About Bread Financial® Bread Financial® (NYSE: BFH) is a tech-forward financial services company that provides simple, personalized payment, lending and saving solutions to millions of U.S. consumers. Our payment solutions, including Bread Financial general purpose credit cards and savings products, empower our customers and their passions for a better life. Additionally, we deliver growth for some of the most recognized brands in travel & entertainment, health & beauty, jewelry and specialty apparel throug ...

Group 1 - Banks have raised interest rates to record levels and added new monthly fees on credit cards, and are now reluctant to reverse these changes despite the Consumer Financial Protection Bureau (CFPB) rule being vacated [1] - Synchrony and Bread Financial, major players in branded credit card issuance, have no plans to roll back the higher rates implemented previously, indicating a shift in their revenue strategy [2] - The CFPB's proposed regulation aimed to limit credit card late fees, which was estimated to save families $10 billion annually, but instead led to higher rates and fees for consumers [2] Group 2 - Retail credit card interest rates reached a record high average of 30.5% last year and have remained close to those levels this year, indicating a significant profit margin for credit card companies [3] - Both Synchrony and Bread Financial exceeded first-quarter profit expectations, leading analysts to raise their earnings estimates for the year despite concerns about a potential U.S. economic slowdown [3]

Core Insights - Bread Financial is investing $3 million over three years to enhance mental health support for children in military families, in collaboration with the Bob Woodruff Foundation [1][2] - The initiative aims to address mental health challenges faced by military-connected children, which are exacerbated by frequent relocations and service-related stressors [2][4] - The investment will fund local mental health service providers to improve access to high-quality care for these children and their families [2][8] Company Overview - Bread Financial is a tech-forward financial services company that offers personalized payment, lending, and saving solutions to millions of U.S. consumers [5] - The company has a history of strategic investments aimed at strengthening communities, particularly in supporting military families [2][4] Partnership Details - The partnership with the Bob Woodruff Foundation will utilize the investment to support local mental health service providers through grants [2][8] - More than 70% of the Foundation's Got Your 6 Network partners reported caring for families with children needing mental health services, but only 13% felt they could meet the full demand [2] Program Focus - The funding will support direct clinical mental health care, training for clinicians, and proven programs that promote overall wellbeing and social connection for military-connected children [8]

Financial Performance - Credit sales reached $6.1 billion, up 1% year-over-year, driven by higher general-purpose spending and overall transaction volume [18]. - Total net interest and non-interest income for the quarter was $970 million, down 2% compared to the first quarter of 2024 [18]. - Net income for Q1 2025 was $138 million, an increase of $4 million or 3% from $134 million in Q1 2024 [35]. - Income from continuing operations per diluted share increased by $0.13 or 5% to $2.86 in Q1 2025 from $2.73 in Q1 2024 [35]. - Total net interest and non-interest income for Q1 2025 was $970 million, a decrease of $21 million or 2% compared to Q1 2024 [35]. - Cash flows from operating activities decreased to $393 million in Q1 2025 from $447 million in Q1 2024, primarily driven by adjustments for credit losses [98]. - Cash flows from investing activities were $691 million in Q1 2025, down from $720 million in Q1 2024, mainly due to seasonal paydowns of credit card and other loans [99]. - Cash used in financing activities decreased significantly to $562 million in Q1 2025 from $975 million in Q1 2024, driven by debt repayments and stock repurchases [100]. Loan and Credit Performance - Average credit card and other loans decreased by 2% to $18.2 billion, while end-of-period loans also decreased by 2% to $17.8 billion, primarily due to macroeconomic conditions [18]. - The company expects 2025 average credit card and other loans to be flat to slightly lower compared to 2024 [28]. - The full year net principal loss rate is expected to range from 8.0% to 8.2% [30]. - Average credit card and other loans for the three months ended March 31, 2025, was $18,164 million, with net principal losses of $365 million, representing a net principal loss rate of 8.2%, down from 8.5% in 2024 [54]. - Total outstanding principal balances of credit card and other loans as of March 31, 2025, was $16,390 million, with a total delinquency rate of 5.9%, unchanged from December 31, 2024 [52]. - Provision for credit losses decreased by $25 million or 8% to $296 million in Q1 2025 from $321 million in Q1 2024 [36]. - The net principal loss rate for credit card and other loans decreased to 8.2% in Q1 2025, reflecting improved asset quality management [54]. Expenses and Costs - Total non-interest expenses were $477 million, a decrease of 1% from the first quarter of 2024, primarily due to reduced volume-related costs [23]. - Total non-interest expenses decreased by $5 million or 1% to $477 million in Q1 2025 compared to $482 million in Q1 2024 [40]. Capital and Liquidity - Direct-to-consumer deposits increased by 13% to $7.9 billion, representing 43% of total funding, up from 36% a year ago [24]. - The company maintains a strong focus on liquidity, with primary sources including cash from operating activities and bank credit facilities, ensuring sufficient resources for daily operations and growth [55]. - The company approved a stock repurchase program of up to $150 million, acquiring 2.1 million shares for $102 million during Q1 2025 [93][94]. - The company paid $12 million in dividends during Q1 2025 and declared a quarterly cash dividend of $0.21 per share on April 24, 2025 [95]. - As of March 31, 2025, the Common equity tier 1 capital ratio for the total company was 12.0%, well above the minimum requirement of 4.5% [107]. - The total risk-based capital ratio for the total company was 15.5%, exceeding the minimum requirement of 8.0% [107]. - Total stockholders' equity as of March 31, 2025, was $3,068 million, with common equity tier 1 capital at $2,266 million after adjustments for goodwill and intangible assets [109]. Regulatory and Risk Management - The company has taken steps to address IT governance issues identified in a consent order from the FDIC, with no monetary penalties imposed [113]. - The company continues to comply with capital adequacy guidelines, maintaining capital levels above the required minimums [104]. - Key risks include macroeconomic conditions, credit performance of customers, and potential increases in regulatory capital requirements [121]. - The company is subject to various regulatory and legal actions that could affect its operations and financial results [121]. - The company faces challenges related to consumer information security and potential impacts from cyberattacks [121]. - Future credit performance is a significant concern, particularly regarding delinquency and write-off rates [118]. Market and Operational Considerations - The transition of credit card processing services to third-party providers was completed in 2022, which may impact operational performance [121]. - The company is focused on managing the concentration of its business in U.S. consumer credit markets [118]. - There are ongoing risks related to the loss of demand from significant brand partners in a competitive market [118]. - Market risk exposure remains stable, with no material changes reported in interest rate risk or other market risks since the 2024 Form 10-K [259]. - The company has not experienced significant changes to its critical accounting policies and estimates from the previous year [115]. - The company anticipates future financial performance and operating results, but acknowledges that actual results may differ due to various risks and uncertainties [118]. - The company has no obligation to update forward-looking statements unless required by law [120].

