Part I [Business](index=6&type=section&id=Item%201.%20Business) Alliance Data Systems operates as a single segment, providing tech-forward payment and lending solutions in North America, following the LoyaltyOne spinoff - The company is a leading provider of tech-forward payment and lending solutions, including credit card products and Bread® digital payment solutions, serving over 600 companies and online merchants[9](index=9&type=chunk)[10](index=10&type=chunk) - On November 5, 2021, the company completed the spinoff of its LoyaltyOne® segment into an independent, publicly traded company, Loyalty Ventures Inc. (NASDAQ: LYLT), retaining a **19% ownership stake**[11](index=11&type=chunk) - Following the spinoff, the company now operates as a single reportable segment, focusing on continuing operations and excluding the discontinued LoyaltyOne segment from its results[12](index=12&type=chunk) - The business strategy involves simplifying the business model, reducing debt, and making strategic investments in technology, digital capabilities, and expanding its product suite[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk) Key Loan Portfolio Statistics (as of Dec 31, 2021) | Metric | Value | | :--- | :--- | | Principal Loans | $16.6 billion | | Active Accounts | ~36 million | | Average Balance (for accounts with balances) | ~$828 | [Products and Services](index=8&type=section&id=Products%20and%20Services) The company offers private label/co-brand credit cards, BNPL options, and digital payment solutions, transitioning processing to Fiserv - Core offerings include private label and co-brand credit card programs, Buy Now, Pay Later (BNPL) options, and direct-to-consumer products[16](index=16&type=chunk)[17](index=17&type=chunk) - The company is transitioning credit card processing services to Fiserv to improve speed to market, add new products, and enhance operational efficiencies[19](index=19&type=chunk) - Through its Enhanced Digital Suite and Bread platform, the company offers omnichannel digital payment solutions, expanding its market to include small- and medium-sized businesses[22](index=22&type=chunk)[23](index=23&type=chunk) [Competition](index=10&type=section&id=Competition) The company operates in a highly competitive market against diverse financial institutions, fintechs, and payment networks - The company competes in a highly competitive market against a wide range of businesses, including financial institutions, fintechs, and payment networks, some with greater resources[26](index=26&type=chunk) - Competition for brand partners is based on factors like program financials, underwriting standards, marketing expertise, service levels, and technological capabilities[27](index=27&type=chunk)[28](index=28&type=chunk) - In the payments space, products compete with cash, checks, debit cards, general-purpose credit cards, BNPL products, and emerging digital/mobile payment solutions, some with less regulatory scrutiny[28](index=28&type=chunk) [Supervision and Regulation](index=12&type=section&id=Supervision%20and%20Regulation) The company operates through two regulated bank subsidiaries subject to extensive federal and state banking regulations - The company operates primarily through its two insured depository institution subsidiaries: Comenity Bank (Delaware-chartered) and Comenity Capital Bank (Utah-chartered)[29](index=29&type=chunk) - Both banks are subject to prudential regulation and supervision by their respective state chartering authorities and the FDIC as their primary federal regulator[31](index=31&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - The banks are subject to risk-based capital and leverage ratio requirements under U.S. Basel III rules, with regulatory capital ratios above "well-capitalized" standards as of December 31, 2021[37](index=37&type=chunk)[43](index=43&type=chunk) - The company is subject to a wide range of consumer protection regulations, including those related to privacy, data protection, anti-money laundering, and fair lending[58](index=58&type=chunk)[62](index=62&type=chunk)[64](index=64&type=chunk)[67](index=67&type=chunk) [Human Capital](index=26&type=section&id=Human%20Capital) The company employed approximately 6,000 associates worldwide as of December 31, 2021, focusing on talent attraction, development, and retention - As of December 31, 2021, the company employed approximately **6,000 associates** worldwide, with key human capital objectives to attract, develop, and retain top talent[74](index=74&type=chunk) - In 2021, approximately **95% of the workforce** continued to work from home, with a focus on associate wellbeing, including mental health support and flexible time off policies[75](index=75&type=chunk)[76](index=76&type=chunk) 2021 Workforce Metrics | Metric | 2021 Rate | 2020 Rate | | :--- | :--- | :--- | | New Associate Acquisition | ~21% | 10% | | Voluntary Turnover | ~17% | 13% | Workforce Diversity (as of Dec 31, 2021) | Category | Total Workforce | Senior Leaders | | :--- | :--- | :--- | | Female | ~60% | 43% | | Minorities | ~41% | 17% | [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company faces a wide range of strategic, financial, regulatory, and operational risks that could materially affect its business [Strategic, Business and Competitive