8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):

July 29, 2021

ALLIANCE DATA SYSTEMS CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware	001-15749	31-1429215
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)

3075 LOYALTY CIRCLE

COLUMBUS, OH 43219

(Address and Zip Code of Principal Executive Offices)

(614) 729-4000

(Registrant’s Telephone Number, including Area Code)

NOT APPLICABLE

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, par value $0.01 per share	ADS	The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    [  ]

Item 2.02 Results of Operations and Financial Condition.

On July 29, 2021, Alliance Data Systems Corporation (the "Company") issued a press release regarding its results of operations for the second quarter ended June 30, 2021.  A copy of this press release is furnished as Exhibit 99.1.

Item 7.01 Regulation FD Disclosure.

On July 29, 2021, the Company issued a press release regarding its results of operations for the second quarter ended June 30, 2021.  A copy of this press release is furnished as Exhibit 99.1.

Attached as Exhibit 99.2 is a presentation to be given to investors and others by senior officers of the Company.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Document Description
99.1	Press Release dated July 29, 2021 announcing the results of operations for the second quarter ended June 30, 2021.
99.2	Investor Presentation Materials.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

Note: The information contained in this report (including Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Alliance Data Systems Corporation
Date: July 29, 2021	By:	/s/ Joseph L. Motes III
		Joseph L. Motes III
		Executive Vice President, Chief Administrative Officer, General Counsel and Secretary

EX-99.1

Exhibit 99.1

Alliance Data Reports Second Quarter 2021 Results

• Net income of $273 million, or $5.47 per diluted share

o Strong credit management and more favorable economic outlook drove a net reserve release of $208 million

o Credit sales returned to pre-pandemic levels as we exited the quarter

• Credit sales trends align with expectation of strong 2022 receivables growth

• Successful execution of strategic initiatives, including launch of Bread/Fiserv relationship

• Previously announced spinoff of LoyaltyOne^® remains on track for year-end completion

COLUMBUS, Ohio, July 29, 2021 – Alliance Data Systems Corporation (NYSE: ADS), a leading provider of data-driven marketing, loyalty and payment solutions, today announced results for the quarter ended June 30, 2021.

“Alliance Data’s second quarter results highlight considerable progress in the transformation of our company, driven by efficient execution across our portfolio, together with improving business conditions,” said Ralph Andretta, president and chief executive officer of Alliance Data. “Credit sales returned to pre-pandemic levels as we exited the quarter, as retailers experienced robust omnichannel shopping and engagement aligned with improved consumer confidence and mobility.  While reopening efforts are progressing in the U.S., we are experiencing a more gradual recovery both in Canada and internationally.  We continue to maintain a favorable outlook for the LoyaltyOne segment given pipeline and activity level improvement.  AIR MILES^® reward miles redeemed and average flight bookings per day significantly increased in June while BrandLoyalty’s new campaign pipeline strengthened, indicating more robust growth in the second half of 2021.

“Credit performance remained strong, reflecting our disciplined risk management and the ongoing impact of economic stimulus resulting in increased customer liquidity and greater ability to pay.  Our net loss rate remains well below our historic average rate of 6.0% and our delinquency rate was exceptionally low at 3.3%.  We expect credit metrics and payment rates to begin to normalize as stimulus programs wind down in the latter half of the year.

“Business development was robust during the second quarter, highlighted by a number of new partner signings, multiple renewals, and a growing pipeline of high-quality prospects.  We continue to expand Bread’s direct acquisition merchant partners as well as enlisting existing card brand partners to launch on Bread’s platform.  The e-commerce pilot for the Bread and Fiserv strategic relationship went live at quarter-end. Select merchant launches from Fiserv’s extensive merchant network will be staggered throughout the second half of 2021 and a full roll-out planned for 2022.  We expect Alliance Data’s differentiated full-spectrum lending capabilities and broad product suite to drive strong growth in 2022 and beyond.

“In June, we released our 2020 Environmental, Social and Governance (“ESG”) performance report highlighting the progress we have made over the past three-years.  Our ESG strategy is a key component of our business transformation, which prioritizes delivering long-term sustainable stakeholder value, modernizing technology, advancing a diverse and inclusive culture, and maintaining a commitment to ethical decision making.  These priorities are embedded in the Company’s business practices and corporate governance, and will help drive the long-term success of Alliance Data.”

Alliance Data Systems Corporation

July 29, 2021

2021 OUTLOOK

“First half results represent a strong foundation on which to build continued revenue growth, as receivables gain traction and LoyaltyOne activity increases in the second half of this year. We remain keenly focused on the execution of our strategy, focused on balancing growth and profitability to ensure the sustainable economics of our portfolio.