Core Insights - Bread Financial Holdings (BFH) reported an operating income of $2.86 per share for Q1 2025, exceeding the Zacks Consensus Estimate by 36.2% and reflecting a 4.8% year-over-year improvement [1] - Despite a revenue decline, credit sales increased by 1% to $6.1 billion, driven by higher general-purpose spending and transaction volume [3] Revenue Performance - Revenues decreased by 2.1% year over year to $970 million, primarily due to lower finance charges and late fees, but still beat the consensus estimate by 1.3% [2] - Total interest income fell by 5.3% to $1.2 billion, missing the consensus estimate of $1.3 billion [4] Credit and Loan Metrics - Average loans decreased by 2% to $18.2 billion, attributed to a challenging macroeconomic environment [3] - The delinquency rate improved to 5.9%, while the net loss rate also improved to 8.2% [4] Financial Position - As of March 31, 2025, cash and cash equivalents increased by 14.4% to $4.2 billion, while long-term debt rose by 28.7% to $1.3 billion [6] - Tangible book value per share increased by 6% year over year to $48.91 [6] Operational Efficiency - Cash from operations decreased by 12.1% year over year to $393 million [7] - Total non-interest expenses decreased by 1% to $477 million, mainly due to lower other expenses [4] Capital Management - BFH repurchased $102 million worth of shares in Q1 2025, totaling 3.2 million shares after additional repurchases in April [8] Future Guidance - Management anticipates average receivables to be slightly down from 2024, with total revenues expected to be flat to slightly up [10]

