Good morning, and welcome to the Alliance Data First Quarter 2019 Earnings Conference Call. [Operator Instructions] In order to view the company's presentation on their website, please remember to turn off the pop-up blocker on your computer. It is now my pleasure to introduce your host, Ms. Vicky Nakhla of AdvisIRy Partners. Madam, the floor is yours.

Thank you, operator. By now, you should have received a copy of the company's first quarter 2019 earnings release. If you haven't, please call AdvisIRy Partners at (212) 750-5800. On the call today, we have Ed Heffernan, President and Chief Executive Officer of Alliance Data; and Charles Horn, Chief Financial Officer of Alliance Data. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC. Alliance Data has no obligation to update the information presented on the call. Also on today's call, our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors. Reconciliation of those measures to GAAP will be posted on the Investor Relations website at alliancedata.com. With that, I would like to turn the call over to Ed Heffernan. Ed?

Great. Thanks, Vicky, and good morning, everyone. Joining me today, as always, is Charles Horn, our CFO. We're going to update you on first quarter results, the pending divestiture of Epsilon and provide some insights into the ongoing businesses, also some new news that we'll share with you regarding some of the initiatives we've undertaken here at the company to make sure that we have the appropriate footprint on a go-forward basis. So lots of progress has been made. And with that, I'll turn it over to Charles.

Thanks, Ed. Let's go to Slide 4 and talk about high-level results. Revenue decreased 3% to $1.3 billion, adjusted EBITDA net decreased 9% to $317 million and core EPS decreased 6% to $3.72 for the first quarter of 2019. These results exclude the Epsilon segment, which has been reclassified as discontinued operations. Overall results for the quarter were consistent with guidance and reflective of our purposeful shift to more attractive growth verticals and clients within Card Services. EPS increased 30% to $3.28 for the first quarter of 2019, aided by a lower effective tax rate, approximately 16% in the first quarter of 2019 compared to approximately 27% in the first quarter of 2018 due to the release of certain tax reserves. As discussed in the earnings release, we have signed a definitive agreement to sell Epsilon to Publicis Groupe for $4.4 billion. We believe this is a good outcome for several reasons. One, it provides significant liquidity to return capital to shareholders and improve our capital structure. We anticipate a pro forma leverage ratio of about 1.7x. Two, it allows us to refocus our resources on our market-leading, high-growth, high-ROI Card Services business. Three, we can realize significant operational efficiencies at the corporate level following the separation of Epsilon. And four, it will be accretive to earnings in the first full year post-closing. Reported results will only have partial year benefits in 2019. In anticipation of the transaction, we spent $223 million during the first quarter to repurchase 1.3 million shares of ADS stocks. Let's go to the next page and starting with LoyaltyOne. Revenue decreased 10% to $204 million for the first quarter. Adjusted for the items highlighted on the slide, AIR MILES revenue was down 3% due to lower redemptions. AIR MILES adjusted EBITDA increased 7%, primarily due to lower cost of redemptions of operations. We are increasingly outsourcing our product fulfillment in order to reduce inventory risk and help drive these operational efficiencies. Issuance was up 3% for the first quarter, mostly driven by strong promotional activity within our grocery vertical. BrandLoyalty's revenue increased 3% on a constant currency basis due to a strong program performance in Europe, Asia and Brazil. Adjusted EBITDA grew double digits in constant currency mostly due to better program mix, excluding the one-time restructuring charge related to lowering our fixed operating cost. Moving to Card Services. Revenue was down 2% to $1.1 billion, driven by lower gross yield, coupled with flat, normalized average receivables growth. Adjusted EBITDA net was down 7% to $295 million, essentially in line with our first quarter expectations. Importantly, we are seeing improving net principal loss and delinquency trends. Net loss rates improved 30 basis points to 6.4%, and delinquency rates improved 10 basis points to 5.25%, signaling a stable credit environment. I will now turn it over to Ed.

