Bread Financial Holdings, Inc. (ADS) on Q2 2021 Results - Earnings Call Transcript
Operator: Good morning, and welcome to Alliance Data Second Quarter 2021 Earnings Conference Call. At this time, all parties have been placed on a listen-only mode. Following today's presentation, the floor will be opened for your questions. . It is now my pleasure to introduce Mr. Brian Vereb, Head of Investor Relations at Alliance Data. Sir, the floor is yours.
Brian Vereb: Thank you. Copies of the sides we'll be reviewing, and the earnings release, can be found on the Investor Relations section of our website. On the call today, we have Ralph Andretta, President and Chief Executive Officer of Alliance Data; and Perry Beberman, Executive Vice President and Chief Financial Officer of Alliance Data.
Ralph Andretta: Thank you, Brian, and thank you to everyone for joining the call this morning. I'm excited to have our new CFO, Perry Beberman, joining me today. He has been on the job for less than three weeks, but he's jumped right in and we're happy to have him on the team. I'll start on Slide 3 with the takeaways from the second quarter. We continue to make considerable progress on our strategic initiatives. During the quarter, we hosted an Investor Event where we discussed our three-year strategic plan, highlighted our enhanced product offerings, reviewed our lending philosophy, and released our long-term financial targets across key metrics. We also announced the expected spinoff of our LoyaltyOne segment, which is key to our strategic transformation to strengthen our balance sheet metrics, and deliver long-term focus sustainable growth. We successfully implemented several monetization and efficiency initiatives that I will discuss later. At the end of the quarter, we launched our Bread Fiserv relationship and continue to sign new partners and build our prospect pipeline, along with renewing several of our valued brand partners. We're pleased to see credit sales rebound to pre-pandemic levels as we exit the second quarter. Consumer confidence and mobility continue to improve, as retailers focus on engaging their customers through an omni channel shopping experience with our Gen Z and Millennials sales of double-digits compared to pre-COVID levels. Digital sales were up $400 million versus the first quarter as total overall sales continue to grow. Finally, our credit performance remains strong as a result of our disciplined risk management and the ongoing impact of the economic stimulus payments and programs. We anticipate the credit metrics, including our delinquency rates, will normalize once government stimulus programs expire in the latter part of the year.
Perry Beberman: Thanks, Ralph. I'm happy to be here. Slide 10 provides our results for the second quarter of 2021 compared to the second quarter of 2020. Revenue was up 3% primarily due to the impact of the pandemic-related consumer relief offered by Alliance Data in the second quarter of 2020. Total expenses excluding provision for loan loss were down 4% compared to the second quarter of 2020, with operating expense efficiencies offsetting our strategic investment in Bread. Pre-provision pre-tax earnings or PPNR were up 20% year-over-year aligned with our focus on driving core underlining earnings growth. Finally, net income included a benefit of the $208 million net reserve release in the quarter. I'll provide more details on our results in the coming slides.
Operator: . Our first question comes from the line of Robert Napoli with William Blair.
Ralph Andretta: Good morning, Bob.
Robert Napoli: Thank you. Good morning. Good morning, Ralph and welcome, Perry. Perry, a question I mean, this is a big change for you coming from where to Alliance Data Systems. What attracted you to ADS? And what do you see, where do you see the ability, and what can you -- what do you see that you can add to the outlook or the story or the strategy, if you would?
Perry Beberman: Thanks, Bob, for the question. Again, as I said, I'm really happy to be here. I've been watching ADS for quite some time. We've been in this industry for, more than 33 years; it's a small community in the credit card and payment space. And so when we heard of Ralph, going over to ADS, obviously, that got some headlines, and then Val joining and a number of other industry vets coming over, it certainly piqued my interest. And then with the Bread acquisitions, a lot of buzz going around that the company was certainly going through a transformation. So to be part of this leadership team and work with this Group is a terrific opportunity. And take you back to the early days in my career, where we basically -- I feel the company and it grew at a quite nice rate. But we're focused on a singular mission, I can tell for being part of this Group for only three weeks. This is an incredibly collaborative team, and I hope to bring that collaboration and bring my experience to them. And I was here a couple of weeks ago in New York, and we had the opportunity to be with the leadership team and the board. And I was incredibly impressed with the engagement and the collaboration was incredibly evident. And this Group is agile, nimble and we're going to drive towards the transformation effort. So I'm excited to be part of this Group.