“Assuming continued strength in the U.S. economy, we are increasing our 2021 credit sales forecast to a double-digit growth rate and now expect a net loss rate in the low 5% range for the year,” said Mr. Andretta.  “Based on our current visibility and payment rate expectations, receivables at year-end 2021 are projected to be in line with year-end 2020 levels, although average receivables are expected to be down mid-single-digits for the year, reflecting the year-over-year pressure in the first half of 2021 and elevated payment rates.  We expect to resume high-single-digit to low-double-digit average receivables growth in 2022.  Total revenue for the year is anticipated to be down low-single-digits compared to 2020 as the impact from lower receivables is partially offset by improving revenue from LoyaltyOne and the Bread acquisition.  We expect efficiencies to enable us to keep total expenses, excluding provision for loan loss, flat year-over-year while we continue to fund initiatives to position the company for future growth.  In 2021, we are investing over $100 million in digital innovation and technology enhancements and $50 million in marketing to support growth and a return to positive operating leverage in 2022.

“We remain on track for the successful spinoff of our LoyaltyOne segment, with completion expected by year-end 2021, positioning both companies to pursue their respective unique growth opportunities and build long-term stockholder value.”

CONSOLIDATED RESULTS

SUMMARY	Quarter Ended June 30,
(in millions, except per share amounts)	2021		2020		Change
Revenue	$	1,012	$	979		3	%
Income before income taxes (“EBT”)	$	372	$	47		691	%
Net income	$	273	$	38		612	%
Net income per diluted share	$	5.47	$	0.81		575	%
Weighted average shares outstanding – diluted		50.0		47.7
**********************************
Supplemental Non-GAAP Metrics (a):
Pre-provision, pre-tax earnings	$	358	$	297		20	%

(a)      See “Financial Measures” for a discussion of non-GAAP Financial Measures.

Second Quarter: Consolidated revenue increased 3% to $1,012 million compared to the second quarter of 2020, resulting from the ongoing consumer recovery from pandemic lows.  EBT increased 691% to $372 million, positively impacted by a net reserve release of $208 million during the second quarter of 2021.  Net income was $273 million, or $5.47 per diluted share.

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Alliance Data Systems Corporation

July 29, 2021

SEGMENT RESULTS

Card Services: Revenue increased 4% to $861 million compared to the second quarter of 2020, primarily due to the impact from pandemic-related consumer relief programs offered by Alliance Data in the second quarter of 2020.  EBT increased $334 million to $404 million compared to the second quarter of 2020, attributable to a lower provision for loan loss.  The net principal loss rate was 5.1% in the second quarter of 2021, an improvement of 250 basis points from the prior year period, while the delinquency rate of 3.3% improved 100 basis points from the prior year period.

Credit sales increased 54% to $7.4 billion compared to the second quarter of 2020, continuing to improve as consumer spending recovers.

LoyaltyOne: Segment revenue was nearly unchanged at $151 million compared to the second quarter of 2020.  BrandLoyalty revenue decreased 9%, or $7 million, due to a decline in retailer programs associated with the continuing impact of COVID-19.  AIR MILES revenue increased 11%, or $7 million, compared to the second quarter of 2020, due in part to higher redemptions, as well as the impact of favorable currency exchange rates.  EBT for the LoyaltyOne segment increased 2% to $24 million due to lower amortization expense.

Issuance of AIR MILES reward miles increased 8% compared to the second quarter of 2020, reflecting an increase in discretionary spending, including credit card spend. AIR MILES reward miles redeemed increased 32% compared to the second quarter of 2020, reflecting an improvement in travel-related categories and continued strength from merchandise redemptions.

Contacts:

Investor Relations:  Brian Vereb (brian.vereb@alliancedata.com), 614-528-4516

Media Relations:  Shelley Whiddon (shelley.whiddon@alliancedata.com), 214-494-3811

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Alliance Data Systems Corporation

July 29, 2021

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generally be identified by the use of words such as "believe," "expect," "anticipate," "estimate," "intend," "project," "plan," "likely," "may," "should" or other words or phrases of similar import. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding, and the guidance we give with respect to, our anticipated operating or financial results, initiation or completion of strategic initiatives including the proposed spinoff of our LoyaltyOne segment, future dividend declarations, and future economic conditions, including, but not limited to, fluctuation in currency exchange rates, market conditions and COVID-19 impacts related to relief measures for impacted borrowers and depositors, labor shortages due to quarantine, reduction in demand from clients, supply chain disruption for our reward suppliers and disruptions in the airline or travel industries.

We believe that our expectations are based on reasonable assumptions. Forward-looking statements, however, are subject to a number of risks and uncertainties that could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, and no assurances can be given that our expectations will prove to have been correct. These risks and uncertainties include, but are not limited to, factors set forth in the Risk Factors section in our Annual Report on Form 10-K for the most recently ended fiscal year, which may be updated in Item 1A of, or elsewhere in, our Quarterly Reports on Form 10-Q filed for periods subsequent to such Form 10-K. Our forward-looking statements speak only as of the date made, and we undertake no obligation, other than as required by applicable law, to update or revise any forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.