Okay. If you could turn to Slide 6, which is Q1 2019, I think overall, I mean, obviously, Charles has covered it, but the first quarter results were consistent with our guidance. We had expected revenue down mid-single digits and core EPS down in the high single digits before the Epsilon transaction. And we came in at revenue $1.8 billion, down 3% and core EPS of $4.07, down 8%. Again, the entire decline you can attribute to the actions we took in Q4 of last year, and that was removing over $2 billion of non-core clients from the card business. And as a result, obviously, you have a grow-over for the first 3 quarters of this year. But behind it, you saw that the active accounts were up almost 11%. So that will fade as the year progresses of the negative drag, and we'll flip nicely as we move into the latter stages of this year. As Charles also mentioned, we took in 1.3 million shares during the quarter, and our corporate leverage ratio stated a very comfortable 2.4x. And that's a rate that, on a pro forma basis, is going to drift down quite a bit post-Epsilon. On the LoyaltyOne side, also, the AIR MILES revenue and adjusted EBITDA are down 12%, but up 7% on the EBITDA side on a constant-currency basis. We also had another adjustment where we had to net gross rev to net rev as we continue to outsource some of our merchandising. AIR MILES issued was up nicely at 3%, and that essentially will drive growth in the financials on a go-forward basis. The burn rate was 87% compared with 96% the year before. The lower burn rate pressures revenue growth in the short term, but also gives us lots of flexibility to get people more excited on the ultimate redemptions and the programs that we run. BrandLoyalty revenue and adjusted EBITDA were up 3% and 14%, respectively, on a constant-currency basis, and that excludes a relatively modest charge that we took at BrandLoyalty to lower the fixed cost structure on a go-forward basis. With that, we'll turn to Epsilon. And Charles, why don't you walk us through the deal itself?

Sure. So let's flip over to Page 7. And as we talked about, we have now signed a definitive agreement to sell Epsilon for $4.4 billion, and we expected to close either late Q2 or early Q3. We selected Publicis -- I'll talk a little bit more about this since this is really our first time to discuss it openly with you. We selected them as the winner of the process due to a number of considerations, including certainty in speed of close, fully committed financing and the opportunity to develop a deeper relationship post-closing. As you can see from the slide, we set it up so we can see it in 2 formats. It was an asset transaction from a tax purpose, which means the buyer paid us for certain tax benefits received. The calculation on the slide shows sales price of $4 billion, which is without the tax benefit and $4.4 billion with the tax reimbursement. And when we evaluated it, we have to look at the multiple of the transaction. We also considered the reduction and cost at the corporate level from the infrastructure we no longer needed to support the Epsilon transaction. So if you look at the slide, the EBITDA foregone is roughly $393 million after this transaction. We're getting either $4.4 billion if you want to look at it on a gross-up basis or $4 billion on a net basis, which is still a 10.2 to an 11.2 multiple, which we believe is very fair to our shareholders. There's been a lot of questions about the tax leakage seeming high at $800 million. Again, if you have to net, it was an asset deal. We will pay $800 million in taxes to the IRS. We received $400 million roughly from Publicis for the benefit of the tax shield. So the net tax leakage was approximately $400 million. The remaining amount we'll look to go for debt retirement. Anywhere from $1.9 billion to $2.4 billion will go to debt retirement. And then we also have a good amount left over for share repurchases in the range of about $1.1 billion.

Okay. Slide 8. Let's go to Card Services. Again, if you look at the picture we're trying to develop here in terms of the momentum that cards is building, as we move throughout the year, right now, it looks quite promising in terms of a number of key metrics, the first being, of course, new client signings. And a lot of this, again, from the client signings, you've heard us talk about this the last couple of years, we have been pivoting fairly dramatically away from signings of additional, as we call it, mall-based specialty apparel, which is really coming under a lot of pressure. And we've been really diversifying the portfolio into what we believe are the healthiest high-growth verticals out there that also have a strong desire for a loyalty-type card program. And so you just look at the clients that we signed just at the beginning of the year, Houzz, which is a very large e-com -- pure e-commerce home furnishings entity. We also signed Sephora, which I think everyone knows in the beauty space. And then we just released Burlington, which is in a vertical that is away from the mall, but is concentrated in what we call the discount department store sector, which is actually one part of the retail space that is actually doing quite well. So the off-mall discount department store vertical is something that seems to be resonating with consumers today. And so that's why I think this would be a very nice add. If you just look at the year-to-date signings, we're already at a $2 billion vintage, meaning that when these 3 names spin up over the next 3 years to sort of a steady-state tender share, we would expect them combined to add roughly $2 billion to the portfolio.…

