Form 8-K ALLIANCE DATA SYSTEMS For: Jan 27

January 27, 2022 7:07 AM EST

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Exhibit 99.1

 Brand Partner Highlights “We were very pleased with the pace and success of our business development activities, which in the fourth quarter attracted several new brand partners, including the NFL, B&H Photo, Michaels, and TBC Corporation – which includes brands like National Tire & Battery (NTB), Big O Tires, and Midas. Alliance Data’s omnichannel touchpoints and comprehensive product suite will position these brand partners to drive incremental sales growth and customer loyalty, while also providing expanded payment choices for their customers,” said Ralph Andretta, president and chief executive officer of Alliance Data.  1  Alliance Data Systems Corporation | January 27, 2022  Alliance Data Reports Full Year and Fourth Quarter 2021 Results     CEO Commentary  “2021 represented a transformational year, resulting in a streamlined and stronger Alliance Data. We successfully executed on our strategy to provide an enhanced suite of product offerings, expanded our fintech payments platform, attracted top-tier talent, advanced our core technology and digital capabilities, and bolstered our financial position by divesting our last remaining non-core business.“Our fourth quarter results demonstrate Alliance Data’s ability to drive growth and improved core earnings. Year-end receivables increased 4% from 2020 levels, and pre-tax pre-provision earnings increased both year-over-year and sequentially in the fourth quarter. At the same time, we continued to strategically invest in our business to capture longer-term efficiencies and growth opportunities, positioning the company to achieve our target of $20 billion in average receivables for the full year of 2023.“Credit sales remained strong in the fourth quarter reflecting improved holiday shopping and consumer activity. In-store credit transactions increased year-over-year as consumers continued to shop across all channels. Millennial and Gen. Z spending and transaction activity exceeded pre-pandemic levels in the quarter.“As expected, our net loss and delinquency rates moved gradually higher in the fourth quarter in tandem with the wind-down of COVID-related federal stimulus programs. While we project these metrics to increase in 2022, they are expected to remain below historic levels.”  - Ralph Andretta, president and chief executive officer  COLUMBUS, Ohio, January 27, 2022 – Alliance Data Systems Corporation (NYSE: ADS), a leading provider of tech-forward payment and lending solutions, today announced results for the full year and the fourth quarter ended December 31, 2021.Fourth quarter net income was $17 million, or $0.34 per diluted share, inclusive of one-time costs related to the spinoff of the LoyaltyOne segment as Loyalty Ventures Inc. (NASDAQ: LYLT).  Financial  Fourth Quarter 2021    Full Year 2021    Summary   Total Company  Continuing Operations(a)   Total Company  Continuing Operations(a)  Net Income ($ millions)  $17  $61  $801  $797  Earnings per Diluted Share  $0.34  $1.21  $16.02  $15.95  Reflective of the spinoff of Loyalty Ventures Inc.Fourth quarter credit sales increased 15% year-over-year.Credit performance held strong with a net loss rate of 4.4% in 4Q21.As a result of the spinoff of Loyalty Ventures Inc., capital and leverage ratios improved as $750 million of debt was paid down and goodwill was reduced by $700 million.         “Also in the quarter, we more than doubled the number of new direct merchant partner signings on Bread’s versatile fintech payments platform compared to third quarter levels. More broadly, our business development pipeline remains robust, including soon-to-be announced new partnerships, supporting our confidence for continued growth in 2022 and beyond,” Andretta noted.  “Additionally, we are excited to extend our relationships with Ulta Beauty, Toyota, top Millennial and Gen Z brands, as well as Lexus. The long-term renewal with Ulta Beauty,   one of our largest and faster-growing brand partners, reinforced our industry-leading position in the beauty vertical, while the Toyota and Lexus renewal extends the growth of diversified verticals. With these renewals, we have secured the vast majority of our brand partner relationships through 2023. 
 

 “We are well-positioned to build on our momentum in 2022. While we continue to monitor uncertainties in the economy, we are confident in the responsible execution of our strategy and the achievement of our financial targets. Our disciplined risk management approach focused on risk-reward tradeoff will enable us to maintain profitable growth in the periods ahead; we are committed to ensuring our strategic investments deliver long-term shareholder value.”   CFO Commentary  - Perry Beberman, executive vice president and chief financial officer    2022 Full Year CFO OutlookMacroeconomic Assumptions: “We expect a return to more normalized economic activity and consumer behavior and remain vigilant in monitoring COVID conditions and the impact on consumers and our brand partners. Our outlook assumes a moderation in the consumer payment rate throughout 2022. Payment rate variability is a key determinant for the high- and low-ends of our forecasted ranges. Four Federal Reserve rate increases are also included in our 2022 forecast and our models indicate that these rate hikes in 2022 would result in a nominal benefit to total net interest income.Average Receivables Growth: “Based on our new business expectations, visibility into our pipeline (including the BJ’s Wholesale Club non-renewal), and the current economic outlook, we expect full year 2022 average receivables growth in the high-single- to low-double-digit range relative to 2021. This expected growth aligns with the achievement of our targeted full year average receivables of $20 billion in 2023.Total Revenue Growth: “Total revenue growth for 2022 is anticipated to be closely aligned with average receivables growth with net interest margin expected to remain steady on a full year basis as compared to 2021.  Total Expenses Growth: “As a result of continued investment in technology modernization, digital advancement, marketing, and product innovation, along with strong portfolio growth, we anticipate total expenses to increase in 2022, while ensuring we deliver modest positive operating leverage for the full year. We will continue to invest prudently to position the Company for future growth and efficiencies, with the expectation of maintaining positive operating leverage. We will manage the pace and timing of our investments to align with our revenue growth outlook, including the planned incremental investment of more than $125 million in digital and product innovation, marketing, and technology enhancements during the year. Net Loss Rate: “We expect a net loss rate in the low-to-mid 5% range for 2022 as credit metrics begin to normalize from historically low rates due to federal stimulus and federal assistance programs largely expiring. We remain confident in our long-term guidance of a through-the-cycle net loss rate below our historical average of 6%.”    2  Alliance Data Systems Corporation | January 27, 2022 
 

