Bread Financial Holdings, Inc. (BFH) Q1 2021 Earnings Report, Transcript and Summary

Good morning, and welcome to the Alliance Data First Quarter 2021 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce Mr. Brian Vereb, Head of Investor Relations at Alliance Data. Sir, the floor is yours.

Thank you. A copy of the slides we'll be reviewing and the earnings release can be found on the Investor Relations site of our website. On the call today, we have Ralph Andretta, President and Chief Executive Officer of Alliance Data; Executive Vice President of Operations and Credit Risk, Tammy Mcconnaughey, will join Ralph for the Q&A portion of the call. 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 Ralph Andretta. Ralph?

Thank you, Brian, and good morning, and thank you all for joining the call. Before I begin, I'd like to acknowledge Tim King for his contributions to Alliance data. As we previously announced, Perry Beberman will be joining the company in July as our new CFO. Perry is an accomplished executive leader with more than 30 years of experience in financial services. We look forward to him joining the team. I will start on Slide 3 with key takeaways from the quarter. First, we are pleased to see credit sales rebound towards prepandemic levels. With the expansion of the vaccine rollout, additional government stimulus, consumer confidence continues to improve, and we are seeing the return of the consumer to in-store shopping. Next, the initial rollout of the brand platform to our brand partners began in the first quarter with Apt2B. We are in active discussions with our partners for additional cross-sell opportunities, and we expect to have more to discuss in the second quarter. Just this morning, we announced the expansion of our business relationship with Fiserv through a new strategic partnership. Fiserv will leverage Bread's payment platform to offer our digital products and capabilities to its merchant partners. The strategic partnership will power point-of-sale lending for Fiserv's extensive merchant base and drive platform sales and receivables growth for Alliance Data. We are very excited about the potential of this partnership. Finally, our credit performance continues to improve as a result of our prudent risk management, deliberate underwriting actions and continued strong card member payment behavior enhanced by stimulus payments in the first quarter. We took deliberate actions to improve our credit performance last year, and the results are evident in our credit metrics. Slide 4 highlights the key financial metrics for the first quarter. We reported diluted EPS of $5.74. Net income was $286 million, and total revenue for the quarter was $1.1 billion. The quarter included a net reserve release of $165 million or $2.40 per diluted share. Revenues were down 21% year-over-year, impacted by elevated consumer payment behavior, while total expenses, excluding provision for loan loss, declined 6%. Credit sales were virtually flat year-over-year as we move closer towards an inflection point for average receivables growth in the second half of the year. Moving on to Slide 5. You can see the continued recovery in credit sales for our Card Services business, which aligns with the improvement in consumer confidence and mobility. The mobility tracker is based on time spent away from home estimated using cell phone location data. As a result of the increased activity, in-store brand sales picked up in the first quarter and are now only 5% lower year-over-year compared to being down 28% year-over-year in the fourth quarter of 2020. In addition to the improvement to in-store sales activity, consumers continue to spend online with digital sales remaining at 40% of the total sales in the quarter. Applications also bounced back in the first quarter to be flat year-over-year with new account growth improving 1%. We are encouraged by the progress we are seeing in the economy and remain optimistic that these positive trends will continue. Slide 6 highlights select partner additions and renewals and our new strategic partnership with Fiserv. The Fiserv partnership opens an extensive distribution model for Bread. As the primary point-of-sale financing partner, Bread will collaborate with Fiserv to provide a best-in-class suite of fully integrated solution for merchants, both online and in-store that use Fiserv's merchant acquiring services. Fiserv will utilize Bread's customized payments platform and robust suite of APIs to augment its existing payment processing services, unlock significant growth opportunities for both companies. We anticipate having our first merchant launch with Fiserv early in the third quarter of 2021. We continue to add new Bread and card partners, including a new partnership with Petco, growing our total merchant count to approximately 650. The Petco pay co-brand card and private label card offer a wide array of benefits for Petco's loyalty program members and allows card members to experience quick, easy and secure checkout in store with a contactless payment option. Bread's success in acquiring new online merchant partners continues. We have displayed a select few of the dozens of new partners added to the platform in the first quarter on this slide. As I mentioned, we successfully launched our first existing card partner on Bread's platform with Apt2B, which is part of the Rooms Place (sic) [RoomPlace] relationship. This was a good chance for the team to test and learn in preparation for several more opportunities we expect to materialize in the second quarter. Our partners have shown considerable interest in augmenting existing programs with Bread's white-label solutions. Also in 2021, we signed multiyear partnership card renewals, both with Torrid and Big Lots and look forward to delivering even greater value going forward. The table on Slide 7 displays our 3 Bread business models: Direct acquisition, distribution model and as a technology and marketing platform, which includes our growing relationship with RBC. Today, I will focus on the distribution