Yes, let's flip over to Page 9 and talk about the first quarter credit metrics. And as we execute the strategy that Ed just delineated quite well, we will see some short-term pressure on some of our core metrics. Specifically, we will see our credit sales decline as it takes some time for our newer, healthier programs to spool up. Let me emphasize this is purely a timing issue. Similarly, we saw an expected decline in the reported average receivables and gross yields and, again, as it takes some time for the newer portfolios to fully ramp. Our total gross yield is down 70 basis points, primarily due to mix. New programs are growing much faster than our older programs, and it really takes a new program 3 to 4 years to hit a run rate gross yield. Longer term, the newer programs may ramp to slightly lower gross yields compared for older programs due to a couple of reasons: one, higher average balances; and two, better credit quality cardholders. So we would expect to mitigate any pressure there through lower net principal loss rates and lower overall operating expenses. So ROE continues to be in good shape, if you look for the quarter, 32%, versus the prior year of 30%. We believe long term, the new programs can get to that 30%-plus ROE. If we turn to operating expenses, they were up 130 basis points from the prior year. That's primarily due to the mark-to-market accounting on the held-for-sale receivables. As you can see on the slide, that was an 85 basis point impact. It is important to note, as we talked about, that our credit metrics have improved and they continue to improve. Accordingly, our allowance reservable receivables has decreased to 6.2% at March 31, 2019, approximating 12 months forward coverage. We would expect that reserve percentage to be relatively stable as the year progresses. Ed?

Okay. Thanks, Charles. Turning to Slide 10, which essentially is just the picture of what we talked about. But I certainly find it has been useful in the past, which is your reporting portfolio growth of minus 5%, should that be an issue? And the answer is, well, when you discontinue over $2 billion of these non-core clients, you're going to face this type of grow-over. So the active clients, which is what we're all focused on and where the end of the year jump-off will actually be, was up a healthy 11%. Again, I spend a lot of time on the newer types of healthy verticals that we've been signing. And even though we've signed a ton of business, it's still at the early stages of ramping up, but it's only $5 billion of our $17 billion file. This $5 billion will eventually be closer to $13 billion when everything's fully signed up. But they're growing quickly, and the transformation of the portfolio, frankly, has been fairly dramatic. So we think everything is on pace. And again, the delta from the 11% to our jump-off of 15% will be filled with a combination of some of the newer programs beginning to ramp up that we've signed recently as well as there's probably half a dozen modest-size portfolios out there. If we can get our hands on, say, 2 or 3 of them, we'll be in very good shape to plug the hole. So that's where we are. We feel pretty good about it. The following page I always find helpful to look at, have historically, this business has delivered this sort of growth rate that we keep talking about, this sort of strong double digit sometimes in the teens over and over. And again, and if you look over…

