Earnings Labs

Bread Financial Holdings, Inc. (BFH)

Q2 2021 Earnings Call· Thu, Jul 29, 2021

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Transcript

Operator

Operator

Good morning and welcome to Alliance Data's Second 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.

Brian Vereb

Analyst

Thank you. Copies of the slides we will be reviewing and the earnings release can be found on the Investor Relations section of our website. On the call today, we have Ralph Andretta, President and Chief Executive Officer of Alliance Data; and Perry Beberman, Executive Vice President and Chief Financial Officer of Alliance Data. 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?

Ralph Andretta

Analyst

Thank you, Brian, and thank you to everyone for joining the call this morning. I'm excited to have our new CFO, Perry Beberman, joining me today. He's been on the job for less than 3 weeks, but he's jumped right in, and we're happy to have him on the team. I'll start on Slide 3 with the takeaways from the second quarter. We continue to make considerable progress on our strategic initiatives. During the quarter, we hosted an investor event where we discussed our 3-year strategic plan, highlighted our enhanced product offerings, reviewed our lending philosophy and released our long-term financial targets across key metrics. We also announced the expected spin-off of our LoyaltyOne segment, which is key to our strategic transformation to strengthen our balance sheet metrics and deliver a long-term focused sustainable growth. We've successfully implemented several monetization and efficiency initiatives that I will discuss later. At the end of the quarter, we launched our Bread/Fiserv relationship and continue to sign new partners and build our prospect pipeline along with renewing several of our valued brand partners. We are pleased to see credit sales rebound to pre-pandemic levels as we exit the second quarter. Consumer confidence in mobility continue to improve as retailers focus on engaging their customers through an omnichannel shopping experience with our Gen Z and millennial sales up double digits compared to pre-COVID levels. Digital sales were up $400 million versus the first quarter as total overall sales continue to grow. Finally, our credit performance remains strong as a result of our disciplined risk management and the ongoing impact of the economic stimulus payments and programs. We anticipate the credit metrics, including our delinquency rate, will normalize once government stimulus programs expire in the latter part of the year. Slide 4 highlights the key financial…

Perry Beberman

Analyst

Thanks, Ralph. I'm happy to be here. Slide 10 provides our results for the second quarter of 2021 compared to the second quarter of 2020. Revenue was up 3%, primarily due to the impact of the pandemic-related consumer relief offered by Alliance Data in the second quarter of 2020. Total expenses, excluding provision for loan loss, were down 4% compared to the second quarter of 2020 with operating expense efficiencies offsetting our strategic investment in Bread. Pre-provision pretax earnings or PPNR 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 reserve release in the quarter. I will provide more details on our results in the coming slides. Slide 11 provides our segment level results for the second quarter. LoyaltyOne revenue was essentially flat year-over-year, while Card Services revenue increased 4%. LoyaltyOne EBT was slightly up due to the increase in travel bookings at AIR MILES, favorable currency exchange rates and lower amortization expense. The improvement in Card Services EBT is primarily a result of the lower loan loss provision expense resulting from continued strong card member payment behavior and the improvement in the 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 sales trends. For the quarter, we saw credit sales come in at $7.4 billion or up 54% year-over-year and up 22% sequentially. As Ralph highlighted earlier, we continue to see a rebound in our credit sales performance as consumer confidence improves. As expected, given seasonal trends, combined with elevated payment rates driven by strong customer liquidity from government stimulus, average receivables were down slightly in the…

Operator

Operator

[Operator Instructions] The first question comes from the line of Robert Napoli with William Blair.

Robert Napoli

Analyst

Perry, question -- I mean this is a big change for you coming from where you were to Alliance Data Systems. What attracted you to ADS? And what do you see -- where do you see the ability and what can you -- what do you see that you can add to the outlook or the story or the strategy, if you would?