Risks](index=33&type=section&id=Strategic%2C%20Business%20and%20Competitive%20Risks) The company faces risks from the ongoing pandemic, partner concentration, and susceptibility to U.S. economic fluctuations - The ongoing COVID-19 pandemic continues to pose risks, including potential impacts on retail partners, consumer spending, credit losses, and operational challenges for a remote workforce[92](index=92&type=chunk)[93](index=93&type=chunk) - The company has significant partner concentration risk, with the **10 largest partners accounting for 59% of total net interest and non-interest income in 2021**, and Victoria's Secret representing **13%** of this total[97](index=97&type=chunk)[98](index=98&type=chunk) - The business is heavily concentrated in U.S. consumer credit, making it highly susceptible to fluctuations in the U.S. economy, consumer spending, and targeted regulatory actions[99](index=99&type=chunk)[100](index=100&type=chunk) Historical Net Charge-off and Delinquency Rates | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net Charge-off Rate | 4.6% | 6.6% | 6.1% | | Delinquency Rate (EOP) | 3.9% | 4.4% | 5.8% | Fraud-Related Operational Losses | Year | Amount (in millions) | | :--- | :--- | | 2021 | $71 | | 2020 | $141 | | 2019 | $195 | [Liquidity, Market and Credit Risks](index=47&type=section&id=Liquidity%2C%20Market%20and%20Credit%20Risks) The company's funding relies on capital markets, securitization, and deposits, exposing it to market conditions and interest rate fluctuations - The company's primary funding sources are customer collections, deposits, securitized financings, and unsecured borrowings, with adverse financial market conditions potentially limiting access[140](index=140&type=chunk)[141](index=141&type=chunk) - A significant source of funding is the securitization of credit card loans, and the inability to access this market could materially impact operations and profitability[143](index=143&type=chunk)[144](index=144&type=chunk) - Customer deposits are another key funding source, totaling **$11.0 billion at year-end 2021**, with intense competition and regulatory restrictions potentially impacting availability and cost[151](index=151&type=chunk)[156](index=156&type=chunk) - The company is exposed to interest rate risk, as the prime rate and LIBOR/federal funds rate may not move in tandem, with the planned discontinuance of LIBOR presenting additional risk[161](index=161&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk) [Legal, Regulatory and Compliance Risks](index=59&type=section&id=Legal%2C%20Regulatory%20and%20Compliance%20Risks) The company is subject to comprehensive government regulation and supervision, which may impose costs, limitations, and capital requirements - The business is subject to comprehensive government regulation and supervision by federal and state authorities, including the FDIC, with changes in laws potentially leading to additional costs and limitations[174](index=174&type=chunk)[175](index=175&type=chunk) - The company's subsidiary banks are subject to extensive regulation that may restrict their ability to pay dividends to the parent company and may require capital contributions[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - As the parent of insured depository institutions, Alliance Data is required to serve as a "source of financial strength" to its banks, potentially requiring financial assistance during times of stress[188](index=188&type=chunk) - Regulations related to privacy, data protection, and cybersecurity are evolving and could increase costs, limit business opportunities, and result in significant penalties for noncompliance[197](index=197&type=chunk)[198](index=198&type=chunk) [Cybersecurity, Technology and Vendor Risks](index=67&type=section&id=Cybersecurity%2C%20Technology%20and%20Vendor%20Risks) The company faces risks from reliance on third-party vendors, data protection failures, and the need for continuous technological investment - The company relies on third-party vendors and is transitioning key services to strategic partners, which presents risks such as implementation delays, data loss, and cost overruns[212](index=212&type=chunk)[214](index=214&type=chunk) - Failures in data protection, cybersecurity, and information security could critically impair products and services, with risks increasing due to new technologies and sophisticated threat actors[215](index=215&type=chunk)[216](index=216&type=chunk) - The industry is subject to rapid technological change, and failure to invest successfully in new technologies like AI, machine learning, and alternative payment mechanisms could harm the company's competitive position[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) [Risks Related to the LoyaltyOne Spinoff](index=71&type=section&id=Risks%20Related%20to%20the%20LoyaltyOne%20Spinoff) The company may not achieve anticipated benefits from the spinoff and faces risks related to its retained stake and potential tax liabilities - The company may not achieve all anticipated benefits from the spinoff, and as a smaller, less diversified business, it may be more vulnerable to market and economic changes[224](index=224&type=chunk)[225](index=225&type=chunk) - The company's retained **19% stake** in Loyalty Ventures Inc. is subject to the spun-off company's performance, which recently recognized a **$50 million non-cash goodwill impairment charge**[225](index=225&type=chunk) - The spinoff could result in substantial tax liability to the company and its stockholders if determined to be taxable, despite receiving a favorable tax opinion and IRS private letter ruling[226](index=226&type=chunk)[227](index=227&type=chunk) [Properties](index=80&type=section&id=Item%202.