Ralph Andretta: You know, Bob, I would say, Perry's protocol is actually is finance, but aside from being a trustee financial advisor, he is a strategic decision maker with a company along with the rest of my leadership team. So we're very happy and lucky to have him here and I am very happy not to have to do the CFO job anymore.
Robert Napoli: Great. Perhaps a question on Bread, and just the momentum. And I thought Wayfair was a really interesting addition and very curious on that, because I know they were an affirmed partner, they still -- still are and Wayfair was an ADS private label customer that shifting off or it hasn't, I think it may already have. So how do you say, is that an exclusive relationship and what does that and then just related to that, have you added was Blue Nile a private label customer, is there a pipeline of ADS private label customers, they're going to become great customers?
Ralph Andretta: Yes, let me first start with Wayfair and I am happy to be associated again with Wayfair that upon my arrival here, Wayfair was exiting the relationship with ADS. And I was disappointed about that because it's such a -- such an interesting and innovative brand. So for us to be back in a relationship with Wayfair, although not exclusive, I'm really happy to do that. We're going to really focus on making this relationship very profitable for them and equitable for us, because I think it's great to be associated with such an innovative brand. So, hoping and welcoming back on, welcoming them with open arms. In terms of Blue Nile, Blue Nile is a private label customer of ours, and we've sold into them, and its 1.7 million customers we had in October -- the -- on the Bread platform, and be able to provide them additional types of financing. So really excited about that, with that partner. And there's more to come in the second half of the year. So there's a number of partners that we will sign and that we will, private label partners and our co-brand partners that will be on our -- on the Bread platform. It does take a little time as you can imagine, but we are -- we have a steady pipeline of our current brand partners and if you think about Bread, it's not a one trick pony. There's three elements to Bread, right, you've got the direct, you've got the direct acquisition and the focus on Fiserv and really scaling up in 2022. We spent a lot of time the first six months getting that signed and focused on getting that done. And then, obviously the RBC relationship and ensuring that we'll have partners on that in the fourth quarter. So I think we've made really nice progress on Bread first of all three, what I call all three legs of the stool.
Robert Napoli: Thank you. If I can sneak in just one last one on Page 13 the bottom right, the revolving credit risk distribution, big change from the second quarter of 2019 to the second quarter of 2021 for ADS, is that the right mix or generally in the range of the mix that you would like to have long-term?
Ralph Andretta: Yes, it is, it's going to fluctuate a little bit, but it is the right mix. That's a mix and two things to remember. One is product mix and risk mix and that's how you get there. So it's a combination of both. It'll moderate back and forth. But that's about where we want to be.
Operator: Your next question comes from the line of Sanjay Sakhrani with KBW.
Sanjay Sakhrani: Thanks. Good morning and congrats, Perry. I guess first question is on the yield. As we look at that gross revenue yield, I understand it stabilized. But do you expect that to start picking up as loan growth materializes; they begin to speak to the directional continual?
Ralph Andretta: Yes, I think it's going to be stable for the rest of the year, Sanjay. And for a couple of reasons, one thing I think the second quarter is seasonal. So you have to factor a little seasonality in the second quarter. But because payment rates are elevated that that yield is going to be steady. So honestly, it's picking up quite a bit for the rest of the year as payment rates moderate. You'll see that yield improve as we go into 2022.
Sanjay Sakhrani: And am I correct, do you guys think it'll migrate back to the highs that we've seen in the past or some intermediate point?
Ralph Andretta: I think it will -- again I think it'll be in the intermediate point because of our product and risk mix. So we're -- the yield will improve. But our loss rate won't deteriorate as that yield improves; I think you'll see a nice balance between yield improvement and loss rate, which is exactly what we're looking for.
