Thanks everybody for joining us. Before we get started, I have a quick disclosure to read and then I'll get started. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Today we're happy to welcome Ralph Andretta, CEO of Alliance Data Systems, to our conference. Ralph has been CEO of ADS for almost 1.5 years now, and I think it's safe to say he's been through one of the more eventful periods ever for someone starting out as CEO of a company. Ralph, welcome, and I believe this is your first time coming to our conference. Yes, Jeff, thank you. I will say I did have three good weeks before the pandemic hit, so it was fine, and I appreciate your time today. I appreciate everybody joining. I'm going to go through some prepared remarks, and you can find those slides on our investor website. I'm happy to take questions at the end. I'm looking forward to that. Today I want to cover our go-forward strategy, our strategic initiatives, talk a little bit about 2021, our update including sales trends and what we're seeing, and then expanding on our Bread opportunity. I want to start on slide three with our go-forward strategy. First, we offer a robust suite focused on customer choice, which differentiates Alliance Data. Our product suite really differentiates us. We can offer our product through a white label or partner-branded option, which is unique to Bread in the buy now, pay later space. As well as that, we can go directly to consumers with our proprietary Comenity card. The acquisition of Bread filled some product gaps for us. It opened up access to a younger, digitally native demographic. Through the use of our unified product offerings and a product graduation strategy, we provide an edge to our partners to better engage consumers by ensuring they have the right products at the right time, and we provide additional products as their needs evolve. We're able to support our consumers across a lifetime shopping experience, which allows our merchants and partners to manage and optimize profitability through a deep integration. Our unified front-end experiences enable us to offer the widest payment suite of any competitor in the space, serving all generations and driving incremental sales for our brands, which is number one priority for us. We believe our unified offering strategy is unique to Bread Financial and a key strategic advantage for us over competitors. Second, we provide a full spectrum of lending capabilities through the use of our advanced underwriting tools and our historic data to drive incremental sales for our partners. We can score and approve more applicants and enhance profit for both our partners and Bread Financial. The expansion of our product suite into buy now, pay later helps us further differentiate our grow and expand approach, which grants manageable credit lines and allows consumers to gradually grow their lines over time with proven payment behavior. Our risk appetite metrics are focused on credit risk and profitability rather than a targeted loss or delinquency rate. This balanced approach results in profitable, fair, and responsible lending. Third, we will continue to enhance our digital capabilities. We are making it easier for consumers to apply and seamlessly transact across channels. Bread's versatile payment technology platform is scalable, nimble, and allows for quick, simple integration for all our merchants. We will continue to invest thoughtfully to adapt to an ever-changing omni-channel world. Finally, we are committed to driving sustainable, repeatable, profitable growth. We will not chase deals that are not appropriate for our business, but rather will continue to prioritize relationships that expand the economic pie for us and our partners. We are confident in our ability to grow responsibly and provide a strong return on our shareholders' investments. If you move to slide four, data and analytics and technology innovation are other areas that set us apart from our competition. We provide essentially real-time access to comprehensive brand acquisition and sales data, as well as underlying driver analysis, providing immediate insight into what is driving performance. Our data and analytics tools help our partners understand the changing behaviors of the consumer, analyze customer preference, and develop internal planning and forecasting models. On the bottom of this page, you'll see proactive risk management, balance sheet management, and expense management. We have taken deliberate actions in recent years to improve our underwriting platform. We have invested in our core platforms to enhance our predictive modeling and machine learning models, allowing us to provide lending approval rates within our risk-tolerable metrics. Next, our recently announced spin-off of LoyaltyOne positions both companies to invest deeper in their unique growth strategies and strengthens Alliance Data's balance sheet. The spin-off will help to improve key metrics, including our TCE to TA ratio and our double leverage ratio, with the target of having these more in line with our peers. Once we are comfortable with the level of enterprise capital metrics, we will ask the board to consider additional capital returns to shareholders in the form of stock repurchases and increased dividends. Lastly, our growth outlook coupled with our disciplined expense management