     +15%  +11%  +52%  +36%  -21%  -0.5%  -1.6%    Key Operating and Financial Metrics(a)       Credit Metrics Diluted EPS  Continuing Operations(a)  Quarter Ended        Year Ended        December 31,        December 31,      ($ in millions, except per share amounts)  2021  2020  Change    2021  2020  Change  Total net interest and non-interest income (“Revenue”)  $855   $769   11%    $3,272   $3,298   (1)%   Net principal losses  $176   $235   (25)%    $720   $1,083   (34)%   Reserve build (release)  $187   ($82)  nm    ($176)  $183   nm  Provision for credit losses  $363   $153   138%    $544   $1,266   (57)%  Total non-interest expenses  $427   $487   (12)%    $1,684   $1,731   (3)%  Income from continuing operations before income taxes  $65   $129   (50)%    $1,044   $301   247%  Income from continuing operations  $61   $74   (18)%    $797   $208   283%  Income from continuing operations per diluted share  $1.21   $1.54   (21)%    $15.95   $4.35   267%  Weighted average shares outstanding – diluted  50.0  48.4      50.0  47.9    **********************************                Pre-tax pre-provision earnings (“PPNR”)*  $428   $282   52%    $1,588   $1,567   1%  (a) Reflective of the spinoff of Loyalty Ventures Inc. for all periods presented.nm – not meaningful* Pre-tax pre-provision earnings is a non-GAAP financial measure.  3  Alliance Data Systems Corporation | January 27, 2022 
 

 4  Alliance Data Systems Corporation | January 27, 2022  Fourth Quarter 2021 Compared to Fourth Quarter 2020 – Continuing OperationsCredit sales increased 15% to $8.8 billion as consumer spending continues to recover. Average and end-of-period receivables increased 2% and 4% to $16.1 and $17.4 billion, respectively, driven by strong credit sales and the recovering economy. Revenue increased 11%, or $86 million, resulting from higher average receivables balances, improved loan yields, and continued improvement in cost of funds. Total non-interest expenses decreased 12%, or $60 million, as the prior year included $25 million in depreciation and amortization costs and $23 million in other expenses related to real estate optimization activities, higher marketing costs related to card program enhancements, and settlement and other remediation costs. These prior year costs were partially offset in the current year by employee compensation and benefit costs which increased 15%, or $24 million, primarily driven by continued digital and technology modernization-related hiring, as well as higher volume-related staffing levels. Pre-tax pre-provision earnings, a non-GAAP measure, improved by $146 million, or 52%, reflecting profitable receivables growth, improved funding costs, and lower expenses. Income from continuing operations decreased $13 million, as the PPNR improvement described above was offset by a $187 million net reserve build in provision for credit losses resulting from year-end receivables growth. Delinquency rate of 3.9% improved 50 basis points from the prior year.  Net loss rate was 4.4%, an improvement of 160 basis points from the prior year.  ContactsInvestor Relations: Brian Vereb ([email protected]), 614-528-4516 Media Relations: Shelley Whiddon ([email protected]), 214-494-3811 Rachel Stultz ([email protected]), 614-729-4890 
 

 5  Alliance Data Systems Corporation | January 27, 2022  Forward-Looking StatementsThis 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 our ability to realize the intended benefits of the spinoff of the LoyaltyOne® segment, future dividend declarations, and future economic conditions, including, but not limited to, market conditions and COVID-19 impacts related to relief measures for impacted borrowers and depositors, labor shortages due to quarantine, and reduction in demand from clients.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.Non-GAAP Financial MeasuresWe prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, certain information included within this release, including the supplemental schedules and related investor presentation, constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies. In particular, Pre-tax pre-provision earnings is calculated by increasing Income from continuing operations before income taxes by Provision for credit losses. Pre-tax pre-provision earnings less gain on portfolio sale is calculated by decreasing Pre-tax pre-provision earnings by gains recognized on loan portfolio sales. We believe the use of these non-GAAP financial measures provides additional clarity in understanding our results of operations and trends. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, please see the financial tables and information that follows.Conference Call / Webcast InformationAlliance Data will host a conference call on Thursday, January 27, 2022 at 8:30 a.m. (Eastern Time) to discuss the Company’s full year and fourth quarter 2021 results. The conference call will be available via the Internet at www.alliancedata.com. There will be several slides accompanying the webcast. Please go to the website at least 15 minutes prior to the call to register, download and install any necessary software. The recorded webcast will also be available on the Company’s website.If you are unable to participate in the conference call, a replay will be available. To access the replay, please dial (866) 813-9403 or (929) 458-6194 and enter “252370”. The replay will be available at approximately 11:59 a.m. (Eastern Time) on Thursday, January 27, 2022. 
 