Sanjay Sakhrani: Okay, great. And then I guess a follow-up question on the Fiserv onboarding. I think I heard you Ralph talk about that it's going to take a process to onboard these merchants. I guess when we think about your targets out to like 2023 just speak to the cadence of the onboarding like you expect to be fully ramped by a certain point in time to hit those targets or how should we think about that?
Ralph Andretta: Yes. So, here’s how I feel about it, Sanjay, we want to get it right. Not want to get as fast, right? Because this is a long-term relationship and we want to make sure that we’re doing things correctly so that the ease of integration and ramp is simple. So we're learning from, look we went live June 30th, we’re going to learn from the partners we bring on this year, and we’re going to ramp, our hope is to ramp quickly, in 2022. And that'll carry us into 2023. The Fiserv is a really nice part of our receivables growth. But if you think about it, it's just one quarter of receivables growth. Another part is, a deeper penetration in our existing partners and our resigns with our new product set. That's part of our growth, the growth in co-brands, again is part of our growth. And then I expect with the team we've put together to get my fair share probably more than my fair share of opportunities out there in the marketplace. So the combination of all those gives me, certainly gives me confidence that we will hit the -- the 2023 metrics.
Sanjay Sakhrani: Great. Just one last for Perry, just following-up on Bob's comments, maybe you could just talk about your strategic priorities over the next year? Thanks.
Perry Beberman: Well, my strategic priorities are the same as the leadership teams' strategic priorities. Make sure we execute spin, ramp up Bread, deliver the efficiencies that we need to do to continue the investments in the company, and make sure that we have disciplined financial management and that we support the business leaders with all the investment decisions we're trying to make. And as Ralph said, compete and win our fair share of new deals and make sure we have the proper economics for the renewals that we have.
Sanjay Sakhrani: Great. Thank you.
Ralph Andretta: It's really good to be aligned with you as CFO. I'm really happy about that.
Operator: Your next question comes from the line of Mihir Bhatia with Bank of America.
Mihir Bhatia: Hi, thank you for taking my questions, and congratulations Perry. I want to, maybe just ask about the receivable guidance, just trying to understand, like some of the dynamics going on there. Because I mean, you've increased your credit sales guidance. Receivables, if you look at the monthly data start seem to have crossed in May. And then you have good momentum in terms of Bread coming on this year. So with government programs, expiring, I'm just trying to understand what’s keeping the receivable guidance down mid-single-digits. Are there implemented portfolio losses that maybe we should be thinking about or some other events? Is it still just all payment rates staying higher than you'd expected?
Ralph Andretta: I think payment rate is a spotlight. Right now, we're seeing elevated payment rates. And we are -- our forecast is that will abate in the second half of the year. But we're still seeing it elevated, I think that to me is, if I had to pick one reason, that's the reason. So we're seeing strong sales growth, that sales growth is still outpacing, is outpacing the payment rates moderation a bit, but it's still payment rates are still high.
Mihir Bhatia: Okay. So if there's nothing else like there’s no portfolio loss or something that --?
Ralph Andretta: No, we've already talked about. We've -- we already factored in that portfolio loss in the third quarter that's impacting us. But really, it's payment rates. It's not that, it's impacting our receivables.
Mihir Bhatia: Got it. And then just one quick one from me on, you mentioned acquisition of proprietary cardholders being an opportunity in 2020. Can you maybe talk a little bit more about that, is it Bread? Is it something else?
Ralph Andretta: Yes. So in 2020, when we did lose the Wayfair partnership, the result of that is the successor, which was City declined to buy the portfolio. So, we had this portfolio sitting out there, we had a couple of bankruptcies sitting out there. So quite frankly, we have never done this before through Val and I suggestion in the team. So why don't we put a proprietary card in the marketplace and not just let that receivable runoff, but improve the receivable. So we're able to find good prospects in those files, in those portfolios, and we offer them a general purpose card with a good cash back program and some incentives and they've been good card members. We've seen quite frankly, Millennials spending on that card and more so than any other part of our population. So we think it's a real opportunity for us. It started as a safe product, but we're going to go direct to market and it just diversifies our portfolio and moves on and kind of moves out, lesses our dependence on bricks-and-mortar on private label and partnerships. It's in the mix. It's one of several things we're offering now as part of our new product sets. We're excited about it. We're getting better at it, a million customers, and I'm really proud of that crossing that million customer mark.