Perry Beberman

Analyst

Yes. Thanks, Bob, for the question. Again, as I said, I'm really happy to be here. I've been watching ADS for quite some time. When you've been in this industry for, as noted 33 years, it's a small community in the credit card and payment space. And so when we heard of Ralph going over to ADS, obviously, that got some headlines and then Val joining and a number of other industry vets coming over, it certainly piqued my interest. And then with the Bread acquisition, a lot of buzz going around that the company was certainly going through a transformation. So to be part of this leadership team and work with this group is a terrific opportunity. And it takes me back to the early days in my career, where we basically IPO'd a company and they grew at quite a nice rate. But everyone was focused on a singular mission. I can tell from being part of this group for only 3 weeks, this is an incredibly collaborative team. And I hope to bring that collaboration and bring my experience to them. And I was here a couple of weeks ago in New York, and we had the opportunity to be with our leadership team and the Board. And I was incredibly impressed with the engagement and the collaboration was incredibly evident. And this group is agile, nimble, and we're going to drive towards the transformation efforts. So I'm excited to be part of this group.

Ralph Andretta

Analyst

Bob, I would say, Perry's first protocol is actually -- is finance. But aside from being a trusted financial adviser, he 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 to do the CFO job anymore.

Robert Napoli

Analyst

Great. Question on Bread and just the momentum. I thought Wayfair was a really interesting addition and very curious on that because I know they were in the firm partner. They still are and Wayfair was an ADS private label customer that's shifting off or if it hasn't, I think it may already have. So how does -- is that an exclusive relationship? And what does that -- and then just related to that, have you added -- was Blue Nile a private label customer? Is there a pipeline of ADS private label customers that are going to become Bread customers?

Ralph Andretta

Analyst

Yes. Let me first start with Wayfair, and I am happy to be associated again with Wayfair. Upon my arrival here, Wayfair was exiting their relationship with ADS. And I was disappointed about that because it's such an interesting and innovative brand. So for us to be back in a relationship with Wayfair, although not exclusive, I'm really happy to do that. We're going to really focus on making this relationship very profitable for them and equitable for us because I think it's great to be associated with such an innovative brand. So hoping to welcome me back, I'm welcoming them back with open arms. In terms of Blue Nile. Blue Nile is a private label customer of ours, and we've sold into them, and it's 1.7 million customers that in October will be on the Bread platform and be able to provide them additional types of financing. So really excited about that, with that partner. And there's more to come in the second half of the year. So there's a number of partners that we will sign and that will -- private label partners and our co-brand partners that will be on the Bread platform. It does take a little time, as you can imagine, but we are -- we have a steady pipeline of our current brand partners. And if you think about Bread, it's not a one-trick pony. There's 3 elements to Bread, right? You've got the direct acquisition, then 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 on getting that done. And then, obviously, the RBC relationship and ensuring that we'll have partners on that in the fourth quarter. So I think we've made really nice progress on Bread across all 3 -- what I call all 3 legs of the stool.

Robert Napoli

Analyst

And just if I can sneak in, just one last one. On Page 13, the bottom right, the revolving credit risk distribution, big change from the second quarter of '19 to the second quarter of '21 for ADS. Is that the right mix or generally in the range of the mix that you would like to have long term?

Ralph Andretta

Analyst

Yes, it is. It's going to fluctuate a little bit, but it is the right mix. That's a mix -- 2 things to remind, one is product mix and risk mix. And that's how you get there. So it's a combination of both to -- it will moderate back and forth, but that's about where we want to be.

Operator

Operator

Your next question comes from the line of Sanjay Sakhrani with KBW.

Sanjay Sakhrani

Analyst · KBW.

Congrats, Perry. I guess, first question is on the yield. As we look at that gross revenue yield, it's -- I understand it's stabilized. But do you expect that to start picking up as loan growth materializes? Maybe you could just speak to the directional trends in yield.

Ralph Andretta

Analyst · KBW.

Yes. I think it's going to be stable for the rest of the year, Sanjay, and for a couple of reasons. I think the second quarter is seasonal. So you have to factor a little seasonality in the second quarter. But because payment rates are elevated, that yield is going to be steady. So I don't see it picking up quite a bit for the rest of the year. As payment rates moderate, you'll see that yield improve as we go into 2022.

Sanjay Sakhrani

Analyst · KBW.

And am I correct, you guys think it will migrate back to the highs that we've seen in the past or some intermediate point?

Ralph Andretta

Analyst · KBW.