will set us up well to execute our long-term target of generating positive operating leverage in 2022 and beyond. We have the ability to flex our expenses up and down as needed, but we'll continue to make strategic investments in order to generate additional profit. Turning to slide five, our focus is on execution. Sales are at an inflection point and will drive receivable growth going forward. We're confident of the growth drivers and opportunities which will benefit us as payment rates begin to normalize and consumer confidence improve in the second half of 2021. While the economic recovery is robust in the States, outside the United States, it's been a bit slower, leading to softer than anticipated LoyaltyOne revenue in the first half of 2021. We are optimistic that the macroeconomic environment will continue to improve, leading to a rebound in the LoyaltyOne segment in the second half of the year, especially in Canadian Air Miles. We believe there's pent-up demand for travel, and as the year goes on, you'll see a robust travel, particularly in Air Miles. Given the strong credit metrics you saw in our monthly performance report this morning, we believe our net loss credit rate will be in the low 5% for the second quarter. We'll provide some guidance in the second half of the year during our earnings release later on during our earnings call after the second quarter ends. We continue to make investments in key areas. Expenses will increase in the second half of 2021 as we continue to optimize the Bread platform, invest in digitalization and analytics, increase marketing, and move forward with the transition of our core processing to Fiserv. The Bread platform investments will position us well for anticipated platform growth in 2022. Again, although you'll see expenses ramp up, we could modify those expenses, ramp those up and down as appropriate. I want to spend a moment on slide six. To avoid any confusion, we are comparing 2021 sales growth to 2019. We feel that's a fair comparison as 2020, with all the COVID-related issues and shutdowns and open ups and shutdowns, really isn't a fair comparison. What you see on this page is 2021 compared to 2019. You can see the continued gradual recovery in credit sales for our Card Services businesses, which aligns with the improvement in the consumer confidence and mobility metrics. The mobility tracker is based on time spent away from the home, estimated by using cell phone location dates. As a result of the increased activity in store, brand sales continue to rebound while online sales remain strong. Millennial shoppers have surpassed their pre-pandemic spending levels with double-digit growth year to date compared to 2019 in our traditional card, private label credit card business, and co-brand channels. We are encouraged by the progress we're seeing in the economy and remain optimistic that these proactive trends will continue. I'd like to spend a couple of minutes on the Bread revenue models. Bread continues to be a key growth driver for us and is an instrumental part of our strategy going forward. We have significant opportunities to drive value across Bread's three business models. First, the direct acquisition model. This model provides us with the highest revenue opportunity since the receivables are on our books and we're not sharing any fees with a third party. We have a well-established relationship with over 130 of our partners that are interested in adding buy now, pay later, and installment loan capabilities as product offering. The Bread sales team continues to add brand partners to align our timing to medium-sized retail and small size retailers. We are in ongoing discussions with our brand partners to allow on timing and staging of the integration into their technology roadmaps over the next year. Our software development kit and Enhanced Digital Suite provides our partners with a simple, quick integration and easy access to seamlessly offer our full suite of products. Most importantly, to get our partners to adapt that software development kit and our Enhanced Digital Suite makes it easy for them when they want to move to our buy now, pay later and installment loan product capabilities. It's a seamless integration. The distribution model provides us with a slightly lower revenue opportunity than the direct acquisition model, since we pay a merchant acquirer fee. The returns are still very attractive. Importantly, this channel provides us with growth opportunities that we wouldn't otherwise have if we were only pursuing the direct acquisition model. We expect some early launches with Fiserv in the third and fourth quarter of this year before scaling in 2022. Lastly, the technology platform gives us a third avenue for growth. While revenues are certainly lower on an absolute level than return, but the returns are attractive. In this model, we don't hold the receivables on our books, but it does provide us with a no credit risk revenue stream. We get fees from the transactions. Bread's capabilities enhance our overall ability to compete in the payment space. Bread's white label, deeply integrated, scalable solution coupled with Alliance Data's ability to provide full spectrum of underwriting, strong customer insights, robust compliance, and low funding costs are key differentiators from other fintech competitors. The