model, which the Fiserv relationship represents. In the model, Fiserv acquires the merchant relationship. Bread provides a platform and capabilities, and the loans reside on Alliance Data bank's balance sheet. The strategic partnership will drive platform sales, growth and build receivable balances for Alliance Data. In return, we provide the merchant acquirer with an acquisition fee. By leveraging Fiserv's broad merchant distribution network, their assets, existing relationships and large sales force, we can further expand our payment capabilities and bring next-generation payment and checkout solutions to more merchants. Let's turn to Slide 8 to review the performance for LoyaltyOne, which includes the AIR MILES rewards program in Canada, and the Netherlands-based BrandLoyalty. As displayed in the graph on the bottom of this slide, AIR MILES reward miles issued and redeemed declined as a result of the continued lockdowns in Canada. AIR MILES is optimistic that travel-related redemptions will increase in the second half of the year, providing a substantial growth opportunity and is already preparing for eventual comeback with airline partners. BrandLoyalty's new program is picking up with strong pipeline of clients in the second half of 2021. Consumers are actively engaged in loyalty campaigns with particular success in products focused on the home. Slide 9 provides our results for the first quarter of 2021 compared to the first quarter of 2020. Revenue was down 21%, while total expenses, excluding provision for loan loss, was down 6% compared to the first quarter of 2020. This, despite increased strategic investments in digital and a full quarter of Bread expenses. The primary driver of high net income in the quarter was the benefit of lower provision expense for loan loss. I will provide more details on the results in the coming slides. Slide 10 provides our segment-level results for the first quarter. Both LoyaltyOne and Card Services revenues were down year-over-year, with a decrease in Card Services primarily tied to lower receivable balances and lower delinquency. LoyaltyOne revenue and EBT were down primarily due to the reduction of travel redemptions, the sale of Precima in January of 2020 and fewer short-term loyalty programs in the market due to the COVID-19 impact. Although we are seeing the loyalty program activity start to pick up, the improvement in Card Services EBT is primarily a result of lower loan loss provision expense, resulting from continued strong card member payment behavior and improving year-over-year delinquency rate. Moving to Slide 11. I will review some of the key business metrics for the company. Starting at the bottom left, we show our average receivables and our total credit sales trends. For the quarter, we saw credit sales coming at $6 billion. As I highlighted earlier, we continue to see a rebound in our credit sales performance as consumer confidence improves and would expect stronger credit sales in the second quarter. While average receivables remained flat sequentially, balances continue to be pressured by elevated payment behaviors and normal seasonal balance reductions coming out of the holiday season. Moving to the lower right. Yields improved sequentially, driven by the higher seasonal sales in the fourth quarter as we maintained our pricing discipline and focus. Card Services cost of funds dropped approximately 10 basis points for the quarter. Finally, turning to expenses. The first quarter was a -- the fourth quarter was -- excuse me, the first quarter was down $154 million from the fourth quarter of 2020, in part due to real estate expenses from our optimization actions in the prior quarter, lower redemption expenses and lower amortization and depreciation expense. Turning to Slide 12. I will start on the upper left. For the quarter, we finished at a loss rate of 5%, down 100 basis points versus the previous quarter. On the bottom left of the slide, you can see the improvement in our delinquency rate to 3.8% and down 60 basis points versus the previous quarter. We are pleased with the continued improvement in our credit metrics. Last year, we took deliberate actions to ensure well-managed and balanced risk management. And the results are evidence of our success. Finally, turning to the right-hand side of the page. Our allowance decreased $165 million to $1.8 billion, primarily driven by a sequential balance decline, the improved delinquency rate and improving economic conditions for a reserve rate of 11.9%. Given the continued uncertainty in the economy, our reserve levels remain elevated to reflect the potential risk. Slide 13 provides our financial outlook for the year. We expect full year average receivables to be down mid-single digits year-over-year with credit sales up high single to low double digits in 2021. We expect to resume high single digit to low double digit card receivables growth in 2022. Our outlook for total revenue and total expenses remains unchanged for the year. Expenses will thoughtfully ramp up each quarter throughout 2021 as we continue to make investments in digital, data and analytics, marketing and Bread to fuel future growth. We have the ability to flex our investment dollars up or down as needed to align with market conditions and our outlook. At this time, given our [Technical Difficulty] recovery, we are [Technical Difficulty] quarters. As credit performance improves and delinquency rate remains low, we anticipate our full year loss rate to be better than historic average of 6% and the second quarter net loss rate to be in the mid- to high 5% range. We remain focused on solidifying our business, improving efficiency and continuing to invest in our strategic initiatives to drive sustained, profitable growth over the long term. We hope you can join us on May 18 for our investor event, where we will showcase our strong leadership team, go deeper into our strategy and provide our long-term financial targets around returns, efficiencies, risk and growth. Operator, we are now ready to open up the lines for questions.