I think -- again, I think it will be in the intermediate point because of our product and risk mix. So we are -- the yield will improve, but our loss rate won't deteriorate as that yield improves. I think you'll see a nice balance between yield improvement and loss rate, which is exactly what we're looking for.

Sanjay Sakhrani

Analyst · KBW.

Okay. Great. And then I guess a follow-up question on the Fiserv onboarding. I think I heard you, Ralph, talk about that it's going to take -- it's a process to onboard these merchants. I guess when we think about your targets out to like 2023, could you just speak to the cadence 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?

Ralph Andretta

Analyst · KBW.

Yes. So here's how I think about it, Sanjay. We want to get it right, not want to get it fast, right? Because this is a long-term relationship, and we want to make sure that we're doing things correctly so that the ease of integration and ramp is simple. So we're learning from -- we went live June 30. We're going to learn from the partners we bring on this year. And we're going to ramp -- our hope is to ramp quickly in 2022, and that will carry us into 2023. The Fiserv is a really nice part of our receivables growth. But if you think about it, it's just one part of our receivables growth. Another part is a deeper penetration in our existing partners and our resigns with our new product set. That's part of our growth. The growth in co-brands, again, is part of our growth. And then I expect with the team we've put together to get my fair share, probably more than my fair share of opportunities out there in the marketplace. So the combination of all those gives me -- certainly gives me confidence that we'll hit the 2023 metrics.

Sanjay Sakhrani

Analyst · KBW.

Great. And just one last one for Perry. Just following up on Bob's comments. Maybe you could just talk about your strategic priorities over the next year.

Perry Beberman

Analyst · KBW.

Well, my strategic priorities are the same as the leadership team's strategic priorities, to make sure we execute spin, ramp up Bread, deliver the efficiencies that we need to do to continue the investments in the company. And make sure that we have disciplined, I'll say, financial management and that we support the business leaders with all the investment decisions we're trying to make. And as Ralph said, compete and win our fair share of new deals and make sure we have the proper economics for the renewals that we have.

Ralph Andretta

Analyst · KBW.

It's really good to be aligned with your CFO. I'm really happy about that.

Operator

Operator

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

Mihir Bhatia

Analyst · Bank of America.

Congratulations, Perry. I wanted to maybe just ask about the receivables guidance. Just trying to understand like some of the dynamics going on there because, I mean, you've increased your credit sales guidance. Receivables, if you look at the monthly data, start -- seem to have troughed in May. And then you have good momentum in terms of Bread coming on this year. So with government programs expiring, I'm just trying to understand what's keeping the receivable guidance down mid-single digits? Are there incremental portfolio losses that maybe we should be thinking about or some other headwinds? Or is it still just all payment rates staying higher than you'd expected?

Ralph Andretta

Analyst · Bank of America.

I think payment rates is a spotlight. Right now, we're seeing that elevated payment rate. And our forecast is that will abate in the second half of the year, but we're still seeing it elevated. I think that to me is if I had to pick one reason, that's the reason. We're seeing strong sales growth. That sales growth is still outpacing -- is outpacing the payment rate moderation a bit, but it's still -- payment rates are still high.

Mihir Bhatia

Analyst · Bank of America.

Okay. So -- but there's nothing else, like there's no portfolio loss or something that...

Ralph Andretta

Analyst · Bank of America.

No. We've already talked about -- we already factored in that portfolio loss in the third quarter. That's impacting us, but really, it's payment rates. That's not impacting our receivables.

Mihir Bhatia

Analyst · Bank of America.

Got it. And then just one quick one for me. You mentioned acquisition of proprietary cardholders being an opportunity in 2022. Maybe talk a little bit more about that. Is it Bread? Is it something else?

Ralph Andretta

Analyst · Bank of America.