Thanks, Ed. So we're now on Slide 13. And what we're doing here is we're breaking it up saying, what would guidance be had Epsilon not been considered at the beginning of the year? And ultimately, what do we think the pro forma run rate accretion is as part of the transaction? So on the top part of the schedule, you can see we reclassified Epsilon as discontinued ops as of 1/1. We've removed in the top part of schedule to establish a new starting point for revenue and core EPS. It's important to note that interest expense associated with $1.9 billion of senior notes we know we're going to retire has been allocated to discontinued operations. New guidance is now revenue of $5.8 billion and core EPS of $18.47 before we apply the use of proceeds in anticipated cost reductions. What we'll do is we'll update you each quarter as the -- the guidance each quarter as actions were actually taken. The bottom part of the schedule shows the pro forma -- on a pro forma basis, the anticipated accretion of the transaction compared to our original core EPS guidance of $22 from 2019. As discussed previously, we expect the net proceeds to approximate $3.5 billion. Subject to Board of Director approval, we initially planned to retire the $1.9 billion of senior notes, leaving $1.6 billion available for additional debt retirement and share repurchases. The projected adjustments above assume an additional $500 million in senior debt retirement and $1.1 billion in share repurchases. It also includes a substantial reduction in corporate expense related to this core of Epsilon. Run rate core EPS assumes these items occur as of 1/1/2019. The bottom line is we believe the Epsilon transaction provides a 3% to 5% lift to the original guidance. Now…

Okay. Let's finish up here. Again, talking about the actual business itself, I think I've spent enough time talking about the move towards the healthier growth verticals. It absolutely is working. The demand for the product, continues to be quite strong. And again, there's a lot of runway between what's been spooled up in the portfolio of $5 billion versus the eventual $13 billion out of these vintages that we expect. On the other side, the divestitures of the nonstrategic clients was completed in Q4. We're now through 2 quarters of the grow-over. We've got another 1-or-so to go, and then we should be in good shape there. And we'll no longer have to talk about active versus reported since they'll be the same. Tracking to -- in 2019 at the $20.5 billion, up 15%, which should be the run rate as we move into 2020, while, at the same time, looking at very stable to improving credit quality. With all of that, we're going to stick to our target ROE equal or better than the 30%. So that's really the bulk of the company. LoyaltyOne is dead on with the plan that we planned for the year, and so no change there. On the Epsilon side, Charles talked about the agreement to sell for $4.4 billion in cash. I can tell you that the process itself, while lengthy, I think we came out at a good spot. The idea of having $4.4 billion of committed financing and all cash with a high-level degree of certainty of close were all very important factors going into this. At the same time, the strategic fit for Epsilon within Publicis itself makes all the sense in the world, where Publicis is going to be using Epsilon as a core engine to then take…

[Operator Instructions] Your first question comes from the line of Sanjay Sakhrani with KBW.

Congrats on the Epsilon sale. Ed, could you just talk about sort of the remaining strategic actions that might be contemplated in the future? Or is this it?

Yes, it's a fair question. I think, Sanjay, frankly, we're kind of focused on the run rate expenses we need to take care of in getting Epsilon closed and getting a couple more big names into the card portfolio right now. Obviously, there are other parts that we are continuing to look at. And to the extent there's something that we want to talk about, when there's an announcement to be made, if there is one, we'll make it at that point.

Okay, great. I guess, second question on the Private Label business, you talked about the retail deposit pool and how you're growing that. How large can you conceivably get in that part of your funding structure? Because a lot of your peers have a lot more of those types of deposits. Is the contemplation that you become majority retail-deposit-funded? Or is there any other action you could take to accelerate that? And then my final question, on the card business as well as the Publicis announcement, I guess, will there be any step-up in costs because you don't have Epsilon to run some of the marketing process? And then you mentioned the opportunity to work closely with Publicis in the future. Could you just maybe expand on that?

I'm trying to remember them all, so I'll go with the first one, which is the retail deposit platform. You're exactly right. It's something that's pretty attractive. It's a huge, whatever it is, $10 trillion market that's out there. What's the right ratio? I think at some point, I think it's fair to say, Sanjay, a minimum of 1/3 of our funding we'd like to see come from that source, and we can flex that up as we so choose. Frankly, some of this comes from our experience during the great recession. As I'm sure you can painfully recall, when liquidity was drying up all over the place, for us, having a combo platter of access to the asset-backed bond market for longer-term funding, the conduit market, the jumbo CDs and then the retail deposit platform, we do think all 4 of those are important liquidity devices for us. But certainly, the retail deposit thing is going to grow, I would say, to at least 1/3 before we make the decision of do we really want to crank it up to half? The next question?

