Q2 2021 Alliance Data Systems Corp Earnings Call
Poor and we received the net.
Necessary permissions required for the anticipated spin co debt refinancing activities.
Capital metrics and provide additional fleets.
The ability for the company.
Slide 6 highlights select brand partner additions and renewals we added several new partners during the second quarter, including New card partners Route 21 and gas Buddy.
Bread success in acquiring new online direct acquisition partners also continues.
The select few of the.
The new partners added to the platform are displayed on the right side of the slide including a new opportunity with <unk> to provide grids digital payment platform offerings to their customer base.
Also in the second quarter, we signed multi year card renewals with several partners, including Ann Taylor and Cigna.
Remain focused on growing profitably with collaborative brand partners and our enhanced product set.
Turning to slide 7 I'll provide more details on the progress in each of our brands business models.
Just recently celebrated the 6 month Mark of our acquisition of bread.
And.
For the opportunities.
The head of us.
Great.
His direct acquisition pipeline remains strong we continue to have positive dialogue ex digital offerings and we are.
Moving to align with bare IQ Roadmaps, and released timelines, which may take longer for larger merchants.
1 schedule of breads platform makes for a quick seamless integration I will highlight the recent signing of our current card partner Blue Nile 1 of the largest online jewelers with over $1.7 million customers now on breads payment platform.
Moving to the distribution channel.
As I mentioned.
<unk> on June 30 of reactivated in the E Commerce pilot with Fiserv and anticipated a select interest paid select few early launches of fiserv merchants onto the <unk> platform. During the second half of the year. We are excited about this opportunity and anticipate a full rollout in 2022.
Finally, our platform capability.
Please with RBC continue to improve as we are of quality.
Pipeline of new partner additions expected to launch in the fourth quarter prior to the.
In June we released our 2000.
Michelle and government governance performance reported.
I am proud of the progress we've made over the past 3 years and we remain focused on the priorities that drive long term success for our business and our stakeholders alike.
Among the many accomplishments I would highlight the results of our multiyear board refreshment program and our human capital management, including our strong.
Capability to diversity equity and inclusion.
Alliance data is ESG strategy will continue to be central to the company's ongoing transformation.
Prioritizes delivering long term sustainable stakeholders Kochi advancing.
And inclusive culture of managing.
Our commitment to ethical decision, making.
Cultural business practices in corporate governance, and sure that we mitigate risk and remain competitive in the dynamic marketplace before I turn it over the Perry I'd like to go back to slide 8 and review the performance of loyalty, 1 which includes which includes air.
The commitment rewards program in Canada, and the Netherlands based brand loyalty.
As displayed in the graph on the right hand on the right air miles reward miles issued and redeemed improved in the quarter as flight bookings increased in anticipation of reduced travel restrictions in the back half of the year at the same time merchandise redemptions.
Air miles strong <unk>.
Average daily flight bookings are currently 10 times higher than we experienced in the first quarter, yet remained at $60 to 70% with the pre pandemic level. So there is the expectation for further improvement as the recovery of Canada continues.
Brand royalties new program activity is improving with a strong.
Strong pipeline of clients in the second half of 2021.
Of course, we continue to closely monitor the COVID-19 conditions throughout the world, including the rise of the Delta Varian and the potential impact on the macro economic environment and our businesses my apologies for being out of order.
Now I'd like to turn it over.
The to <unk>, our new CFO Perry started with US on July 6 of the I am really happy to turn it over the CFO duties to him.
As you likely saw of Perry has over 33 years of experience in the card industry and bank and card and banking industry and is a very welcome the edition to our team with that I'll turn it over the period.
Thanks, Ralph I'm happy to be here slide.
Slide 10 provides our results for the second quarter 2021, compared to the second quarter of 2020.
The 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 provisions.
For loan loss were down 4% compared to the second quarter of 2020 with operating expense efficiencies offsetting our strategic investment in breath.
Pre provision pretax earnings or <unk> were up 20% year over year aligned with our focus on driving core underlying earnings growth.
Finally net income.
Included the benefit of the $208 million net.
Net reserve release in the quarter I will provide more details on our results in the coming slides.
Slide 11 provides our segment level results.
On the revenue was essentially flat year over year.
Revenue increased.