Financial Measures

In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, the Company may present financial measures that are non-GAAP measures, such as pre-provision pre-tax earnings.  Pre-provision pre-tax earnings is calculated by adding the provision for loan loss to income before taxes.  The Company believes that these non-GAAP financial measures, viewed in addition to and not in lieu of the Company’s reported GAAP results, provide useful information to investors regarding the Company’s performance and overall results of operations.

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Alliance Data Systems Corporation

July 29, 2021

Reconciliation of Non-GAAP Financial Measures

Reconciliations to comparable GAAP financial measures are available in the accompanying schedules, which are posted as part of this earnings release in both the News and Investors sections on the Company’s website (www.AllianceData.com). The events necessitating a non-GAAP adjustment are inherently unpredictable and may have a material impact on the Company’s future results.

The financial measures presented are consistent with the Company’s historical financial reporting practices. The non-GAAP financial measures presented herein may not be comparable to similarly titled measures presented by other companies, and are not identical to corresponding measures used in other various agreements or public filings.

Conference Call

Alliance Data will host a conference call on Thursday, July 29, 2021 at 8:30 a.m. (Eastern Time) to discuss the Company’s second quarter 2021 results. The conference call will be available via the Internet at www.alliancedata.com. There will be several slides accompanying the webcast. Please go to the website at least 15 minutes prior to the call to register, download and install any necessary software. The recorded webcast will also be available on the Company’s website.

If you are unable to participate in the conference call, a replay will be available. To access the replay, please dial (800) 585-8367 or (416) 624-4642 and enter “4284128”. The replay will be available at approximately 11:59 a.m. (Eastern Time) on Thursday, July 29, 2021.

About Alliance Data

Alliance Data^® (NYSE: ADS) is a leading provider of data-driven marketing, loyalty and payment solutions serving large, consumer-based industries. The Company creates and deploys customized solutions that measurably change consumer behavior while driving business growth and profitability for some of today's most recognizable brands. Alliance Data helps its partners create and increase customer loyalty across multiple touch points using traditional, digital, mobile and emerging technologies. Headquartered in Columbus, Ohio, Alliance Data is an S&P MidCap 400 company that consists of businesses that together employ approximately 8,000 associates at more than 45 locations worldwide.

Alliance Data’s Card Services business is a comprehensive provider of market-leading private label, co-brand, general purpose and business credit card programs, digital payments, including Bread^® and Comenity-branded financial services. LoyaltyOne^® owns and operates the AIR MILES^® Reward Program, Canada’s most recognized loyalty program, and Netherlands-based BrandLoyalty, a global provider of tailor-made loyalty programs for grocers. More information about Alliance Data can be found at www.AllianceData.com.

Follow Alliance Data on Twitter, Facebook, LinkedIn, Instagram and YouTube.

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Alliance Data Systems Corporation

July 29, 2021

ALLIANCE DATA SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021		2020
Revenue	$	1,012.4		$	979.3	$	2,097.3	$	2,361.1
Operating expenses:
Cost of operations		521.7			479.0		1,036.1		1,002.2
Provision for loan loss		(14.1	)		250.1		19.3		906.0
Depreciation and amortization		31.5			41.3		65.5		80.1
Asset impairments		—			34.2		—		34.2
Total operating expenses		539.1			804.6		1,120.9		2,022.5
Operating income		473.3			174.7		976.4		338.6
Interest expense, net:
Securitization funding costs		30.4			42.7		64.0		92.6
Interest expense on deposits		41.8			58.9		87.3		119.2
Interest expense on long-term and other debt, net		29.5			26.1		59.0		54.4
Total interest expense, net		101.7			127.7		210.3		266.2
Income before income tax	$	371.6		$	47.0	$	766.1	$	72.4
Income tax expense		98.1			8.6		206.4		4.0
Net income	$	273.5		$	38.4	$	559.7	$	68.4
Per share data:
Weighted average shares outstanding – basic		49.7			47.6		49.7		47.6
Weighted average shares outstanding – diluted		50.0			47.7		49.9		47.7
Basic – Net income	$	5.50		$	0.81	$	11.26	$	1.44
Diluted – Net income	$	5.47		$	0.81	$	11.21	$	1.43
Pre-provision pre-tax earnings:
Income before income tax	$	371.6		$	47.0	$	766.1	$	72.4
Provision for loan loss		(14.1	)		250.1		19.3		906.0
Pre-provision pre-tax earnings	$	357.5		$	297.1	$	785.4	$	978.4

Non-GAAP financial measures of adjusted EBITDA, net and core earnings per share and the associated reconciliations are available in earnings slide appendix

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Alliance Data Systems Corporation

