Bread Financial (BFH) 27 Jul 232023 Q2 Earnings call transcript

Good morning, and welcome to Bread Financial's Second Quarter Earnings Conference Call. My name is Emily, and I'll be coordinating your call today. At this time, all parties have been placed on a listen-only mode.

Following today’s presentation, the floor will be open for questions. [Operator Instructions]

pleasure Mr. my now is to introduce It Brian of Investor Bread Financial. Relations at Vereb, Head yours. is floor The

Thank the on Copies earnings section you. of our release and be of can the reviewing be found website. the Relations slides Investor we will

Andretta, of today, of Executive Bread and Beberman, Financial. Ralph Financial; and President and Executive Chief On the Vice have Chief President call Perry we Officer Bread Financial Officer

other of some the begin, on with Before SEC. assumptions, to statements call like of that the in the to filings would you today’s These comments are and I and may we and management’s the questions uncertainties the remind some responses your statements. and and contain described on made earnings to company’s subject risks current forward-looking expectations based are release

call, are reference Reconciliation quarterly for in information financial Also certain provide believe GAAP speakers investors. earnings we website posted on our will to non-GAAP included will measures today’s Investor which measures, Relations on at useful breadfinancial.com. materials our of those our

I that, Andretta. the call to would turn Ralph over to like With

of senior everyone to Trust. Thank to tenure Sinclair, the good Services and veteran morning joining you, Northern Joyce Directors. Joyce completed the recently a to welcoming successful Financial call call. start I'd Board today Brian, our most with by a like executive XX-year

forward as look thrilled perspectives and to We insights Board's our on compensation the well the of member risk Board and brings as committees. to are We capital extensive Board have her a value serve experience. our through human and she as to

achieved million. towards by parent long-term and another for more second reducing debt highlights the our milestone financial key than quarter, on our the quarter X. the $XXX with We refinancing slide Starting goals unsecured in major

meaningful a priority Our management leverage another and quarter reduce to the forward has this in took regard. company made that step our team it

end. at share value $XX quarter book Tangible per exceeded

for year portfolio. of period versus we improved our the shareholders provider continue services growth for a technology tangible a ago. leading we broadest private industry's will Technologies, announced the deliver value we Earlier credit with a XX% provide Importantly, Dell program to and with technology today, same book label

definitive portfolio will of quarter a is in The consumer our this fourth Dell close include and the of market. acquire program consumer expands payment the year. broad agreement The expected Pay position solutions to Dell's to technology suite in

partners. will continue and upgraded industry sophisticated services to our and capabilities leverage financial analytics our deep technology We to data drive value expertise, for

sales. and have customers' including and our time Moving our on to interest consumers macroeconomic to income headwinds, weighed rising rapidly the economy. influence inflation, impact tend job tightening slowdown prolonged a in including Numerous market rates Americans, to a credit disproportionately decisions. moderate headwinds spending These

are In like we certain beauty strong continued and entertainment, seeing travel growth. areas year-over-year and

declining However, has specialty in spending apparel, like softened year-over-year. other areas

tighten facing pressures the continue macroeconomic to increases ongoing the proactively responsibly and Given underwriting to consumers, we by pandemic, prudent. exposure and management. approval decreases line proactively rates, our credit tightening line were pausing line implementing and our we prior Even managed

monitor will and economic adjust and changing consumer We behaviors health to closely conditions. continue spending to

X. slide to Turning

growing investing are balance data and sheet, business. technology and XXXX in responsibly, for areas strengthening strategically focus current Our our our optimizing

Our management value. driving sustainable, committed that will long-term deliver profitable team is growth to shareholder

top considering our pursue both our integral long-term our be partnership to that priority selectively balance portfolios partners accretive is new enhancing strategy. with to opportunities sheet to and and continue We novo will business, existing de a and remains

additional flow continued strong future including flexibility utilization, distribution. made and free we quarter, capital cash coupled capital capital our additional and have generation, the with I sheet for growth, and unsecured As financial mentioned, management actions reducing resilience debt balance enhance supporting our in debt further business building parent our second progress provide reduction

credit liquidity rate our improve to balance position, manage risk our build capital sheet strength. our to funding and We and build and interest refine will proactively continue our structure

continue and portfolio. On platform and leverage capabilities gained front, from system conversion, innovative product our we expanded to the technology enhancements data

We enhance have learning to line successfully machine collections. utilized to underwriting, risk for and management credit many build years strong models

in self-service range We continue deliver and experiences data exceptional invest innovations of capabilities customers. technology to to digital we analytics customer and value strive our from for a will continually and as to

goal our our efficiency support expense is and Our in to growth achieve to reinvest returns. continuously to generate targeted business responsible

years X since Starting resulting funding. prudent balance the actions company. past the sheet from highlights the financial with I've Slide includes management over joined three