Mihir Bhatia: Understood. Thank you.
Operator: Your next question comes from the line of Jeff Adelson with Morgan Stanley.
Ralph Andretta: Good morning, Jeff.
Jeff Adelson: Hey, good morning, Ralph, and welcome, Perry. Just wanted to follow back up on the Wayfair point in the loan growth. I agree that it was pretty interesting to see that your guys were able to kind of reenter with that company. Just wondering if there's anything in your strategy that you're doing to go after maybe some other card portfolios that you lost in the past or how you're viewing this as perhaps a hook to win more of those relationships that you don't currently have on the card side today.
Ralph Andretta: Yes. Listen, I -- we have a crack sales team and I've kind of unleashed them to go after good business and profitable business for us. So and why revisit where we've lost certain partners, I mean, I'm happy to sell, buy now pay later installment loan to them, but their card relationships are long-term. So when they're up again, we may decide to go after them, but in the sense that we could continue to work with them, like we're working with Wayfair on a different lending model. I'm very happy to do that. So -- but it's not a -- that itself is not a definitive strategy. The strategy is to go after and sign profitable partners for ADS and Bread.
Jeff Adelson: And then -- and just on the payment rates, are you seeing, I know they’re still elevated. I’m just wondering, are you seeing any signs that that’s actually starting to maybe go down from here? And then when you think about the high-single digit, low-double digit growth for next year. Just kind of wondering how exactly you're thinking about payment rates. So they need to go back down to the pre-pandemic level or can they remain a bit elevated and you still hit that target.
Ralph Andretta: Yes. So we -- as of July -- as of July 29, the payment rates are elevated. We obviously we look at them every day. And they're still elevated. And -- but they don't have to go down to pre-pandemic levels for us to get to that high-single, double -- low double-digit growth in 2022, as we predicted, because sales growth is outpacing that moderation in payment rates. They're still high with our sales growth in double-digit. And we expect that to continue be as a result of earnings out there. We're not -- we're monitoring that. And we're not turning a blind eye to what's in the marketplace. But as we see today, our sales are outpacing the moderation the high payment rates a bit.
Jeff Adelson: And then just one last housekeeping for me. And on the $0.5 billion portfolio, I know that’s coming out. Can you just remind us of the timing of when that actually happened, or when it could happen --?
Ralph Andretta: That would be third quarter -- end of third quarter.
Jeff Adelson: End of third quarter, okay.
Ralph Andretta: Yes.
Jeff Adelson: Thank you. That's all for me.
Operator: Your next question comes from the line of John Pancari with Evercore ISI.
John Pancari: On Bread, can you perhaps help us out with the updated loan balance for Bread as of June 30? I believe it was around $130 million as of the first quarter. And do you still expect a doubling in that loan balance by the year-end 2021?
Ralph Andretta: Yes. We expect that loan balance will double as we exit 2021. I think the loan balance is in the 10-Q. Take a look at it there. But we expect -- we're on track to double that loan balance in 2020/2021.
John Pancari: And related to that, do you still expect GMV of about $10 billion by year-end 2023? And how should we think about the loan balance by year-end 2023, if that's achievable?
Ralph Andretta: Well, let me say we will approach $10 million -- $10 billion in 2023. And we're not -- the loan balance is going to be a combination of -- we're going to keep ADS within the card services division. So it's a -- its part of a greater loan balance, but we view it as being a big part of our loan balance going forward, particularly if we approach that $10 billion of GMV in 2023.