combination of our traditional PLCC and co-brand offerings, the Enhanced Digital Suite, our Comenity card and Bread capabilities position us well to win new business as well as retain existing business and brand relationships, which gives us confidence on our long-term growth ambitions. We're excited to drive the business forward while maintaining our focus on providing long-term value to shareholders through sustainable, profitable, and repeatable growth. Jeff, thanks for the time, and I'm happy to answer a few questions. Thanks, Ralph. That was great. Thanks for the presentation. Before we dive in, I want to just give a quick reminder to everyone on the webcast that if you have any questions, you can submit it in the submission box below the video on the website. Ralph, just maybe digging into slides three and four a little bit more on your strategic vision for the company. When we think about everything you've been able to put in place over the past 16 months, there's been a lot of things. You've shored up the balance sheet, you've been hiring people, you bought Bread, you've launched these new partnerships. As we start to look beyond the pandemic here, do you feel like ADS has the entire toolkit in place it needs to succeed? Is there anything else you think you need to add or might be missing? Well, I think you never have the entire toolkit. You always want to look over the horizon and see what's next and make sure you're current. As it stands today, our focus right now is execution. We've launched a lot of things. As you said, we've bought Bread. We're outsourcing our core processing to Fiserv. We've outsourced ancillary activities. We've beefed up data and analytics. We're excited about things that we've launched and where we are, and our focus is maniacally focused on execution. We have to spin to care for this year as well. There's a lot going on. In the near term, do I anticipate another acquisition? Probably not. I anticipate really getting the most value out of the things that we've launched over the last 16 months. If I just kind of think about what's been happening so far, the pandemic isn't quite over yet. It seems like on slide six, you're calling out quite a nice recovery in your credit sales. I know you're looking at it versus 2019, but I think that implies something like a pretty strong 50% increase YoY, if I have that right. When do you think we'll surpass 2019 levels, and how are you thinking about the trajectory beyond that? Are there any pockets of strength you'd call out? Yeah. I think you'll see that pick up in the third and fourth quarter. I think we're seeing people's behaviors change from hoarding to spending, and I think that's going to be important. I think we're going to exit the second quarter pretty good, probably not at 2019 levels, but I think in the third and fourth quarter, you may see us at or above those levels as we move forward. I think you'll see that continued trajectory. I think consumer confidence, and I'll speak for the U.S., is coming back. It's pretty robust, and I think you'll see that translate into sales for us. Ultimately, sales will translate into receivables. I know that you were calling out the kind of return to in-stores driving a lot of this recovery. Are there any trends you're seeing? Are there any types of stores that are driving more of it? Are there any laggards still? I know you called out millennials being a source of strength. Are there just any kind of little things like that you could point out? Yeah. We're seeing it in a lot of the verticals. We're certainly seeing it in retail and soft goods. We're still seeing it in home improvement. We're still seeing people kind of sprucing up their homes, so we're still seeing it there as well. We're starting to see it in pets, in pet care and all those things. Not one vertical is standing out positively and negatively. We're seeing a nice trend across all our verticals. While stores are coming back and we see good acquisition, our digital sales are at a solid 40%, and the pie is getting bigger. As you think about the growth of Bread and the growth of our Fiserv partnership relationship, you'll see that digital sales will continue to grow. I think the entire pie is going to grow, but I think you'll see digital sales grow over time as well. Speaking of loan growth, I mean, this morning you also put out another pretty solid set of data, both on credit and loan growth. Maybe focusing on the loan growth piece. You're also highlighting in slide 5 this kind of inflection you're getting. I think you're one of the few names to actually see a downtick in your payment rate this month. I guess what I'm wondering is there any reason we shouldn't see upside to your loan growth in the second half of this year? I think you're calling for more of a flattish outcome this year. Yeah. We did see a bit of a downtick, but still over last year. Although payment rates have modified a little bit, they're still greater than they were last year. I anticipate late in the second half of the year, you'll start seeing some loan growth. We've never been faced with this type of economy. There's trillions of dollars of recovery in the economy between stimulus, unemployment benefits, suspension of student loans. That's all rolling off. People are getting out, spending, and you may see that payment