%20Properties) As of December 31, 2021, the company leased 14 general office properties totaling approximately 1 million square feet, deemed suitable for its business needs Principal Leased Facilities | Location | Square Feet | Lease Expiration | | :--- | :--- | :--- | | Columbus, Ohio | 326,354 | Sep 12, 2032 | | Coeur D'Alene, Idaho | 114,000 | Jul 31, 2038 | | Columbus, Ohio | 103,161 | Dec 31, 2027 | | Draper, Utah | 22,869 | Aug 31, 2031 | | Plano, Texas | 27,925 | Jun 30, 2026 | [Legal Proceedings](index=80&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various claims and lawsuits arising in the ordinary course of business, not expected to materially affect its financial condition - The company is periodically involved in various claims and lawsuits arising in the ordinary course of business, which are not expected to have a material effect on its financial condition[259](index=259&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=83&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under "ADS," with **49,948,146 shares outstanding** as of February 18, 2022, and a quarterly dividend of **$0.21 per share** declared in January 2022 - Common stock is listed on the NYSE under the symbol "ADS," with **49,948,146 shares outstanding** as of February 18, 2022[265](index=265&type=chunk) - On January 27, 2022, the Board of Directors declared a quarterly cash dividend of **$0.21 per share**[267](index=267&type=chunk) - No shares were purchased as part of a publicly announced repurchase plan or program during the three months ended December 31, 2021[268](index=268&type=chunk)[271](index=271&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=87&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A reviews 2021 financial performance post-spinoff, highlighting reduced credit losses and outlining the 2022 outlook - Following the November 5, 2021 spinoff of the LoyaltyOne segment, the company adjusted its financial statement presentation to align with bank holding companies and now operates as a single segment[279](index=279&type=chunk)[280](index=280&type=chunk) - The 2022 outlook anticipates high-single- to low-double-digit growth in average Total credit card and other loans, with a net loss rate expected in the low-to-mid **5% range** as credit metrics normalize[286](index=286&type=chunk)[285](index=285&type=chunk) - The company plans an incremental strategic investment of over **$125 million** in 2022 for digital/product innovation, marketing, and technology, expected to increase total non-interest expenses[287](index=287&type=chunk) - The company's contract with BJ's Wholesale Club was not renewed, which accounted for approximately **8% of total net interest and non-interest income** and **11% of total credit card and other loans** in 2021[286](index=286&type=chunk) [Consolidated Results of Operations](index=91&type=section&id=Consolidated%20Results%20of%20Operations) In 2021, the company reported **$801 million** in net income, driven by a significant decrease in the provision for credit losses and moderate reduction in non-interest expenses Financial Performance Summary (in millions, except per share data) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total net interest and non-interest income | $3,272 | $3,298 | $4,050 | | Provision for credit losses | $544 | $1,266 | $1,188 | | Total non-interest expenses | $1,684 | $1,731 | $2,200 | | Income from continuing operations | $797 | $208 | $506 | | Net income | $801 | $214 | $278 | | Diluted EPS from continuing operations | $15.95 | $4.35 | $9.94 | - The Provision for credit losses decreased by **$722 million (57%)** in 2021 compared to 2020, driven by lower net charge-offs and an improved macroeconomic outlook, with 2020 being higher due to COVID-19 reserve build and CECL adoption[303](index=303&type=chunk) - Total non-interest expenses decreased by **$47 million (3%)** in 2021, primarily due to a **$73 million reduction** in card and processing expenses, partially offset by a **$62 million increase** in employee compensation[311](index=311&type=chunk)[312](index=312&type=chunk) [Asset Quality](index=103&type=section&id=Asset%20Quality) Asset quality improved in 2021, with total delinquency rates decreasing to **3.9%** and net charge-off rates falling to **4.6%** Delinquency Trends on Credit Card and Other Loans (Principal Balance) | Delinquency Status | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | 31 to 60 days | 1.3% | 1.4% | | 61 to 90 days | 0.9% | 1.0% | | 91 or more days | 1.7% | 2.0% | | **Total Delinquent** | **3.9%** | **4.4%** | Net Charge-Offs on Credit Card and Other Loans | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Average credit card and other loans (in millions) | $15,656 | $16,367 | $17,298 | | Net charge-offs of principal balances (in millions) | $720 | $1,083 | $1,055 | | **Net charge-off rate** | **4.6%** | **6.6%** | **6.1%** | - As of