July 29, 2021

ALLIANCE DATA SYSTEMS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

	June 30, 2021			December 31, 2020
Assets
Cash and cash equivalents	$	3,001.9		$	3,081.5
Credit card and loan receivables:
Credit card and loan receivables		15,723.8			16,784.4
Allowance for loan loss		(1,635.3	)		(2,008.0	)
Credit card and loan receivables, net		14,088.5			14,776.4
Redemption settlement assets, restricted		745.1			693.5
Right of use assets - operating		215.3			233.2
Intangible assets, net		69.6			81.7
Goodwill		1,359.3			1,369.6
Other assets		2,332.7			2,311.2
Total assets	$	21,812.4		$	22,547.1
Liabilities and Stockholders’ Equity
Deferred revenue	$	1,042.8		$	1,004.0
Deposits		9,619.8			9,792.6
Non-recourse borrowings of consolidated securitization entities		4,603.3			5,709.9
Long-term and other debt		2,760.1			2,805.7
Operating lease liabilities		281.0			300.0
Other liabilities		1,457.5			1,413.3
Total liabilities		19,764.5			21,025.5
Stockholders’ equity		2,047.9			1,521.6
Total liabilities and stockholders’ equity	$	21,812.4		$	22,547.1
Shares of common stock outstanding		49.7			49.7

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Alliance Data Systems Corporation

July 29, 2021

ALLIANCE DATA SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended June 30,
	2021			2020
Cash Flows from Operating Activities:
Net income	$	559.7		$	68.4
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		65.5			80.1
Deferred income taxes		22.1			131.4
Provision for loan loss		19.3			906.0
Non-cash stock compensation		16.0			11.0
Amortization of deferred financing costs		16.4			18.3
Change in operating assets and liabilities, net of sale of business		(4.9	)		(179.8	)
Other		39.1			32.1
Net cash provided by operating activities		733.2			1,067.5
Cash Flows from Investing Activities:
Change in redemption settlement assets		(41.0	)		(18.7	)
Change in credit card and loan receivables		666.2			3,053.4
Proceeds from sale of business		—			25.4
Purchase of credit card portfolio		(31.5	)		—
Sale of credit card portfolio		—			289.5
Capital expenditures		(34.9	)		(26.1	)
Other		(24.2	)		16.5
Net cash provided by investing activities		534.6			3,340.0
Cash Flows from Financing Activities:
Borrowings under debt agreements		31.0			650.0
Repayments of borrowings		(81.7	)		(300.7	)
Net decrease in deposits		(176.0	)		(936.4	)
Non-recourse borrowings of consolidated securitization entities		2,065.0			350.0
Repayments/maturities of non-recourse borrowings of consolidated securitization entities		(3,172.9	)		(2,630.0	)
Payment of deferred financing costs		(8.3	)		(3.0	)
Dividends paid		(21.1	)		(40.4	)
Other		(0.6	)		(1.1	)
Net cash used in financing activities		(1,364.6	)		(2,911.6	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		0.7			(2.9	)
Change in cash, cash equivalents and restricted cash		(96.1	)		1,493.0
Cash, cash equivalents and restricted cash at beginning of period		3,463.2			3,958.1
Cash, cash equivalents and restricted cash at end of period	$	3,367.1		$	5,451.1

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Alliance Data Systems Corporation

July 29, 2021

ALLIANCE DATA SYSTEMS CORPORATION

SUMMARY FINANCIAL HIGHLIGHTS

(In millions)

(Unaudited)

	Three Months Ended June 30,									Six Months Ended June 30,
	2021			2020			Change			2021			2020			Change
Segment Revenue:
LoyaltyOne	$	150.9		$	151.1			—	%	$	327.5		$	349.2			(6	)%
Card Services		861.5			828.2			4			1,769.8			2,011.9			(12	)
Corporate/Other		—			—			—			—			—			—
Total	$	1,012.4		$	979.3			3	%	$	2,097.3		$	2,361.1			(11	)%
Segment Earnings Before Taxes:
LoyaltyOne	$	24.5		$	24.0			2	%	$	56.2		$	70.6			(20	)%
Card Services		404.5			70.3			475			814.3			102.4			695
Corporate/Other		(57.4	)		(47.3	)		21			(104.4	)		(100.6	)		4
Total	$	371.6		$	47.0			691	%	$	766.1		$	72.4			958	%
Key Performance Indicators:
Credit sales	$	7,401		$	4,799			54	%	$	13,445		$	10,898			23	%
Average receivables	$	15,282		$	16,116			(5	)%	$	15,533		$	17,205			(10	)%
End of period receivables	$	15,724		$	15,809			(1	)%	$	15,724		$	15,809			(1	)%
Card Services gross revenue yield		22.5	%		20.4	%		2.1	%		22.8	%		23.2	%		(0.4	)%
Net principal loss rate		5.1	%		7.6	%		(2.5	)%		5.0	%		7.3	%		(2.3	)%
Delinquency rate		3.3	%		4.3	%		(1.0	)%		3.3	%		4.3	%		(1.0	)%
AIR MILES reward miles issued		1,139			1,053			8	%		2,251			2,369			(5	)%
AIR MILES reward miles redeemed		800			608			32	%		1,540			1,602			(4	)%

