BREAD FINANCIAL HOLDINGS, INC. Segments Disclosure
25. SEGMENT INFORMATION
Operating segments are defined by ASC 280, “Segment Reporting,” as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The operating segments are reviewed separately because each operating segment represents a strategic business unit that generally offers different products and services.
As discussed in Note 7, “Discontinued Operations,” in the first quarter of 2019, the Company’s Epsilon segment was classified as a discontinued operation and was sold on July 1, 2019. The Company operates in the LoyaltyOne and Card Services reportable segments, which consist of the following:
| ● | LoyaltyOne provides coalition and short-term loyalty programs through the Company’s Canadian AIR MILES Reward Program and BrandLoyalty; and |
| ● | Card Services provides private label, co-brand, general purpose and business credit card programs, digital payments, including Bread, and Comenity-branded financial services. Card Services provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services. |
Corporate and other immaterial businesses are reported collectively as an “all other” category labeled “Corporate/Other.” Income taxes are not allocated to the segments in the computation of segment operating profit for internal evaluation purposes and have also been included in “Corporate/Other.”
Corporate/ | ||||||||||||
Year Ended December 31, 2020 |
| LoyaltyOne |
| Card Services |
| Other |
| Total | ||||
(in millions) | ||||||||||||
Revenues | $ | 764.8 | $ | 3,756.5 | $ | 0.1 | $ | 4,521.4 | ||||
Income (loss) before income taxes | $ | 111.0 | $ | 501.5 | $ | (218.0) | $ | 394.5 | ||||
Interest expense, net |
| (0.8) |
| 385.4 |
| 109.3 |
| 493.9 | ||||
Operating income (loss) |
| 110.2 |
| 886.9 |
| (108.7) |
| 888.4 | ||||
Depreciation and amortization |
| 78.0 |
| 102.8 |
| 3.0 |
| 183.8 | ||||
Stock compensation expense |
| 5.5 | 7.0 |
| 8.8 |
| 21.3 | |||||
Gain on sale of business, net of strategic transaction costs | (8.0) | — | — | (8.0) | ||||||||
Strategic transaction costs | 0.4 | 0.3 | 15.2 | 15.9 | ||||||||
Asset impairments |
| — |
| 63.7 |
| — |
| 63.7 | ||||
Restructuring and other charges | 0.1 | (8.3) | — | (8.2) | ||||||||
Adjusted EBITDA (1) |
| 186.2 |
| 1,052.4 |
| (81.7) |
| 1,156.9 | ||||
Less: Securitization funding costs | — | 165.9 | — | 165.9 | ||||||||
Less: Interest expense on deposits | — | 219.5 | — | 219.5 | ||||||||
Adjusted EBITDA, net (1) | $ | 186.2 | $ | 667.0 | $ | (81.7) | $ | 771.5 | ||||
Capital expenditures | $ | 24.3 | $ | 29.4 | $ | 0.3 | $ | 54.0 | ||||
Corporate/ | ||||||||||||
Year Ended December 31, 2019 |
| LoyaltyOne |
| Card Services |
| Other |
| Total | ||||
(in millions) | ||||||||||||
Revenues | $ | 1,033.1 | $ | 4,547.8 | $ | 0.4 | $ | 5,581.3 | ||||
Income (loss) before income taxes | $ | 103.1 | $ | 991.7 | $ | (356.4) | $ | 738.4 | ||||
Interest expense, net |
| 2.3 |
| 439.0 |
| 127.7 |
| 569.0 | ||||
Operating income (loss) |
| 105.4 |
| 1,430.7 |
| (228.7) |
| 1,307.4 | ||||
Depreciation and amortization |
| 80.1 |
| 89.3 |
| 6.7 |
| 176.1 | ||||
Stock compensation expense | 7.2 | 9.3 | 8.6 | 25.1 | ||||||||
Strategic transaction costs | 1.0 | — | 10.7 | 11.7 | ||||||||
Restructuring and other charges | 50.8 | 29.4 | 37.9 | 118.1 | ||||||||
Loss on extinguishment of debt |
| — |
| — |
| 71.9 |
| 71.9 | ||||
Adjusted EBITDA (1) |
| 244.5 |
| 1,558.7 |
| (92.9) |
| 1,710.3 | ||||
Less: Securitization funding costs | — | 213.4 | — | 213.4 | ||||||||
Less: Interest expense on deposits | — | 225.6 | — | 225.6 | ||||||||
Adjusted EBITDA, net (1) | $ | 244.5 | $ | 1,119.7 | $ | (92.9) | $ | 1,271.3 | ||||