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

Good job, Ralph, for wearing 2 hats. Ralph, it seems like you're gaining more confidence on sort of the loan growth expectations and also providing some of the guidance into 2022 was positive. Maybe you could just talk about some of the specific areas that are driving that confidence? And then I also want you to touch on the competitive environment because of what we saw with the Cap and Synchrony, I'm just curious sort of how you see that unfolding across the industry given your years of experience?

Sure, Sanjay. I'll answer this as a CEO, then as a CFO, if you don't mind. So yes, it's early in the year, but we're encouraged by what we're seeing in sales growth. There was an article in a journal I think it was Monday that foot traffic in malls has increased 86% year-over-year for March. Although not yet to the '19 levels, that's encouraging for us because we're seeing strong sales growth trends in April and hoping that continues going forward. It takes probably 2 or 3 months to -- for those sales to become receivables. So we're cautiously optimistic. But the offset to that is payment rates are still a bit high, and we're expecting to moderate in the back end of the year. So we expect receivables to be flat and probably exit the year with a little bit of growth, getting us into 2022 as we move forward. So feel good about that. In terms of competition, it is fierce because people are out there for trying to grab receivables that are on the marketplace. I would tell you, I've seen this once before, Sanjay, coming out of the great recession, people are anxious to grab receivables. And it becomes an arm's race or bidding war. What I tell you we won't do is we will not chase receivables at any cost. Because when you do that, you get receivables at all costs. So we are going to stick true to our good returns, good economics and demonstrating to partners that we can grow the pie bigger for both of us, so there's profitability on both sides. But yes, we see increased competition.

Okay. And then I guess the Bread announcement. Obviously, you're making quite a bit of progress on Bread. And you talked about how you're looking to augment or your partners are looking to augment Bread with other relationships that they have. Is the goal to augment or supplant the others? And I'm curious with the Fiserv deal, is that exclusive? Or do they offer other products as well?