<unk>, 4%.
Loyalty 1 E <unk> was slightly up due to the increasing travel bookings at air miles favorable currency exchange rates and lower amortization expense the.
The improvement in card services. The EBT is primarily a result of the lower loan loss provision expense, resulting from continued strong card.
Remember point of view.
Delinquency rate year over year.
Moving to slide 11, I will review some of the key business metrics for the company.
Starting on the left of the slide we show our average receivables and our total credit.
We saw credit sales.
Sales come in at $7.4 billion are up 54% year over year.
And sequentially.
As highlighted earlier, we can performance as consumer confidence.
Bruce as expected.
And with elevated payment.
By the strong customer liquidity from government stimulus average receivables were down slightly in the second quarter sequentially.
Moving to the variety of revenue yields declined slightly from the first quarter as payment rates remain elevated leading to lower delinquency rates and related late fees card.
Services cost of funds continues to trend lower down of approximately 10 basis points from the first quarter as our consumer deposit portfolio rates continued to move lower.
Turning to slide 13, I'll start on the upper left.
Our delinquency rate dropped 50 basis points versus the previous.
Previous quarter to 3.3%.
On the upper right you can see that we finished at a loss rate of 5.1% down 250 basis points versus last year. These low rates of the result of our disciplined risk management as well as the economic stimulus, which is driving higher consumer savings rates across the industry.
Greater ability to pay.
Turning to the bottom left of the page our allowance decreased $208 million to $1.6 billion.
Primarily driven by the improved.
A delinquency rate and improving economic conditions for the reserve rate lastly.
On the bottom right hand side.
Side of the swap of the page our revolving credit risk distribution continues to trend slightly higher towards the greater than 660, <unk> segment accounted for 64% of our total portfolio in the second quarter I would note that we believe these numbers are slightly elevated in part due to the economic stimulus.
The aging consumer scores.
Slide 14 provides our financial outlook for the year.
Our full year receivable of guidance remains down mid single digits year over year, while we now look for 2021 while payments.
The rates of slightly moderated from.
The peak in March the elevated the level continues to put pressure on receivables.
The credit sales growth.
Our outlook for the full year revenue and total expenses remains unchanged expenses will increase in the back half of <unk>.
2021 as we.
The digital data and analytics.
Related to our core process of transition.
The fiserv as well as higher brand loyalty redemption expenses aligned with the increase in <unk>.
And the revenue expected in the second half of 2021.
And we have the ability.
Loss rates and delinquency rates remained low.
So we are adjusting our full year loss rate guidance to be in the low 5% range, we anticipate that credit metrics and payment rates will begin to normalize in the latter half of the.
The year of stimulus programs wind down.
We remain dedicated to simplifying and strengthening our business and investing in our strategic initiatives to continue to drive sustained profitable growth, we expect to resume high single to low double digit receivable growth in 2022.
Operator, we're now ready to open up the lines for questions.
At this time I would like to remind everyone.
What does the ask a question. Please press Star then the number 1 telephone keypad.
We will follow up with just a moment to compile the Q&A roster.
The first question comes from the line of Robert Napoli with William.
Some glass.
Good morning. Thank you good morning, good morning, Ralph and welcome Terry.
Perry.
Question I mean in terms of big change for you.
Coming from where.
The water to the alliance data systems.
Attracted you.
2 aes and what do you see where do you see.
The ability of what can you what do you see the new can add.
The 2.
To the outlook of the story of the strategy if you would.
Yeah, Thanks, Bob for the question.
Again, as I said, I'm really happy to be here.
I've been watching eds for quite some time when you've been in this industry for as noted 33 years at the small community in the credit card and payment space and so when we heard of Ralph going over the ADL.
The need obviously that got some headlines and then Val joining in a number of other industry events are coming over at certainly piqued My interest and then with the bread acquisitions of lot of buzz of going around at the company with certainly going through a transformation.
Good to be part of this leadership team and.
At work with this group is a terrific opportunity and it takes me back to the early days in my career, we basically IPO of the company and it grew at quite a nice rate, but everybody is focused on a singular mission I can tell from being part of this group of falling 3 weeks. This is an incredibly collaborative team and I hope to bring that.
Collaborate.