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EX-99.2

 Alliance DataSecond Quarter 2021 Results  Perry BebermanEVP & CFO  © 2021 ADS Alliance Data Systems, Inc.  July 29, 2021  Ralph AndrettaPresident & CEO  Exhibit 99.2 

 This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generally be identified by the use of words such as "believe," "expect," "anticipate," "estimate," "intend," "project," "plan," "likely," "may," "should" or other words or phrases of similar import. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding, and the guidance we give with respect to, our anticipated operating or financial results, initiation or completion of strategic initiatives including the proposed spinoff of our LoyaltyOne segment, future dividend declarations, and future economic conditions, including, but not limited to, fluctuation in currency exchange rates, market conditions and COVID-19 impacts related to relief measures for impacted borrowers and depositors, labor shortages due to quarantine, reduction in demand from clients, supply chain disruption for our reward suppliers and disruptions in the airline or travel industries.We believe that our expectations are based on reasonable assumptions. Forward-looking statements, however, are subject to a number of risks and uncertainties that could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, and no assurances can be given that our expectations will prove to have been correct. These risks and uncertainties include, but are not limited to, factors set forth in the Risk Factors section in our Annual Report on Form 10-K for the most recently ended fiscal year, which may be updated in Item 1A of, or elsewhere in, our Quarterly Reports on Form 10-Q filed for periods subsequent to such Form 10-K. Our forward-looking statements speak only as of the date made, and we undertake no obligation, other than as required by applicable law, to update or revise any forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.  2  Forward-Looking Statements 

 Continued progress on strategic initiativesBread’s strategic relationship with Fiserv active as of June 30New partner signings, renewals, and strong pipelineModernization and efficiency initiatives on schedule  1  Inflection point for receivables growthCredit sales returned to pre-pandemic levelsImproving consumer confidence and mobility Closely monitoring COVID conditions  2  Credit performance remains strongReflective of disciplined risk managementPayment rates remain elevated benefiting from economic stimulus  3  Second Quarter 2021 Key Takeaways  3 

 Second Quarter 2021 Financial Highlights  4    Revenue increased 3% year-over-year, while total expenses excluding provision for loan loss declined 4%Net Income of $273 million includes a net reserve release of $208 millionCredit sales of $7.4 billion were up 54% year-over-year and up 22% compared to 1Q21Average receivables were down 5% year-over-year Credit metrics remained strong with a net loss rate of 5.1% for the quarter  $1.0B  Revenue  $273MM  Net Income  $5.47  Diluted EPS 

 Strategic Initiatives Update  5 

       Card Services Brand Partner Highlights  6  Select New Bread Direct Acquisition Partners  Select New Brand Partners    Brand Partner Renewals 

 Direct Acquisition  Distribution  Technology Platform  Select new brand partners include Wayfair and Blue NilePipeline gaining momentum  E-commerce pilot active on June 30Select early launches in 2H21 Full roll-out in 2022  Anticipated new brand partner additions in 4Q21  Bread Business Update  7  + 

 LoyaltyOne® Performance Highlights  8  AIR MILES® reward miles issued and redeemed increased versus 2Q20 as airline bookings improved and merchandise redemptions remained strongAIR MILES is working with travel partners to offer promotions and redemptions to drive increased Collector travel and tourism as appropriate, leading to optimism in the latter half of 2021July to-date average daily flight bookings are currently 10x the 1Q21 level, yet remain at 60% - 70% of the pre-pandemic level  BrandLoyalty’s new program activity is gaining momentum with a strong pipeline of clients in the second half of 2021Consumers are actively engaged in loyalty campaigns with particular success in products focused on the home 

 2020 Environmental, Social and Governance Performance Report  9  Report highlights key findings from second materiality assessment, which will guide Company’s evolving ESG strategy in alignment with its business transformation.  Secure & Responsible Use of Data: No data breaches; ongoing investments in tools, technology upgrades and training for safeguarding data.Human Capital Management: Reduced voluntary turnover by 3%; increased investment in training dollars per associate by 35%; established formal DE&I strategic framework and appointed SVP level DE&I Officer.Community Investment: Contributed over $30 million, including nearly $7 million in “Data for Good” initiatives; associates volunteered over 76,000 hours. Environment: Facility upgrades, energy-efficient lighting, LEED certifications, electric vehicle charging stations, investments in global conservation initiatives to support efforts around management/mitigation of climate risk.  Sustainability Governance: Successful execution of multi-year Board refreshment program; Nominating & Corporate Governance and Compensation & Human Capital committees responsible for oversight of management’s ESG and sustainability strategies and program execution; Committees receive reports quarterly then report into the full Board, ensuring proper oversight and engagement and management accountability.Fair & Responsible Banking: Technology upgrades to the Company’s underwriting process reduce bias and create parity; top marks for excellence in customer service.  Progress against 3-year sustainability goals set in 2017: 

