Financial Data and Key Metrics Changes - Adjusted net income for the second quarter of 2025 was $149 million, with adjusted earnings per diluted share of $3.15, excluding a $10 million post-tax impact from debt repurchase expenses [5] - Return on average tangible common equity was 22.7% for the quarter [5] - Revenue decreased by 1% year over year to $929 million, primarily due to lower finance charges and late fees [13] - Average loans decreased by 1% to $17.7 billion, influenced by macroeconomic challenges and elevated gross credit losses [12] Business Line Data and Key Metrics Changes - Credit sales grew by 4% year over year, driven by new partner growth and higher general purpose spending [6] - Non-interest income increased by $3 million, primarily due to recent paper statement pricing changes [14] - Total non-interest expenses increased by $12 million or 3% year over year, mainly due to debt extinguishment costs [13][15] Market Data and Key Metrics Changes - Direct to consumer deposits increased to $8.1 billion at quarter end, up 12% year over year [9] - Delinquency rate improved to 5.7%, down 30 basis points year over year [21] - Net loss rate was 7.9%, down 70 basis points year over year [22] Company Strategy and Development Direction - The company is focused on technology modernization, digital advancement, and product innovation to drive future growth [9] - A multi-year extension of the relationship with Caesars Entertainment was announced, securing top programs until at least 2028 [10] - The company aims to optimize its balance sheet and maintain a strong capital position while delivering value to shareholders [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of consumer health and spending trends, despite mixed economic data [28][30] - The full-year net loss rate guidance was adjusted to a range of 7.8% to 7.9%, reflecting better-than-expected improvements in credit metrics [25] - Management remains cautious about potential macroeconomic impacts on consumer spending and employment [30][90] Other Important Information - The company completed a $150 million share repurchase program and a $150 million tender offer for senior notes [9] - The total loss absorption capacity was reported at 25.7% of total loans, indicating a strong margin of safety [21] Q&A Session Summary Question: Health of the customer regarding credit sales and loan growth - Management noted that consumer health remains stable, with a positive trend in credit sales growth continuing into July [28][30] Question: Capital plans and buybacks - Management indicated that capital priorities remain unchanged, focusing on responsible growth and potential buybacks when appropriate [36][38] Question: Top line view and NII progression - Management acknowledged that improved delinquency rates and lower late fees are impacting top line NII, with expectations for variability in revenue [43][46] Question: Growth prospects and capital utilization - Management emphasized ongoing investments in the business and maintaining a balance between growth and shareholder returns [49][52] Question: Trends in applications and approval rates - Management reported strong application flows and appropriate approval rates based on current economic conditions [76][78] Question: Impact of BNPL and new client conversations - Management confirmed that BNPL is part of their product offerings and highlighted a robust pipeline for future growth opportunities [93][96] Question: Competitive renewal processes and risk-adjusted returns - Management described the competitive nature of the market and their proactive approach to partner renewals, ensuring alignment with hurdle rates [100]

Financial Data and Key Metrics Changes - Bred Financial reported adjusted net income of $149 million and adjusted earnings per diluted share of $3.15, excluding a $10 million post-tax impact from debt repurchase expenses [4] - Return on average tangible common equity was 22.7% for the quarter, reflecting strong operational performance [4] - Revenue for the quarter was $929 million, down 1% year over year, primarily due to lower finance charges and late fees [12] Business Line Data and Key Metrics Changes - Credit sales grew 4% year over year, driven by new partner growth and higher general purpose spending [5] - Average loans decreased by 1% to $17.7 billion, impacted by macroeconomic challenges and elevated gross credit losses [11] - Direct to consumer deposits increased to $8.1 billion, up 12% year over year, indicating strong growth in this segment [7] Market Data and Key Metrics Changes - The net loss rate improved to 7.9%, down 70 basis points year over year, reflecting better credit metrics [20] - Delinquency rate decreased to 5.7%, down 30 basis points from last year, indicating improved consumer credit health [19] - The reserve rate for credit losses was 11.9%, a 30 basis point improvement year over year, due to better credit metrics [21] Company Strategy and Development Direction - The company is focused on technology modernization, digital advancement, and product innovation to drive future growth [7] - A multi-year extension of the partnership with Caesars Entertainment was announced, securing top programs until at least 2028 [8] - The company aims to optimize its balance sheet and maintain disciplined capital allocation while investing in growth opportunities [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of consumer health and spending, despite mixed economic signals [28] - The outlook for the net loss rate was adjusted to a range of 7.8% to 7.9%, reflecting better-than-expected credit metrics [24] - Management remains cautious about macroeconomic uncertainties but optimistic about gradual consumer improvement [30] Other Important Information - The company completed a $150 million share repurchase program and a $150 million tender offer for senior notes, enhancing shareholder value [7] - Total liquid assets and undrawn credit facilities were $7.7 billion, representing 35% of total assets, indicating a strong liquidity position [16] - The company anticipates higher marketing and employee-related costs in 2025 due to typical seasonality [14] Q&A Session Summary Question: Health of the customer and credit sales growth - Management noted that consumer health remains stable, with a 4% growth in credit sales and positive trends continuing into July [27][30] Question: Capital plans and buybacks - Management indicated that capital priorities remain unchanged, focusing on responsible growth and potential buybacks as capital ratios improve [34][36] Question: Top line revenue outlook - Management explained that improved delinquency rates and lower late fees are pressuring top line revenue, but they expect gradual improvements [42][44] Question: Growth prospects and credit actions - Management highlighted ongoing efforts to manage credit strategies dynamically, with a focus on improving loss rates and consumer engagement [66][68] Question: Trends in applications and approval rates - Management reported strong application flows and appropriate approval rates based on current economic conditions, emphasizing customer engagement post-approval [78][80] Question: BNPL and new product offerings - Management confirmed that BNPL is part of their product set, allowing flexibility to meet market demands and partner needs [97][100] Question: Competitive renewal processes and retail partner penetration - Management discussed proactive renewal strategies with partners and emphasized the importance of deepening relationships to drive growth [104][106]