And having them bring my experience to them and I was here a couple of weeks ago in non New York and we had the opportunity with our leadership team and the board and I was incredibly impressed with the engagement and the collaboration with incredibly evident.
And this group is agile nimble and we're going to drive towards the transformation effort.
So I am exciting part of this group.
Hello, Bob.
I would say Paris first protocol is actual is financed but.
Aside from being a trusted financial advisor is a strategic decision maker with the company along with the rest of my leadership team. So we are very happy and lucky to have him here and I am very happy not to have.
Have to do the CFO job anymore.
Great.
The question on on bread and.
Yes.
The momentum in that you know that's not wait there was the really interesting addition in the.
The very curious on that because I know they were in the firm partner on phase still Stillwater and wait there was the in Aes.
Private label.
Customer that the.
You know that's the.
Shifting off or if it hasn't I think it may already have so how did you say that is that an exclusive relationship and what the debt and then just the related to that have you added was blue now with Blue Nile of private label customer of is there a pipeline of avs.
The label customers Theyre going to become great customers, Yes, Let me, let me first of all with the with the way fair and I am happy to be.
Associated again with wafer of that upon my arrival here <unk> taken advantage of the relationship with <unk>.
I was disappointed about that because it's such a.
As such of such an interesting and innovative brand so for us to be back in a week.
Relationship with the way fair, although not exclusive I'm really happy to do that we're going to moving to you.
We really focus on making this relationship very profitable for them and an equitable for us because I think it's great to be associated with such an innovative banjo.
The private fleet of welcomed me back I'm walking around the drag of open arms in terms of Blue Nile do now as a private label customer of ours, and we've sold into them and it's 1.7 million customers had in October.
B on the bread platform and be able to.
We will provide them additional types of financing so really excited.
About that.
With that partner and Theres more to come in the second half of the year. So there is a number of partners that we will sign in the private label partners in our co brand partners that will be on a on the Brent platform. It does take a little time as you can imagine, but we are.
We have of steady pipeline of op.
Of our current brand partners and if you think about Brian it's not a 1 trick pony.
3 elements to Brad right, you've got the director of <unk>.
The direct acquisition and then the the.
The focus on fiserv and really scaling up in 2022, we spent a lot of time in the first 6 months getting that signed and focused.
Getting that done and then obviously there of the.
The RBC relationship and ensuring that we will have partners on that for the fourth quarter. So I think we've made really nice progress on brand across all 3 of what I call free laser of the stool.
Hi, Thank you just if I could sneak in just 1 last 1 on page 13, the bottom right.
The revolving credit risk distribution.
The change from the second quarter of 19th of the second quarter of 2001 for <unk> is that the right mix or generally in the range of the mixed use like the half longtime.
Hum.
Yes it.
The on going to fluctuate a little bit but it is it is the right mix you know thats the mix.
The 2 data driven by 1 of its product mix of risk and risk the risk mix.
And that's how you get there so is the combination of both to the it'll it'll moderate back of course, but that's about where we want to be.
Thank you I appreciate it.
Is it your next question from the line of Sunshine in the chronic with K B W.
Thanks, Good morning, and congrats Barry.
I guess first question is on the yield as we look at the gross revenue yield I understand it stabilized do you expect that to.
Thank you.
As loan growth materializes, maybe you could just speak to the directional in terms of yield.
Yes.
I think it's going to be stable for the rest of the year Sanjay and for a couple of reasons why I think the second quarter of seasonal so you have to factor of little seasonality in the second quarter, but because payment rates are elevated.
That yield is going to be steady as honestly of picking up quite a bit for the rest of the year as payment rates moderate.
So that yield improve as we go into 2022.
And am I correct, you guys think it will migrate back to the highest that we've seen in the past of some intermediate point.
I.
Again, I think it will be in the intermediate point because of our product and risk mix.
So the yield will improve but our 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.
Great and then I guess follow up question on the Pfizer of Onboarding I think I heard you Ralph talk about but it's going to take it the process to onboard.
Merchants I guess, when we think about your targets out to like 2023.
I think it does speak to the cadence of of the Onboarding like do you expect to be fully ramped by a certain point in time to hit those targets or how should we think about that.
So.
So here's how I think about Sanjay we want to get it right not kind of get it fast right. Because this is the long term relationship and we want to make sure that we're doing things.
