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, 2020, filed with the Securities and Exchange Commission, or SEC, on
February 26, 2021.
2021 First Quarter Financial Highlights
Results of operations for the first quarter of 2021 continued to be impacted by
the COVID-19 pandemic; however, we continue to see improvement in key credit
metrics and continued sequential improvement in business conditions. Financial
highlights for the first quarter of 2021 as compared to the corresponding prior
year period are as follows:
? For the three months ended March 31, 2021, as compared to the three months
ended March 31, 2020:
? Revenue decreased $296.9 million, or 21%, to $1,084.9 million.
? Provision for loan loss decreased $622.5 million, or 95%, to $33.4 million
? Income before income taxes increased $369.0 million, or 1,452%, to $394.4
million.
? Net income increased $256.2 million, or 854%, to $286.2 million.
? We paid dividends and dividend equivalent rights of $10.7 million for the three
months ended March 31, 2021.
On April 14, 2021, the Company announced that Perry Beberman will be named
Executive Vice President and Chief Financial Officer, effective July 6, 2021.
? Mr. Beberman served most recently as Senior Vice President and Finance
Executive for Bank of America's Consumer and Wealth Management Lending
Products. He succeeds Mr. King who resigned as Executive Vice President and
Chief Financial Officer on April 13, 2021.
COVID-19 Update
On March 11, 2020, the World Health Organization declared the current
coronavirus, or COVID-19, outbreak to be a global pandemic. In response to this
declaration and the rapid spread of COVID-19, international, provincial,
federal, state and local government or other authorities have imposed varying
degrees of restrictions on social and commercial activity in an effort to
improve health and safety. As the global COVID-19 pandemic has continued to
evolve, our priority has been and continues to be, the health and safety of our
employees, with the vast majority of our employees continuing to work from home.
The effects of the COVID-19 pandemic impacted our results and year-over-year
comparisons; however, credit metrics have remained resilient, with a net loss
rate of 5.0% for the three months ended March 31, 2021, and a delinquency rate
of 3.8% for the period ended March 31, 2021. Improvement in the net loss rate is
a result of prudent risk management strategy changes, deliberate underwriting
actions, and direct consumer stimulus payments. Credit sales year-over-year
performance strengthened versus the previous quarter. The majority of the credit
sales improvement can be attributed to instore sales, which have benefitted
from increased consumer confidence and mobility. However, redemptions in our AIR
MILES Reward Program declined 26% largely due to the downturn in the travel
market as a result of the pandemic and related restrictions such as border
closures repressing travel-related redemptions. The AIR MILES Reward Program
continues to pivot the rewards portfolio to emphasize more nontravel options,
driving higher merchandise redemptions. In addition, the AIR MILES Reward
Program is working with airline partners to plan for the eventual return of
airline travel with optimism for the second half of the year. At BrandLoyalty,
uncertainty remains with many European countries still in lockdown; however, new
program activity is increasing with consumers actively engaged in loyalty
campaigns, with particular success in products focused on the home.
Despite the emergence of vaccines, surges in COVID-19 cases, including variants
of the strain, may cause people to self-quarantine or governments to shut down
nonessential businesses again. The broad availability of COVID-19 vaccines and
the willingness of individuals to be vaccinated are difficult to predict. The
pace and shape of the COVID-19 recovery as well as the impact and extent of
potential resurgences is not presently known. We continue to evaluate the nature
and extent of changes to the market and economic conditions related to the
COVID-19 pandemic and current and potential impact on our business and financial
position. However, given the dynamic nature of this situation, we cannot
reasonably estimate the impacts of COVID-19 on our future results of operations
or cash flows at this time.
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