December 31, 2021, approximately **$86 million** in credit card loans were under a COVID-19 related forbearance program, down from **$157 million** at year-end 2020[328](index=328&type=chunk) [Consolidated Liquidity and Capital Resources](index=104&type=section&id=Consolidated%20Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by operations, credit facilities, securitization, and deposits, with strong capital ratios post-spinoff - Primary sources of liquidity include cash from operations, a credit agreement, debt securities, securitization programs, and deposits, with **$1.54 billion** cash from operations in 2021[333](index=333&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) - Following the LoyaltyOne spinoff, the company used **$725 million** of proceeds to repay term loans, with **$658 million** remaining outstanding and a **$750 million** revolving line of credit undrawn as of December 31, 2021[343](index=343&type=chunk)[344](index=344&type=chunk) Funding Sources (as of Dec 31, 2021) | Source | Amount (in billions) | | :--- | :--- | | Total Deposits | $11.0 | | Securitized Credit Card Loans | $11.2 | | Debt issued by consolidated VIEs | $5.5 | | Long-term and other debt | $2.0 | Combined Banks Capital Ratios (as of Dec 31, 2021) | Ratio | Actual Ratio | Minimum to be Well Capitalized | | :--- | :--- | :--- | | Tier 1 capital to average assets | 18.6% | 5.0% | | Common Equity Tier 1 capital to risk-weighted assets | 20.0% | 6.5% | | Tier 1 capital to risk-weighted assets | 20.0% | 8.0% | | Total capital to risk-weighted assets | 21.3% | 10.0% | [Discussion of Critical Accounting Estimates](index=114&type=section&id=Discussion%20of%20Critical%20Accounting%20Estimates) The Allowance for Credit Losses is the most critical accounting estimate, significantly influenced by the CECL model, economic forecasts, and qualitative adjustments - The most critical accounting estimate is the Allowance for Credit Losses, determined using the Current Expected Credit Loss (CECL) model, influenced by portfolio characteristics, economic forecasts, and qualitative adjustments[371](index=371&type=chunk)[372](index=372&type=chunk) - The CECL model utilizes historical data and macroeconomic variables, with management incorporating qualitative overlays to address uncaptured risks, particularly related to the macroeconomic environment and the COVID-19 pandemic[372](index=372&type=chunk)[373](index=373&type=chunk) - A hypothetical **100 basis point (1.0%) increase** in the Allowance as a percentage of loans would have resulted in a change of approximately **$171 million** in the Allowance for Credit Losses at December 31, 2021[374](index=374&type=chunk) [Controls and Procedures](index=116&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with an unqualified auditor opinion - Management, including the CEO and CFO, evaluated and concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[380](index=380&type=chunk)[381](index=381&type=chunk) - Management assessed internal control over financial reporting using the COSO framework and concluded that it was effective as of December 31, 2021[385](index=385&type=chunk) - The independent registered public accounting firm, Deloitte & Touche LLP, provided an unqualified attestation report on the effectiveness of the company's internal control over financial reporting[386](index=386&type=chunk) Part III [Items 10-14](index=120&type=section&id=Items%2010-14) Information required for Part III, Items 10 through 14, is incorporated by reference from the company's forthcoming 2022 Proxy Statement - Information for Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership), Item 13 (Certain Relationships and Related Transactions), and Item 14 (Principal Accounting Fees and Services) is incorporated by reference from the forthcoming 2022 Proxy Statement[388](index=388&type=chunk)[389](index=389&type=chunk)[390](index=390&type=chunk)[391](index=391&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=121&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K, with schedules omitted if not applicable or included elsewhere - This section contains the list of financial statements and exhibits filed with the Form 10-K, with financial statement schedules omitted if not applicable or included in the consolidated financial statements[392](index=392&type=chunk)[393](index=393&type=chunk) Financial Statements and Notes [Reports of Independent Registered Public Accounting Firm](index=145&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting, highlighting the CECL adoption and LoyaltyOne spinoff - The auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements, confirming they are presented fairly in conformity with U.S. GAAP[413](index=413&type=chunk) - The audit report includes an Emphasis of Matter paragraph noting the classification of the LoyaltyOne segment as a discontinued operation and the change in financial statement presentation to the bank holding company format (Article 9)[416](index=416&type=chunk) - The critical audit matter identified was the Allowance for Credit Losses, due to the significant and subjective management judgments required for its estimation under the CECL model, particularly regarding economic forecasts and qualitative adjustments[419](index=419&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk) - The