John Pancari: Okay. And then, lastly, on your receivables growth in 2022, the highest single to low double-digit. Regarding the last answer to the last question on that is -- is it that the payment rates are coming in that much. I mean, the sales volume is coming in that much better than expected that is all setting the payment rates remaining elevated for a longer period. And that's why you're still confident in that high single-digit to low double-digit expectation, because I would have thought that you might have tempered that a little bit given the way payment rates have been projecting for the industry?
Ralph Andretta: Yes, well, I would say, the sales are coming in better than expected. And it's marginally set up -- marginally offsetting those payment rates, they're still high, but it's still, it's outpacing in a little bit. So it's marginally offsetting that, it gives us enough confidence, knowing what's in our pipeline that 20 -- that 2022 kind of high single, low double-digit is achievable.
Operator: Your next question comes from the line of Meng Jiao with Deutsche Bank.
Ralph Andretta: Good morning, Meng.
Meng Jiao: Hi, good morning. Good morning, guys. Thanks for taking my question. I wanted to ask quickly on the in-store versus digital sales, it looks like percentages in-store versus digital new councils had sort of moderated to pre-pandemic levels. I guess do you have expectation for that to trend higher with Bread coming online. And as mentioned, the focus on the propriety card next year, just your general thoughts there?
Ralph Andretta: Yes. It certainly will. I think our digital sales will trend higher as we bring partners on to Bread as we enhance our digital suite, as we add more partners at FASTag, and we selling more product -- more of our products or partners through digital and omni channel, I would expect that to increase at a good clip.
Meng Jiao: Got you, great. And then separately, I guess can you guys sort of disclose the ethnicity of partnerships coming online with Bread?
Ralph Andretta: No, look here's what I will say, some of those partnerships are exclusive, some of them are not they're competitive. And we're very happy to compete in the marketplace. So, obviously you want exclusive partnerships over the best time, but clearly if it's not exclusive, we're very able to compete on price, and product and quality.
Meng Jiao: Got it, And then, lastly for me, on the payment rates, is there an expectation that as government stimulus sort of ends in September/October that you're going to start to see more, I guess a gradual celebration of payments coming down, is your expectation in terms of when the decline in payments happened and it certainly happened?
Ralph Andretta: You know boy, I wish I had that my magic eight ball. But we think as the government stimulus rolls off, you'll see a moderation of payment rates in the fourth quarter. I'll begin to see payment rates go to our pre-pandemic levels, because we have changed our product mix and our score mix. That was intentional. So, we'll see payment rates moderate because of the stimulus, but I think they'll be elevated. No, there won't be our traditional payment rates we have pre-pandemic because we have intentionally changed our product and score mix, risk mix as well. So we'll go moderate but not in my view, not to where they used to be in 2019.
Operator: Your next question comes from the line of David Scharf with JMP Securities.
Ralph Andretta: Good morning, David.
David Scharf: Hi, good morning. Welcome, welcome aboard, Perry and thanks for taking my questions. Two things first, Ralph, when I saw all the jewelry brands listed under the renewals, I guess the Signet brands, kind of reminded me to be asked for an update on vertical concentration, and in particular, I'm assuming that beauty and health is still the fastest growing vertical or best forming. Can you provide an update on perhaps for all the Pagoda and Zales sort of where they fall in terms of the maturities sort of renewal schedule? And whether or not that vertical -- is it -- growth expectations for that vertical are a key part of meeting receivables targets?
Ralph Andretta: Yes. So I'll speak of portfolio in total, we have 160 Brand Partners, and those renewals are staged over five to seven years and not one-year of renewables really hurts us, non-renewables really impact the P&L in a great way, we hate to lose the partners, but we’ve structured in a way that it's over a period of time and we've been focused on early renewals with our partners. And we really are leading in the beauty space, and it's been very, very healthy. And we've worked closely with the partners you have mentioned, and we continue to work closely with them bringing new products to the market, making it easy for acquisition, giving them options on in terms of products and penetrating deeper into their loyalty base. So I think we're -- we will continue to diversify. I think health is an interesting product line, beauty is an interesting product line, jewelry as you kind of noted plus sizes is an interesting product vertical for us. So we’ve been doing a lot of work in a little different vertical, which really helps us pivot away from the traditional bricks-and-mortar, and retail that we were before. So we're excited about them, we're working with all those partners, in all those verticals. And the key is ensuring that we're growing the pie for them and for us with new products, data and analytics, and good service.
