Bread Financial Holdings, Inc. Q2 FY2025 earnings call

• Adjusted net income was $149 million and adjusted earnings per diluted share was $3.15. Return on average tangible common equity was 22.7%. • Credit sales grew 4% y-o-y with spending weighted towards nondiscretionary purchases via co-brand and proprietary products. • Updated full year net loss rate outlook to 7.8% to 7.9% due to improving trend. • Adjusted total noninterest expense was essentially flat despite technology investments. • Completed $150 million share repurchase and $150 million senior notes tender offer. • Direct-to-consumer deposits reached $8.1 billion, up 12% y-o-y. • Renewed long-term relationship with Caesars Entertainment, launched new Caesars Rewards Prestige Visa Signature card and Crypto.com co-brand credit card.

Credit sales for the second quarter were $6.8 billion, increasing 4% year-over-year. Direct-to-consumer deposits grew steadily to $8.1 billion at quarter end, up 12% year-over-year. Product offerings represent more than 50% of credit sales.

• Expect average loans to be flat to slightly down. • Total revenue excluding gains on portfolio sales anticipated to be flat vs 2024. • Adjusted 2025 net loss rate guidance revised to 7.8% to 7.9% from 8.0% to 8.2%. • Full year normalized effective tax rate expected to be 25% to 26%.

• Uncertainty regarding macroeconomic outcomes, particularly downstream impacts on consumer spending and employment from monetary and fiscal policies. • Potential inflationary effects from trade policies. • Variability in credit metrics improvement depending on macro conditions.

Q: Mihir Bhatia asked about customer health, credit sales monthly trends, July update, and loan growth translation.

A: Perry S. Beberman said consumer is stable and resilient, July has positive trend, and loan growth is flat to slightly down with watch on macro environment.

Q: Sanjay Harkishin Sakhrani asked about tempered top line view, NII progression.

A: Perry S. Beberman explained lower billed late fees, product mix shift, cash mix, and pricing changes as factors affecting top line.

Q: Moshe Ari Orenbuch asked about mix shift impact on balance growth and late fee mitigants.

A: Perry S. Beberman said mix shift is gradual, affecting loan yield slightly, and working with partners on pricing and mitigants.

Q: Terry Ma asked about unwinding credit tightening actions.

A: Perry S. Beberman said it's dynamic, with gradual adjustments based on performance and macro.

Q: Reginald Lawrence Smith asked about gross applications, approval rates, and wallet share with top partners.

A: Ralph J. Andretta said there's good application flow, approval rates based on economy, and focus on partner relationships.

Q: Jeffrey David Adelson asked about BNPL and new client conversations.

A: Ralph J. Andretta said BNPL is a product in the set, pipeline is robust, and winning de novo business.

Q: Bill Carcache asked about Caesars renewal and retail partner penetration.

A: Ralph J. Andretta said renewal is proactive, competitive, and focus on partner growth and value propositions.

Q: Ryan Patrick Shelley asked about debt tender and capital structure.

A: Perry S. Beberman said opportunistically managing debt structure with optionality on calls.

Q: Vincent Albert Caintic asked about loss expectations and merchant engagement.

A: Perry S. Beberman said loss expectations are guided based on macro and seasonality, and merchant pipeline is robust with disciplined economics.