Yes. So in 2020, when we did lose the Wayfair partnership, the result of that is the successor, which was Citi, declined to buy the portfolio. So we had this portfolio sitting out there. We had a couple of bankruptcies sitting out there. So quite frankly, we had never done this before. Through Val and I's suggestion and the team's, said why don't we put a proprietary card on the marketplace and not just let that receivable run off but improve the receivable? So we were able to find good prospects in those files, in those portfolios, and we offered them a general-purpose card with a good cash back program and some incentive. And they've been good card members. We've seen, quite frankly, millennial spending on that card more so than any other part of our population. So we think it's a real opportunity for us. It started as a safe product, but we're going to go direct to market. And it just diversifies our portfolio and moves on -- and kind of moves our -- lessens our dependence on bricks and mortar, on private label and partnerships. It's in the mix. It's one of several things we're offering now as part of our new product set. So we're excited about it. We're getting better at it, 1 million customers, and I'm really proud of that -- crossing that 1 million customer mark.

Operator

Operator

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

Jeffrey Adelson

Analyst · Morgan Stanley.

Just wanted to follow back up on the Wayfair point in the loan growth. I agree that it was pretty interesting to see that you guys were able to kind of reenter with that company. Just wondering if there's anything in your strategy that you're doing to go after maybe some other card portfolios that you lost in the past. Or how you're viewing this as perhaps a hook to win more of those relationships that you don't currently have on the card side today?

Ralph Andretta

Analyst · Morgan Stanley.

Yes. Listen, I -- we have a crack sales team, and I've kind of unleashed them to go after good business and profitable business for us. So while we visit where we've lost certain partners, I mean I'm happy to sell buy now, pay later installment loan to them, but their card relationships are long term. So when they're up again, we may decide to go after them. But in the sense that we could continue to work with them, like we're working with Wayfair on a different lending model, I'm very happy to do that. So -- but it's not -- that itself is not a definitive strategy. The strategy is to go after and sign profitable partners for ADS and Bread.

Jeffrey Adelson

Analyst · Morgan Stanley.

And then -- and just on the payment rates, are you seeing -- I know they're still elevated. I'm just wondering are you seeing any signs that that's actually starting to maybe go down from here? And then when you think about the high single-digit, low double-digit growth for next year, just kind of wondering how exactly you're thinking about the payment rates? Do they need to go back down to the pre-pandemic level? Or can they remain a bit elevated and you still hit that target?

Ralph Andretta

Analyst · Morgan Stanley.

Yes. So we've -- as of July 29, the payment rates are elevated. Obviously, we look at them every day, and they're still elevated. And -- but they don't have to go down to pre-pandemic levels for us to get to that high single, double -- low double-digit growth in 2022 as we predicted because our sales growth is outpacing that moderation in payment rates. They're still high but our sales growth are double digit. And we expect that to continue, albeit the Delta variant is out there. We're monitoring that. We're not turning a blind eye to what's in the marketplace. But as we see today, our sales are outpacing the moderation -- the high payment rates a bit.

Jeffrey Adelson

Analyst · Morgan Stanley.

And then just one last housekeeping for me. On the $0.5 billion portfolio, I know that's coming out, can you just remind us of the timing of when that actually happens or when it could happen?

Ralph Andretta

Analyst · Morgan Stanley.

That would be third quarter -- end of third quarter.

Operator

Operator

Your next question comes from the line of John Pancari with Evercore ISI.

John Pancari

Analyst · Evercore ISI.

On Bread, can you perhaps help us out with the updated loan balance for Bread as of June 30? I believe it was around $130 million as of the first quarter. And do you still expect a doubling in that loan balance by the year-end '21?

Ralph Andretta

Analyst · Evercore ISI.

Yes. We expect that loan balance will double as we exit 2021. I think the loan balance is in the 10-Q. Take a look at it there. But we expect -- we're on track to double that loan balance in 2021.

John Pancari

Analyst · Evercore ISI.

And related to that, do you still expect a GMV of about $10 billion by year-end '23? And how should we think about the loan balance by year-end '23, if that's achievable?

Ralph Andretta

Analyst · Evercore ISI.

Well, let me say we will approach $10 million -- $10 billion in 2023. And we're not -- the loan balance is going to be a combination of -- we're going to keep ADS within the Card Services division. So it's part of a greater loan balance, but we view it as being a big part of our loan balance going forward, particularly if we approach that $10 billion of GMV in 2023.

John Pancari

Analyst · Evercore ISI.