Financial Data and Key Metrics Changes - Bread Financial reported net income of $138 million and earnings per diluted share of $2.78 for Q1 2025, reflecting a resilient business model despite macroeconomic challenges [6][7] - Revenue for the quarter was $970 million, down 2% year over year, primarily due to lower net interest income [17][18] - Average loans decreased by 2% to $18.2 billion, influenced by lower consumer spending and tighter underwriting standards [16][18] - Total non-interest expenses decreased by $5 million or 1%, driven by operational excellence initiatives [17][20] Business Line Data and Key Metrics Changes - Credit sales increased by 1% year over year to $6.1 billion, supported by higher general purpose spending [16][18] - Direct-to-consumer deposits grew by 13% year over year, reaching $7.9 billion, marking significant growth from just over $1 billion five years ago [8][23] - Non-interest income rose by $25 million, attributed to recent pricing changes for paper statements [19] Market Data and Key Metrics Changes - The delinquency rate for Q1 was 5.9%, down 30 basis points year over year, indicating improved credit performance [31] - The net loss rate was 8.2%, down 30 basis points from the previous year, reflecting better-than-expected credit trends [31] Company Strategy and Development Direction - The company is focused on optimizing its capital structure, having executed a $400 million subordinated notes offering to strengthen its balance sheet [7][24] - Strategic credit tightening actions are being implemented to manage credit risk effectively while expanding partnerships and product offerings [11][12][14] - The company aims to maintain flexibility to adapt to changing fiscal and monetary policies and evolving regulatory landscapes [14][26] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about economic uncertainty, including the impact of tariffs and inflation on consumer behavior [9][10][39] - The outlook for 2025 includes expectations of flat to slightly down average loans, with total revenue anticipated to be flat to slightly up [35][36] - Management remains confident in the company's ability to generate capital and cash flow, despite macroeconomic challenges [26][40] Other Important Information - The company completed a $150 million share repurchase program, repurchasing 3.2 million shares at an average price below tangible book value [7][25] - Total liquid assets and undrawn credit facilities were $7.4 billion, representing 33% of total assets [27] Q&A Session Summary Question: Insights on consumer payment behavior and credit trends - Management noted that while credit quality is improving, there is significant uncertainty in the economy, influenced by tariffs and inflation [42][44] Question: Unemployment rate assumptions and reserve guidance - The company has incorporated a 7% unemployment rate assumption into its reserve modeling, reflecting a conservative approach [57] Question: Discussion on late fee regulation and partner relationships - Management confirmed that discussions with partners have been positive, and changes made in response to late fee litigation are included in the guidance [58][62] Question: Factors behind improved late-stage roll rates - The improvement is attributed to wage growth outpacing inflation and better performance of newer vintages [66][68] Question: Impact of economic conditions on credit tightening actions - Management stated that while they are maintaining a consistent credit posture, uncertainty may delay potential credit unwind actions [86][88] Question: Capital management and buyback strategy - The company remains focused on responsible growth and will evaluate future buyback opportunities based on capital needs and market conditions [92][94] Question: Net interest margin trajectory - Management expects slight expansion in net interest margin despite headwinds from prime rate reductions and changing product mix [100][102]

Financial Data and Key Metrics Changes - Bread Financial reported net income of $138 million and earnings per diluted share of $2.78 for Q1 2025, reflecting a resilient business model despite macroeconomic challenges [6][7] - Revenue for the quarter was $970 million, down 2% year over year, primarily due to lower net interest income [17][18] - Average loans decreased by 2% to $18.2 billion, influenced by lower consumer spending and tighter underwriting standards [16][18] Business Line Data and Key Metrics Changes - Credit sales increased by 1% year over year to $6.1 billion, driven by higher general purpose spending [16][18] - Direct-to-consumer deposits grew by 13% year over year, reaching $7.9 billion, marking significant growth from just over $1 billion five years ago [8][23] - Non-interest income rose by $25 million, attributed to recent pricing changes for paper statements [19] Market Data and Key Metrics Changes - The delinquency rate for Q1 was 5.9%, down 30 basis points year over year, indicating improved credit performance [31] - The net loss rate was 8.2%, down 30 basis points from the previous year, reflecting better-than-expected credit results [31] - Direct-to-consumer deposits accounted for 43% of average total funding, up from 36% a year ago, while wholesale deposits decreased from 37% to 29% [23] Company Strategy and Development Direction - The company is focused on optimizing its capital structure and strengthening its balance sheet, evidenced by a $400 million subordinated notes offering [7][24] - Strategic credit tightening actions are being implemented to manage credit risk effectively while expanding partnerships and product offerings [11][12] - The company aims to maintain flexibility to adapt to changing fiscal and monetary policies and evolving regulatory landscapes [14][26] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about economic weakness due to declining consumer and small business confidence, while also noting positive trends in credit management [9][10][31] - The outlook for 2025 includes expectations of flat to slightly down average loans, with total revenue anticipated to be flat to slightly up [35][36] - Management remains vigilant regarding credit policy and is closely monitoring potential impacts from higher tariff-driven inflation [39] Other Important Information - The company completed a $150 million share repurchase program, repurchasing 3.2 million shares at an average price approximately 5% below the current tangible book value per share [7][25] - Total liquid assets and undrawn credit facilities were $7.4 billion, representing 33% of total assets [27] Q&A Session Summary Question: Insights on consumer payment behavior and credit trends - Management noted that while credit quality is improving, there is significant uncertainty in the macroeconomic environment, influencing consumer behavior [42][43] Question: Unemployment rate assumptions and reserve guidance - The company has incorporated a 7% unemployment rate assumption into its reserve modeling, reflecting a conservative approach [57] Question: Discussion on late fee regulation and partner relationships - Management confirmed that discussions with partners have been positive, and changes made in response to late fee litigation are included in the guidance [58][62] Question: Factors behind improved late-stage roll rates - The improvement is attributed to wage growth outpacing inflation and better performance of newer vintages [66][68] Question: Impact of economic conditions on credit tightening actions - Management stated that while they are maintaining a consistent posture, uncertainty in the macro environment may delay credit unwind actions [86][88] Question: Capital management and buyback strategy - The company remains committed to responsible growth and will evaluate buyback strategies based on capital needs and market conditions [92][94] Question: Net interest margin trajectory - Management expects slight expansion in net interest margin despite headwinds from prime rate reductions and changing product mix [100][102]