We broaden quarter our in our ability deposit $X.X growth objectives billion we growth continued remain with of deposits further funding fund as to quarter have and direct-to-consumer deposits since XXXX have diversified reached direct-to-consumer We with at our base going efficiently end. base growth forward. consumer from of $X our billion the in first confident long-term

convertible and to As offer plan successfully made credit, included our board steps company approval dividend notes our the executing debt mentioned previously, progress parent for we million great have refinancing our loan reduction. parent executing receiving our quarter, a second the debt facilitate and tender revolving offering, of in line $XXX bank completing to term

since we down $X.X more by our than result, reduced XXXX, paying billion. a have XX%, As debt parent level

the since than TA to quarter have XXXX, ratio. Additionally, our first more of tripled we TCE

the in day with our to deliver responsibly our value basis XXXX. points These capacity CECL in rate balance significant and rate long-term demonstrate three over while loss managing reserve one Finally, quarter, strengthening reserve business XXX success credit our a our remained our to shareholders. consequential the sheet years we for last absorption our rate past than higher steady expanded

progress we we our achieved. and pleased with Overall, are results second quarter the have

balance our environment efficiencies new achieving and through positive navigate partners, in our to with sheet, a confidence continue providing experience. customer associates strengthening winning gaining goals and tenacity changing a Our

and that Together, to Our time. leadership focused profitable their hard achieve dedication many performance their work over behalf on of appreciates shareholder team stakeholders. sustainable, remain value growth on builds driving our our we

turn I'll the financials Perry for quarter. over it Now, to discuss to the

partner sale Financial's $X.X credit were continued sales of quarter, coupled BJ's growth. XX% first This offset highlights. X new year-over-year moderating with the partially was the to financial portfolio in the Fred Ralph. driven Slide provides quarter consumer by spending. Thanks, by our down second our billion,

past taken year Additionally, and uncertainties affecting of to assignments and have for base. portion economic the line both action tighten our a and new economic larger the credit the customer our we given underwriting pressures existing customers responsibly over

Average of in the mostly consumer loans the end-of-period rate as increased X% driven of the as partners by respectively addition BJs well in X% and These by payment portfolio. were offset sale the increases new further moderation year-over-year.

up average losses Total in credit noninterest and expenses interest quarter. increased quarter higher higher the for was income, reversals offset resulting from XX% $X the increased gross partially of resulting Revenue by X% billion noninterest balances and year-over-year. from card fees

of Looking and XXXX, X. Total more from with year-over-year. interest income quarter X% expenses nearly flat declined Total the XX% was NIM detail in at of yet financials sequentially. X% second increased from second on quarter up the noninterest slide the XXXX net

partially the of technology increase compensation and was support benefits increased year-over-year investment to capabilities. The in result and employee both costs due to digital higher our hiring

We collection as processing higher costs well as including elevated also carbon incurred costs, fraud.

expense driven from credit The sequential tightening was and lower and sales lower decline in expenses variable costs strategic efficiencies. by

and costs. an sequential the efficiencies approximately expense the third quarter, depreciation amortization resulting in including expect decline in in continue expenses We $XX lower in certain million sequential third to quarter,

XXXX, expense lower operations versus for was the year-over-year. for in a of the PPNR can the up be while continuing credit on Additional quarter details from found of $XX quarter second reflecting slide losses marginally the Income million appendix increased provision drivers deck.

remain causing prime continued Turning line by pressured upward rate, slide reversal were continue the to margin and basis trend our to of expectations. related XXX interest credit higher to Loan the an rise net Both an Funding yields benefited from and year-over-year. in costs elevated increase and yield loans with up fees move price interest points loan in our X. losses. increase, to Loan to tandem. yields in in variable

funding can is to you sale graph, maintaining this of the our to secured actions see continue result grow while quarter The to our right a portfolio direct-to-consumer funding. February. As of deposits flexibility BJ's mix our in borrowings secured we reduction of in and the bottom wholesale on the improve

and pleased are our in made progress certain debt. the the of including parent quarter with reducing extending our loan we our unsecured maturities line credit, debt As discussed, term during revolving debt Ralph plan, refinancing and our we executing of

X. Slide to Turning

We are funding have we deposits. from direct-to-consumer our diversification success in proud growth and the achieved of

balances Our current over direct-to-consumer which are quarter represented average grew XX% billion. funding deposits deposits, These ago. the standing XX% year-over-year with at $X.X of total billion a mix to FDIC year XX% for insured versus XX% our $X over

positive net of balances each the second experienced inflows during Notably, week deposit quarter. direct-to-consumer we of

in We'll deposit As online we yet grow our we opportunistic, the seeing to are prudent more remain expected, as direct-to-consumer funding. competition continue space.

rates competitive low and we stability. of maintain offer credit costs, Given very and to to the portfolio characteristics are our drive repricing deposit balance able gathering growth card