 Financial Results – Consolidated  10  ($ in millions, except per share)  2Q21  2Q20    % Change    Total revenue  $1,012  $979    3   %              Total operating expenses, excl. provision for loan loss  553  555     -    Interest expense, net  102  128    (20)    Total expenses excl. provision for loan loss  655  683    (4)  %              Pre-provision, pre-tax earnings (PPNR)  $358  $297     20  %              Provision for loan loss  (14)  250    (106)    Total earnings before tax (EBT)  $372  $47    691  %              Income tax  98  9     1,045    Net income  $273  $38     612  %              Net income per diluted share  $5.47  $0.81    579  %  Weighted average shares outstanding – diluted   50.0  47.7    5                See “Financial Measures” in earnings press release for a discussion of non-GAAP Financial MeasuresTotals may not sum due to rounding 

 Financial Results – Segments  11  2Q21 total revenue*   2Q21 total earnings before tax*  * Percentages based on Card Services and LoyaltyOne segments combined as reported excluding Corporate/Other and intersegment eliminations. Totals may not sum due to rounding   ($ in millions)  2Q21  2Q20    % Change     LoyaltyOne  $151  $151    -  %   Card Services  861  828    4     Corporate/Other  -  -    -    Total revenue  $1,012  $979    3  %   LoyaltyOne  $24  $24    2  %   Card Services  404  70    475     Corporate/Other  (57)  (47)    21    Total earnings before tax (EBT)  $372  $47    691  % 

 Key Business Metrics  12  Card Services gross revenue yield remains steady  Credit sales near pre-pandemic level($ in billions)  *Revenue divided by normalized average receivables 

 Credit Quality and Allowance  13  Reserve rate ($ in Millions)  Net loss rate  Delinquency rate  5 year Max rate: 7.6%  5 year Min rate: 4.7%  5 year Avg rate: ~6.0%  Historic quarterly range for the last five years  * Net loss rate impacted by pandemic-related consumer relief program.  ** Calculated as a percentage of allowance for loan loss to end of period credit card and loan receivables  Revolving Credit Risk Distribution  _____________________EOP receivables: $19,463 ALLL balance: $1,815Reserve rate: 9.3%  CECL Day 1: 1/1/20 

 Full Year 2020Actuals  Full Year 2021Outlook  Commentary  Average receivables $16,367 million  Down mid-single-digits  Flat year-over-year in 2H21Expect year-end receivables to be in line with year-end 2020Credit sales up double-digits in 2021  Total revenue$4,521 million  Down low-single-digits  LoyaltyOne full year revenue growth in 20211Q21 Card Services revenue suppressed with receivable balances rebuilding from pandemic-related reductionsCard Services gross revenue yield remains steady  Total expenses*(Excludes provision for loan loss)$2,861 million  Flat  Includes accelerated digital investment and an increase in marketing spend from depressed levels in 2020Impacted by Bread® & Fiserv investment transition expenses  Net loss rate2020 = 6.6%  Net loss rate in the low 5% range    2021 Financial Outlook  14  * Total expenses represent total operating expenses excluding provision for loan loss plus total interest expense, net 

 In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, the Company may present financial measures that are non-GAAP measures, such as pre-provision earnings before taxes, adjusted EBITDA, adjusted EBITDA, net of funding costs, core earnings and core earnings per diluted share (core EPS). Adjusted EBITDA eliminates the uneven effect across all reportable segments of non-cash depreciation of tangible assets and amortization of intangible assets, including certain intangible assets that were recognized in business combinations, and the non-cash effect of stock compensation expense. In addition, adjusted EBITDA eliminates the effect of the strategic transaction costs, asset impairments, and restructuring and other charges.  Adjusted EBITDA, net is equal to adjusted EBITDA less securitization funding costs and interest expense on deposits. Similarly, core earnings and core EPS eliminate non-cash or non-operating items, including, but not limited to, stock compensation expense, amortization of purchased intangibles, non-cash interest, strategic transaction costs, asset impairments, and restructuring and other charges. The Company believes that these non-GAAP financial measures, viewed in addition to and not in lieu of the Company’s reported GAAP results, provide useful information to investors regarding the Company’s performance and overall results of operations.  15  Financial Measures 

 Appendix 

 Key Business Metrics  17    2Q21  2Q20  2Q21 vs    1Q21  2Q21 vs        2Q20      1Q21  LoyaltyOne (in millions)              AIR MILES reward miles issued  1,139  1,053  8%     1,112   2%  AIR MILES reward miles redeemed  800  608  32%    739   8%                Card Services ($ in millions)              Credit sales  $7,401  $4,799  54%    $6,043  22%  Average receivables  $15,282  $16,116  (5)%    $15,785  (3)%  Normalized average receivables*  $15,282  $16,204  (6)%    $15,785  (3)%  End of period receivables  $15,724  $15,809  (1)%    $15,537  1%  Total gross revenue yield %**  22.5%  20.4%  2.1%    23.0%  (0.5)%  Cost of funds  1.9%  2.5%  (0.6)%    2.0%  (0.1)%  Principal loss rate  5.1%  7.6%  (2.5)%    5.0%  0.1%  Reserve rate  10.4%  13.3%  (2.9)%    11.9%  (1.5)%  Delinquency rate  3.3%  4.3%  (1.0)%    3.8%  (0.5)%  Return on equity  36%  15%  21%    27%  9%  *Normalized average receivables includes held-for-sale receivables**Revenue divided by normalized average receivables 