Yes. So augment is pretty much our goal with our partners. And I do want to thank Apt2B for being our initial launch. We are already seeing good activity there. And I really gave the team a chance to understand what's important to a partner, how to approach your partner and how to execute in a defined period of time. So really grateful to them for helping us out there. The relationship we have with Fiserv. So let me -- so there's no confusion. We have two relationship with Fiserv: One is that we are outsourcing our technology stack to Fiserv, and that will be done in the middle of 2022. That's completely exclusive to what we announced today. So we -- there are two different relationships. What we announced today is really differentiated from any of their other partners. We will be the only integrated provider for digital point-of-sale physical point-of-sale, and we'll be on their dashboard as we move forward. So although they may have other providers that are referrals, we are really the only integrated and differentiated provider for Fiserv for their extensive merchant network.

And do they offer other buy now, pay later products to their merchants or...

Yes, they have one buy now, pay later, but I would categorize it as like a phone book referral. It's a kind of throw over the fence. And we are the only -- we have buy now, pay later and installment loan. So we're a full-service provider to Fiserv and integrated.

Your next question comes from the line of Robert Napoli with William Blair.

Nice job on the quarter. Just maybe on your Investor Day, you gave a little bit of a highlight. I was wondering if you could give a little more color on what you're looking to accomplish. I mean, is your team solidified at this point? And I know you're going to go through the team and the outlook, but maybe a little more color on what you're looking to accomplish.

Yes. I'm looking to accomplish 2 or 3 things on Investor Day. One is really to introduce what I consider a top-notch team and one of the best in the industry. We've assembled a team of newcomers to Alliance Data and people that have been here for a while with institutional knowledge. And I'm excited for the investment community to meet the team. That said, I'm also excited for the investment community to see the things that this team has been doing in terms of products and digital innovation. So we're really excited about that. Also, to be transparent about where we're going over the next 3 years, what are our financial metrics would be, how we're going to get there, how we're thinking about it. So those are the things I'm hoping we accomplish in Investor Day. We're really excited about it. We've been working hard on it. Coming out of pandemic, we were anxious to meet with the investor community to do those things, demonstrate the competency of our team, show new products and services and really give guidance over the next few years of where we're going.

A question on online sales. I think -- I mean, you said that online sales were 40%, I think. Is that up from a year ago? I mean, online sales have become a much bigger piece. Is ADS maintaining its share of online sales with its client base?

Yes. It's very slightly up than a year ago which I like. But again, it's slightly up of a bigger -- of a flat pie. So we're happy with that. You can expect our online sales to increase going forward, particularly with the Bread integration, everything we've been doing on Bread. So you can expect that, that online sales number will grow as our total sales number will grow.

Yes. And I would say, Bob, also, right, given this environment right now with consumer confidence improving, we actually did see a pretty nice increase in in-store sales. And so that certainly would be another reason that our digital sales were relatively stable year-over-year.

And then just last question. I guess a little more color, I think, on Bread. The RBC, the technology, I mean, is there a pipeline on the technology side in addition? And is the Fiserv relationship something that you think is going to drive material new business for Bread over the next couple of years?

And so let me address the RBC first. So the RBC relationship, to be clear, is a relationship that's really a technology and marketing fee, a recurring technology and marketing fee as transactions occur. And we see good growth there. So we don't carry that receivable. We get a fee. So there's less risk there. We see growth there, and you'll see growth over the balance of this year. The Fiserv relationship can be very big for Bread and for us. Think about that network that Fiserv has, and integrating into that merchant network will be very advantageous for ADS and Bread. One of the -- coming into this, one of the questions we got was, Bread did not have an extensive merchant network. Given -- with Fiserv now, we really have that extensive merchant network that will be integrated into. So we see really good opportunity there. 2021, we're going to be ramping up. Third quarter will be our first set of implementations. And then we'll see that grow as we exit the year and into 2022.

Your next question comes from the line of Ryan Nash with Goldman Sachs.

Ralph, maybe I'll try one CEO question and one CFO question for you. So maybe first on Fiserv as a follow-up to what you just said, can you maybe just give us a sense for the size of the merchant base? And maybe as a follow-up to Sanjay's question, how do you incentivize them to use your product relative to some of the others that are already being offered? And how do we maybe think about the ramp and revenue opportunity from this over the next few years?