Could you correctly, so that the ease of integration and ramp the simple so we're learning from.
We went live June 30th we're going to learn from the partners that we bring all of this year and we're going to ramp.
Our hope is to ramp quickly in 2022 and that will carry us into 2023 the price.
Crew is.
Really nice part of our receivables growth, but if you think about it. It's just 1 part of our receivables growth another part of it.
A deeper penetration in our existing partners in our re signs with our new product set that's.
1 of our growth the.
The growth in co brands again as part of our growth.
And then I expect with the team we've put together to get my fair share probably more of than my fair share of.
Of opportunities out there in the marketplace. So the combination of all of those.
Gives me.
Certainly gives me confidence that we'll hit the.
The 2023 metrics great.
Just 1 last 1 on parent for Perry.
And just following up on Bob's comments, maybe you could just talk about your strategic priorities over the next year. Thanks.
Well my strategic priorities are the same as the.
The leadership team's strategic partners.
Yes.
Sure we execute spin Ram.
Our ramp up Brad.
Ed deliver the efficiencies that we need to do to continue the investments in the company and make sure of that we are disciplined.
Of the financial management and that we support the business leaders.
With all of the investment thesis and we're trying to make and as Ralph said compete and win our fair share of new deals and make.
We have the proper economics for the renewals that we have.
Great. Thank you, it's really good to be in line with your CFO I'm really happy about that.
Yeah.
Great.
Your next question comes from the line of Mihir Bhatia with Bank of America.
Hi, Thank you.
Sure, we my questions and congratulations Patrick.
The 1 maybe just ask about the the Steven guidance.
Just kind of understand like some of the dynamics going on there because I mean, we've increased credit sales guidance receivables. If you look at the monthly data stock seem to have profit in may.
They do have good momentum in terms of Brad coming on this year.
So with government programs.
Expiring I'm, just trying to understand what what's keeping the receiver guidance of down mid single digits are the.
Incremental portfolio of losses that maybe we should be thinking about automobile.
It's still just all payment grid.
And then you higher than you would expect.
I think payment rates as the spotlight.
Now, we're seeing that elevate the payment rate.
<unk>.
Our our forecast is that will that will abate in the second half of the year.
But we're still staying at elevated I think that to me is that of pick 1 reason that's.
The reason.
We're seeing strong sales growth net sales growth is still outpacing outpace.
Outpacing the payment rates moderation of bit, but it's still the payment rates are still high.
Okay.
But there is nothing else like Theres no portfolio of loss of something.
You talked about earlier already.
We factored in a portfolio of loss in the third quarter.
That's impacting us, but really its payment rates.
That's kind of impacting our receivables.
Got it and then just 1 quick 1 for me on you mentioned the acquisition of proprietary card holders of being an opportunity in 2000. When you can maybe talk a little bit more of up.
About that as it Brad is it something else.
Yes.
So in 2020, when we when we did lose the way fair.
Our partnership.
The result of that is.
The the successor, which was city declined to buy the portfolio. So we have this portfolio.
So sitting out there we had a couple of bankruptcies of sitting out there. So quite frankly, we had never done this before.
Through the Allen I suggestion and the teams so while we put the proprietary card in the marketplace.
And not just let the debt receivable run off but improve the receivable. So we were able to find good prospects in those.
Both of those.
And those portfolios and we offer them the general purpose card.
Good cashback.
Cashback.
The program and.
Some incentives and they've been good card members, we've seen quite frankly millennials spending on that card more so than any other any other part of our population.
<unk>. So we think it's the real opportunity for US is starting to have the same product, but we can go direct to market and it's just the.
Diversifies, our portfolio and move on and kind of kind of moves.
Lessens, our dependence on bricks and mortar on private label.
And partnerships it's in the mix. It's 1 of several things we are offering now.
As part of our new product set so we're excited about it we're getting better at it and the end customers.
Really proud of that crossing the 1 million customer Mark.
Thank you.
Your next question comes from the line of Jeff Adelson with Morgan Stanley.
Good morning, Jeff.
Hey, good.
Good morning, Ralph and welcome Terry.
Just wanted to follow back up on the wafer pointed in the loan growth.