 6  Alliance Data Systems Corporation | January 27, 2022  About Alliance DataAlliance Data® (NYSE: ADS) is a leading provider of tech-forward payment and lending solutions, serving customers and consumer-based industries in North America. Through omnichannel touch points and a comprehensive product suite that includes credit products and Bread® digital payment solutions, Alliance Data helps its partners drive loyalty and growth, while giving customers greater payment choices. Through its Comenity-branded financial services, it also offers credit and savings products to consumers. Headquartered in Columbus, Ohio, Alliance Data is an S&P MidCap 400 company that employs approximately 6,000 associates worldwide. In November 2021, Alliance Data completed the spinoff of its LoyaltyOne segment, which included the Canadian AIR MILES® Reward Program, and Netherlands-based BrandLoyalty. The company is now known as Loyalty Ventures Inc. (Nasdaq: LYLT).More information about Alliance Data can be found at AllianceData.com. Follow Alliance Data on Twitter, Facebook, LinkedIn, Instagram and YouTube. 
 

 7  Alliance Data Systems Corporation | January 27, 2022         Three Months Ended December 31,                  Year EndedDecember 31,                         2021          2020          2021          2020          Interest income:                                                     Interest and fees on loans     $  1,015        $  948        $  3,861        $  3,931        Interest on cash and investment securities        2           2           7           21        Total interest income        1,017           950           3,868           3,952        Interest expense:                                                     Interest on deposits        37           50           167           238        Interest on borrowings        47           62           216           261        Total interest expense        84           112           383           499        Net interest income        933           838           3,485           3,453        Non-interest income:                                                     Interchange revenue, net of retailer share arrangements        (119  )        (107  )        (369  )        (332  )     Other        41           38           156           177        Total non-interest income        (78  )        (69  )        (213  )        (155  )     Total net interest and non-interest income        855           769           3,272           3,298        Provision for credit losses        363           153           544           1,266        Total net interest and non-interest income, after provision for credit losses        492            616           2,728            2,032        Non-interest expenses:                                                     Employee compensation and benefits        182           158           671           609        Card and processing expenses        81           84           323           396        Information processing and communication        55           48           216           191        Marketing expense        47           57           160           143        Depreciation and amortization        22           42           92           106        Other        40           98           222           286        Total non-interest expenses        427           487           1,684           1,731        Income from continuing operations before income taxes        65           129           1,044           301        Provision for income taxes        4           55           247           93        Income from continuing operations        61           74           797           208        (Loss) income from discontinued operations, net of taxes         (44  )        (62  )        4           6        Net income     $  17        $  12        $  801        $  214                                                              Basic earnings per share:                                                     Income from continuing operations     $  1.22        $  1.54        $  16.02        $  4.36        (Loss) income from discontinued operations        (0.88  )        (1.29  )        0.07           0.11        Net income per share     $  0.34        $  0.25        $  16.09        $  4.47                                                              Diluted earnings per share:                                                     Income from continuing operations     $  1.21        $  1.54        $  15.95        $  4.35        (Loss) income from discontinued operations        (0.87  )        (1.29  )        0.07           0.11        Net income per diluted share     $  0.34        $  0.25        $  16.02        $  4.46                                                              Weighted average shares:                                                     Basic        49.8           48.3           49.7           47.8        Diluted        50.0           48.4           50.0           47.9                                                              Pre-tax pre-provision earnings:                                                     Income from continuing operations before income taxes     $  65        $  129        $  1,044        $  301        Provision for credit losses        363           153           544           1,266        Pre-tax pre-provision earnings*     $  428        $  282        $  1,588        $  1,567        ALLIANCE DATA SYSTEMS CORPORATIONUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In millions, except per share amounts)  * Pre-tax pre-provision earnings is a non-GAAP financial measure. 
 

 8  Alliance Data Systems Corporation | January 27, 2022        December 31, 2021       December 31, 2020       Assets                       Cash and cash equivalents      $  3,046     $  2,796     Credit card and other loans:                        Credit card and other loans         17,399        16,784     Allowance for credit losses         (1,832  )     (2,008  )  Credit card and other loans, net         15,567        14,776     Property and equipment, net        215        213     Intangible assets, net         53        77     Goodwill         634        634     Other assets         2,230        1,588     Assets of discontinued operations        1        2,463     Total assets      $  21,746     $  22,547                             Liabilities and Stockholders’ Equity                       Deposits      $  11,027     $  9,793     Non-recourse borrowings of consolidated securitization entities        5,453        5,710     Long-term and other debt         1,986        2,806     Other liabilities         1,190        1,359     Liabilities of discontinued operations        4        1,357     Total liabilities         19,660        21,025     Stockholders’ equity         2,086        1,522     Total liabilities and stockholders’ equity      $  21,746     $  22,547                             Shares of common stock outstanding        49.8        49.7     ALLIANCE DATA SYSTEMS CORPORATIONUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(In millions) 
 

