Alliance Data Systems(BFH) - 2025 Q1 - Quarterly Results

Financial Performance - Net income for Q1 2025 was $142 million, with diluted earnings per share of $2.86, reflecting a year-over-year increase of 5%[10] - Revenue for Q1 2025 was $970 million, a decrease of $21 million or 2% compared to the previous year[10] - Net income for Q1 2025 was $138 million, showing an increase from $7 million in Q4 2024, representing a significant growth[67] - The company's pretax pre-provision earnings (PPNR) for Q1 2025 were $493 million, compared to $390 million in Q4 2024, indicating a rise of about 26.5%[69] - The company reported an adjusted net income per diluted share of $2.82 for Q1 2025, compared to $0.40 in Q4 2024, marking a substantial increase[67] Credit Quality - The delinquency rate improved to 5.9%, down from 6.2% in Q1 2024, while the net loss rate decreased to 8.2% from 8.5%[13] - Delinquency rates peaked at 6.5% in 3Q23, compared to a 15-year average of approximately 4.9%[54] - Net loss rates reached a peak of 9.4% historically, with the current rate at 8.0% in 3Q23, reflecting ongoing credit quality challenges[54] - The provision for credit losses in Q1 2025 was $296 million, down from $417 million in Q4 2024, indicating improved credit quality[69] - The company expects to see a negative impact on net loss rates in 2Q25 due to the effects of recent natural disasters, estimating a benefit of over 20 basis points in prior periods[58] Funding and Deposits - Direct-to-consumer deposits reached $7.9 billion, up 13% year-over-year, now representing 43% of average total funding[8] - End-of-period direct-to-consumer deposits increased by 13% to $7,922 million in 1Q25 from $6,984 million in 1Q24[43] Loans and Sales - Credit sales amounted to $6.1 billion, a 1% increase driven by general-purpose spending[13] - Average loans decreased by 2% to $18.2 billion, attributed to macroeconomic conditions affecting consumer spending[13] - End-of-period credit card and other loans decreased by 2% to $17,815 million in 1Q25 from $18,185 million in 1Q24[43] - Credit sales increased by 1% to $6,106 million in 1Q25 from $6,030 million in 1Q24[43] Expenses and Efficiency - Total non-interest expenses decreased by 1% to $477 million in 1Q25 compared to $482 million in 1Q24[36] - Adjusted total non-interest expenses for Q1 2025 were $475 million, down from $536 million in Q4 2024, reflecting a decrease of approximately 11.4%[67] - The efficiency ratio for 1Q25 was 49.1%, compared to 48.6% in 1Q24[43] Capital Ratios - The CET1 capital ratio decreased to 12.0% in Q1 2025 from 12.6% in Q1 2024, while the total risk-based capital ratio was 15.5%[21] - Common equity tier 1 capital ratio increased from 11.8% in 1Q23 to 12.9% in 3Q23, with a rolling 4 quarter average of 12.9%[51] - Total risk-based capital ratio improved from 13.2% in 1Q23 to 14.2% in 3Q23, with a rolling 4 quarter average of 14.8%[51] - Tangible common equity to tangible assets ratio rose from 9.1% in 1Q23 to 10.0% in 3Q23, indicating stronger asset backing[51] Future Outlook - The 2025 outlook anticipates average loans to be flat to slightly down compared to 2024, with revenue expected to be flat to slightly up[26] - The company anticipates continued challenges from macroeconomic conditions, including interest rates and consumer spending behavior, which could impact future performance[64] - Forward-looking statements indicate that actual results may differ materially from projections due to various risks and uncertainties, including regulatory changes and credit performance[64] Strategic Initiatives - The company plans to strategically invest in technology modernization and product innovation to drive growth and efficiencies[30] - The average daily balance calculation was revised in 2024 to align with industry practices, which may affect future financial reporting[58] - The company continues to evaluate its operations excluding the volatility from repurchased Convertible Notes, focusing on adjusted metrics for clearer insights[66] Share Repurchase - The company repurchased a total of 3.2 million shares, completing a $150 million share repurchase program[8] - The company repurchased a portion of its outstanding $316 million Convertible Senior Notes due 2028, impacting total non-interest expenses and net income positively[66]