David Scharf: Got it. Got it. I appreciate the color. Just a follow-up on yield. Maybe a little more of a longer term question, obviously, the elevated payment rate when you're talking about so different from what every other lender is done during this transitional year of stimulus. But I'm wondering if we look forward, and I know there was a question earlier about where yields ultimately normalize. As you look at sort of the current credit profile it was provided in one of the slides and as you also think about by 2023, the composition of the portfolio that's coming from buy now pay later. Can you talk about sort of what percentage of gross yield you think will be coming from late fees, once things normalize, versus maybe the profile of ADS a few years ago, when it may have been as much as a third? So I'm trying to understand, I think that may get the biggest window into ultimately what the gross yield kind of secular outlook is?
Ralph Andretta: Yes. So, as I said, we've changed our product mix and our risk profile. So we're not -- we're not relying on late fees as -- as ADS was in the past. So that’s not a -- it's not a place where we want to place our bets. We want to place our bets on returns with good products and getting good yield from people that are good payers. So that's important to us. So we don't see late fees as being a predominant that predominant in our -- on our go-forward yield. I'm sure it'll say apart, but it won't play the predominant point as it did in the past. If you think about yield, and you think about Bread, the Bread yields are accretive to us because it is relatively low cost to acquire, and low cost to serve. And those yields are accretive to us, and they will make -- enhance our yields going forward. So, I'm confident with that, our yields will be steady going forward. But -- and I'm also confident that given the product mix and the risk mix, it's not going to be just driven by late fees.
Operator: Your next question comes from the line of Dominick Gabriele with Oppenheimer.
Ralph Andretta: Good morning, Dominick.
Dominick Gabriele: Thanks so much for taking my questions. I just want to say welcome Perry, and Wayfair returning really is a testament to the strategic transformation here for sure.
Ralph Andretta: Yes. I got two deals this quarter.
Dominick Gabriele: Just right and it came in at a discount, right?
Ralph Andretta: Exactly.
Dominick Gabriele: So, I guess, as we look at the -- people who have been really focusing on how -- on the Fiserv fees, saying that it's not an exclusive relationship to some extent, and I was actually just going to flip that on its head and ask you, could you sign up another partner like Fiserv within that type of channel to get after perhaps different partners, merchants that they maybe I mean, Fiserv fits us everybody, but is there a way to kind of diversify those partners as like lenders will diversify their sub banks?
Ralph Andretta: Yes, well, let me just talk about -- first talk about the Fiserv relationship. Although not exclusive, we are integrated into their dashboard. So when a merchant turns on Fiserv relationship, we are there and integrated into their dashboard, so it's ease of use, so that although not exclusive that to me is really, really important. We have a -- we -- so Fiserv was a very important partner of ours and we were doing many things with them across the past. But to the second part of your question, of course, we can work with another third-party as well. The place where I'm really interested and really want to be bullish on is particularly internationally, if we can, is on the technology platform that we have with RBC. So we are the white label solution to RBC in terms of buy now pay later installment lending. And we get a transaction fee there. So the revenue is without receivable that's something that we could rollout around the world pretty quickly. That's where -- that there's a real opportunity for us there to have RBC like relationships in other geographic locations.
Dominick Gabriele: Right. Yes, absolutely big opportunity. And I know it's a bit early to maybe ask this question, but maybe you could take back out the April, but if we think about the consumer's excess liquidity, I mean, I think one of the big banks talked about 50% of stimulus still being in their bank accounts. When I guess -- when we think about the holiday season coming up, I guess, can you talk about how your new relations -- relationships over time to diversify that fourth quarter receivables jump and how you're thinking about this holiday season with your partners, the spend turning into balances. Thanks so much, guys. I really appreciate it.