 9  Alliance Data Systems Corporation | January 27, 2022               Year EndedDecember 31,                              2021            2020                                      Cash Flows from Operating Activities:                           Net income           $  801          $  214     Adjustments to reconcile net income to net cash provided by operating activities:                           Depreciation and amortization              123             184     Deferred income taxes              (15)             (223)     Provision for credit losses              544             1,266     Non-cash stock compensation              29             21     Amortization of deferred financing costs              31             36     Asset impairment charges              —             64     Change in operating assets and liabilities, net of acquisitions and dispositions              (41)             283     Other              71             38     Net cash provided by operating activities              1,543             1,883                                 Cash Flows from Investing Activities:                           Change in redemption settlement assets              (113)             (41)     Change in credit card and loan receivables              (1,805)             1,784     Payments for acquired business, net of cash and restricted cash              (75)             (267)     Purchase of credit card and loan portfolios              (110)             —     Sale of credit card portfolio              512             289     Capital expenditures              (84)             (54)     Other              (16)             63     Net cash (used in) provided by investing activities              (1,691)             1,774                                 Cash Flows from Financing Activities:                           Borrowings under debt agreements              38             1,276     Repayments of borrowings              (864)             (1,320)     Net increase (decrease) in deposits              1,228             (2,370)     Non-recourse borrowings of consolidated securitization entities              4,278             2,419     Repayments/maturities of non-recourse borrowings of consolidated securitization entities              (4,538)             (4,096)     Debt proceeds from spinoff of Loyalty Ventures Inc.              652             —     Transfers to Loyalty Ventures Inc. related to spinoff              (127)             —     Payment of deferred financing costs              (13)             (19)     Dividends paid              (42)             (61)     Other              (4)             4     Net cash provided by (used in) financing activities              608             (4,167)                                 Effect of exchange rate changes on cash, cash equivalents and restricted cash              —             15     Change in cash, cash equivalents and restricted cash              460             (495)     Cash, cash equivalents and restricted cash at beginning of period              3,463             3,958     Cash, cash equivalents and restricted cash at end of period           $  3,923          $  3,463                                          Note: The unaudited Condensed Consolidated Statements of Cash Flows are presented reflecting the combined cash flows from continuing and discontinued operations.  ALLIANCE DATA SYSTEMS CORPORATIONUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions) 
 

 10  Alliance Data Systems Corporation | January 27, 2022  ALLIANCE DATA SYSTEMS CORPORATIONUNAUDITED SUMMARY FINANCIAL HIGHLIGHTS(In millions, except per share amounts and percentages)         Three Months Ended December 31,                                     Year EndedDecember 31,                         2021             2020             Change           2021       2020       Change                                                                      Credit sales     $   8,778            $   7,657           15%           $  29,603     $  24,707     20%     Average receivables     $   16,086            $   15,759           2%           $  15,656     $  16,367     (4)%     End-of-period receivables     $  17,399            $  16,784           4%           $  17,399     $  16,784     4%     End-of-period direct-to-consumer deposits     $   3,180            $   1,700           87%           $  3,180     $  1,700     87%                                                                            Return on average assets(1)        1.1%              1.4%          (0.3)%              3.6%        0.9%     2.7%     Return on average equity(2)        11.1%              21.3%          (10.2)%              40.7%        16.7%     24.0%                                                                            Net interest margin(3)        18.8%              17.8%          1.0%              18.2%        16.8%     1.4%     Loan yield(4)        25.2%              24.1%          1.1%              24.7%        24.0%     0.7%     Risk-adjusted loan yield(5)        20.9%              18.1%          2.8%              20.1%        17.4%     2.7%                                                                            Efficiency ratio(6)        50.0%              63.4%          (13.4)%              51.5%        52.5%     (1.0)%                                                                            Tangible book value per common share(7)     $  28.09           $  16.34          71.9%           $  28.09     $  16.34     71.9%     Tangible common equity / tangible assets ratio (TCE/TA) (8)        6.6%              3.7%          2.9%              6.6%        3.7%     2.9%     Cash dividend per common share     $  0.21           $  0.21          —%           $  0.84     $  1.26     (33.3)%                                                                            Net loss rate        4.4%              6.0%          (1.6)%              4.6%        6.6%     (2.0)%     Delinquency rate        3.9%              4.4%          (0.5)%              3.9%        4.4%     (0.5)%     Reserve rate        10.5%              12.0%          (1.5)%              10.5%        12.0%     (1.5)%     Return on average assets represents Income from continuing operations divided by average Total assets.Return on average equity represents Income from continuing operations divided by average Total stockholders’ equity.Net interest margin represents Net interest income divided by average Total interest-earning assets.Loan yield represents Interest and fees on loans divided by Average receivables.Risk-adjusted loan yield represents Loan yield less Net loss rate.Efficiency ratio represents Total non-interest expenses divided by Total net interest and non-interest income.Tangible book value per common share represents Total stockholders’ equity less Intangible assets, net, and Goodwill divided by shares outstanding.Tangible common equity represents Total stockholders’ equity less Intangible assets, net, and Goodwill. Tangible assets represents Total assets less Intangible assets, net, and Goodwill. 

 
 Alliance DataFourth Quarter & Full Year 2021 Results  Perry BebermanEVP & CFO  January 27, 2022  Ralph AndrettaPresident & CEO    © 2022 ADS Alliance Data Systems, Inc.  Exhibit 99.2 
 

 Forward-Looking Statements    2  © 2022 ADS Alliance Data Systems, Inc.  Non-GAAP Financial Measures  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 our ability to realize the intended benefits of the spinoff of the LoyaltyOne® segment, future dividend declarations, and future economic conditions, including, but not limited to, market conditions and COVID-19 impacts related to relief measures for impacted borrowers and depositors, labor shortages due to quarantine and reduction in demand from clients.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.  We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, certain information included within this presentation, constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies. In particular, Pre-tax pre-provision earnings is calculated by increasing Income from continuing operations before income taxes by Provision for credit losses. Pre-tax pre-provision earnings less gain on portfolio sale is calculated by decreasing Pre-tax pre-provision earnings by gains recognized on loan portfolio sales. We believe the use of these non-GAAP financial measures provides additional clarity in understanding our results of operations and trends. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, please see the financial tables and information that follows. 
 