Yes. In terms of size, I can't give you a specific number, but it's extensive, one of the largest networks around. I think there's probably public domain information on size, so you can go take a look. But it is an extensive network with an extensive sales force. So it's growing all the time. So we are really pleased with that size of the network. And in terms of revenue, in terms of using us in terms a different partner, again, we offer both buy now, pay later and installment loan, and we will be the only integrated partner. So it will look like an extension of a merchant rather than well, punch out to a third party. We think that's particularly important, particularly important to Fiserv because it's an end-to-end transaction. So that's why, certainly, we believe we're differentiated for many of the partners that are out there.

Got it. And maybe on loan yields. So we saw, as you highlighted, we saw sequential improvement, and I think you guys are targeting flat year-over-year. So I was wondering just where are we now on card-related fees, just given the elevated payment rates that you're seeing? And maybe could we see some upside to the loan yield as we move back towards more normal credit trends? And as we look into next year, we could see both accelerating loan growth and improving loan yields?

Yes. So I guess switch seats. I think a couple of things. I think our loan yield for 2021 will be steady. And we did have a grow over issue on fees in the first quarter. I think we've all come that, and we'll see -- we'll overcome that for the second quarter going forward. On the back end of the year, we expect payment rates to moderate. So again, we expect our yields to be fairly steady. Going into 2022, we expect we'll have certainly incremental growth in receivables. We're expecting revenue to grow. We can moderate expenses. So we think really focused on positive operating leverage in 2022. Tammy, anything to add to that?

No. I just think we'll continue. As you said, the second half of the year, we expect the payment rates to moderate, which means we expect that our yields will remain steady throughout the year.

Our next question comes from the line of Darrin Peller with Wolfe Research.

Listen, when we look at the digital trends, it's great to hear the 40% now. First of all, I guess, if you can give us some color on how the growth rates are on the digital side as the world does reopen? The reopening of the physical side sounds like it's going well. But the mix is obviously going to be an important factor in our view for the growth profile long term. So are we holding up from a growth rate standpoint? And then just on that sort of related topic on the buy now, pay later and digital strategy, now with Fiserv, who's more global also. I mean do you see this being an opportunity you can take from domestic and start moving with the Fiserv footprint across especially given how much buy now, pay later is a popular method in places like Europe and other parts of the world?

Yes. First on the digital growth rate, given our investment in digital, the enhanced digital suite, investment in digital acquisition, we certainly expect digital growth rate to grow. And I want to be clear. When we talk about customer-facing digital, it's end-to-end. So it's not only acquisitions and sales. It's servicing. It's collection. So we're looking at it from end-to-end perspective which will also contribute to positive operating leverage in 2022. In terms of Fiserv, I'm optimistic of what we could do with them as that network grows and we could be -- and we're integrating to that network. I see a growth there. As you had mentioned, I think we'll see that growth continue. But I'm really excited about the relationship. And as they grow, we'll grow alongside them.

When we think about the credit environment, obviously, it's been notably stable and you're showing that now with your reserves, with your provision levels. But you still have obviously high -- relatively high allowance. Can you just touch again on what your thoughts are, maybe medium term to long term around credit deterioration potential on timing? What -- just what are your thoughts on the environment? When would you say that from a typical cyclical pattern, you'd expect things to change? And what should we -- just remind us what we should think about in terms of targets as a percentage of...

I am going to ask Tammy to answer that question, and I will jump in at the end, if appropriate.

Yes, absolutely. So right, you're right. Right now, our reserve rates are weighted towards the downside scenario. Certainly, if positive trends continue, we believe we could see further release. However, there are many factors to consider, and there are still many uncertainties, one being the health of the labor market and just really given the unprecedented support in the system right now. We are confident in our loss rate guidance for the year, feel really good about coming in below 6% for the full year and feel really good actually with the second quarter. Right now, I would tell you, as we look to close out April, we are really leaning towards the -- I would say, the bottom end of that guidance in the mid-5% range. And certainly, I think the question becomes all the uncertainties and when that actually potentially we could see an increase in delinquency levels. They will come up from here as consumers return to some normal payment behavior.