auditor also issued an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2021[424](index=424&type=chunk) [Consolidated Financial Statements](index=151&type=section&id=Consolidated%20Financial%20Statements) For 2021, the company reported **$3.485 billion** in net interest income, **$797 million** in income from continuing operations, and **$21.7 billion** in total assets Consolidated Statement of Income Highlights (2021, in millions) | Line Item | Amount | | :--- | :--- | | Net Interest Income | $3,485 | | Provision for credit losses | $544 | | Total non-interest expenses | $1,684 | | Income from continuing operations | $797 | | **Net Income** | **$801** | Consolidated Balance Sheet Highlights (Dec 31, 2021, in millions) | Line Item | Amount | | :--- | :--- | | **Assets** | | | Cash and cash equivalents | $3,046 | | Credit card and other loans, net | $15,567 | | **Total Assets** | **$21,746** | | **Liabilities & Equity** | | | Deposits | $11,027 | | Total Debt | $7,439 | | **Total Liabilities** | **$19,660** | | **Total Stockholders' Equity** | **$2,086** | [Notes to Consolidated Financial Statements](index=158&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, including the LoyaltyOne spinoff, Bread acquisition, credit loan portfolio, CECL allowance, and regulatory capital [Note 2. Acquisitions](index=166&type=section&id=Note%202.%20Acquisitions) On December 3, 2020, the company acquired Lon Inc. (Bread) for **$491 million** net of cash, recognizing significant goodwill and developed technology - On December 3, 2020, the company acquired **100% of Lon Inc. (Bread)** for total consideration of **$491 million** (net of cash acquired), consisting of cash, equity, and deferred cash[472](index=472&type=chunk)[473](index=473&type=chunk) Bread Acquisition - Fair Value of Net Assets Acquired (in millions) | Assets/Liabilities | Fair Value | | :--- | :--- | | Goodwill | $370 | | Developed technology | $91 | | Installment loans | $112 | | Intangible assets | $11 | | Total liabilities assumed | ($104) | | Other net assets | $11 | | **Net assets acquired** | **$491** | [Note 3. Credit Card and Other Loans](index=166&type=section&id=Note%203.%20Credit%20Card%20and%20Other%20Loans) Net credit card and other loans increased to **$15,567 million** in 2021, with **62%** of the portfolio having a Vantage Score of **661 or higher** Credit Card and Other Loans, Net (as of Dec 31, in millions) | Component | 2021 | 2020 | | :--- | :--- | :--- | | Credit card loans | $17,217 | $16,666 | | Installment loans | $182 | $118 | | Total loans | $17,399 | $16,784 | | Less: Allowance for credit losses | ($1,832) | ($2,008) | | **Credit card and other loans, net** | **$15,567** | **$14,776** | Credit Quality by Vantage Score (as of Dec 31) | Vantage Score | 2021 % of Portfolio | 2020 % of Portfolio | | :--- | :--- | :--- | | 661 or Higher | 62% | 60% | | 601 to 660 | 26% | 28% | | 600 or Less | 12% | 12% | - Unused credit card lines available to cardholders totaled approximately **$112 billion** at December 31, 2021, up from **$108 billion** at year-end 2020[492](index=492&type=chunk) [Note 4. Allowance for Credit Losses](index=175&type=section&id=Note%204.%20Allowance%20for%20Credit%20Losses) The allowance for credit losses, estimated using a CECL model, decreased in 2021 due to improved credit performance and macroeconomic variables - The allowance for credit losses is estimated using a CECL model, which considers historical experience, current conditions, and reasonable forecasts of future economic conditions over the estimated life of the loans[496](index=496&type=chunk)[497](index=497&type=chunk) Allowance for Credit Losses Rollforward (in millions) | Description | 2021 | 2020 | | :--- | :--- | :--- | | Beginning balance | $2,008 | $1,171 | | CECL adoption impact | - | $644 | | Provision for credit losses | $544 | $1,266 | | Net principal charge-offs | ($720) | ($1,083) | | Other | - | $10 | | **Ending balance** | **$1,832** | **$2,008** | - The decrease in the allowance in 2021 was due to improved credit performance, lower net charge-offs, and improving macroeconomic variables, while the 2020 increase was driven by CECL adoption and COVID-19 economic outlook[504](index=504&type=chunk) [Note 11. Borrowings of Long-term and Other Debt](index=189&type=section&id=Note%2011.%20Borrowings%20of%20Long-term%20and%20Other%20Debt) Total borrowings were **$18.466 billion** as of December 31, 2021, primarily from deposits and debt issued by consolidated VIEs, with credit agreement maturity extended to July 2024 Total Borrowings Summary (as of Dec 31, in millions) | Category | 2021 | 2020 | | :--- | :--- | :--- | | Long-term and other debt | $1,986 | $2,806 | | Deposits | $11,027 | $9,793 | | Debt issued by consolidated VIEs | $5,453 | $5,710 | | **Total Borrowings** | **$18,466** | **$18,309** | - In July 2021, the company amended its credit agreement, extending the maturity of most of its term loans and its revolving credit facility to July 2024[542](index=542&type=chunk) - As of December 31, 2021, the company had two series of senior notes outstanding: **$850 million of 4.750% notes due 2024** and **$500 million of 7.000% notes due 2026**[543](index=543&type=chunk)[544](index=544&type=chunk)[545](index=545&type=chunk) [Note 22. Discontinued Operations and Bank Holding Company Financial Presentation](index=216&type=section&id=Note%2022.