 Our Business Transformation    3  © 2022 ADS Alliance Data Systems, Inc.  Leading provider of tech-forward payment and lending solutions    Expanding our Product Suite & Developing Strategic Relationships  Improving our Capital Ratios and Reducing our Leverage  Enhancing our Core Technology & Advancing Digital Capabilities      Increasing Prioritization of ESG    Simplifying our Business Model   
 

 Credit Sales UpdateCredit sales held strong in the fourth quarter, up 15% year-over-yearHoliday sales were strong with beauty and jewelry each up 30% from 4Q20In-store credit transactions increased year-over-year   Business Development and Product UpdateLeveraged strong pipeline & robust business development & renewal activitiesFurther diversified mix of portfolios and productsContinued investment in digital capabilities to scale for growthExpanded growth opportunities with strategic platform business relationships   Key Highlights  Financial Targets Performance UpdateExceeded 2021 financial guidanceDrove stronger than expected receivables growthPositive credit performance with full year net loss rate near historical lows, reflective of disciplined risk management & environment  4  © 2022 ADS Alliance Data Systems, Inc. 
 

       Brand Partner Highlights  Select New Brand Partners  Brand Partner Renewals  Select New Bread Direct Acquisition Partners  TBC Corporation including brands like:    5  © 2022 ADS Alliance Data Systems, Inc. 
 

 Financial Results  ($ in millions, except per share)  4Q21  4Q20    % Change      FY21  FY20    % Change    Income from continuing operations, net of taxes  $61  $74    (18)  %    $797  $208    283  %  (Loss) income from discontinued operations, net of taxes  (44)  (62)    (30)      4  6    (38)    Net income  $17  $12    42  %    $801  $214    275  %  ***********************************************************************************************************************************************************                        Net income per diluted share from continuing operations  $1.21  $1.54    (21)  %    $15.95  $4.35    267  %  Net (loss) income per diluted share from discontinued operations  (0.87)  (1.29)    (33)      0.07  0.11    (36)    Net income per diluted share  $0.34  $0.25    36  %    $16.02  $4.46    259  %                          Weighted average shares outstanding – diluted (in millions)  50.0  48.4          50.0  47.9          6  © 2022 ADS Alliance Data Systems, Inc. 
 

   Fourth Quarter 2021 Financial HighlightsContinuing Operations  Credit sales of $8.8 billion were up 15% year-over-yearFourth quarter average receivables of $16.1 billion were up 2% year-over-year Revenue increased 11% year-over-year, while total non-interest expenses declined 12%Income from continuing operations of $61 million was down 18% year-over-year, primarily as a result of higher Provision for credit losses due to increased year-end receivablesCredit metrics remained strong with a delinquency rate of 3.9% and a net loss rate of 4.4% for the quarter  $855MM  Revenue  $61MM  Income from Continuing Operations  $1.21  Diluted EPSfrom Continuing Operations    7  © 2022 ADS Alliance Data Systems, Inc. 
 

   Full Year 2021 Financial HighlightsContinuing Operations  Credit sales of $29.6 billion were up 20% year-over-yearFull year average receivables of $15.7 billion were down 4% year-over-year, with end-of-period receivables up 4%Revenue was nearly flat year-over-year, while total non-interest expenses declined 3%Income from continuing operations of $797 million was up 283% year-over-year, primarily as a result of lower Provision for credit losses reflecting a lower reserve rate at year-end 2021Credit metrics remained strong with a delinquency rate of 3.9% and a net loss rate of 4.6% for the year  $3.3BN  Revenue  $797MM  Income from Continuing Operations  $15.95  Diluted EPSfrom Continuing Operations    8  © 2022 ADS Alliance Data Systems, Inc. 
 

 Financial Results – Continuing Operations  ($ in millions, except per share)  4Q21  4Q20    % Change      FY21  FY20    % Change     Total interest income  $1,017  $950    7  %    $3,868  $3,952    (2)  %   Total interest expense  84  112    (24)      383  499    (23)    Net interest income  933  838    11      3,485  3,453    1                             Total non-interest income  (78)  (69)    12      (213)  (155)    38                            Revenue  855  769    11      3,272  3,298    (1)                             Net principal losses  176  235    (25)      720  1,083     (34)     Reserve build (release)  187  (82)    nm      (176)  183     nm     Provision for credit losses  363  153    138      544  1,266    (57)                             Total non-interest expenses  427  487    (12)      1,684  1,731    (3)                            Income before income taxes  65  129    (50)      1,044  301    247                             Provision for income taxes  4  55    (93)      247  93    168                            Net income  $61  $74    (18)  %    $797  $208    283  %                           Net income per diluted share  $1.21  $1.54    (21)  %    $15.95  $4.35    267  %   Weighted average shares outstanding – diluted  50.0  48.4    3  %    50.0  47.9    4  %  ********************************************************************************************************************************************                        Pre-tax pre-provision earnings (“PPNR”)*  $428  $282    52  %    $1,588  $1,567    1  %  $ in millions  $ in billions  +52%  +2%    * Pre-tax pre-provision earnings and Pre-tax pre-provision earnings less gain on portfolio sales are non-GAAP financial measures.  nm – not meaningful  9  © 2022 ADS Alliance Data Systems, Inc. 
 