Yes. And only I totally agree with Tammy. I think we're being prudent because this is unprecedented times. We're coming out of a pandemic. There's trains of dollars stimulus in the system. It's hard to tell what's going to happen. So being prudent and keeping a sharp eye on it is, I think, the right thing to do.

Our next question comes from the line of Mihir Bhatia with Bank of America.

Maybe if we could just start with Bread for a second. If you go back to Slide 7, maybe you can just talk about the economics of the various distribution models? And just from your perspective, the maybe rank -- I don't know if you want to rank onto them, but at least maybe just talk about the opportunity sizes between the different models. You have 3 different ways of taking Bread to market. And I was just wondering in terms of just the economics to you how they differ, particularly between the distribution and technology other than just interest that you'll get on the loans? Is there something else we should be keeping in mind?

Yes. So I think a couple of things. We haven't dimensioned each model to the nth degree. But the direct acquisition model for us is a model that Bread's used to and we are used to. So they're -- we complete the transaction. We get the receivable, and we -- the margins are good and the losses are appropriate for the risk we're taking. For the technology platform model, the arrangement we have with RBC, that's clearly fees. And from that perspective, we get a recurring fee per transaction. There's less risk for us there. Obviously, the margins on that would not be as great as holding the receivable. And then we -- certainly -- and as we grow, we expect those fees to increase. And those fees, I think of those fees as no different than a network fee than a fee that Mastercard or Visa or Discover would get in term -- or American Express would get based on transactions, we get a fee per transaction. And then the distribution relationship we like quite a bit for a number of reasons. There's a sales force out there signing merchants all the time. And we have a distribution relationship. We can continue to integrate and merchants and make that merchant network that much greater. We get a transaction fee. We service the loan, and we get any other fees that would come with that and interest on the loan. So the margins are good there as well. And we pay Fiserv a fee, a bounty for the transaction. So each of them have good economics for us. I would say the margins on direct acquisition and distribution are probably healthier than the fees. But again, there's no risk with the fee option.

Right. That's helpful. And then just wanted to ask about April trends. Have you seen credit sales now inflecting positively and just any moderation in payment rate? I know some of your competitors have talked about that.

Yes. So again, I'm going to refer back to the article that was in the journal. We're seeing incremental foot traffic in malls. And the consequence of that is we're seeing greater sales in store. In terms of payment rates, they were fairly strong for April. Tammy?

Yes. Actually, payment rates were very strong, as you can imagine, at the beginning of April. We did see that start to moderate, I would say, over the last week or so, but still elevated, but not to the degree that we saw at the beginning of April.

Okay. And then my last question is just on OpEx. Wanted to ask sequentially going back to Page 11 -- I think Slide 11 it was. Should we think about marketing expense and redemptions coming back? Or are redemptions more travel weighted, so those will take a little bit longer till travel recovers? And relatedly, you mentioned $50 million in incremental marketing expense in the 2021 outlook section. That wasn't there last quarter. Is that new? Or was that always planned?

As we exited -- I'll address the marketing first. As we exited 2020 with the lockdown, spending money in-store with merchants really wasn't economical or feasible at that time. And so as stores open up and malls open up, in this foot traffic, we've certainly targeted marketing. And not just in the store but omnichannel. So we were certainly planning -- we wanted to come out of the pandemic strong with marketing. So that's why you see that $50 million marketing increase. And to be clear, we can moderate that as the year goes on. So if there are -- if there's changes in the economy, if there's changes in openings, we can moderate that. That's a flexible number for us. In terms of redemptions, redemption expense, as -- that was down because LoyaltyOne's revenue was down. So as revenue grows, that redemption expense would grow, but also it would be growth. We would have positive margin.

