported excluding Corporate/Other and intersegment eliminations. Totals may not sum due to rounding; nm = not meaningful ($ in millions) 3Q21 3Q20 % Change LoyaltyOne $169 $185 (8) % Card Services 930 866 7 Corporate/Other - - nm Total revenue $1,099 $1,050 5 % LoyaltyOne $45 $18 143 % Card Services 314 212 48 Corporate (64) (55) 17 Eliminations (4) - nm Total earnings before tax (EBT) $291 $176 65 %
Key Business Metrics 10 Card Services gross revenue yield and cost of funds Average receivables and credit sales($ in billions) *Revenue divided by average receivables and held-for-sale receivables
Credit Quality and Allowance 11 Reserve rate ($ in Millions) Net loss rate Delinquency rate 5 year Max rate: 7.6% 5 year Min rate: 3.9% 5 year Avg rate: ~6.0% Historic quarterly range for the last five years * Net loss rate impacted by pandemic-related consumer relief program. ** Calculated as a percentage of allowance for loan loss to end of period credit card and loan receivables Revolving Credit Risk Distribution ________________Receivables: $19.5B ALLL: $1.8BReserve rate: 9.3% CECL Day 1: 1/1/20
Full Year 2020Actuals Full Year 2021Outlook Commentary Average receivables $16,367 million Down mid-single-digits Flat year-over-year in 2H21Expect year-end receivables to be in line with year-end 2020Credit sales up double-digits in 2021 Total revenue$4,521 million Down low-single-digits LoyaltyOne full year revenue growth in 20211Q21 Card Services revenue suppressed with receivable balances rebuilding from pandemic-related reductionsCard Services gross revenue yield remains steady Total expenses*(Excludes provision for loan loss)$2,861 million Flat to down Includes accelerated digital investment and an increase in marketing spend from depressed levels in 2020Impacted by Bread® & Fiserv investment transition expenses Net loss rate2020 = 6.6% High 4% range Credit performance reflective of disciplined risk management and environment 2021 Financial Outlook 12 * Total expenses represent total operating expenses excluding provision for loan loss plus total interest expense, net
Our Business Transformation Continues Expanding our Product Suite Improving our Leverage and Capital Ratios Simplifying our Business Model Enhancing our Core Technology & Advancing Digital Capabilities 13 Changing the Way We Work Leveraging our Bread Fintech Platform & Developing Strategic Relationships Attracting Top Talent, Activating DE&I Strategy, Driving Inclusive Culture Increased Prioritization of ESG Strategy, in Alignment with Business Transformation
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Key Business Metrics 15 3Q21 3Q20 3Q21 vs 2Q21 3Q21 vs 3Q20 2Q21 LoyaltyOne (in millions) AIR MILES reward miles issued 1,155 1,240 (7)% 1,139 1% AIR MILES reward miles redeemed 896 687 30% 800 12% Card Services ($ in millions) Credit sales $7,380 $6,152 20% $7,401 -% Average receivables $15,471 $15,300 1% $15,282 1% End of period receivables $15,690 $15,599 1% $15,724 -% Total gross revenue yield % 24.0% 22.5% 1.5% 22.5% 1.5% Cost of funds 1.6% 2.4% (0.8)% 1.9% (0.3)% Principal loss rate 3.9% 5.8% (1.9)% 5.1% (1.2)% Reserve rate 10.5% 13.3% (2.8)% 10.4% 0.1% Delinquency rate 3.8% 4.7% (0.9)% 3.3% 0.5% Return on equity 37% 14% 23% 36% 1%