I agree that it was pretty interesting to see that you guys were able to to kind of reenter with that company. Just wondering if there is anything in your strategy that youre doing to go after maybe.
Maybe some other.
Card portfolios that you lost in the past are or how you are viewing this as perhaps a hook to win more of those relationships that you don't currently have on the card side today.
Yes, listen I, we have of crack sales team and kind of unleash them.
To go after good business and profitable business for us so.
Why revisit where we where we've lost certain partners.
I'm happy to sell buy now pay later installment loan to them, but their card relationships of long term. So when they are up again, we may decide to go after them, but in the <unk>.
We could continue to work with them like we are working with <unk> on a different lending model I'm very happy to do that.
But.
It's not that that itself is not a definitive strategy. The strategy is to go after and sign.
The profitable partners.
For <unk>.
Since then.
And then just wanted to payment rates are you seeing I know theres 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.
Wondering how exactly youre thinking about the take rates.
So they need to go back down to the pre pandemic level of or Ken may remain a bit elevated and could you still hit that target.
Yes so.
As of July as of July 29.
The payment of rates are elevated obviously, we look at them every day.
And they're still elevated.
And Brent and the.
But they don't have to go down of pre pandemic levels.
For us to get to the high single or double.
Low double digit growth in 2022 of them.
Predicted because of our sales growth is outpacing that moderation in payment rates are still high but our sales growth of double digits and we expect we expect that to.
Albeit the delta bearings out there we're mining we're monitoring that and we're not turning a blind eye to what's in the marketplace, but as we sit today our sales are outpacing of moderation.
The high payment rates of.
A bit.
And then just 1 last housekeeping for me on the on the <unk>.
5 billion portfolio I know that's coming out.
Contingent can you just remind us of the tightening of the 1 that actually happens or.
Alright.
Operator.
The third quarter end of third quarter.
And the third quarters. Okay. Thank you that's all for me.
Our next question comes from the line of John <unk> with Evercore ISI.
Yeah.
Good morning.
Good morning, John.
Brad can you, perhaps help us out with the updated loan balance for bread as of June 30 year card believe it was around 130 million as of the first quarter and we still expect the doubling in that loan balance per day.
The year end of 'twenty 1.
Yes.
We expect that looked at loan balance will double as we exit 2021, I think the loan balances in the 10-Q.
Take a look at it there, but we expect we are on track to double of that loan balance in 2000.22021.
And related to that do you still expect the GMT.
<unk> of about 10 billion by year end of 'twenty, 3 and how should we think about the loan balance.
The year end 'twenty 3 if that's achievable.
Well, let me say, we were a prudent approach $10 billion $10 billion in 2023, and the loan balance is going to be a combination of.
The.
We're going to.
Keep avs within the card card services Division so it's a.
It's part of the greater loan balance, but we view it as being as kind of being a big part of our loan bounce going forward, particularly if we approach that $10 billion of DMV in 2023.
Okay, and then lastly on the receivables growth in 2022 of the high single to low double digit regarding the last answer to the last question on that is it that the payment rates.
Coming in that much I mean.
The sales volume is coming of that much better than expected that is offsetting.
Of the payment rates remaining elevated for a longer period of and that's why you're still confident in that high single digit to low double digit expectation because I would've thought that you might have tempered that a little bit given the way payment rates have been trajectory for the industry.
Yes, I would say.
The sales of coming in better than expected and it's more.
<unk> generally marginally offset any of those payment rates, they're still high but.
It is outpacing in the little bit so it's marginally offsetting that the gives us enough confidence knowing what's in our pipeline.
That 22022.
High single low double digit is achievable.
Okay got it thank you for taking my questions.
Karen.
Your next question comes from the line of mean Chao with Deutsche Bank.
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 percentage of in store digital news.
Capital had sort of moderate the pre pandemic levels against the euro and expectations of that the trend higher with the red coming online and as you mentioned the focus on the proprietary card next year.
The general thoughts there.
Yeah.
It certainly will I think our digital sales will trend higher as we bring partners on to Brad as we.
And so our digital suite as we as more partners, the tap that and we sell them more and more of our products the partners, which of our digital and omni channel I would expect that to increase.
At a good clip.
Got you great and then.
Separately I guess.
You guys.
Sort of disclosed.