Our next question comes from the line of Jeff Adelson with Morgan Stanley.

So I just wanted to -- I know it's been asked a lot already, but I wanted to focus a little bit on the Fiserv opportunity again, but maybe asking it a different way. How are you thinking about the longer-term opportunity of that partnership relative to the kind of Rolodex that Bread has with your existing card partners. Do you still really view the existing card partners as a primary growth engine for Bread? Or is there really more of an attractive universe out there with Fiserv, just given their network?

Yes. I think a couple of things. I think it's the relationship with Fiserv is multiyear, and it will go -- we get to follow that merchant network, irrespective if they partners for us or not. So really excited about that. In terms of integration to our partners, that's still primary for us because we're able to offer those partners a basket or a number of products. So whether it's a co-brand, buying out, pay later, installment loan, private label card, we're able to offer choice to our partners' consumers. That's very powerful. Whereas with the Fiserv relationship, we are integrated for buy now, pay later and installment loan. So there's growth opportunities there as well. At our investor conference on May 18, we'll go into a little bit more depth on that. But we see good growth on both those vectors.

Got it. And then just on the Bread conversions. I know you had that one with Apartment 2B. You've got a few more coming. But any sense of when we can expect maybe some more meaningful or sizable partners launching? And maybe when do you think you'll be able to get maybe like a quarter or half of your partners onto the platform? Is that a medium term, like year-end '22 type thing? Or is that -- is there a chance that's closer?

Well, we have 130 partners, so we've got some work to do. But I think you'll see some pickup in the second half of the year. I think you'll see us getting partners on in the second half of the year. Like I said, Apt2B was proof-of-concept that we can demonstrate that we do things quickly. I guess the thing to remember is, bread has only been part of the family for less than 4 months. And I think we've made some really good progress in that period of time.

And then if I could just slip one more in. Does your loan growth or receivable growth guidance incorporate any kind of widening of the credit box? Or maybe how are you guys high level thinking about that as the year goes on?

No, not really. I think we're comfortable where the credit box is. And again, going back to -- we're going to be prudent about risk management as we move forward.

[Operator Instructions] Our next question comes from the line of Dominick Gabriele with Oppenheimer.

Congrats. That's really exciting news on Fiserv. I guess when you think about the retail mix that you currently have of your partners versus what this Fiserv opportunity could lead to, can you just talk about how your retail mix of industry partners could change over time?

Sure. One of the things that we're very focused on and especially coming out of the pandemic is risk concentration in soft retail and in malls, why we think there is certainly a future there. Having a diversified portfolio really, really helps us mitigate our risk. So having that -- those Fiserv merchants across many verticals, having Bread across many verticals, thinking through those things, really mitigates our risk and gives us what I like to call a balanced portfolio of not only partners that are in different industries, but also different types of receivables. So receivables that have high margin and a little more risk, receivables that have good margin and moderate risk and fees that have good margin and no risk. So we're really balancing and de-risking our revenue streams and Fiserv certainly contributes to that.

Absolutely. And then when we just think about this relationship even more obviously, historically, from at least our calculations, the ISV portion of merchant acquiring is growing faster. It's considered a faster vertical than overall merchant growth. And so when you think about the opportunity within Fiserv space, can they flip a switch and you get added to their existing partnerships? Or are we really talking about -- as they grow their existing merchant base, you would be added into those or the ones that kind of get churned upgraded to the news product much.

We are working hard to get integrated into Fiserv, so using our APIs. So in essence, it is flipping a switch. We're hoping to be -- to be on their dashboard as well. So it is -- once we get rolling, it's a pretty efficient seamless implementation.

Yes. And I think, Dominick, the other thing is that, as you mentioned, as their business continues to grow, it opens up additional opportunities for us as well.