XX. credit to Moving slide on

was quarter impact the quarter the delinquency processing loss down Our as second rate transition services credit our from the X.X%, card of rate slightly the net from abating. expected, The was the for with the first of estimate services. transition by X.X% processing points to our quarter. for second related XXX customer the card quarter last accommodations made elevated from approximately rate We basis the was year credit

indicators of economic remained consequential on in showing We XX.X% challenges conservative credit impact of signs rate key maintain model flat anticipation weighting reserves. forward-looking stability. credit and macroeconomic of scenarios ongoing our reserve intend as began sequentially macroeconomic to The at a reserve in the our

of now believe our see for and we we portfolio now of the both terms steady hold reserve characteristics loan period what will and the may credit of time. the outlook, quality internal rate From have peaked macro in a

credit first risk modestly improved our score the from Additionally, distribution mix quarter.

portfolio. remains percentage tightening mix prudent Our cards score a the pandemic materially larger levels mix of a and XXX PLUS CO pre product our diversified more branded representing proprietary portion cardholders credit above with of with given credit

to a continued actions. number by of resilience Turning taking enhance We've to slide our XX. financial

his the of to balance conditions. As risk remarks, economic our we sheet protect manage credit in challenging Ralph continue more to mentioned our proactively in face

strong closely ensures managing the appropriately risk are the take. for peers. above our compensated risk We we margins Consistently monitor generating goal tolerance our projected our of returns with risk-adjusted we

line continue trade-off credit when pausing necessary. line tightened risk responsibly manage to decreases return and Additionally, implementing which by includes we credit, credit increases

in disciplined our the remain credit drive our We sustainable management value cycle. through to risk and ability economic confident full

We are slow more responsible economic uncertain growth if during even committed means growth, delivering in to it periods. profitable

levels. touched XX. Moving in to we've slide and on achieved metrics debt the our Ralph capital notable already improvements

XXXX, substantial opportunities made since improvements strengthen additional have our sheet ahead. have balance to still we we While some

closer our peers, Specifically, double leverage today. total company aim of our where are we to from those our ratio reducing capital we build metrics while to

achieving balance these with investments our capital priorities. will We targets aligned business growth our in and responsible continued with

growth we XXXX. in will years Our actions long-term over provide plans, the to Investor past detail flexibility greater Day support our financial three which our during

on graph XXXX our value the book slide the I would the to per side tangible highlight of moving right share our Before outlook, shown as XX. in improvement on

We to generation, strong common quarter expect a in value compound our tangible given XX% annual value cash have book of growth further we the time. to XXXX, flow continue first rate generated since our per our over grow tangible book share and

growth, a initiatives to combined balance that remain valuation our build long-term This our company value. continue a and yield in value. tangible a with of resilience and to confident book sheet execute We improved strengthened we'll strategic financial meaningfully our should direction is multiple on

slide XX XXXX. the full provides Finally, outlook financial our for year

and Our growth as financial consumer of has tightening. spending sales targeted reflect updated both credit our been a slowing to outlook self-moderated result

spend, are consumer expected consumer this year, fourth our acquisition, expected credit based in of current mid-single-digit outlook new to low Dell is strategies full pipeline, to portfolio the the in of year. the and economic latest grow quarter loans including XXXX to close which average credit the the on the announcement relative impacted range For partner to

in drive less is Dell sweet than $XXX be portfolio million portfolio and strong That which risk returns. acquired spot our projected expected to acquisitions, adjusted for is is to historical

excluding full slightly sale growth growth net a our on from with XX.X%. sale similar the to the XXXX XXXX, interest We expect loan portfolio year revenue above rate average margin to full gain year in be the of

second the first improved to efforts third total the half lower to our the driven continue lower operating expenses intangible to half expect XXXX lower modernization expenses year than technology be We with quarter, be of to by efficiencies amortization related expense. and quarter than second

run the With below expense second previously in software quarter to forecast life a project we reaching million amortization capitalized development the the quarter. depreciation and third of per a end decline quarter, in to rate $XX its useful

in net the our refined now XXXX mid-X% credit have We range, the as transition services. be rate year we rate of card full the to our outlook processing from impacts will anticipate loss low including

rate headwind net these a While forms lowering rate for by in equation. the near-term XXXX's balance our future credit which the line should loss create remainder tighter of the underwriting denominator management loss benefit loss loan our and performance, actions projected

the assumes gradual outlook inflation for increase but unemployment a moderates with Our XXXX. in rate remains the elevated of remainder economic

third the ally reflect month representing anticipated around impact transition processing services. which is net loss our credit expect be We X% to rate from last to of quarter card and the the that

effective items. normalized XX% year in remain the full tax discrete rate expected Our to is with quarter-over-quarter to range to certain XX%, of timing variability of

morning, this Board approved to for half of that a count dilution repurchase and intended Finally, second bringing offset back XXXX. diluted authorization we share our weighted the average announced count the share shares closer share in to XX million XXXX

long-term while for challenging we value through our closing, trade-offs prudently are and managing drive to macroeconomic environment a In invest risk stakeholders. return continuing strategically