Capital expenditures | $ | 41.5 | $ | 44.2 | $ | 0.8 | $ | 86.5 | ||||
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Corporate/ | ||||||||||||
Year Ended December 31, 2018 |
| LoyaltyOne |
| Card Services |
| Other |
| Total | ||||
(in millions) | ||||||||||||
Revenues | $ | 1,068.4 | $ | 4,597.6 | $ | 0.6 | $ | 5,666.6 | ||||
Income (loss) before income taxes | $ | 153.8 | $ | 1,381.6 | $ | (320.4) | $ | 1,215.0 | ||||
Interest expense, net |
| 5.6 |
| 385.9 |
| 150.8 |
| 542.3 | ||||
Operating income (loss) |
| 159.4 |
| 1,767.5 |
| (169.6) |
| 1,757.3 | ||||
Depreciation and amortization |
| 84.8 |
| 101.1 |
| 7.7 |
| 193.6 | ||||
Stock compensation expense |
| 10.0 |
| 13.3 |
| 21.1 |
| 44.4 | ||||
Adjusted EBITDA (1) |
| 254.2 |
| 1,881.9 |
| (140.8) |
| 1,995.3 | ||||
Less: Securitization funding costs | — | 220.2 | — | 220.2 | ||||||||
Less: Interest expense on deposits | — | 165.7 | — | 165.7 | ||||||||
Adjusted EBITDA, net (1) | $ | 254.2 | $ | 1,496.0 | $ | (140.8) | $ | 1,609.4 | ||||
Capital expenditures | $ | 34.0 | $ | 53.8 | $ | 5.5 | $ | 93.3 | ||||
| (1) | Adjusted EBITDA is a non-GAAP financial measure equal to income from continuing operations, the most directly comparable financial measure based on GAAP plus stock compensation expense, provision for income taxes, interest expense, net, depreciation and other amortization, and amortization of purchased intangibles. Adjusted EBITDA also excludes the gain on the sale of Precima, strategic transaction costs, which represent costs for professional services associated with strategic initiatives, asset impairments, restructuring and other charges, and loss related to the Company’s extinguishment of debt in July 2019. |
Adjusted EBITDA, net is also a non-GAAP financial measure equal to adjusted EBITDA less securitization funding costs and interest expense on deposits. Adjusted EBITDA and adjusted EBITDA, net are presented in accordance with ASC 280 as they are the primary performance metrics utilized to assess performance of the segments.
The table below reconciles the reportable segments’ total assets to consolidated total assets:
LoyaltyOne | Card Services | Corporate/ Other | Total | |||||||||
(in millions) | ||||||||||||
Total Assets | ||||||||||||
December 31, 2020 | $ | 2,422.3 | $ | 19,884.6 | $ | 240.2 | $ | 22,547.1 | ||||
December 31, 2019 | $ | 2,338.0 | $ | 23,931.1 | $ | 225.7 | $ | 26,494.8 | ||||
With respect to information concerning principal geographic areas, revenues are based on the location of the subsidiary that generally correlates with the location of the customer. Information concerning principal geographic areas is as follows:
Europe, | ||||||||||||||||||
| United |
|
| Middle East |
| |||||||||||||
| States |
| Canada |
| and Africa |
| Asia Pacific |
| Other |
| Total | |||||||
(in millions) | ||||||||||||||||||
Revenues | ||||||||||||||||||
Year Ended December 31, 2020 | $ | 3,767.7 | $ | 286.9 | $ | 332.6 | $ | 80.5 | $ | 53.7 | $ | 4,521.4 | ||||||
Year Ended December 31, 2019 | $ | 4,588.3 | $ | 352.2 | $ | 449.1 | $ | 121.7 | $ | 70.0 | $ | 5,581.3 | ||||||
Year Ended December 31, 2018 | $ | 4,621.3 | $ | 411.3 | $ | 463.2 | $ | 122.0 | $ | 48.8 | $ | 5,666.6 | ||||||
Long Lived Assets | ||||||||||||||||||
December 31, 2020 | $ | 1,874.9 | $ | 310.7 | $ | 714.3 | $ | 11.4 | $ | 1.4 | $ | 2,912.7 | ||||||
December 31, 2019 | $ | 1,361.1 | $ | 311.1 | $ | 696.2 | $ | 12.8 | $ | 0.9 | $ | 2,382.1 | ||||||
As of December 31, 2020, 2019 and 2018, revenues from L Brands and its affiliates represented approximately 10.3%, 10.6% and 10.8%, respectively, of consolidated revenues and are included in the Card Services segment.
About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.