Okay. Absolutely. Maybe one more here. Is I guess, is there any chance that you could provide or just thinking about the yields? Is there any chance that you could provide the unpaid adjusted fee dollar amount or give some color versus even like the fourth quarter, if it was up or down? I have a feeling it was down. And just wondering on the yield benefit quarter-over-quarter that, that provided.

The other thing I'll say about the yields, we were pleased that we had yield growth. But -- and lapping the late season the first quarter, but we expect yields to be just stable for the rest of the year.

Our next question is from the line of Meng Jiao with Deutsche Bank.

Most of my questions have been answered, but I wanted to ask about the deposits. I think roughly, it's now 51% of liabilities, while deposit costs has also sort of declined sequentially. How did you guys think about deposit growth going forward? And could you see continued declines in the costs there?

Yes. I like our deposit growth. Certainly, it helps us in funding. We have good yield on those deposits. We're competitive in the marketplace. And I view it as two things: One, it's a good way to gather customers to cross-sell to; and secondly, it's a good way to just to help our funding costs. So we'll continue to be in the market for deposits.

Got you. Great. And then just secondly, on applications, are you sort of also seeing an increase into applications just given the mall openings? Or is it still a sort of mix between digital and in-store?

We're seeing an increase in applications as things open up. We certainly are. We've made it easier in-store for application with a QR code. Go up to sign, hit it with a QR code. So applications went smoother in the store than they were before. So it's not so much a point-of-sale, waiting in line. People could do that not at point of sale. So we're seeing interest there ramp up.

Yes, absolutely. When you look at the first quarter, certainly, January and February were relatively low, but we really started to see the pickup in March. As the consumer confidence grew as things started to open back up, we really started to see a nice improvement, which allowed us to get applications relatively flat year-over-year. And our new accounts were actually up as well. So we feel really good about the continued momentum, and we're continuing to see that as we move in and close out the month of April.

Yes. Meng. And on to Slide 21. You can see a little more detail on that as well.

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

We've obviously predictably focused on consumer confidence and reengagement. And obviously, everybody gauging the timing and trajectory of the light at the end of the tunnel for the consumer. I'm wondering one of the things we haven't talked about as much in recent quarters is the private label partner pipeline. And Petco, obviously, stood out as a notable addition. I'm wondering, over the course of the last year, retailers sort of put decision-making on hold, given all the uncertainty? And is that something that might open up? Just any more color on what the new partner pipeline might look like over the course of the next 12 months?

Sure. And to answer your question, I think you've answered your question. Retailers have put those decisions on hold because like everybody else, they were trying to manage through the pandemic. So some of those decisions have been put on hold. But in terms of our pipeline and renewals, I feel pretty good about it. So we announced Torrid and Big Lots today to a multiyear renewal. I think that's critically important. We have a very robust pipeline for private label and co-brands to be very frank. So that pipeline is continuing. Now retailers are looking towards the future and worried about surviving the current. And so we're seeing that open up quite a bit. But I think we -- last quarter, we announced a couple of renewals. This quarter, we announced 2 big renewals with Torrid and Big Lots. The addition of Petco is very exciting for us. I think that card is going to be -- I don't -- I think people can't wait to get their pause on that card. It's going to be a great card, quite frankly. So we're really excited about that new partnership and our existing partnerships. But you're right, it is on pause, but now it's trending up a little bit.

Okay. Good data. And then lastly, maybe just a quick clarification once again on the Bread kind of Fiserv for data partnership. When you refer to integrated being the only integrated provider, does that also -- is that primarily on a white-label basis? Just trying to get a sense if this is going to dramatically increase the branding of Bread payments? Or is this on a white-label basis? Or could it be either for the merger?

I think it depends. It depends on the merchant and how they want to integrate. So it's kind of need of the hour. But in any case, it will certainly increase Bread's merchant network and certainly -- and to a degree, increase the brand name as well. So listen, thank you all for joining the call today and your interest in Alliance Data. We really appreciate it. We remain focused on executing our plan and building for the future and hoping that we see all of you on May 18 Investor Day. Everybody, have a good rest of the day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.