questions. Operator, up now ready lines for open we are to the

Sakhrani KBW. comes the question please first Our Sanjay, line Sanjay from of Instructions] [Operator you. today Thank ahead. go from

good a results tough backdrop. morning Thanks. Good in and

for questions Ralph. First

we're late partners? level impact Maybe your fees. As much seems out an same it from what as rule you're kind proposal. us to and feedback final it seems give around just of plan this the update the you getting preliminary could moving offset on the Pretty the at towards

ways Yeah, looking We've themes opening looking while a chime changed. at alternative -- Perry so for I been this the to our haven't so and to with look at we display anticipating now, organization looking credit. We're Perry. gap let APRs. continue in just credit the close in. and we do We're that I’ll look move are that the we things and such at at as fees line underwriting on as we've all add, been looking to forward. we'll for for beginning continue where draw things other to Anything at we're Those at,

likely aware can associations, what No, industry you any by to something you've I probably before are and be was of you're new in going probably become that rules to those rules rules expect already expecting heard the to October, a in process challenged similar in the aren't when say effective. result final, lengthy court

and Ralph talked working economics partner throughout things think impacted to is our in sure not different are team about objective from as to that this. but is what's this partnership. our all We're partners that with the I the called try together this, really make closely a

diminishing a just assumption, you bit. us then And your you, but also seeing lot in for terms follow-up Perry, slower assume a growth TCE you up ramp you And point demand a driven by of this return. maybe you capital just it is capital what small that then -- tightening Okay. the do I'm of being loans? the I for It's the positive just could actually help ratio? think about the slower growth, box Thanks. a return, at are is right or little step, curious the can -- good the

Yeah.

with talked by own key a the we their things outlook loan think credit they're our are two consumer the impacted on say combination I'd to tightening, inflation, related the people about about most self-moderating also things. we who One, you spend. and when So, gave the it's growth. but of economy

seeing that's are some spend, built slowing our we outlook. moderating and So into in

when loan as So things can those of periods the that this it's percentage elevated at have temper a that combination impacting you two growth gross growth time. by, are point a losses say, of also well

down balance priorities Ralph in pay we continue the clearly targets, growth make improve I our As continue are. business. sheet, strengthen ratios the in past those capital, support the think what to capital we set to it capital relates has debt, to going our capital stated use very returns, sure We're as our

plan, around our $XX keeping that good our and more than this million is housekeeping call we'll count nothing already really, So share in range. capital and what repurchase is

Thank Great. you.

ahead. Napoli comes William question Blair. Robert go Robert, from next with Our please

Your line is open.

Good you. dramatic And morning. really pretty the substantial. the congratulations Thank on appreciated in sheet. That's improvement balance

a the What Ralph on charge-off your gives cycle. It kind ago sub now. and with So you your actually X% that? little has X% -- become subprime. you to bit in confidence of reiterate like from presentation, mix your me through you're -- your of couple What more in years above comfortable do we're a looks rate Perry, the

just I of cycle. charge-off to So confidence you like a that how in have a rate through understand would type

Yes.

look trough-to-trough, think a it we've the from to evaluated you is the years. XX when can I XX-year cycles way about cycle at XX when be a think cycles, to and through peak-to-peak,

So you're going you're going to when when average have cycle – the of through periods X%. it run

then you’re going you’re and have below above to quarters where you’re You’re when X% have and X%. years – years years

to continues to compared we where profile were credit Our pre-pandemic. improve

which back, portfolio, mix And some that we greater in noted, in a ago, of had a the year when movement our was look just you you BJs there. say,

a better-than-average had that So score. credit

So in, set partner each managing credit are profile, has coming X%. time out, this over to partners a coming new that of we that different achieve but

we economy really, be a below in blend below will prolonged when is going come X%, improves. back be on terms then out. back dependent much So to so you or X% the at of when period that And

hear I low. I but unemployment pretty -- mean is you.

I know does a come today that than nice future. Dow pipeline is to portfolio? And mean of is with win -- Dell business? unemployment we the of potential commentary it see Does that's in I new a But lower a on just and So the on kind maybe challenge. don't DEP. much get the

spot. Yes. Ralph. with This comes is a Dell around sweet portfolio our

of array products can we are line million the up have consumers' down because and really to we're one that onboard robust, very the all up The robust excited $XXX about for $XXX of needs. now those and from with the things and portfolio the portfolios and partners very million line it's an So down the address in novos and to fourth that and compete is portfolios excited we can them remains above quarter. pipeline de we that