Key Business Metrics – Quarterly 16 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 LoyaltyOne (in millions) AIR MILES reward miles issued 1,344 1,486 1,316 1,053 1,240 1,355 1,112 1,139 1,155 AIR MILES reward miles redeemed 1,078 1,199 994 608 687 838 739 800 896 Card Services ($ in millions) Credit sales $7,824 $9,297 $6,099 $4,799 $6,152 $7,657 $6,043 $7,401 $7,380 Year-over-year change 6% 4% -3% -36% -21% -18% -1% 54% 20% Average receivables $17,449 $18,096 $18,294 $16,116 $15,300 $15,759 $15,785 $15,282 $15,471 Year-over-year change -1% 8% 9% -4% -12% -13% -14% -5% 1% End of period receivables $17,928 $19,463 $17,732 $15,809 $15,599 $16,784 $15,537 $15,724 $15,690 Year-over-year change 3% 9% 5% -10% -13% -14% -12% -1% 1% Total gross revenue yield % 24.7% 23.3% 25.5% 20.4% 22.5% 22.3% 23.0% 22.5% 24.0% Cost of funds 2.4% 2.4% 2.4% 2.5% 2.4% 2.1% 2.0% 1.9% 1.6% Principal loss rate 5.6% 6.3% 7.0% 7.6% 5.8% 6.0% 5.0% 5.1% 3.9% Reserve rate 5.9% 6.0% 12.1% 13.3% 13.3% 12.0% 11.9% 10.4% 10.5% Delinquency rate 5.9% 5.8% 6.0% 4.3% 4.7% 4.4% 3.8% 3.3% 3.8% Return on equity 28% 23% 18% 15% 14% 16% 27% 36% 37%
Financial Results – Quarterly 17 ($ in millions, except per share) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 Total revenue $1,438 $1,461 $1,382 $979 $1,050 $1,110 $1,085 $1,012 $1,099 Total operating expenses, excl. provision for loan loss 836 771 562 555 552 699 548 553 555 Interest expense, net 140 142 139 128 115 113 109 102 92 Total expenses excl. provision for loan loss 976 913 701 683 667 812 657 655 647 Pre-tax pre-provision earnings (PPNR) $462 $548 $681 $297 $384 $299 $428 $358 $452 Provision for loan loss 297 381 656 250 208 152 33 (14) 161 Total earnings before tax (EBT) $164 $167 $25 $47 $176 $146 $394 $372 $291 Income tax 43 37 (5) 9 43 53 108 98 67 Income from continuing operations $122 $130 $30 $38 $133 $93 $286 $273 $224 Income from continuing operations per diluted share $2.41 $2.74 $0.63 $0.81 $2.79 $1.93 $5.74 $5.47 $4.47 Weighted average shares outstanding – diluted 50.4 47.6 47.7 47.7 47.8 48.4 49.8 50.0 50.0 ************************************************************************************************************************************************************************************************** (Including discontinued operations) Net income (loss) $(108) $98 $30 $38 $133 $12 $286 $273 $224 Net income (loss) per diluted share $(2.13) $2.05 $0.63 $0.81 $2.79 $0.25 $5.74 $5.47 $4.47 Totals may not sum due to rounding
Financial Results – Segments by Quarter 18 ($ in millions) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 LoyaltyOne $246 $332 $198 $151 $185 $231 $177 $151 $169 Card Services $1,192 1,128 1,184 828 866 879 908 861 930 Corporate/Other - - - - - - - - - Total revenue $1,438 $1,461 $1,382 $979 $1,050 $1,110 $1,085 $1,012 $1,099 LoyaltyOne $(5) $58 $47 $24 $18 $22 $32 $24 $45 Card Services 300 162 32 70 212 187 410 404 314 Corporate/Other (131) (52) (53) (47) (55) (63) (47) (57) (64) Eliminations - - - - - - - - (4) Total earnings before tax (EBT) $164 $167 $25 $47 $176 $146 $394 $372 $291 Totals may not sum due to rounding
Funding, Capital and Liquidity 19 Combined Banks Capital Ratios 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 Common equity tier 1 capital ratio 15.5% 14.5% 15.9% 18.3% 18.8% 18.4% 21.0% 22.1% 22.6% Tier 1 capital ratio 15.5% 14.5% 15.9% 18.3% 18.8% 18.4% 21.0% 22.1% 22.6% Total risk based capital ratio 16.8% 15.8% 17.3% 19.7% 20.1% 19.7% 22.3% 23.4% 23.9% Tier 1 leverage capital ratio 13.4% 12.5% 12.8% 14.2% 16.1% 17.1% 17.8% 19.2% 19.5% Parent LevelLiquidity at 9/30 of $1.1 billion, consisting of cash on hand plus revolver capacity Approximately $332 million in cash and cash equivalents, ~$750 million in unused revolver9/30 TCE/TA ratio of ~4.0%. Expect ~300 basis point improvement in TCE/TA as a result of the spinBank LevelBanks finished the quarter with $2.8 billion in cash and $3.3 billion in equityTotal risk based capital ratio at 23.9% - over double the 10% threshold to be considered well-capitalized; CET1 at 22.6%Funding readily available with heavy demand for FDIC-insured deposit products – continued strategic focus on retail growth Funding Mix
Card Services Sales Data 20 In-store vs. digital sales Digital includes all non-store new accounts and Bread $ in billions In-store vs. digital new accounts in millions