Epsilon support to Card Services.

Yes, the Epsilon support to Card Services. Cards will be a significant client of Epsilon. Those contracts have always been at arms length and, therefore, they won't change going forward. Cards is going to be using, on a go-forward basis, a lot of the services that used before, the technology used in the Loyalty platforms, a lot of the digital communication technology and probably the largest being the Conversant piece, which will allow us to go out into the marketplace and help source not only new cardmembers, but also new clients -- new customers for our clients. So all those things have already been in place. They're a part of longer-term servicing arrangements. So there won't be any step-up in costs from that perspective. And was there one other piece, Sanjay? Okay, next.

Your next question is from the line of Darrin Peller with Wolfe Research.

Maybe just touch on, first, the feedback you're hearing from your clients on the card side just given the announcement of the Epsilon sale, like I'm sure you've had some discussions as with some of your legacy older clients. Curious to hear how it's coming back in. And then, guys, just the capital structure that we expect for you to be able to operate your business, that you're comfortable managing the business going forward with and without Epsilon, I guess, without LoyaltyOne potentially also, what would be -- how would we think about that?

Yes. I think from the feedback from the clients, I think it's been fairly muted other than, hey, can I continue to count on the technology that we've been accessing in the past? And again, that's sort of the -- that Conversant piece to go out and find incremental new business as well as the loyalty platforms and the digital communication platforms. And all of that is -- the answer is a resounding yes. We think it's one of the critical advantages that we have out there. And as a result, as long as they're comfortable with that, frankly, I would say some of them are not displeased with the fact that we're continuing to really narrow the focus of our area of expertise into payment services and cards. So I would say from that perspective, it's a bit cleaner story with the clients. In terms of capital structure going forward, from our perspective, we've always said that a leverage ratio of we didn't really want to creep above 3x in terms of leverage. The pro forma is going to take us down to 1.7. Obviously, that's very comfortable in terms of flexibility. What we'll do from that point going forward is we'll likely reduce it even more, unless there's a big opportunity in cards that could offer us another step-up in growth. But from a capital structure, you should consider there's going to be a lot of free cash flow coming off of this company and a combo platter of some deleveraging as well as we talked about some significant share repurchases is something that we'd be focused on.

All right. That's helpful. Just for my quick follow-up, you guys have done well signing, new, digital-oriented, fast-growth clients. I mean, when we think about the 15% growth rate, and you're even including some portfolio, that's obviously the trend that would be for these faster growth types of entities. I just want to make sure that even without Epsilon being exclusively tied to you guys, you have the differentiated -- because that really was differentiated offerings, I think, that helped you win some of these clients. Is there still some exclusive differentiation that Epsilon will just provide for you and the guys have built in-house that will allow you to keep letting those digital-oriented, online-type clients going forward?

Yes. Obviously, we can't discuss what the services agreements have, but this is what we do. I mean, this is -- we're not -- you can almost think of what are the markets we're not going after. We're not going after these massive, general-purpose, co-brand-type programs that the big banks go after. We're going after our bread-and-butter, which is the high-touch, personalized-type service with the ability to communicate to the clients' customers on a one-on-one basis, which means all that digital stuff and technology, we still retain that sort of 500-person group of experts within the card group itself that will utilize the Epsilon and Conversant technology. So the product offerings we have should continue to be unique in the marketplace.

Your next question is from the line of Andrew Jeffrey with SunTrust.

Ed, one of the things, I think, investors are trying to wrap their heads around as they envision ADS a pure-play Card Services business, is just how you stack up versus the competition. I know quantitatively, you've talked about ROE and relative growth. And I think those are important things. But can you frame up sort of why, as you move toward this pure play kind of model, investors should perhaps pay a premium for ADS versus some of your peers?