I can see beauty of partnerships.
Coming online.
Right.
No.
What I will say some of those partnerships are exclusive of some of them or not the competitive in and we're very happy to.
To compete in the marketplace. So.
Obviously, you want exclusive partnerships.
And here the best time, but clearly the if it's not exclusive.
We're very able to compete on price and product and quality.
And then just.
Lastly for me.
On the on the payment rates.
The expectation that as government stimulus sort of ends in September.
So of that.
October that youre going to start to see a more I guess the.
Gradual acceleration of claim rates coming down due to your expectation in terms of when the.
The decline in payments happen.
Boy I wish I wish I had that in my magic 8 ball, but.
We think as the government stimulus rolls off you'll see a moderation.
But the payment rates in the fourth quarter I don't think of going to see payment of rates go to our pre pandemic levels, because we have changed our product mix in our score of Max.
That was intentional so we'll see payment rates moderate.
Because of the stimulus, but I think there'll be elevate there won't be our traditional low prepayment.
Moderator, we have pre pandemic because we have.
Intentionally changed our product and score mix of risk masks.
As well, so we will sell moderate but not in my view of not to where they used to be in 2019.
Got it great. Thank you guys.
Your next question comes from.
On the line of David Scharf with the JMP Securities.
Morning, David Good morning.
Welcome welcome aboard Terry and thanks for taking my questions.
2 things first.
When I.
When I saw all of the jewelry brands listed under the renewals I guess the signet brands.
<unk> reminded me too.
Maybe ask for an update on vertical concentration in particular.
I'm, assuming the beauty and health.
Still the fastest growing vertical of our best performing can you provide an update.
And perhaps for all of the Sephora and salaries.
Sort of where they fall in terms of.
The maturities sort of renewal schedule.
And.
And whether or not.
Net vertical.
Is it the.
Growth expectations for that vertical are a key part of meeting receivables targets.
Yes.
So.
I'll speak to our portfolio in total we have of 160 brand partners and.
Those renewals are staged over 5 to 7 years and.
Not 1 year of renewals really hurts us.
No.
Non renewable really.
<unk> of the P&L on pain of Great way, we hate to lose partners.
We've structured and the way that it.
It's over a period of time and we've been focused on early renewals without partners.
And we we really are leading in the in the in the beauty space and it's been very very healthy and we've worked closely with the partnership of mentioned and we'll continue to work closely.
But the new products to the market, making it easy for acquisition.
Options.
In terms of products and penetrating deeper into their into the loyalty base. So.
We will continue to diversify.
Thank.
Pets and 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 the whole different vertical, which really helps us pivot away from the traditional bricks and mortar and.
<unk>.
And retail that we where we were before so we're excited about them.
And with all of those farmers and all of those verticals.
And the key is ensuring that we are growing the pie for them and for us with new products data and analytics and good service.
Got it got it I appreciate the color.
Just just a follow up on yield.
It may be.
Little more of the longer term question, obviously, the elevated payment rate when you're talking about sort of differ from whatever the other lenders during this transitional year.
Of the stimulus.
But I'm wondering.
As we look forward and I know there was the question earlier about.
Where yields ultimately normalize.
As you look at sort of the current credit profile and it was provided in 1 of the slides.
In.
And as you also think about 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 a D. S. A few years ago. When it may have been as much as the third cause I'm trying to understand I think you know that may give the biggest window into ultimately you know what.
What the gross yield kind of secular outlook is.
Yes.
Yeah.
As I said, we've changed our product mix and our risk profile.
Yeah, you know, we're not going to we're not relying on the late fees.
As the ABS was in the past sales.
<unk>.
It's just not a place where we want to place of our backs 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.
It's not an arm on a go forward yield I'm sure. It will play a part of that will play a predominant part of the didn't in the past.
If you think about yield and you think about bread the bread yields are accretive to us.
Because of its low cost to acquire and low cost of.
Dominant and those yields are accretive to us and they will.
Meg.
Hence our yields going forward, so I'm confident that our yields will be will be will.
It will be steady going forward, but I'm also confident that given the product mix and the risk mix.
It's not going to be just driven by late.
Late fees.
Got it. Thank you very much that's helpful.
Your next.
<unk> comes from the line of Dominic Gabriel with Oppenheimer.