 Key Business Metrics – Quarterly   18    2Q19  3Q19  4Q19  1Q20  2Q20  3Q20  4Q20  1Q21  2Q21  LoyaltyOne (in millions)                    AIR MILES reward miles issued  1,423  1,344  1,486  1,316  1,053   1,240    1,355    1,112   1,139  AIR MILES reward miles redeemed  1,050  1,078  1,199  994  608   687    838   739   800                      Card Services ($ in millions)                    Credit sales  $7,551  $7,824  $9,297  $6,099  $4,799  $6,152  $7,657  $6,043  $7,401  Average receivables  $16,798  $17,449  $18,096  $18,294  $16,116  $15,300  $15,759  $15,785  $15,282  Normalized average receivables*  $18,335  $19,299  $19,368  $18,553  $16,204  $15,356  $15,759  $15,785  $15,282  End of period receivables  $17,615  $17,928  $19,463  $17,732  $15,809  $15,599  $16,784  $15,537  $15,724  Total gross revenue yield %**  23.9%  24.7%  23.3%  25.5%  20.4%  22.5%  22.3%  23.0%  22.5%  Cost of funds  2.3%  2.4%  2.4%  2.4%  2.5%  2.4%  2.1%  2.0%  1.9%  Principal loss rate  6.1%  5.6%  6.3%  7.0%  7.6%  5.8%  6.0%  5.0%  5.1%  Reserve rate  5.7%  5.9%  6.0%  12.1%  13.3%  13.3%  12.0%  11.9%  10.4%  Delinquency rate  5.2%  5.9%  5.8%  6.0%  4.3%  4.7%  4.4%  3.8%  3.3%  Return on equity  31%  28%  23%  18%  15%  14%  16%  27%  36%  *Normalized average receivables includes held-for-sale receivables**Revenue divided by normalized average receivables 

 Financial Results – Quarterly  19  ($ in millions, except per share)  2Q19  3Q19  4Q19  1Q20  2Q20  3Q20  4Q20  1Q21  2Q21  Total revenue  $1,348  1,438  $1,461  $1,382  $979  $1,050  $1,110  $1,085  $1,012                      Total operating expenses, excl. provision for loan loss  754  836  771   562   555   552   699   548   553  Interest expense, net  143  140  142   139  128  115  113   109   102  Total expenses excl. provision for loan loss  897  976  913  701  683  667  812  657  655                      Pre-provision, pre-tax earnings (PPNR)  $451  $462  $548   $681   $297   $384   $299   $428   $358                      Provision for loan loss  257  297  381  656  250  208  152  33  (14)  Total earnings before tax (EBT)  $194  $164  $167   $25  $47  $176  $146   $394   $372                      Income tax  51  43  37   (5)  9   43   53   108   98  Income from continuing operations  $142  $122  $130   $30   $38   $133   $93   $286   $273                      Income from continuing operations per diluted share  $2.71  $2.41  $2.74  $0.63  $0.81  $2.79  $1.93  $5.74  $5.47  Weighted average shares outstanding – diluted  52.6  50.4  47.6  47.7  47.7  47.8  48.4  49.8  50.0                      **************************************************************************************************************************************************************************************************                    (Including discontinued operations)                    Net income (loss)  $139  $(108)  $98  $30  $38  $133  $12  $286  $273  Net income (loss) per diluted share  $2.64  $(2.13)  $2.05  $0.63  $0.81  $2.79  $0.25  $5.74  $5.47  See “Financial Measures” in earnings press release for a discussion of non-GAAP Financial MeasuresTotals may not sum due to rounding 

 Financial Results – Segments by Quarter  20   ($ in millions)  2Q19  3Q19  4Q19  1Q20  2Q20  3Q20  4Q20  1Q21  2Q21   LoyaltyOne  $251  $246  $332  $198  $151  $185  $231  $177  $151   Card Services  $1,097  $1,192  1,128  1,184  828  866  879  908  861   Corporate/Other  -  -  -  -  -  -  -  -  -  Total revenue  $1,348  $1,438  $1,461  $1,382  $979  $1,050  $1,110  $1,085  $1,012   LoyaltyOne  $27  $(5)  $58  $47  $24  $18  $22  $32  $24   Card Services  263  300  162  32  70  212  187  410  404   Corporate/Other  (96)  (131)  (52)  (53)  (47)  (55)  (63)  (47)  (57)  Total earnings before tax (EBT)  $194  $164  $167  $25  $47  $176  $146  $394  $372  Totals may not sum due to rounding 

