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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto presented in this quarterly report and the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission, or SEC, on February 28, 2020.

2020 Recent Developments

Effective February 3, 2020, our Board of Directors appointed Ralph Andretta as ? Alliance Data's President and Chief Executive Officer as well as a Director of the Company.

? For the three months ended March 31, 2020, as compared to the three months ended March 31, 2019:

? Revenue increased 4% to $1.4 billion.

? Net income decreased 80% to $30.0 million.

? Earnings per share decreased 78% to $0.63.

? Adjusted EBITDA, net decreased 74% to $83.5 million.

Effective January 1, 2020, we adopted Accounting Standards Codification, or ASC, 326, "Financial Instruments-Credit Losses," and applied a current expected credit loss, or CECL, model to determine our allowance for loan loss. Estimates of expected credit losses under the CECL model are based on relevant ? information about past events, current conditions, and reasonable and supportable forward-looking forecasts regarding the collectability of the loan portfolio. The impact of CECL is significantly influenced by the composition, characteristics and quality of our portfolio of credit card and loan receivables, as well as the prevailing economic conditions and forecasts utilized.

In January 2020, we sold Precima, a provider of retail strategy and customer data applications and analytics, for total consideration of approximately $43.8 ? million, which includes contingent consideration with an estimated fair value of $6.5 million, upon the occurrence of specified events and performance of the business. Precima was included in our LoyaltyOne segment.

? We paid dividends and dividend equivalent rights of $30.3 million for the three months ended March 31, 2020.

? We sold one credit card portfolio for preliminary cash consideration of $289.5 million during the three months ended March 31, 2020.

COVID-19 Update

On March 11, 2020, the World Health Organization, or WHO, declared the current coronavirus, or COVID-19, outbreak to be a global pandemic. Both prior to and in response to this declaration and the rapid spread of COVID-19 around the world and within the United States, international, federal, state and local governments have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. As a result, COVID-19 restrictions have adversely impacted and continue to adversely impact our associates, our business partners, and our customers.

In response to the COVID-19 pandemic, first and foremost, we have prioritized the health and safety of our associates. Effective teleworking protocols are in place for more than 95% of our associates. Cross-training programs have been completed at our Card Services business to ensure appropriate workforce coverage while managing higher cardholder-related call volumes resulting from forbearance programs introduced in response to the COVID-19 pandemic. These forbearance programs include the option to waive the next payment or enroll in short-term hardship programs for eligible accountholders. We are working closely with our partners across all of our businesses to optimize their budgets, adjust marketing support accordingly and accommodate the rapid shift to ecommerce in light of retail-based store closings to reduce the spread of COVID-19. At LoyaltyOne, we are adjusting the timing of significant coalition and sponsor-specific promotions and marketing programs for our coalition loyalty program. Additionally, we are enhancing efforts on redemption categories that focus on high-demand, non-travel reward options, stay-at-home products and services, and AIR MILES Cash redemptions. We are extending the length of certain short-term loyalty programs, allowing consumers a better opportunity to collect and redeem prior to program expiration.


We continue to monitor the rapidly evolving situation and guidance from international, federal, state and local government and public health authorities. Given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows at this time. However, we expect COVID-19 to have an adverse impact on future revenue growth as well as overall profitability. In particular, our allowance for loan loss under the CECL model may be volatile due to changes in the macroeconomic environment. We continue to evaluate and implement additional cost saving measures in procurement, marketing and operating expenses, while maintaining service levels and positioning for future growth.

May 06, 2020

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