We're and to So RFPs a of development we're about getting lot business to invited be it. excited strong. continues

right follow we've up want I that point. for right is what's That's unemployment elevated about thing persistently a inflation is past about to on talked level year, and your that consumers driving are point back loss their up And XXX. fair on And the consumers earned the is year rate now recently now. that inflation ago. years and what our $XXX that low ago experienced to of absolutely to Well, a the think and from American pay. experiencing, monthly their about the consumers $XX, right? up pressure I putting mean X bill what's you ability if $XXX,XXX that's average the have high

unemployment that's problem real and the So is income low, inflation and Americans. moderate is while persistent inflation lower impacting

what that's you the then and control So they that that inflation are would outpace is going is inflation wage inflation then is And in and that's we're the so -- Fed give what on what eases all can able to put focused to consumers. the growth relief. relief consumers expect to doing, get fill

and So that's one periods these different different this causing you're cycles, really all are the economic is in pressure. when inflation-driven

will consumers. expect unemployment that, that earlier, I but expect may then relief that's it of I So tick yes, impact. And replace over time, don't could for some what come to to our I inflation a up some said create broader down, compounding which be

you. Thank

in on business loans? view of of What's analysis of the a effect your effect Just the from to loans. student repayment sneak your X more, your student

Yeah.

that is around We and action as with X/X to less the good monitor administration to we're something line can't see that. that underwrite have we I'd portfolio -- than but relief debt what they some up sight ways have we necessary. what The we to -- is loans. we customers, give then forgive who is And there So outright. to watching. our loan their other have performance of while to consumers. a we And say student that's think can we going expect know ruling what happened student take loan, a student come with working of when that I happen

of I payment rights requirements think determined seeing of the percent minimum the you're Department payment discretionary a their in within how as Education of are recalculate income. terms has to

then pay they of for So do they're at, and who have XX discretionary income or making people it. to the -- debt down student and years X% at to from look how what it $X able wage to moving income to minimum XX% then XX hey, waiving for calculate of entirely that per people

it's to don't going I actively think have large monitor. So it's impact, we a will something but

you. Thank

question America Our of Operator: from next comes Bhatia with Merrill Bank Please ahead. Mihir Lynch. go

open. is line Your

you're want you just my And changed morning. Good I sounds second start quarter. specifically, the from like with in slower is for that's there, data growth. And then taking during you what quarter something tightened in you it loan sales lower Is which seeing right? this Maybe questions. second to thank you the giving to Because And leading go the the further underwriting quarter, pause? growth. like there

the guidance. what's changed in your also talking sounded I like in past there. different you in there's Just months, what your Again, -- what's data to But most X denominator upticked months your credit You So seeing your or changing in in most seeing? think some people Are just ago quarter in are a think own effect I guess like you're investors second expectations? X the just little right? partly versus it up trying today come below what understand landing, because something macro, soft I data? something

really good Yeah. question. a It's

that with economy how that an then how credit the start think And out we're how broadly that going through we of on by about and what's informs and play so then more telling let performance actual itself seeing me way consumers. -- the

and the look, when the economy we So is consumer think about we think the economy, resilient.

some at retail year-over-year March, X%. with up the look the to they're signs start in And X%, while and lot if that's they're since the inflation But economy that persistent US are of X% how to sales with only steadying even terms of starting showing signs north of we'll So I headwinds mean improvement, out we with slow. is of a are there's of that. uncertainty and dealing there.

concerned economists you a think spending XXXX. by real means recession a about then the back back that So significant that's was of since to were preempted point, down. That's And before lot is potential it because level pandemic. the that lowest

inflation remained time, during of so this And period it's elevated, while been has improving.

they're about think and still food, up year-over-year. you significantly If shelter

to you headlines made that if out there. coming. We're today. make about more their monthly in about more and layoffs much consumer There's XX,XXX how think And seeing average they're some the paying comment I bills

pull You Consumer and in we see you're June but to interest news fell wage outpace of of starting sentiment of XXXX. sentiment the April on May, the weighing time starting through. impact that time first higher consumers. for that improved since okay, yet rates But period had see, are good growth February is inflation the to compounding effect over is

while job terms that's and forward So sounds market both stock the is the in steady, of that market good. market,

those consumer of So the month sentiment factors to are June. in improving

we we're sales seeing and said, to pressure and That our partners. in July in hear listen

So economy, in Americans lender, are conditions quarter. economic Americans. Modern full contraction in a where we've all And about middle spectrum income talked a I third middle-class of the as than times right? the bit a affected the more is I'll us caused think kind little upper think about many of this about that's by past the you say,

So most things up. shelter these and of tell way depleted a month It's I prices due that who savings. people to make are cohort there cost growing to folks food the out their have of the their every are struggling

across they're risk doing but feeling consumer through customers. groups, exaggerated the is So And all we're that we're they lower to pressure observing this, work score happening they're spend. adjusting can the consumers observing the for their but the slower and are really best spend

back credit we we're doing pullbacks way, quarter. watching. just along our credit then we're getting line is the pulling what into those line a looking But And sight gives better like. we're year the that's not started half pullbacks as into more of So of and compounding back, effect demand this with of now of coupled the us consumer sight what like actions

this need honestly, spending. remains where the type resume a steady prolonged these customers, of robust I growth employment And outpace wage period for to think, inflation with household we

was While be. what they're we're many being it And growth. more a we've just stated I said that than on we and saying we're we're thought spending, times, -- little to Ralph tempered it's focused going still responsible

appreciate In I about I helpful wanted question. who you're you think the for it answer, are said not on quickly I to late think, to trying us. the up quite rule. just I impacted I on economics fee something make follow -- you No, -- that. was sure Perry Can partners' Sanjay's that It's on by partners, like for to are maybe the paying expand to how issue? Thank to guess, are your I discussion attention willing changes about make some program account take on with the -- How How they opportunity they are expand they the to just more, to they much making are thinking it? just you. it? think the