rate moderate or flatten as we move forward. If that does happen in the second half of the year, late second half of the year, you'll start to see loan growth. Just as we think about the longer term, I mean, at your recent Investor Day, you were putting out some pretty robust growth targets. I think you're calling for this kind of high single-digit growth rate with maybe some upside to low double digit in 2022 and 2023. One of the biggest questions I get is: Is this really achievable? I think it's been a number of years since ADS has been able to consistently deliver on this kind of growth. What gives you such confidence to get there? I think a couple of things. If you think about our business, I'll call it our traditional core business, right? The PLCC and the co-brand. We're now able to go deeper with those businesses because we have new products. If you just think of that business alone, that business to me, with our new products and data and analytics and really focusing on growth will give us single-digit growth, mid to high single-digit growth. The acquisition of Bread and the ramping up of Fiserv and going direct to consumer, aside from our core businesses, that's where the incremental growth will come from in the high single digits, low double-digit growth. It's a combination. There's not a home run. There's a lot of doubles and singles and maybe a triple in there. It's a combination of deeper penetration and new frontiers for us, and that's why I have confidence in the high single digit, low double-digit growth over the course of the next few years. All those kind of upside things you're talking about are what take you to the $20 billion number you're talking about for 2023, right? Yeah. It's exactly right. It's all included. That $20 billion of average receivables in 2023 is a combination of all the above. How does Bread specifically factor into those growth plans? They're a big contributor to those growth plans, because if you think about it, they impact our current core business by offering our current core business buy now, pay later. They impact our direct to consumer, when we assign merchants and through the direct model we talked about. They impact us in a distribution model from a receivables perspective because of the ramp up with Fiserv and the scale we get there. From a revenue perspective, they impact us in the technology platform for the recurring transaction fees. That to me is like almost a network fee. It's a low-risk revenue stream. We're not breaking them out specifically, but they are within our Card Services revenue group, and they play a significant role. When you talk about the growth there, I think you've kind of talked about this more than doubling this year. Do you have any high-level sense of where that could go beyond this year? Yeah. I think they'll more than double this year, and we've talked about approaching $10 billion. I think that's 2023, that's where we'll see it going. It's all in how fast we can ramp up and how fast we can scale. To take a step back, we've had Bread for less than just about six months. The integration is well on target, and we were able to announce two or three big things. We're excited about that. It's a matter of how fast we can scale and how fast we can scale with some partners. That's where I think in 2023, you'll see us nearing that number. Got you. Just that $10 billion GMV figure that you mentioned by 2023. That's one of the areas I get a lot of questions on is how can you get to $10 billion when I think some of the other incumbents out in buy now, pay later are just starting to kind of hit those run rate numbers. What do you think about your model lets you get there similar pace as them? A couple of things. We're a full service financial institution, right? We've got 130 partners that we can tap and go deeper in penetration, right? As I said, the most important thing is that software development kit and the Enhanced Digital Suite, getting that installed with our partners so they can switch on our buy now, pay later installment loan. If you think about what we do as opposed to the competitors, we have relationships with these partners. We're not transactional. We have a relationship. It's a repeat relationship. We have all the data and information. We could drive a transaction and create a transaction instead of just get a transaction. I think that makes us different. If you think about pricing, we can price on a relationship basis. We're not going to deep discount, but we have a relationship, and we can do things on a relationship basis. That gives me a lot of confidence that we can move swifter than others. Right now, buy now, pay later is gaining traction. People are embracing it more so. We've been talking about it for a while. People are starting to embrace it now. I think we're well on our way to gaining traction. The relationship with Fiserv helps us. We can bring data and analytics to that relationship and there's scale there, and that's important to us as well. Listen, I'm bullish on buy now, pay later installment loan. I'm bullish because we bought that in a pandemic. We acquired Bread in a pandemic to close product gaps. We were very much focused from day one when I got here, that we were going to close this product gap. We did it, I believe, in the quickest way we could, which is buying. We