 Net Interest Margin        Average interest-earning assets($ in billions)  Average interest bearing-liabilities ($ in billions)      10  © 2022 ADS Alliance Data Systems, Inc. 
 

 Credit Quality and Allowance  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%  * Calculated as the percentage of the Allowance for credit losses to end-of-period Credit card and other loans.  Revolving Credit Risk Distribution  5 year Max rate: 6.0%  5 year Avg rate: ~5.0%  5 year Min rate: 3.3%    11  © 2022 ADS Alliance Data Systems, Inc. 
 

 Full Year 2021Actuals  Full Year 2022Outlook  Commentary  Average receivables $15,656 million  Up high-single to low-double digits  Continued sales momentum and net partner additions driving strong growthExpect year-end receivables growth year-over-year to be slightly stronger than full year average receivables growth year-over-yearOutlook includes soon-to-be-announced brand partner additions & assumes BJ’s non-renewal  Revenue$3,272 million  Aligned with receivables growth  Net interest income growth is expected to be slightly favorable to full year average receivables growth year-over-year as the net interest margin benefits from lower cost of funding in 2022Outlook assumes four fed rate increases in 2022 with a nominal benefit to Net interest incomeNon-interest income year-over-year change is expected to offset the favorability in Net interest income (potential gain on investment in LVI and portfolio sales not included in outlook)   Total non-interest expenses$1,684 million  Positive operating leverage  Includes a planned incremental strategic investment of more than $125 million in technology modernization, digital advancement, marketing, and product innovation driving future growth and efficienciesWe will manage the pace of our investments to align with our revenue & growth outlook  Net loss rate4.6%  Low-to-mid 5% range  Expect credit metrics to normalize in 2022 off of historically low rates, yet remain below our historic through-the-cycle average of ~6.0%  2022 Financial Outlook    12  © 2022 ADS Alliance Data Systems, Inc. 
 

 Appendix    © 2022 ADS Alliance Data Systems, Inc. 
 

 Average Receivables and Credit Sales  ($ in billions)  Receivables continue to inflect higher with strengthening credit sales providing momentum entering 2022    14  © 2022 ADS Alliance Data Systems, Inc. 
 

 Total Non-Interest Expenses  $ in millions  $ in billions  -12%  -3%  Total non-interest expenses were down 12% versus 4Q20Employee compensation and benefit costs increased 15% primarily driven by continued digital and technology modernization-related hiring, as well as higher volume-related staffing levels.Marketing expenses decreased primarily due to higher marketing costs related to card program enhancements in 2020.Depreciation and amortization costs decreased primarily due to $25 million in charges related to real estate optimization activities in 2020.Other expenses decreased primarily due to $45 million in charges related to real estate optimization activities, and settlement and other remediation costs in 2020.  -13%  -1%    ($ in millions)  (4)%  15%  15%  (18)%  (47)%  (59)%  15  © 2022 ADS Alliance Data Systems, Inc. 
 

 ($ in millions)  4Q21  4Q20  4Q21 vs    3Q21  4Q21 vs    FY21  FY20  FY21 vs        4Q20      3Q21        FY20  Credit sales  $8,778  $7,657  15%    $7,380  19%    $29,603  $24,707  20%  Average receivables  $16,086  $15,759  2%    $15,471  4%    $15,656  $16,367  (4)%  End-of-period receivables  $17,399  $16,784  4%    $15,690  11%    $17,399  $16,784  4%  End-of-period direct-to-consumer deposits  $3,180  $1,700  87%    $3,052  4%    $3,180  $1,700  87%                        Return on average assets(1)  1.1%  1.4%  (0.3)%    3.7%  (2.6)%    3.6%  0.9%  2.7%  Return on average equity(2)  11.1%  21.3%  (10.2)%    38.0%  (26.9)%    40.7%  16.7%  24.0%                        Net interest margin(3)  18.8%  17.8%  1.0%    18.9%  (0.1)%    18.2%  16.8%  1.4%  Loan yield(4)  25.2%  24.1%  1.1%    25.6%  (0.4)%    24.7%  24.0%  0.7%  Risk-adjusted loan yield(5)  20.9%  18.1%  2.8%    21.7%  (0.8)%    20.1%  17.4%  2.7%                        Efficiency ratio(6)  50.0%  63.4%  (13.4)%    50.6%  (0.6)%    51.5%  52.5%  (1.0)%                        Tangible book value per common share(7)  $28.09  $16.34  71.9%    $31.18  (9.9)%    $28.09  $16.34  71.9%  Tangible common equity / tangible assets ratio (TCE/TA) (8)  6.6%  3.7%  2.9%    7.2%  (0.6)%    6.6%  3.7%  2.9%  Cash dividend declared per common share  $0.21  $0.21  —%    $0.21  —%    $0.84  $1.26  (33.3)%                        Net loss rate  4.4%  6.0%  (1.6)%    3.9%  0.5%    4.6%  6.6%  (2.0)%  30+ day delinquency rate  3.9%  4.4%  (0.5)%    3.8%  0.1%    3.9%  4.4%  (0.5)%  Reserve rate  10.5%  12.0%  (1.5)%    10.5%  —%    10.5%  12.0%  (1.5)%    (1) Return on average assets represents Income from continuing operations divided by average Total assets.  (2) Return on average equity represents Income from continuing operations divided by average Total stockholders’ equity.  (3) Net interest margin represents Net interest income divided by average total interest-earning assets.  (4) Loan yield represents Interest and fees on loans divided by Average receivables.  (5) Risk-adjusted loan yield represents Loan yield less Net loss rate.  (6) Efficiency ratio represents Total non-interest expenses divided by Total net interest and non-interest income.  (7) Tangible book value per common share represents Total stockholders’ equity less Intangible assets, net, and Goodwill divided by shares outstanding.  (8)Tangible common equity represents Total stockholders’ equity less Intangible assets, net, and Goodwill. Tangible assets represents Total assets less Intangible assets, net, and Goodwill.  16  © 2022 ADS Alliance Data Systems, Inc.  Summary Financial Highlights- Continuing Operations 
 

