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

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].