didn't build, we didn't partner, we bought. Now we're driving that across our entire enterprise. No, it was certainly a very timely acquisition. I guess one of the questions that we also get on that is, what if you have a retailer that already offers buy now, pay later? What's the strategy to go after that? Is it more of a side-by-side? Do you want to get exclusivity or are you going to undercut them or are you going to try to do this relationship pricing? What's your goal to win there? Strategy to win? Yeah. Listen, exclusivity is important, but not essential, the way I think about it. I'd love to have exclusivity, but these buy now, pay later deals with the fintechs, they're short-term. Yeah. They're a year, 24 months at tops. They're not exclusive. We can offer a suite of products to the partner or to the merchant. We're not a one-trick pony anymore. We have a suite of products that can address a number of lending needs that customers might have. I talked about it earlier. We have a slew of data and information on our partners' customers, because we are their partners. It's almost a closed loop if you think about a closed loop of information. We know their buying habits. We know when we can provide a marketing opportunity for buy now, pay later, or installment loan, or something else. I think that's a positive which our competitors don't have. It comes down to the relationship that we have with them. Most competitors, they want you to download their app, and that's what they want you to use, agnostic of the merchant. We're focused on driving value for the merchant as well as us. That's the important part to me. We're going to grow the pie for both of us. We're not looking to dismediate the merchant. We're looking to enhance the merchant's opportunity. I think that will catch on. I think they will see that. I think we'll show them that value add that we have, and you'll see things certainly help to move in our direction. As you add more value to these retailers, perhaps you're able to maintain that kind of market rate that's out there right now in buy now, pay later. I think there was a very big competitor out there that recently said the other day at a conference that he expects to see significant pressure on discount rates there. I was just wondering, what do you think of that comment, and how do you think ADS will evolve if that happens down the line? Yeah. I've not seen any pressure yet. It may be out there, but I haven't seen any pressure yet. I think we'll be able to absorb that because, again, we're not pricing a transaction, we're pricing a relationship. I think we'll be able to adjust accordingly, still be profitable, and still be attractive to our partner because we have other levers that we work with them on. You're looking at a rate card almost, as opposed to one transaction fee that they have to get. That's the way I view it. Relationship pricing there's always a benefit to that as you work with partners. Is that more just you can when you say the relationship pricing, you're talking about how you can pivot to different products, or are you just charging for the entire sale that goes to them, regardless of what platform? Can you talk a little bit more about that? Sure. We have different revenue streams with the partners that we can adjust accordingly. Right? There may be a revenue stream where private label, we price it at a rate that gives us the opportunity to potentially reduce the rate on a buy now, pay later transaction. Because as a whole, one and one is going to equal three, because we have multiple relationships with them from a revenue perspective and a product perspective. We could price accordingly for profitability, not just price a transaction for profitability. You just launched Apt2B, I think, and you probably have a couple more on the way. Can you give us a quick update on how the rollout's going and how many should we expect the next quarter? Maybe how to think about the cadence to come? Yeah. I think you'll see a number of launches in the second quarter. You'll see a few more in the third quarter. I think you'll see that robust move going into 2022. I think that's what you'll see. As I said, we're working with them now to really focus on that software development kit and Enhanced Digital Suite that makes the switch to buy now, pay later and installment loan seamless and quick. As long as we're working with our partners to install and move forward there, that's kind of the heavy rock right now, and the launches after that will be seamless and continuous. That's the way we view it. Do you have any expectation that maybe one of your larger ones will be coming through anytime soon? Yeah, we're in negotiations with the larger ones, but as you would imagine, like any large company, to get into their tech stack and their tech prioritization, we're working through that now. We have a big launch coming up with Fiserv. We're focused on that, which is distinctly different from this year. All our partners have different types of launches out there. We're working to prioritize and get into their tech stack. We're working with our larger partners for execution on that. I actually had a question come through. I know we already discussed the merchant fees, but do you have a personal view of where you see the buy now, pay later merchant fees going? I think