Okay. And then, lastly, on your receivables growth in 2022, the high single to low double-digit. Regarding your -- the last answer to the last question on that, is it that the payment rates are coming in that much -- I mean the sales volume is coming in that much better than expected, that it's offsetting the payment rates remaining elevated for a longer period? And that's why you're still confident in that high single digit to low double-digit expectation? Because I would have thought that you might have tempered that a little bit given the way payment rates have been trajecting for the industry.

Ralph Andretta

Analyst · Evercore ISI.

Yes. Well, I would say the sales are coming in better than expected, and it's marginally offsetting those payment rates. They're still high, but it's still -- it's outpacing it a little bit. So it's marginally offsetting that to give us enough confidence. Knowing what's in our pipeline, that 2022 high single, low-double digit is achievable.

Operator

Operator

Your next question comes from the line of Meng Jiao with Deutsche Bank.

Mengxian Jiao

Analyst · Deutsche Bank.

I wanted to ask quickly on the in-store versus digital sales. It looks like percentage of in-store versus digital new account growth has sort of moderated to prepandemic levels. I guess is there an expectation for that to trend higher with Bread coming online? And as you mentioned, the focus on the proprietary card next year, just your general thoughts there.

Ralph Andretta

Analyst · Deutsche Bank.

Yes. It certainly will. I think our digital sales will trend higher as we bring partners on to Bread, as we enhance our digital suite, as we -- as more partners adapt that and we sell in more of our products to partners, which are digital and omnichannel. I would expect that to increase at a good clip.

Mengxian Jiao

Analyst · Deutsche Bank.

Got you. Great. And then separately, I guess do you guys sort of disclose the exclusivity of partnerships coming online with Bread?

Ralph Andretta

Analyst · Deutsche Bank.

No. Here's what I will say. Some of those partnerships are exclusive. Some of them are not. They're competitive, and we're very happy to compete in the marketplace. So we -- obviously, you want exclusive partnerships; those are the best kind. But clearly, if it's not exclusive, we are very able to compete on price and product and quality.

Mengxian Jiao

Analyst · Deutsche Bank.

Got it. And then just lastly for me. On the payment rates, is there an expectation that as government stimulus sort of ends in September/October that you're going to start to see more, I guess, a gradual acceleration of payment rates coming down? Just your expectation in terms of when the decline in payment rates happen and if it does happen.

Ralph Andretta

Analyst · Deutsche Bank.

I wish I had that -- my magic 8 ball, but we think as the government stimulus rolls off, you'll see a moderation of payment rates in the fourth quarter. I don't think you're going to see payment rates go to our pre-pandemic levels because we have changed our product mix and our score mix. That was intentional. So we'll see payment rates moderate because of the stimulus. But I think there'll be elevated -- there won't be our traditional payment rates we have pre-pandemic because we have intentionally changed our product and score mix and risk mix as well. So they'll moderate but not -- in my view, not to where they used to be in 2019.

Operator

Operator

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

David Scharf

Analyst · JMP Securities.

Two things. First, Ralph, when I saw all the jewelry brands listed under the renewals, I guess, the Signet brands, it kind of reminded me to maybe ask for an update on vertical concentration. And in particular, I'm assuming that beauty and health is still the fastest-growing vertical or best performing. Can you provide an update on perhaps for Ulta, Sephora and Sally's, sort of, where they fall in terms of the maturities, sort of renewal schedule and whether or not that vertical -- is the growth expectations for that vertical are a key part of meeting receivables targets?

Ralph Andretta

Analyst · JMP Securities.

Yes. So I'll speak to our portfolio in total. We have 160 brand partners, and those renewals are staged over 5 to 7 years. And that 1-year renewal really hurts us. A nonrenewal really impacts the P&L in a great way. We hate to lose partners. But we've structured in a way that it's over a period of time. And we've been focused on early renewals with our partners. And we really are leading in the beauty space, and it's been very, very healthy. And we've worked closely with the partners you have mentioned, and we continue to work closely with them, bringing new products to the market, making it easy for acquisition, giving them options in terms of products and penetrating deeper into their loyalty base. So I think we'll continue to diversify. I think pet is an interesting product line. Beauty is an interesting product line. Jewelry, as you've kind of noted, plus sizes is an interesting product -- different vertical for us. So we've been doing a lot of work in little different verticals, which really helps us pivot away from the traditional bricks and mortar and retail that we were before. So we're excited about them. We're working with all those partners and all those verticals. And the key is ensuring that we're growing the pie for them and for us with new products, data and analytics and good service.