Yes. Again, I'd say we're a little bit different from our peers. But to hit your question dead on, the easiest way to put it is, yes, to the extent we keep pedaling the bike the way we have been, you're going to see a growth rate that's 2 to 3x, what the market's doing, and you're going to have ROEs 2 to 3x what the market's doing. So from a purely financial metric perspective, that certainly would suggest that we're on a much faster track with much higher levels of cash flow generation. Aside from that, from an actual product perspective, as you know, we have focused on a certain portion of the market that we think is quite large, and that portion of the market does not mean necessarily massive clients with multibillion-dollar portfolios, but we're very good at those brands that are growing fast, that are heavy in the digital space, but also have an offline presence as well. We are focused on the high-end customer care, the high touch as well as offering sort of the seamless, frictionless-type experience for the cardmember. Those are things that you can do when you have that as your model. You have a platform that is used to dealing with clients that are -- that have a couple hundred million dollars of receivables and isn't reliant upon massive balances and $10 billion-type portfolios. And that's just what we're geared towards. So as long as there are growth opportunities with clients, who want the high-end brand and loyalty program that aren't really attracted to the big banks, that's our sweet spot. And as long as we stay there, we think there's huge growth. We think it's about a $50 billion portfolio market, and we're at around $18 billion right now.

Okay, I appreciate that. And then would you also argue that through a cycle, you can deliver attributes like you just described?

Oh, absolutely. I mean, the -- one of the best test cases for us was the great recession, which I know a lot of people don't want to revisit. But the fact is that because the returns that we have are 2 to 3x, as you would call it, the peer group, we have a lot more leeway to actually take advantage of downturns when others pull in their horns and cut credit and everything else. We actually use that as an opportunity to step in and actually grow and bring on even additional clients because of that flexibility. And knowing that our loss experience, the volatility is much, much lower than these big general-purpose bankcards that everyone thinks is so safe. As I said, it takes 5 or 6 households in our world to equal the write-off of 1 big, general-purpose player. So we use the times of weakness as growth opportunities, and you should definitely expect us to put more capital into the growth if there's actually a pullback in the economy itself.

Your next question comes from the line of David Scharf with JMP Securities.

Two here. Ed, the first is on how you want to think about sort of visibility into closing out the year at that $20.5 billion portfolio level in the context of what we're seeing with credit sales growth. And maybe the question is more a point of clarification. There are clearly timing issues as you ramp up new programs, but the credit sales growth for active accounts seems to be decelerating. I mean, it's just at 4% this first quarter. Is that just sort of a denominator or just the effect of new programs that have been layered on that haven't started to ramp up yet? I'm trying to get a sense for, come September, where that credit sales growth figure, the spending level for those active accounts, should be for us to get comfort in closing out the year at north of $20 billion.

Yes. No, that's an excellent question. I mean, over -- as I say, over the long term, the growth rate in sales and portfolio growth should converge to the same growth rate, right? Now there are going to be times when your sales growth is less than your portfolio growth and times when your sales growth is going to be greater than your portfolio growth. And obviously, when you're in a period where you're spooling up a bunch of brand new clients from scratch, you're going to have a lot of sales, but it won't stick to your AR. So you're going to have much higher sales growth than AR growth. We're in a position now where, yes, we have a lot of stuff spooling up, but we still have the very large core client base that's still sitting there. They're growing at a pretty modest pace, I would expect, as the year progresses, and we continue to see some of these, the Sephoras of the world and the Ultas of the world and IKEAs of the world and names like that, that you'll begin to see the sales growth rate begin to pick up and accelerate as we move through the rest of the year. So I'd give it a couple of quarters, and you should see that metric continue to creep up.

Got it, and that's helpful. And just a follow-up on the loyalty side. I appreciate you kind of not necessarily dodging, but sort of kicking the can down the road a little on an earlier question about the ultimate state of that segment. But I'm wondering, kind of lost in the bullet points here is this sort of $8 million restructuring charge at BrandLoyalty. And can you give us a sense for both BrandLoyalty and the AIR MILES business, whether there are any others sort of excesses or restructurings that you think need to be undertaken either as a continuing operation or to potentially make it a little more attractive for a buyer?