the market's going to set the price like anything else. What I do know is that our cost to serve and our end-to-end servicing will enable us to be very competitive wherever that price is set. You think about us as opposed to the fintechs that are out there. We underwrite a bit better because we've been in the business for a very long time. We have good credit and collections. We have good servicing. We've established that over a long period of time, right? We're not building that, we're enhancing that. Taking this buy now, pay later installment loan functionality and using all the tools we've traditionally used over the years to drive better profitability. That's why wherever the price settles, I think we'll be very competitive. Let's switch gears a little bit and kind of focus on some other important news happening with the company. I think we've spent a lot of time on Bread already. You recently announced a spin-off. You just mentioned earlier in our conversation that you're trying to achieve peer levels of tangible common equity. I think you kind of highlighted that in your investor day as being a high single digit, low double-digit range. Yep. I think when I look at your peers, though, they tend to kind of shake out normalized in the high single digit. Why would you get to the low double digit? Is that because you want to hold more capital for potential loan growth? Help us understand that. Yeah. Listen, I gave a range, but the low single digits would be a peer level would be very attractive for me. That's where I'd like to be. If you get to the high single digits, that's great. It means you have excess capital, you can acquire a bit more. The low single digits is really my comfort zone. You talk about return to shareholders. One investor question that actually came in was, what will the EBITDA and debt split look like between Card Services LoyaltyOne post-spin? When can we expect the spin to occur? I mean, to the extent you can answer. Yeah. You can expect a spin to occur in the fourth quarter. That's what we're working towards. We'll have more information on the split spin, but it'll be fourth quarter that the spin should occur. Okay. We're on schedule. Okay. You mentioned earlier in the conversation, one follow-up, that LoyaltyOne perhaps a little bit lagging in the first half of this year. Does that impact any of the financials or plans that we should expect with the spin? I know that you've talked about the Q2 financials as being kind of a driver of what you'll do with the debt and so forth. Is there maybe a delay there, or is that all on track still? No, it's on track. I think it's all about timing. Let me break LoyaltyOne into two businesses that we have. One is BrandLoyalty, which is our business in the Netherlands. They're on track. We've seen good growth in the second quarter. Air Miles, our business in Canada, is a bit behind, and they were not behind because of any structural issues. They're behind simply because of the pandemic. Similar to when the U.S. opened up, we saw a spike in sales. We're anticipating seeing a spike in travel in the third and fourth quarter. I would say it's not a miss, it's a delay. We haven't really spent a lot of time on credit yet. That's probably a first for ADS, I think. Given the robustness of what we're seeing come through, I guess I was just curious on a couple things. Are you still comfortable with this kind of sub 6% through the cycle loss rate? Is the strength you're seeing changing that at all? Maybe what kind of trajectory you're looking for through 2022? The other thing would be, you recently highlighted 40% of your book is now below 660, I think. Do you expect that to change, or have you changed your underwriting versus pre-pandemic in other ways? Yeah. I think one of the things that I found here that was very a pleasant surprise, although we have a terrific team around credit and collections. Very sophisticated. I am really pleased. I have worked at American Express, I have worked at Citi, so I have come from companies that really knew how to manage credit, and I was really pleasantly surprised to see how we manage credit here using VantageScore. I think 6% through the cycle is adequate. We will be in the low fives in the second quarter. We will give more guidance in our earnings release later on as we close the second quarter. I see us at below 6% through the cycle. I think that is a good number. Our recession readiness plan went into place. We were very prudent about how we would manage our risk. We're not changing any of our risk policies, although we are opening up the spigot a little bit in Bread because that's where it was a little tighter. You'll see us probably underwrite a bit more in Bread, which is to our advantage. I'm very pleased at the end-to-end process we have here. I'm comfortable with the 6%. Payment rates hopefully they'll moderate as we move forward, I feel good about that through the cycle. Okay, great. I think we're just about out of time. I want to thank you, Ralph, for joining us today. It was a pleasure. Hopefully, we'll get to do this in person next year. Thanks everyone for joining. I'm looking forward to doing it in person. I really am. Yeah. It'll be a pleasant change. Thank you. Thanks everyone. Thank you for your time, and thank you everyone for joining. I appreciate it. Thank you.