 ($ in millions)  1Q20  2Q20  3Q20  4Q20  1Q21  2Q21  3Q21  4Q21    FY20  FY21  Credit sales  $6,099  $4,799  $6,152  $7,657  $6,043  $7,401  $7,380  $8,778    $24,707  $29,603   Year-over-year change  (3)%  (36)%  (21)%  (18)%  (1)%  54%  20%  15%    (20)%  20%  Average receivables  $18,294  $16,116  $15,300  $15,759  $15,785  $15,282  $15,471  $16,086    $16,367  $15,656   Year-over-year change  9%  (4)%  (12)%  (13)%  (14)%  (5)%  1%  2%    (5)%  (4)%  End-of-period receivables  $17,732  $15,809  $15,599  $16,784  $15,537  $15,724  $15,690  $17,399    $16,784  $17,399   Year-over-year change  5%  (10)%  (13)%  (14)%  (12)%  (1)%  1%  4%    (14)%  4%  End-of-period direct-to-consumer deposits  $1,192  $1,843  $1,707  $1,700  $2,152  $2,398  $3,052  $3,180    $1,700  $3,180   Year-over-year change  nm*  144%  57%  46%  81%  30%  79%  87%    46%  87%                          Return on average assets(1)  —%  0.3%  2.1%  1.4%  4.9%  4.8%  3.7%  1.1%    0.9%  3.6%  Return on average equity(2)  (0.2)%  7.0%  37.2%  21.3%  66.3%  56.4%  38.0%  11.1%    16.7%  40.7%                          Net interest margin(3)  19.5%  13.7%  16.1%  17.8%  17.7%  17.3%  18.9%  18.8%    16.8%  18.2%  Loan yield(4)  26.6%  21.3%  23.9%  24.1%  23.8%  23.9%  25.6%  25.2%    24.0%  24.7%  Risk-adjusted loan yield(5)  19.6%  13.7%  18.1%  18.1%  18.8%  18.8%  21.7%  20.9%    17.4%  20.1%                          Efficiency ratio(6)  40.4%  60.6%  51.0%  63.4%  50.1%  55.5%  50.6%  50.0%    52.5%  51.5%                          Tangible book value per common share(7)  $15.41  $16.99  $20.68  $16.34  $21.32  $27.12  $31.18  $28.09    $16.34  $28.09  Tangible common equity / Tangible assets ratio (TCE/TA) (8)  3.1%  3.6%  4.7%  3.7%  5.2%  6.4%  7.2%  6.6%    3.7%  6.6%  Cash dividend declared per common share  $0.63  $0.21  $0.21  $0.21  $0.21  $0.21  $0.21  $0.21    $1.26  $0.84                          Net loss rate  7.0%  7.6%  5.8%  6.0%  5.0%  5.1%  3.9%  4.4%    6.6%  4.6%  30+ day delinquency rate  6.0%  4.3%  4.7%  4.4%  3.8%  3.3%  3.8%  3.9%    4.4%  3.9%  Reserve rate  12.1%  13.3%  13.3%  12.0%  11.9%  10.4%  10.5%  10.5%    12.0%  10.5%    *nm – not meaningful  (1) Return on average assets represents Income from continuing operations divided by average Total assets.  (2) Return on average equity represents Income from continuing operations divided by average Total stockholders’ equity.  (3) Net interest margin represents Net interest income divided by average total interest-earning assets.  (4) Loan yield represents Interest and fees on loans divided by Average receivables.  (5) Risk-adjusted loan yield represents Loan yield less Net loss rate.  (6) Efficiency ratio represents Total non-interest expenses divided by Total net interest and non-interest income.  (7) Tangible book value per common share represents Total stockholders’ equity less Intangible assets, net, and Goodwill divided by shares outstanding.  (8)Tangible common equity represents Total stockholders’ equity less Intangible assets, net, and Goodwill. Tangible assets represents Total assets less Intangible assets, net, and Goodwill.  17  © 2022 ADS Alliance Data Systems, Inc.  Summary Financial Highlights- Continuing Operations 
 