 Capital and Liquidity  21  Combined Banks Capital Ratios  2Q19  3Q19  4Q19  1Q20  2Q20  3Q20  4Q20  1Q21  2Q21  Common equity tier 1 capital ratio  15.4%  15.5%  14.5%  15.9%  18.3%  18.8%  18.4%  21.0%  22.1%  Tier 1 capital ratio  15.4%  15.5%  14.5%  15.9%  18.3%  18.8%  18.4%  21.0%  22.1%  Total risk based capital ratio  16.7%  16.8%  15.8%  17.3%  19.7%  20.1%  19.7%  22.3%  23.4%  Tier 1 leverage capital ratio  13.7%  13.4%  12.5%  12.8%  14.2%  16.1%  17.1%  17.8%  19.2%  Parent Level Liquidity at 6/30 of $1.0 billion, consisting of cash on hand plus revolver capacity Approximately $284 million in cash and cash equivalents, $750 million in unused revolverBank LevelBanks finished the quarter with $2.7 billion in cash and $3.1 billion in equityTotal risk based capital ratio at 23.4% - over double the 10% threshold to be considered well-capitalized; CET1 at 22.1%Funding readily available with heavy demand for FDIC-insured deposit products – both direct-to-consumer and brokered 

 Card Services Sales Data  22  In-store vs. digital sales  Digital includes all non-store new accounts and Bread  $ in billions  In-store vs. digital new accounts  in millions 

 Reconciliation of Non-GAAP Information  23  (1) Represents amortization of debt issuance costs.(2) Represents costs for professional services associated with strategic initiatives.(3) Represents the tax effect including the related non-GAAP measure adjustments using the expected effective annual tax rate.   ($ in millions, except per share amounts)  2Q21  Net income  $273.5   Add back non-cash/ non-operating items:     Stock compensation expense  9.2   Amortization of purchased intangibles  11.5   Non-cash interest(1)  8.0   Strategic transaction costs(2)  4.8   Income tax effect(3)  (7.1)  Core earnings  $299.8   *******************************************************************************************    Weighted average shares outstanding – diluted  50.0  Core earnings per share – diluted  $5.99 

 Reconciliation of Non-GAAP Information  24  (1) Represents costs for professional services associated with strategic initiatives.   ($ in millions)  LoyaltyOne  Card Services  Corporate  2Q21 Total            Income (loss) before income taxes  $24.5  $404.5  $(57.4)  $371.6  Interest expense, net  (0.1)  72.2  29.6  101.7  Operating income (loss)  24.4  476.7  (27.8)  473.3  Depreciation and amortization  9.4  21.5  0.6  31.5  Stock compensation expense  1.8  3.6  3.8  9.2  Strategic transaction costs(1)  -  -  4.8  4.8  Adjusted EBITDA  35.6  501.8  (18.6)  518.8  Less: Funding costs  -  72.2  -  72.2  Adjusted EBITDA, net  $35.6  $429.6  $(18.6)  $446.6 

 25  Alliance Data announces spinoff of the LoyaltyOne Segment  Proposed spinoff is expected to be tax-free and will create two independent, publicly traded companies        Rationale  Leadership  Timing  Aligns with our strategic transformation to deliver long-term, sustainable growthPositions both companies to invest more deeply in their unique growth opportunitiesTransaction expected to strengthen Alliance Data’s balance sheet and improve key ratiosCreates standalone data-driven, tech-enabled loyalty solutions provider, “Spinco”  Ralph Andretta will remain president and CEO of Alliance DataCharles Horn will continue to lead LoyaltyOne and will be named President and CEO of SpincoBoard of Directors will be established for Spinco and announced in the coming monthsNo resulting change to Alliance Data Board of Directors  Announced on May 12, 2021Spinoff is expected to be completed in Q4 2021, subject to market conditions and satisfaction of regulatory requirements  Spinco will raise debt capital and distribute the funds to Alliance Data for corporate debt reduction as part of the spinAlliance Data retains ~19% non-controlling interest in Spinco, with the intent to monetize that stake as appropriate for Alliance Data corporate debt reduction4.75% Senior Notes due 2024 & 7.00% Senior Notes due 2026 to remain with Alliance Data    Balance Sheet 

XML

Document and Entity Information	Jul. 29, 2021
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 29, 2021
Entity Registrant Name	ALLIANCE DATA SYSTEMS CORPORATION
Entity Incorporation, State or Country Code	DE
Entity File Number	001-15749
Entity Tax Identification Number	31-1429215
Entity Address, Address Line One	3075 LOYALTY CIRCLE
Entity Address, City or Town	COLUMBUS
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	43219
City Area Code	614
Local Phone Number	729-4000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0001101215
Title of 12(b) Security	Common stock
Trading Symbol	ADS
Security Exchange Name	NYSE