Key highlights First quarter 2025 results April 24, 2025 © 2 0 2 2 B r e a d F i n a n c i a l | C o n f i d e n t i a l & P r o p r i e t a r y 1 $970 million Revenue • Closely monitoring the impact of the new administration's policies including tariffs, trade, immigration, tax and deregulation, and the impacts they have on consumers and our business. • While consumer financial health was relatively steady in the first quarter, we will remain disciplined with our credit risk management given ongoing macroe ...

Core Insights - Bread Financial Holdings (BFH) reported a revenue of $970 million for the quarter ended March 2025, reflecting a decrease of 2.1% year-over-year, while EPS increased to $2.86 from $2.73 in the previous year, indicating a positive trend in earnings despite revenue decline [1] - The revenue exceeded the Zacks Consensus Estimate by 1.28%, while the EPS surpassed the consensus estimate by 36.19%, suggesting stronger-than-expected performance in earnings [1] Financial Performance Metrics - Efficiency Ratio stood at 49.1%, better than the average estimate of 52.4% from three analysts [4] - Net Interest Margin was reported at 18.1%, slightly above the estimated 17.8% [4] - Total Risk-based Capital Ratio was 15.5%, exceeding the average estimate of 14.2% [4] - Common equity tier 1 Capital Ratio was 12%, below the estimated 12.8% [4] - Total interest income reached $1.23 billion, slightly below the average estimate of $1.25 billion [4] - Interest on cash and investment securities was $46 million, lower than the estimated $49.26 million [4] - Interchange revenue was reported at -$83 million, better than the estimated -$96.84 million [4] - Interest and fees on loans totaled $1.19 billion, slightly below the estimate of $1.20 billion [4] - Net interest income matched the average estimate of $1.01 billion [4] - Total non-interest income was -$36 million, outperforming the estimate of -$51.58 million [4] - Other Non-Interest Income was $47 million, exceeding the estimated $44.74 million [4] Stock Performance - Shares of Bread Financial have returned -7% over the past month, compared to a -5.1% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Core Insights - Bread Financial Holdings (BFH) reported quarterly earnings of $2.86 per share, exceeding the Zacks Consensus Estimate of $2.10 per share, and up from $2.73 per share a year ago [1] - The earnings surprise for the quarter was 36.19%, and the company has surpassed consensus EPS estimates three times in the last four quarters [2] - The company generated revenues of $970 million for the quarter, surpassing the Zacks Consensus Estimate by 1.28%, but down from $991 million year-over-year [3] Earnings Performance - The earnings surprise of 36.19% indicates strong performance relative to expectations [2] - The company has consistently exceeded revenue estimates, achieving this three times in the last four quarters [3] Stock Performance - Bread Financial shares have declined approximately 21.6% year-to-date, compared to a decline of 8.6% for the S&P 500 [4] - The current Zacks Rank for the stock is 3 (Hold), suggesting it is expected to perform in line with the market in the near future [7] Future Outlook - The consensus EPS estimate for the upcoming quarter is $1.77 on revenues of $952.44 million, and for the current fiscal year, it is $6.50 on revenues of $3.9 billion [8] - The industry outlook is favorable, with the Financial - Miscellaneous Services sector ranking in the top 36% of Zacks industries, indicating potential for outperformance [9] Related Industry Insights - Upstart Holdings, Inc. (UPST), another company in the same industry, is expected to report quarterly earnings of $0.19 per share, reflecting a year-over-year increase of 161.3% [10] - UPST's anticipated revenues are projected to be $200.74 million, representing a 57.1% increase from the previous year [11]