David Scharf

Analyst · JMP Securities.

Got it. Got it. I appreciate the color. Just a follow-up on yield, maybe a little more of a longer-term question. Obviously, the elevated payment rate, what you're talking about is no different from what every other lender is during this transitional year of stimulus. But I'm wondering, as we look forward -- and I know there was a question earlier about where yields ultimately normalize. As you look at sort of the current credit profile, it was provided in one of the slides. And as you also think about by 2023, the composition of the portfolio that's coming from buy now, pay later, can you talk about sort of what percentage of gross yield you think will be coming from late fees once things normalize versus maybe the profile of ADS a few years ago when it may have been as much as a third? Because I'm trying to understand -- I think that may give the biggest window into ultimately what the gross yield kind of secular outlook is.

Ralph Andretta

Analyst · JMP Securities.

Yes. So as I said, we've changed our product mix and our risk profile. So we're not reliant on late fees as ADS was in the past. So it's not a place where we want to place our bets. We want to place our bets on returns with good products and getting good yield from people that are good payers. So that's important to us. So we don't see late fees as being a predominant -- that predominant on our go-forward yield. I'm sure it will play a part, but it won't play a predominant part as it did in the past. If you think about yield and you think about Bread, the Bread yields are accretive to us because it's a low cost to acquire and low cost to serve. And those yields are accretive to us, and they will enhance our yields going forward. So I'm confident that our yields will be steady going forward. But -- and I'm also confident that given the product mix and the risk mix, it's not going to be just driven by late fees.

Operator

Operator

Your next question comes from the line of Dominick Gabriele with Oppenheimer.

Dominick Gabriele

Analyst · Oppenheimer.

I just want to say welcome, Perry, and Wayfair returning really is a testament to the strategic transformation here, for sure.

Ralph Andretta

Analyst · Oppenheimer.

Yes. I got 2 gifts this quarter.

Dominick Gabriele

Analyst · Oppenheimer.

Seriously, and it came at a discount, right.

Ralph Andretta

Analyst · Oppenheimer.

Exactly.

Dominick Gabriele

Analyst · Oppenheimer.

So I guess as we look at the -- people have been really focusing on how -- on the Fiserv piece, saying that it's not an exclusive relationship to some extent. And I was actually just going to flip that on its head and ask you, could you sign up another partner like Fiserv within that type of channel to get after perhaps different partners, merchants that they may be -- I mean, Fiserv basically has everybody. But is there a way to kind of diversify those partners as like lenders will diversify their sub banks?

Ralph Andretta

Analyst · Oppenheimer.

Yes. Well, let me just talk about -- first talk about the Fiserv relationship. Although not exclusive, we are integrated into their dashboard. So when a merchant turns on a Fiserv relationship, we are there and integrated into their dashboard, so it's ease of use. So that -- although not exclusive, that to me is really, really important. We have a -- so Fiserv is a very important partner of ours. And we're doing many things with them across the patch. But to the second part of your question, of course, we can work with another third party as well. The place where I'm really interested and really want to be bullish on this, particularly internationally, if we can, is on the technology platform, what we have with RBC. So we are the white label solution to RBC in terms of buy now, pay later installment lending, and we get a transaction fee there. So the revenue is without receivables. That's something that we could roll out around the world pretty quickly. That's where -- there's a real opportunity for us there to have RBC-like relationships in other geographic locations.

Dominick Gabriele

Analyst · Oppenheimer.

Great. Absolutely big opportunity. And I know it's a bit early to maybe ask this question, but maybe you could take back out the APA. But if we think about the consumers' excess liquidity, I mean, I think one of the big banks talked about 50% of stimulus still being in their bank accounts. When -- I guess when we think about the holiday season coming up, I guess can you talk about how your new relationships over time can diversify that fourth quarter receivables jump and how you're thinking about this holiday season with your partners, the spend turning into balances?