 ($ in millions, except per share)  1Q20  2Q20  3Q20  4Q20  1Q21  2Q21  3Q21  4Q21    FY20  FY21   Total interest income  $1,227  $860  $915  $950  $942  $915  $994  $1,017    $3,952  $3,868   Total interest expense  146  127  114  112  107  100  92  84    499  383  Net interest income  1,081  733  801  838  835  815  902  933    3,453  3,485                           Total non-interest income  (11)  (28)  (47)  (69)  (33)  (51)  (51)  (78)    (155)  (213)                          Revenue  1,070  705  754  769  802  764  851  855    3,298  3,272                           Net principal losses   320    305    223    235    198    194    152    176      1,083    720    Reserve build (release)   336    (55)   (16)   (82)   (164)   (208)   9    187      183    (176)   Provision for credit losses  656  250  207  153  34  (14)  161  363    1,266  544                           Total non-interest expenses  432  427  385  487  402  424  431  427    1,731  1,684                          (Loss) income before income taxes  (18)  28  162  129  366  354  259  65    301  1,044                           (Benefit) provision for income taxes  (17)  8  47  55  99  91  53  4    93  247                          Net (loss) income  $(1)  $20  $115  $74  $267  $263  $206  $61    $208  $797                           Net (loss) income per diluted share  $(0.01)  $0.41  $2.41  $1.54  $5.38  $5.25  $4.11  $1.21    $4.35  $15.95   Weighted average shares outstanding – diluted   47.7  47.7  47.8  48.4  49.8  50.0  50.0  50.0    47.9  50.0  ***************************************************************************************************************************************************************************************                        Reconciliation of GAAP to Non-GAAP Financial Measures:                        (Loss) income before income taxes  $(18)  $28  $162  $129  $366  $354  $259  $65    $301  $1,044   Provision for credit losses  656  250  207  153  34  (14)  161  363    1,266  544  Pre-tax pre-provision earnings (“PPNR”)*  $638  $278  $369  $282  $400  $340  $420  $428    $1,567  $1,588   Gain on portfolio sales  20  —  —  —  —  —  10  —    20  10  PPNR less gain on portfolio sales*  $618  $278  $369  $282  $400  $340  $410  $428    $1,547  $1,578    * Pre-tax pre-provision earnings and Pre-tax pre-provision earnings less gain on portfolio sales are non-GAAP financial measures.   18  © 2022 ADS Alliance Data Systems, Inc.  Financial Results – Continuing Operations 
 

 Net Interest Margin      4Q21                FY21      ($ in millions)  Average Balance    Interest Income / Expense    Average Yield / Rate    Average Balance    Interest Income / Expense    Average Yield / Rate   Cash and investment securities  $3,711    $2    0.21%    $3,480    $7    0.21%   Credit card and other loans  16,086    1,015    25.25%    15,656    3,861    24.66%  Total interest-earning assets  19,797    1,017    20.55%    19,136    3,868    20.21%                           Direct-to-consumer deposits (retail)  3,120    6    0.77%    2,490    23    0.91%   Wholesale deposits  7,386    31    1.69%    7,509    144    1.92%  Interest-bearing deposits  10,506    37    1.42%    9,999    167    1.67%                           Secured borrowings  4,537    22    1.91%    4,596    112    2.43%   Unsecured borrowings  2,383    25    4.28%    2,699    104    3.84%  Total interest-bearing liabilities  $17,426    $84    1.94%    $17,294    $383    2.21%                          Net Interest Income      $933            $3,485                              Net Interest Margin*      18.85%            18.21%      * Net interest margin represents Net interest income divided by average Total interest-earning assets.   19  © 2022 ADS Alliance Data Systems, Inc. 
 

 Capital and Liquidity  Banks Combined Capital Ratios  1Q20  2Q20  3Q20  4Q20  1Q21  2Q21  3Q21  4Q21  Common equity tier 1 capital ratio(2)  15.9%  18.3%  18.8%  18.4%  21.0%  22.1%  22.6%  20.0%  Tier 1 capital ratio(3)  15.9%  18.3%  18.8%  18.4%  21.0%  22.1%  22.6%  20.0%  Total risk-based capital ratio(4)  17.3%  19.7%  20.1%  19.7%  22.3%  23.4%  23.9%  21.3%  Tier 1 leverage capital ratio(5)  12.8%  14.2%  16.1%  17.1%  17.8%  19.2%  19.5%  18.6%    Total Company Tangible Common Equity/Tangible Assets Ratio(1)  6.6%    ~ 300 basis point improvement in TCE/TA ratio as a result of the LVI spinoff  Parent Level:Liquidity as of December 31, 2021, of $0.9 billion, consisting of cash on hand plus revolver capacity Approximately $120 million in cash and cash equivalents, approximately $750 million in unused revolver capacityBank Level (Banks Combined):As of December 31, 2021, the Banks finished the quarter with $2.9 billion in cash on hand and $3.2 billion in equityTotal risk based capital ratio at 21.3% - over double the 10% threshold to be considered well-capitalized; CET1 at 20.0%Healthy funding markets currently available for 2022 growth – continued strategic focus on retail growth  (1) Tangible common equity represents Total stockholders’ equity less Intangible assets, net, and Goodwill. Tangible assets represents Total assets less Intangible assets, net, and Goodwill.(2) The Common equity tier 1 capital ratio represents common equity tier 1 capital divided by total risk-weighted assets.(3) The Tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets.(4) The Total risk-based capital ratio represents total capital divided by total risk-weighted assets. (5) The Tier 1 leverage capital ratio represents tier 1 capital divided by total assets for leverage ratio.   20  © 2022 ADS Alliance Data Systems, Inc. 
 

 Sales and New Account Data  In-store vs. digital sales  Digital includes all non-store new accounts and Bread  $ in billions  In-store vs. digital new accounts  in millions    21  © 2022 ADS Alliance Data Systems, Inc. 

 


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