%20Discontinued%20Operations%20and%20Bank%20Holding%20Company%20Financial%20Presentation) On November 5, 2021, the company completed the spinoff of its LoyaltyOne segment, distributing **81%** of shares and retaining **19%**, and adjusted its financial presentation to a bank holding company format - On November 5, 2021, the company completed the spinoff of its LoyaltyOne segment into Loyalty Ventures Inc., distributing **81%** of shares to stockholders and retaining a **19% stake** accounted for using the equity method[623](index=623&type=chunk) - In connection with the spinoff, Alliance Data received a **$750 million distribution** from Loyalty Ventures, which was used to repay term loans[623](index=623&type=chunk) - The note provides a detailed reconciliation of the company's historical financial statement presentation (Article 5) to the new bank holding company presentation (Article 9) for 2020 and 2019, showing discontinued operations removal and reclassifications[638](index=638&type=chunk)[639](index=639&type=chunk)

Financial Data and Key Metrics Changes - Credit sales increased by 15% year-over-year to $8.8 billion in Q4 2021, driven by strong consumer spending [33] - Revenue for Q4 2021 was $855 million, an 11% increase year-over-year, while income from continuing operations was $61 million [33] - For the full year 2021, credit sales rose by 20% to $29.6 billion, with revenue at $3.3 billion and income from continuing operations at $797 million [35] - Diluted EPS from continuing operations improved to $15.95, driven by a lower provision for credit losses [35] Business Line Data and Key Metrics Changes - The company introduced a new proprietary card that grew to 1 million cardholders with nearly $650 million in outstanding balances by the end of 2021 [12] - The company reported strong performance in the beauty and jewelry verticals, with holiday sales up more than 30% in each category [19] - The company successfully added new brand partners, including the NFL and Michaels, enhancing its vertical diversification efforts [21][24] Market Data and Key Metrics Changes - Consumer activity remained robust, with notable improvements among millennials and Gen Z during the holiday season, exceeding pre-pandemic spending levels [19] - The company observed a year-over-year increase in in-store transactions in Q4 2021, indicating a recovery in physical retail [20] Company Strategy and Development Direction - The company aims for long-term financial targets of $20 billion in average receivables for 2023, focusing on responsible growth and financial discipline [10][9] - The spin-off of Loyalty Ventures was completed, strengthening the balance sheet and allowing for a sharper focus on future growth plans [11] - The company plans to invest over $125 million in 2022 for technology modernization, digital advancement, and product innovation [51][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth outlook despite the non-renewal of the BJ's contract, emphasizing a robust business development pipeline [9][76] - The company anticipates a normalization of credit metrics throughout 2022, with a projected loss rate in the low to mid 5% range [53] - Management remains vigilant regarding the competitive landscape, particularly in the buy now, pay later segment, and is prepared to adapt to regulatory changes [57][64] Other Important Information - The company has secured nearly 90% of year-end receivable balances under contract through 2023, providing clarity for future growth [27] - The company is transitioning its financial reporting to align more closely with traditional bank holding companies, enhancing transparency [36] Q&A Session Summary Question: Dynamics of the competitive marketplace - Management acknowledged the competitive nature of the business, highlighting a greater number of wins and renewals compared to losses in 2021 [56] Question: Regulatory pressures on buy now, pay later - Management noted that merchants are beginning to understand the implications of buy now, pay later models and emphasized their compliance and underwriting capabilities [57] Question: Long-term ROE targets - Management indicated that while they do not plan to provide EPS guidance, they are targeting mid to high 20s ROE in the long term [60] Question: Economics of the Ulta renewal - Management stated that the economics of the Ulta renewal were fair for both parties, with a focus on growing the overall portfolio [62] Question: Future non-renewals - Management confirmed that 90% of receivables are secured through 2023, indicating limited risk of additional non-renewals [76] Question: Loan growth targets - Management confirmed that growth will be a mix of organic and inorganic, with a focus on net positive growth overall [84] Question: Expense management and efficiency ratio - Management expressed a goal of improving the efficiency ratio over the long term while allowing for flexibility in investments [86]

Alliance Data Fourth Quarter & Full Year 2021 Results January 27, 2022 Ralph Andretta President & CEO Perry Beberman EVP & CFO © 2022 ADS Alliance Data Systems, Inc. © 2022 ADS Alliance Data Systems, Inc. Forward-Looking Statements 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 ...

