Thanks, Amy. By now, you should have received a copy of the company's fourth quarter and full year 2019 earnings release.

If you haven't, please call AdvisIRy Partners at (212) 750-5800.

On the call today, we have Charles Horn, Acting CEO, Executive Vice President and Vice Chairman of Alliance Data; and Tim King, 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 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 Charles Horn. Charles?

Thank you. Good morning.

Thank you for joining us today. With me is Tim King, our CFO.

We plan to keep our prepared remarks quite short today. And with that, let's go to Page 4 and talk about our 2019 consolidated results.

For the year, revenue decreased 2% to $5.6 billion, adjusted EBITDA net decreased 21% to $1.3 billion and core EPS decreased 14% to $16.77, which is in the lower end of our range for the 2019 guidance. The weakness in 2019 was primarily at Card Services.

2019 was a transition year at ADS, painful but productive.

Let's begin with the transition of Card Services toward more attractive clients and verticals. This process hurt 2019 profitability as we have sold $3.2 billion of noncore but income-producing receivables since 2017.

The result is a healthier client base below our revenue growth. We were able -- we were slow to adjust our operating cost structure commensurate with the lower growth, but actions undertaken late in 2019 have rectified that.

As part of a strategic review that commenced in 2018, we sold Epsilon in 2019 and Precima in January 2020, simplifying our story and allowing increased investment in Card Services.

Next, we streamlined our cost structure throughout ADS, reducing run rate expenses by over $200 million entering 2020. Lastly, after some executive management turnover, the Board of Directors hired a seasoned industry veteran in Ralph Andretta, who joins ADS next week to lead the business going forward.

During 2019, we reduced the parent level debt by $2.9 billion, while extending the debt maturity ladder for the remaining debt with $2 billion extended from June 2021 to December 2022, and $850 million extended from June 2021 to December 2024. In addition, we spent $976 million on share repurchases during 2019.

Our capital allocation priority in 2020 will continue to focus on debt retirement as well as internal investment to support new product capabilities at Card Services.

Moving to Page 5. I'll turn it over to Tim.

Good morning. As Charles mentioned, I'm on Page 5, where we have broken out our segment results.

I'm just going to go discuss the corporate results here, as I'll go into greater detail on the next few pages for LoyaltyOne and Card.

Turning to corporate expense. At the bottom of the page, we have been able to lower the corporate expense from $141 million in 2018 to $93 million in 2019, a decrease of 34%.

This area was a major focus for us in 2019. With the sale of Epsilon, we needed to pare back expenses quickly and we did.

We now estimate our run rate of corporate expenses of approximately $65 million for 2020.

And now turning to Slide 6, I'll go into more details on the LoyaltyOne segment. On an adjusted basis, revenue increased 5%, while adjusted EBITDA net was essentially flat compared to 2018.

Breaking out the results further, you'll see that AIR MILES adjusted revenue was flat, primarily due to a 1% decrease in AIR MILES redeemed compared to 2018. Adjusted EBITDA net decreased 8% on a constant currency basis, primarily due to the increased expenses at Precima associated with the onboarding of 2 new clients in 2019.

As most of you know, Precima was sold in January of 2020. AIR MILES issue were flat in 2019, but turned positive at 1% growth in the fourth quarter.

Importantly, our largest client, Bank of Montreal, extended its contract 3 years in October.

Brand loyalties revenue increased 8% on a constant currency basis, while adjusted EBITDA net increased to 20% on a constant currency basis. Strength in the Disney product offering was a driving factor in the revenue growth, which coupled with our cost containment measures implemented during the year, helped drive strong improvements in our adjusted EBITDA net.

Moving to Slide 7, let's discuss the key metrics of Card Services. Credit sales for 2019 were up 1% resulting in normalized average receivables growth of 1%.

End-of-period receivables were approximately $19.5 billion, up 9% year-over-year and consistent with our expectations. Gross yields were down 50 basis points for the year, negatively impacted by purchase accounting associated with the acquired portfolio in the second quarter and decreases in the Fed fund rates, which negatively impacted our finance charges.

We feel comfortable that gross yields will be modestly up in 2020.

Our operating expenses, excluding the fair value adjustment on the held-for-sale receivables, worsened by 4 basis points in 2019. Cost containment measurements, implemented late in 2019, should lead to $100 million of expense savings for Card Services in 2020.