Yes. say productive having that discussions we're partners. is What I would the with

perhaps those contractual even think fact going -- pricing adjustments, make some to that I to of some we the changes Ralph or they the with appreciate have changes, and ones that mentioned. there's without to have could sale. would their may say, to contracts, the I'll the we underwrite. we're mean restricting credit, enable impact own that of also our ability then people reduce to, some And And able which

probably they conversations look are each those different partner. So, for

but of it none to each like trust, jointly understand us others. And starting it partners that's it. impacted looks the rule proposed different -- something again, are partners to change working mitigate we by how rule I they're be I for than change figure out and I included, to do so -- think that partner. all think don't proposed better going this Some more mean

So to continue we're lend customers serve. the they able to who to

my for Thank Okay. question. taking you

Stanley. with of Jeff go the your from ahead; Morgan line comes please question Jeff next Adelson The is open. line

morning Appreciate my Hey here. question good guys. taking

in wanted under Just the to understand a your hood little what better portfolio. you're seeing bit

bit a maybe been guys income a lowest credits lowest has there are that that? quality, little think seeing a to you bit. of narrative I Are the stabilize starting

you there. maybe percentage a ago? low know, Maybe versus last or an pay you borrowers then just And to doing on what Perry, year more an now maybe give on alluded update us can a the on min some pressure internals I quarter specifically, your mid-income just update the consumer. of are

at for guide about look our rate you our us basis delinquency is points where Yes, which I being stabilization, I quarter confident the rates, be in we're -- able why to to to XXX at second below. thing is feel when loss think look at look seeing best the

quarter are still sight look third points when our quarter mean the rate continue quarter. loss first loss quarter second I ratio, compared line because into Payment XXX formation. you to we rates at got we where below come to basis down of of delinquency this the

that the we've Again, give hopefully improvement something when continue actions of that elevated. seeing But these do looking to you inflation we we're taken. at we're is certain remain that I bit a some just But relief. things of or when it they think and is watch just look it, continue to at do and credit little because stabilization going part of to are moderation monitor you categories, the some in

So this. just very we're watchful of

of the think in is to of in distorting the kind just then of far continuing And before? Okay. way terms growth year-over-year and that within noise how in the said your for to is I so how about just spending, any get But and sense consumer trying July to of I of think retail of are like seeing trending spending sending sales you're the XX% about know decline. still BJ's BJ's trade your book guess, consumers you weakness down, whether front. they're know kind comment a some better July. I kind

Ralph. Yes. This is

perspective, book. it put spend, high let's high in BJ's was a transactor think I

are effects the that those that's And seeing. what you're so --

We coming the on. new as seeing have growth came some they book. partners We're on with new partners

they move see accelerated with those growth So, forward. partners you'll as

softer. spending in little was I they're that spending turned June. So, is in We've the June, self-regulating. but are still softer little was see corner spending, consumers than July What a a

with spending which good they're in thoughtfully I think is thing. of So different a way, a instead spending

So time they're with and have of high their inflation in period a managing they interest high budget when to rates.

So spend. I will some partners, expect But a new as period that on of see we we for bring continue time. growing

Thank you.

line please of ahead. question Our from Bill next with comes Wolfe Carcache go Research. Bill, the

internally? metric the enterprise-level great to there XX% but the your do it'd follow to of a commentary Ralph at you targets close, The range capital like you up tangible are have most think guys in how comparable growth CETX you morning, but you hear and you Good your been to tend getting impressive, are? that Perry. about your from you. Thank to seems on CETX be level? I peers. equity in enterprise common closer building around your It close think peers has wanted Is

look, Yes. it, right? we're I risk-based mean, But closing binding us, in constraint. is capital on our our for total

based something for getting internal like that's to we has -- so stress and the for target their continuing rate on of to what's peers, slightly their that company us. a say, profile And every target right remember, we business. the models closer And evaluate different are

ratio, where something room we leverage double progress, we're it's more further. look, go a and you've -- So well to bit getting and we're that improve have still we to as close. down little paying But which tremendous as means as made noted, continue debt

peer at greater Right. that clarity levels. have on And puts meat restart the once just it of we seems more of the you're kind kind the like it of buyback

to Thank but math And so be for close, able suggests provide would you. be there's That back certainly, guys to that was that appreciated. be the something just envelope you it some try way that me. any if like great you're going that might forward, it'd of much

you. Thank

Our next go Dominick. of from with line question Gabriele Oppenheimer. comes Please Dominick ahead, the

line Your is open.