Business Performance & Outlook - New business pipeline remains robust across all products[7] - Receivables growth in November was up approximately 2% year-over-year[7] - Early season holiday sales increased by about 12% compared to 2020, with more in-store activity[7] - The company is confident in its average receivables growth outlook for 2022[7] Credit Performance - Credit performance remains strong, reflecting disciplined risk management and the current environment[7] - Payment rates have remained stable and resilient fourth quarter-to-date[7] - The company anticipates a better-than-expected fourth quarter and full-year NCO rate in the mid-4% range[7] - Delinquency rate has remained steady in the fourth quarter compared to the third quarter[7] Strategic Initiatives - The company announced a multi-year agreement with the NFL[7] - Bread platform investment is emphasized to scale for further growth in 2022[7] - The company is offering an omnichannel experience through its full suite of products and Enhanced Digital Suite[10]

[Part I: FINANCIAL INFORMATION](index=4&type=section&id=Part%20I%3A%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The company presents its unaudited condensed consolidated financial statements for the third quarter of 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased while stockholders' equity significantly increased due to strong net income Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$22,257.3** | **$22,547.1** | | Credit card and loan receivables, net | $14,045.1 | $14,776.4 | | Cash and cash equivalents | $3,172.2 | $3,081.5 | | **Total Liabilities** | **$20,011.7** | **$21,025.5** | | Deposits | $9,885.5 | $9,792.6 | | Non-recourse borrowings | $4,588.7 | $5,709.9 | | **Total Stockholders' Equity** | **$2,245.6** | **$1,521.6** | [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income surged year-over-year, driven by a substantial reduction in the provision for loan loss Consolidated Income Statement Highlights (in millions, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,099.3 | $1,050.5 | $3,196.5 | $3,411.5 | | Provision for loan loss | $161.1 | $207.7 | $180.3 | $1,113.7 | | Operating Income | $382.8 | $291.0 | $1,359.3 | $629.6 | | **Net Income** | **$223.7** | **$133.3** | **$783.4** | **$201.7** | | Diluted EPS | $4.47 | $2.79 | $15.68 | $4.23 | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income grew significantly, reflecting strong net income performance Comprehensive Income (in millions) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $223.7 | $133.3 | $783.4 | $201.7 | | Other comprehensive (loss) income, net of tax | $(23.1) | $39.8 | $(51.2) | $52.2 | | **Total comprehensive income, net of tax** | **$200.6** | **$173.1** | **$732.2** | **$253.9** | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity grew substantially, driven by net income and a major treasury stock retirement - Total stockholders' equity increased to **$2,245.6 million** at September 30, 2021, from $1,521.6 million at December 31, 2020[16](index=16&type=chunk) - In Q3 2021, the company retired **67.4 million shares of treasury stock**, which had a cost of $6,733.9 million, with no impact on total stockholders' equity[13](index=13&type=chunk)[124](index=124&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated positive cash flow from operations and investing, offset by financing outflows Cash Flow Summary for the Nine Months Ended Sep 30 (in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,208.0 | $1,488.6 | | Net cash provided by investing activities | $380.7 | $3,364.8 | | Net cash used in financing activities | $(1,157.1) | $(5,064.3) | | **Change in cash, cash equivalents and restricted cash** | **$427.4** | **$(207.2)** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Disclosures detail the LoyaltyOne spinoff, segment performance, credit quality, and legal contingencies - The company's Board of Directors approved the separation of its LoyaltyOne segment into an independent, publicly traded company, Loyalty Ventures Inc, expected to be completed on **November 5, 2021**[24](index=24&type=chunk) - For Q3 2021, the **LoyaltyOne segment** generated $169.3 million in revenue, while the **Card Services segment** generated $930.0 million in revenue[28](index=28&type=chunk)[147](index=147&type=chunk) - The allowance for loan loss decreased to **$1,644.8 million** from $2,008.0 million at year-end 2020 due to improved credit performance and macroeconomic variables[54](index=54&type=chunk)[55](index=55&type=chunk) - The company recorded a **$150.0 million liability** related to an indemnification obligation to Publicis Groupe S.A. for a DOJ investigation concerning Epsilon[116](index=116&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes strong net income growth, the LoyaltyOne spinoff, and improved credit performance - The planned spinoff of the LoyaltyOne segment into Loyalty Ventures Inc was approved by the Board on October 13, 2021, with an expected completion date of **November 5, 2021**[157](index=157&type=chunk) - Credit performance remained strong, with the net loss rate improving to **3.9% in Q3 2021** from 5.8% in Q3 2020, and the delinquency rate falling to **3.8%** from 4.7%[161](index=161&type=chunk)[209](index=209&type=chunk) - The company's bank subsidiaries, Comenity Bank and Comenity Capital Bank, **remain well capitalized**, with all capital ratios significantly exceeding minimum requirements[229](index=229&type=chunk) Nine-Month Performance Comparison (2021 vs 2020) | Metric | 9 Months 2021 | 9 Months 2020 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $3,196.5M | $3,411.5M | (6)% | | Provision for loan loss | $180.3M | $1,113.7M | (84)% | | Income before income taxes | $1,056.8M | $248.3M | 326% | | Net Income | $783.4M | $201.7M | 288% | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its primary market risks since the 2020 year-end - The company's primary market risks are identified as **interest rate risk, credit risk, and foreign currency exchange rate risk**[236](index=236&type=chunk) - There has been **no material change** in the company's exposure to these market risks since the 2020 year-end report[236](index=236&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirms the effectiveness of disclosure controls and internal controls over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the third fiscal quarter, September 30, 2021[238](index=238&type=chunk) - There were **no material changes** to the company's internal control over financial reporting during the third quarter of 2021[237](index=237&type=chunk) [Part II: OTHER INFORMATION](index=49&type=section&id=Part%20II%3A%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company faces ordinary course legal claims not expected to have a material adverse effect - The company is involved in ordinary course claims and lawsuits that are **not expected to be materially adverse**[239](index=239&type=chunk) - A key legal matter mentioned is the indemnification related to the DOJ investigation, as detailed in **Note 14** of the financial statements[116](index=116&type=chunk)[239](index=239&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) New risk factors are disclosed related to the planned spinoff of the LoyaltyOne segment - A new risk factor is introduced concerning the planned spinoff of the LoyaltyOne segment, which **may not be completed** on the contemplated terms or timeline, or at all[240](index=240&type=chunk) - Risks associated with the spinoff include potential **business disruption**, failure to realize expected benefits, loss of synergies, and the possibility that the transaction may not be tax-free[243](index=243&type=chunk) - Following the spinoff, the trading price of ADSC common stock is expected to be lower and **may fluctuate significantly**[244](index=244&type=chunk)[246](index=246&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details common stock purchases made for its employee 401(k) and savings plan - The shares purchased were for the company's 401(k) and Retirement Savings Plan and were **not part of any publicly announced repurchase programs**[247](index=247&type=chunk)[248](index=248&type=chunk) Common Stock Purchases (Q3 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 1-31 | 1,907 | $98.08 | | August 1-31 | 6,391 | $93.35 | | September 1-30 | 2,326 | $101.57 | | **Total** | **10,624** | **$96.00** | [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including credit agreements and certifications - Key exhibits filed include the Seventh Amendment to the Amended and Restated Credit Agreement and First Supplemental Indentures related to existing debt[250](index=250&type=chunk)[251](index=251&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer as required by Rule 13a-14(a) and Rule 13a-14(b) are included as exhibits[251](index=251&type=chunk)[253](index=253&type=chunk)

Alliance Data Systems Corporation (ADS) Q3 2021 Earnings Conference Call October 28, 2021 8:30 AM ET Company Participants Brian Vereb - Head, IR Ralph Andretta - President & CEO Perry Beberman - EVP & CFO Valerie Greer - EVP, CCO, Card Services Tammy McConnaughey - EVP, Operations and Credit Risk, Card Services Conference Call Participants Sanjay Sakhrani - KBW Bob Napoli - William Blair John Pancari - Evercore Bill Carcache - Wolfe Research Mihir Bhatia - Bank of America Jeff Adelson - Morgan Stanley Meng ...

Alliance Data Third Quarter 2021 Results Ralph Andretta President & CEO Perry Beberman EVP & CFO October 28, 2021 © 2021 ADS Alliance Data Systems, Inc. Forward-Looking Statements 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," "an ...

Index UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-15749 ALLIANCE DATA SYSTEMS CORPORATION (Exact name of registrant as specified in its charter) Delaware 31-1429215 (State ...

Alliance Data Systems Corporation (ADS) Q2 2021 Earnings Conference Call July 29, 2021 8:30 AM ET Company Participants Brian Vereb - Head, IR Ralph Andretta - President & CEO Perry Beberman - EVP & CFO Conference Call Participants Robert Napoli - William Blair Sanjay Sakhrani - KBW Mihir Bhatia - Bank of America Jeff Adelson - Morgan Stanley John Pancari - Evercore ISI Meng Jiao - Deutsche Bank David Scharf - JMP Securities Dominick Gabriele - Oppenheimer Reggie Smith - JPMorgan Operator Good morning, and w ...

Financial Performance - Revenue increased by 3% year-over-year to $1.012 billion[10, 30] - Net income reached $273 million, including a $208 million net reserve release[10] - Diluted EPS was $5.47[10] - Credit sales increased significantly by 54% year-over-year to $7.401 billion, and 22% compared to 1Q21[10, 44] - Average receivables decreased by 5% year-over-year[10] - Total expenses excluding provision for loan loss declined 4%[10, 30] - Total earnings before tax (EBT) increased 691% to $372 million[30, 32] Segment Performance - Card Services revenue was $861 million, a 4% increase[32] - LoyaltyOne revenue remained flat at $151 million[32] - Card Services EBT was $404 million, a significant increase of 475%[32] - LoyaltyOne EBT was $24 million, a 2% increase[32] Key Business Metrics - AIR MILES reward miles issued increased 8% year-over-year to 1,139 million[44] - AIR MILES reward miles redeemed increased 32% year-over-year to 800 million[44] - Principal loss rate was 5.1%, a decrease of 2.5%[44]