Ralph Andretta

Analyst · Oppenheimer.

Yes. I think you're -- if you look at the baseline forecast, you'll start to see in the fourth quarter -- at least what's projected, you'll start to see savings -- those savings dissipate a little bit in the fourth quarter as stimulus rolls off and holiday season rolls on. And we're seeing, like I said, high double-digit sales. So we're positioning ourselves very well for the holiday season. And I'd say over -- I think about it in 3 areas. One, as Perry talked about and I talked about, we're going to ramp -- we have been ramping and 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 season. We continually add partners to the Bread portfolio. That will help us with the holiday season. I mentioned earlier that we have a number of really good prospects with RBC that will be ready for the holiday season. So all of those things, in my view -- although RBC is not receivables, but it is revenue. All those things will help us really drive to jump-start 2022. And in a combination of payment rates moderating and sales continuing to grow, I think we'll -- you will see that -- as we exit the year, you'll see that receivables growth.

Operator

Operator

[Operator Instructions] Your next question comes from the line of Reggie Smith with JPMorgan.

Reginald Smith

Analyst · JPMorgan.

I got 2 quick questions. Number one, just trying to understand, I mean, you guys have talked a bit about the Bread integration process. But curious like how does that compare to the stand-alone buy now, pay later companies? So specifically, like does it take you longer to integrate given the nature of the integration? Or are you on par with how quickly they can be up and running with a client?

Ralph Andretta

Analyst · JPMorgan.

Yes. We are probably -- we could be running as fast. And I think the distinction between us and the standalones, there's a couple of distinctions. One is we're on the merchant side. So we integrate into the purchase path and give that merchant the option -- give the customer the option to pay different ways at the merchant. We're not interested in taking the transaction away from the merchant. We're interested in adding a transaction to the merchant because the merchants are our partner. So that's one distinction. We're not asking them to download an app. We're asking to execute a transaction within the purchase path of that merchant. That's a real different distinction than the standalones. Secondly, for our existing partners, we can offer relationship pricing because they're a partner of ours beyond just that transaction. And we have a balance sheet, we have better funding and we have a relationship. So we could be very, very competitive in terms of pricing as well, another distinction from the third party. But in terms of up and running, we're as quick as they are.

Reginald Smith

Analyst · JPMorgan.

Got it. And if I can squeeze one more follow-up in. You mentioned, I guess, the success -- early success you're seeing with millennials on your proprietary card. I was curious, is that a function of you kind of picking off former Wayfair customers? Or are there certain features about the card that resonate with millennials? I guess what I'm asking is, have you considered or are you thinking about integrating like buy now, pay later functionality or installment functionality into your proprietary card or maybe even rebranding it to make it more of a consumer-facing product?

Ralph Andretta

Analyst · JPMorgan.

Great question. Yes, I mean, I think we're seeing early success from millennials because it's a cash back card, so millennials are rational and they like cash flow. So they see it as an opportunity to get something back for their spending. Also, we're skewing towards digital like a product as well, and we'll continue to make that product digital as well. So in terms of making it a bigger part of our portfolio, we're certainly bullish on this product, and you'll see us lean into this product next year.

Reginald Smith

Analyst · JPMorgan.

Got it. I guess just to make sure it was heard. Is there any idea or thought about making installment like a feature in that product? Or could you not talk about that? I don't want to...

Ralph Andretta

Analyst · JPMorgan.

I'm sorry if I didn't answer your question fully. Yes, we're going to bring all our product capabilities to our proprietary card. So installment, buy now, pay later, all the capabilities we have, we'll make available to our proprietary card.

Operator

Operator

At this time, there are no further questions. I would now like to turn the call back over to Mr. Ralph Andretta.

Ralph Andretta

Analyst

So thank you all for the call today and your interest in Alliance Data. As you know, we remain focused on executing our strategic plan, building for the future and really excited about the progress we've made and our outlook. So everyone, have a terrific day, and thank you all very much. Take care.

Operator

Operator

This concludes today's teleconference. Thank you for participating. You may now disconnect.