Good morning Dominic.
Thanks, So much for taking my questions I, just wanted to say I will compare in the wafer returning really.
As a testament of the strategic transformation here for sure, Yes, I got to give us this quarter.
Right.
And given the discount rate exactly.
So I guess.
As we look at the people who have been really focusing on.
Now.
Price or P, saying.
But it's not an exclusive relationship.
To some extend and I was actually just kind of flip that on its head and ask you could you sign up another partner like Pfizer of within that type of channel to get after of perhaps different.
The partners.
On the merchants that they that they maybe.
Hi services, everybody, but yes, there are weighted kind of diversify those partners as like lenders will diversify the sub banks, yes, well, let me let me just talk about first of all about the Pfizer relationship although not exclusive we are integrated into their dashboard. So.
When a merchant turns on the Pfizer relationship we are there and integrating some of the dashboard. So its ease of use.
Net.
Although non exclusive of that to me is really really important.
We have a.
So Pfizer it was a very important partner of ours.
Ours and income.
We are doing many things with them across the patch but.
The second part of your question of course, we can work with another third party.
As well the place where I'm really interested in I'm really going to be bullish on this particularly internationally. If we can is on the technology platform, what we have with RBC. So.
We are we are the white label.
Solution to RBC in terms of buying out of pay later, the installment lending and we get a transaction fee. There. So the revenue is without receivables that's something that we could rollout around the world pretty quickly, that's where there's a real opportunity for us there too.
To have R&D CLEC relationships.
In other geographic locations.
Great Yeah, absolutely the opportunity.
And I know, it's a bit early.
Asked this question, but maybe you could take that got the the 8 pas but.
If we think about.
The consumers excess liquidity I mean, I think 1 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.
The fourth quarter receivables jump and how you're thinking about this holiday season with your partners the <unk>.
Spend turning into.
Balances. Thanks, so much guys I really appreciate it.
I think I think your.
If you look at the the.
The baseline forecast.
You'll start to see in the fourth quarter at least what the projected youll start to see.
Savings.
We anticipate a little bit in the fourth quarter.
Fitment with rolls off in the holiday season Rolls on and we are seeing.
Net high double digit sales. So we are positioning ourselves very well for the holiday season.
I would say over.
No.
I think about it in 3 areas..1 is Perry talked about and I talked about we were going to ramp we have been ramping will continue to ramp up our 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.
The day season, we continually add partners to the brand portfolio that.
That will help us with the holiday season.
I mentioned earlier that we have a number of really good prospects with RBC that.
That will be ready for the holiday season. So all of those things in my view of the RBC is not.
Receivables, but it is the revenue.
All of those things will help us really drive.
2 the jumpstart 2022, and in the combination of payment rates moderating and sales continuing to grow.
I think we will.
You will see that as we exit the year youll see that receivables growth.
Excellent. Thanks, so much.
<unk>.
Thank you you.
You bet.
As a reminder to ask a question you will need to price.
Good morning revenue.
All of the mind of.
The 2 quick questions.
Much of the number 1 just trying to understand maybe you guys can talk a bit about the bread integration process, but I'm curious like how does that compare to.
The standalone the run out of their companies.
Typically of like is it took longer to integrate given the nature of the integration of our U.
On par with how quickly they can be up and running with the with the clients.
Yes, we are probably as we could be running as fast and I think the distinction between us and and the stand alone. There's a couple of distinctions..1 is we are on the merchant services.
So we integrate.
Each of the purchase path and give them give that merchant the option of <unk>.
The customer of the option pay different ways that the merchant we're not interested in taking the transaction away from the merger and we're interested in adding the transaction to the merchant because of the merchants of our partner. So that's 1 distinction we're not asking them the downloading the app, we're asking to.
To execute the transaction within the purchase path of of that merchant, that's the 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 of balance sheet.
The funding.
And we have a relationship so it could be very very competitive in terms of pricing as well another distinction from from the the third party, but in terms of up and running whereas quickest data.
And the vitamin squeeze 1 more follow up then.
You mentioned.
We.
Some of this product.
You'll see us lean into this product next year.
Okay.
All of the capabilities, we have will make available to our proprietary.
Thanks, Michael.
Net.
Yeah.