Ralph Andretta: Yes. I think you're -- if you look at the baseline forecast, you'll start to see in the fourth quarter, at least what's projected, you'll start to see savings -- those savings dissipate a little bit in the fourth quarter. Spring has rolled off and holiday season rolled on and we're seeing, like I said, high double-digit sales. So we're positioning ourselves very well for the holiday season though and I'd say over I think about it in three areas. One, as Perry talked about and I talked about, we ramp -- we're going to ramp -- we have been ramping, we'll continue to ramp up on marketing dollars. That those marketing dollars are focused on driving incremental spend with our existing partners and acquiring new customers in the third and fourth quarter. So that helps us through the holiday season. We continually add partners to the Bread portfolio that will help us through the holiday season. I mentioned earlier that we have a number of really good prospects with RBC that will be ready for the holiday season. So all those things in my view of RBC is not receivables, but it is revenue. All those things will help us really drive to jumpstart 2022 and in a combination of payment rates, moderating, and sales continuing to grow. I think we'll -- you will see that as we exit the year, you'll see that receivables growth.
Operator: . Your next question comes from the line of Reggie Smith with JPMorgan.
Ralph Andretta: Good morning, Reggie.
Reggie Smith: Hey, good morning, guys. I got two quick questions. Number one, just trying to understand, maybe you guys have talked a bit about the Bread integration process, but I'm curious, like how does that compare to the standalone on the buy now pay later companies? So specifically like it takes you longer to integrate given the nature of integration, are you on par with how quickly they can be up and running with a client.
Ralph Andretta: Yes, we are, probably as we could be running as fast. And I think the distinction between us and the standalones, there's a couple of distinctions. One is we're on the merchant side. So we integrate into the purchase path and give that merchant the option, typically the customer the option pay different ways that the merchant. We're not interested in taking the transaction away from the merchant. We're interested in adding the transaction to the merchant, because the merchants are partner. So that's one distinction. We're not asking them to download an app. We're asking to execute a transaction within the purchase path of that merchant. That's a real different distinction than the standalone. Secondly, for our existing partners, we can offer relationship pricing, because they're a partner of ours beyond just that transaction. And we have a balance sheet, we have debt funding, and we have a relationship. So it could be very, very competitive in terms of pricing as well. Another distinction from the third-party, but in terms of up and running we're as quick as they are.
Reggie Smith: Got it. And if I can squeeze one more follow-up in, you mentioned, I guess, the success -- early success you're seeing with Millennials on your proprietary card. I was curious, is that a function of you kind of picking now formal Wayfair customers, or are there certain features about the card that resonate with Millennials? And that's what I'm asking is, have you considered, or are you thinking about integrating like buy now pay later functionality or installment functionality into your proprietary card and maybe even rebranding it to make it more of a consumer-facing product? Thanks.
Ralph Andretta: Great question. Yes, I mean, I think we’re seeing early success of Millennials, because it's a cash back card. So Millennials are rationale and they like cash flow. So they see it as a opportunity to get something back for their spending. Also we're skewing towards digital with the product as well. And we'll continue to make that product digital as well. So in terms of making it a bigger part of our portfolio we're certainly bullish on this product and you'll see us lean into this product next year.
Reggie Smith: Got it. I guess, just to make sure it was heard. Is there any idea or thought about making installment, like a feature in that product or could you not talk about that or --?
Ralph Andretta: Yes. I think we have --
Reggie Smith: I don't want -- I don't want -- I don't want you to abide?
Ralph Andretta: Yes. So I'm sorry if I didn't abide -- I didn't answer your question fully. Yes. We're going to bring all our product capabilities to our proprietary card. So installment buy now pay later all the capabilities we have will make available to our proprietary card.
Operator: At this time, there are no further questions. I will now like to turn the call back over to Mr. Ralph Andretta.
Ralph Andretta: So thank you all for the call today and your interest in Alliance Data. As you know, we remain focused on executing our strategic plan, building for the future, and really excited about the progress we've made and our outlook. So everyone have a terrific day and thank you all very much. Take care.
Operator: This concludes today's teleconference. Thank you for participating. You may now disconnect.