for question much so my good Thanks morning, and taking everybody.

in talked would it's -- head start fees a recoup three fully that quarter coming follow-up. excuse you more revenue you. late got really of a how to fee late or a think on Thank I offset of a about measured yours And down? “years”. you've this, two take offsets impact, just the the So some peer have recouping this to years is me, through you think of Do that wondering I was about timing? I guess if

Thanks, Dominick. way the as APRs we increase think and for as Yes, think the months to it that we hierarchy APR But has and I first dynamic accounts customers, the do across-the-board and -- lever, in highest goes start to may the new it about rules, low. payment pays which happen? as later. then effect existing CARD really say levers then you announcement, the the the the we soon the think you off APR Yes, if would Act increases hear think XX as as we soon you So pull, right? goes of

on a happen balances. higher bit burn-in APRs to of So to benefits it's take the period a of that to account realize the going existing for us for

new that soon New book benefit accounts, you the you get as as account.

different. So a little for those, they look

speaking base of mitigate. So take what your determines in -- phase-in and that to the really, it and what really to amount through new volume portfolio how is think, I the that existing accounts the they're this is is it would long of the account comes new churn fully on

all time obviously, a much period Now, fees, partner take Act annual But the things longer could balances. in. on of existing burn they're to a aspect think be CARD have will I just things XXX% faster mitigated that fees, speaking transaction those agreements, like

does portfolio. really the fully to dollar is mitigated. of it it's last depends degree which the on, take the I think, it Maybe profile just the So years.

the that's of sounds sound right? it to there. Does almost were more So if we the of portfolio total -- like hearing calculate right turnover I'm what that

goes at pace into gets is it that which element offset. the That an factor the at

few the Okay. but factors? seen trend you've gains, I'm think the really over about about quarter, believe elevate some it And up percentage a what that you was was expenses you're to talked of appreciate from could trying that the of think we've the But out last modest about maybe think and about real of just it's I efficiency the if that then Cool. that progress know percentage I we last just have targeting. sales, that. year. changed that Thanks. may previous some some as this should where about just X.X% percentage and to talk you X% and quarter, and I years. credit processing efficiencies

Yeah.

would would year, with back think expect efficiencies seen driven It the expense the industry. is, rate yet part the to those out in down. elevated see I in I to been coupled half conversion-related time, over come I of was first of what say us carryover this to because across be able continue that elevated that's fraud

as with. of line industry year time. over the been to that's half back elevated a in the so first industry the in -- something the get across that again, always expect and It's grapple little has to entire And

you. Thank

Our go please JPMorgan. next question Reggie, from comes with Reggie Smith ahead.

line Your is open.

taking been on But set for standards. tightening any how the Most about credit about question. you -- -- is, kind Hey, have everybody contractual limits hit. My I and to talking high dig APRs good have wanted morning. I into of to are of Thanks question new can is talked bands accounts. mine there know guys you

open maybe Just that, of guys obviously, wondering more you you or if higher a I was are or risk way at the there a curious and limit? at are accept APR business people in more accounts was pricing just that to

to not we but in. environment we competitive are the want that There and in limits, responsible work be

view reasonable So while to be is there got are be not limits, we've respectful and our competitive. and

you. Thank it. Got you. Thank

Our comes with JMP. David, please next from go question ahead. David Scharf

morning. for as Thanks Good my well. question taking

outlook return wondering, and to helpful. discussion it Just to the spending I'm was observations.

specifically, were provided to and was a vertical I where I in the changes -- update of some of it it's seeing you of is were remarks question. on just a sounded like X-part maybe I'm mix? wondering, talk prepared amount verticals that the specialty an One guess you early seeing fair very your sort moderation. You exposure the of mean, the apparel,

historical secondly, discretionary about exposure And you as think very verticals like to your jewelry.

talk next something the whether likely more discretionary in broad-based mix to moderation. I slowdown that's this that think now you whether of whether that may for in Can there there, representing are be kind and are highlighted a be travel considerable is is verticals portfolio? line about you holding of just

Yes.

back verticals goods of technology as beauty mall tech really take we've travel AAA just our our portfolio. Dell, today And got we've announcement entertainment, you the got I think and in if the since well. -- vertical. We've automotive. base. wrap now, XXXX, We've got was derisked with XXXX, number a we're Come a diversified soft retail look and at verticals,

All those that verticals, we concentration no risk. longer have

travel well really and actually So we it, think growing. and and as entertainment are beauty about extremely holding

of because spend different And spend our have a goods, a general of and than of while So see really those of co-brand was. portfolio migrated discretionary soft in our bit are increase we've -- and we we've spend remember, moved we is an see and categories up. XX% now it -- cards areas. sales decline and lot We in to very little our those XX%