Yes. And I'm not offended. You can say I dodged it because I did. The -- what we want to do is we believe that the AIR MILES business itself has characteristics of, obviously, a top 3 brand in Canada. Its longer-term growth rate profile is one of mid-single digits, top line, mid-single digits EBITDA, very robust free cash flow, not a lot of CapEx. So that's sort of the profile there. With BrandLoyalty, we need to get it back to what it has been traditionally, which is essentially a 10% or more top line-type growth vehicle, but much lower margins than the AIR MILES business. And so they've both been, frankly, a bit up and down and not consistent over the years. So what we're doing is we're trying to get the cost structures in place where we can return to those types of metrics for those businesses. And as long as they deliver that type of profile, that's something that would be extremely attractive, both internally to the company or externally as well. But again, the lesson from the Epsilon transaction, when we tried to bring people along, was that there seemed to be nothing but a certain level of disappointment at how slow things were moving. And so at that point, so we're just basically -- if there's something to say, we'll say it. But we want to make sure, first and foremost, both of those businesses return to where they need to be. One more.

And your final question comes from the line of Ramsey El-Assal with Barclays.

I wanted to ask kind of a broader -- ask for your sort of broader view on the addressable market and maybe in the context of the portfolio repositioning that you're undertaking. Has the addressable market, now that you've kind of ring-fenced off pieces the retail market that is a little bit challenging, has that impacted your kind of the way you're viewing the addressable market? Has it shrunk? Is the same -- is there the same amount of runway in the business that there was prior?

Yes, it's a great question. Actually, you're exactly right. You had -- the traditional core for us has shrunk. The newer verticals, which, thankfully, everyone seems to be climbing on the bus of, "hey, I don't understand my customers as well as I should. Hey, I want to communicate with them. Hey, there's a lot of clutter out there. How do I communicate them -- with them on a one-to-one personalized basis with an offer that has the right discount or the right number of important points at the right time with the right cadence, all that stuff that we specialize in?" And so I would say that 2, 3 years ago, we view the overall market -- our sandbox, so to speak, is roughly $40 billion for the portfolio. If you shrink what we traditionally went in, but you added in the big, new verticals of pure e-comm of beauty, travel, areas like that, we're currently running around $50 billion, $52 billion, seems to be the appropriate market size for us right now. So you take away from some. You add some others. And right now, it looks like we're -- it grew a little bit.

Okay. And then just last quick follow-up for me. Can you comment on Charles' role now and the amount of time he'll be sticking around? Will we be graced with his voice on the next earnings call? Is he sticking around through maybe some of these strategic options that you're exploring? Or is there a search underway for a replacement?

Yes. I mean, he's like gum on my shoe, right? I mean, it's -- Charles is -- I mean, he's sitting right across from me, so I'll probably let him chime in here. But he had expressed an interest, I think it was last fall, that he's done his 10 years, and he thinks that's probably enough. We've kept asking him to hang around because we had some additional stuff going on here. How long he chooses to stay is his call, but for sure, we're not assuming he is going to be hanging around here forever. And I'll kick it over to you, Charles, in terms of what you want to say.

Sure. So the way I look at it is, obviously, we've been quite busy with Epsilon. We have a number of other initiatives underway as well. Obviously, a lot of moving pieces. So what I agree to do is stick around through August. Obviously, I'm prepared to help any way I can, support in the search for the appointment of the next CFO, I think maybe a little bit longer just provide some continuity as we execute some of these initiatives.

Yes. So there's no hard and fast, but it's -- every time we ask him to kick the can down the road, he seems to be getting a little bit more cranky. So we're heading in the right direction, no worries. Thank you, everyone. We look forward to our next update. Bye-bye.

Thank you, again, for joining today's conference. This does conclude today's call. You may now disconnect.