VS spend kind you other lower a that has of And question always goods has profile, getting been a a Got related it. about in there age whether of sale maybe portfolio the it. attrition versus think moderation kind of demographic, Maybe Got believe, largest I and more point-of-sale the just as soft share the lower of a know of observation. moderation. is historically. maybe just any offerings FICO of any Is way market sense macro point actually to the at I

any of Yes, the is I are point the in think of growth Partners better another capturing aspect partner. it's in this our factors extraordinarily do sales Ralph doing we're have some who to we're and on in a each and particular, going certainly specifics maybe influences And growing in, more and something say, well aren't to others and I'll question. favor a as the growth pressure partner I think share, that's good little who performance not -- we mentioned, than is you're one but any -- consumer that feeling that others are differently. partner making, clearly are giving environment and

about you're think tender it's But you not share. our into I'm I as particular you're their the thinking So will right, own read -- influence it, way partner. headlines, of saying any that

taking Got for my much it. Great. so questions. Thanks

Villalobos line today Alexander Please go with final comes Jefferies. from ahead. question Our of the

Your line is open.

a wanted net little in want question. my could like And Thank give I we you also that? then Thank that should on is Did ask this What assume guys. next guide clarify to to on the if interest included a you bit Hey little just the portfolio, or already the taking was on you. seasonality if income? sale Maybe I bit that? of quarters. on top for few on of us in

that things guide. including as I'll that. best in you, about talk portfolio start the are economy. the We that's we within well of first, as we're our guidance, aware And Well, of Dell tell our I'll when were with absolutely view pipeline the the

So our certainly in Dell was guide.

close we interest full to the the expect and And there's we net of As it had same be moving parts, year. to talked pluses rate lots relates to margin, about last that minuses. year we

Second quarters. quarter, the with of you're each variability going to get

impacted quarter, the related in second the was it elevated purifications losses. a to lot So by

down interest net So that dragged margin.

drag improvement effective Then seasonally, of because of losses. net which means loss And third interest going a quarter related point. then is high you're a case, to an our are in on see the those normally less lower also expectation, to margins

So, get higher first half is obviously of XX.X. second the that be going the year to to to average of than half the mathematically

it about then the was look being that third the reversal losses I sequentially the bit by and purification higher in the be points, and than means third fourth at of will the in talked earlier fee than fourth impact XX quarter, And a the interest quarter. in and third you net basis higher what quarter about interest margin quarter little

in of saw the again, of interest our higher But what year. first bit of little a it half get of net it, than you'll with around be we margin. the So bouncing will sight into line

you one should kind question. we quick last drove what the of you. much. same levels Perfect. Thank Thank And going kind benefit? quarter, expect the And so this of RFP Perfect. forward?

Yeah.

on based quarter, As it really originations. related lower it's to RFP sales this

Okay, taking my congrats on for you perfect, quarter. good and questions thank

you. Thank

the question with further one comes ISI. of have John, John Evercore Pancari go please do that line We ahead. from

open. now Your line is

morning. Good

Good morning.

Good morning.

did The a share. there LoyaltyOne? a $XX on million relate or loss traditional related just is to? What loss there the a it to or charge a Was operating the loss, discontinued taken reserve operations, that or $X.XX revenue-driven

that discontinued in businesses, and legacy with including related LoyaltyOne quarter What's Yeah. Epsilon. to ops small associated charges some is discontinued this

Okay.

the taken in Loyalty been the charge business? litigation potential for any reserve the has So --

No. related anything to the This nothing has with do to spin.

Okay.

everybody And we've talking litigation been by not at I has know sued about. this point, been trust. that

it. Got Right. Right.

separately, of just And relatively of you competition maturing of on in partnerships? line to that given updated then partnerships remains sight can your -- pipeline partnership Would love Thanks. potential of maturities comment get on brisk Okay. the in just the any terms front. your in terms

Yes.

we're And being on earlier a initiatives, mentioned before, given that one things with think XXXX. it. And And secure the we very we we're the as I think more have little XXXX. very is been on reliant of where nearly we're winning diversification top have robust. any because And through we our share. certain ported one go, renewed renewals our partner to our are our than five through I about pipeline less is of and XX% as pleased our loans of brands

pretty we to can at we offer good And we and now products and have go So, our secure. determine it? we a outlook what borrow. our pipeline is our And they percentage of have a want look about at on of we their renewables earlier winning, at look now would how partners that we basket how customers and

renewals. good about the our about we very very, feel feel about feel results, We good very pipeline. good and we our So very

Okay. my Great. taking Thanks questions. for

Thank you.

Ralph We further have comments. the Andretta closing for call to no back I'll turn questions.

you. for all joining call. you to thank want Thank I the

wonderful on and As and balance a sheet progress thank your We'll be paying we've questions you interest. to down really like on debt. made continue you've have very And again seen, our our on focused day, everyone that. for We're focused we and that. nice your to

Thank you, your everyone, concludes our lines. for joining now you us disconnect call, This and today. may