The principal loss rate improved from 2018 and now more closely is following our normal seasonal patterns. While underlying credit trends are stable, we could see a slight increase in the rate in 2020 due to a slightly lower receivables growth rate, what we call the denominator effect.

Delinquency rates were up 14 basis points, primarily due to the portfolios acquired in mid-2019. Delinquency rates on these receivables, which is being serviced by a third party, has deteriorated since the acquisition to date.

The portfolio are scheduled to convert onto our platform in the first quarter of 2020. Return on equity dropped in 2019 commensurate with the decline in profitability.

We expect ROEs to improve in 2020 to the 27% to 29% range.

Turning to Slide 8. I'll go through some financials for Card, starting with the receivables.

As I mentioned in the prior slide, obviously, normalized receivables were up 1%, but yields were down 50 basis points. Combined, these factors led to a 1% decrease in our revenue year-over-year.

Operating expenses were up 6%, primarily due to the additional $90 million adjustment for the carrying value of the held-for-sale receivables. Excluding this charge, the operating percent was essentially flat to 2018.

Provision for loan losses increased from $172 million or 17% primarily driven by a 9% increase in the ending receivables and timing with strong loss trends in Q4 2019 due to a stable loss trends in Q4 2019 versus improving loss trends in Q4 2018. Funding costs increased 14% due to rate pressure in early 2019, coupled with the success of our consumer direct funding initiatives.

Essentially, we raised money in this channel faster than anticipated when we needed to fund receivables growth.

Let's go to Page 9 and discuss our 2020 guidance. I'll start, and our initial revenue guidance for 2020 is flat.

There are really 2 primary reasons for this. One, we sold Precima, as we've talked about before in January 2020.

Precima contributed over $80 million in revenue to LoyaltyOne in 2019, with expectations of $100 million of revenue in 2020; and two, no growth in normalized average receivables at Card Services. Remember, we sold $2.1 billion of revenue-generating receivables during 2019, which creates a significant growover impact going into 2020.

With core EPS, we expect an increase of 22% as we reap the full year benefits of the cost containment measures implemented during 2019. In addition, we continuously explore further cost containment initiatives in 2020.

Tim?

Charles has already mentioned that our normalized receivables will be flat, but we expect to exit the year up mid-single digits. Assuming no further rate cuts by the Fed, we would expect our gross yields to increase 30 to 50 basis points.

Turning to operating expenses. We have mentioned the company-wide expense reduction initiatives, including those initiatives undertaken in Card.

We anticipate that Card Services will benefit approximately 50 to 70 basis points due to these initiatives. While slower growth helps our gross yields, there will be some pressure on principal loss rates.

This is a denominator effect, as I mentioned before, as we do not see any pressure on our consumer. And of course last, we will be implementing CECL in 2020.

The day 1 effect is strictly a balance sheet impact to allowance for loan losses, deferred taxes and equity. We anticipate recording between $600 million and $650 million as it increased the allowance for loan losses with the decrease in equity net of taxes.

As allowed by the regulators, we will rebuild our bank equity over the next 4 years. On a go-forward basis, all new receivables will be reserved at the higher allowance rate, increasing approximately 50% to 55%.

For 2020, we anticipate an additional provision expense of approximately $60 million, which has been fully contemplated in our guidance.

With that, we'll open it up for questions.

All right. Obviously, a lot of moving pieces here.

I guess, first question is, when we think about the key variables going forward that could affect the Card Services or Loyalty business and your outlook, could you just talk about what they might be outside of a change in the macro environment?

Let's start with LoyaltyOne. I'd say LoyaltyOne is set up for a good 2020.

As we've talked about, we did renew with Bank of Montreal, our biggest sponsor at AIR MILES. Issuance growth turned slightly positive in the fourth quarter, and we expect that to continue in 2020.

The AIR MILES cost structure has been adjusted quite a bit. So we do think you're looking at a business there that can be low single digits on revenue and low single digits in terms of EBITDA net.

They are somewhat mature business, but they generate good cash flow. And I would expect their EBITDA margins to jump up north of 40% again.

With Brand Loyalty, you saw a good turnaround for them in 2019. You saw the revenue increase in constant currency, up more than mid-single digits, good expansion in the EBITDA net.

I think next year is going to be a little bit more stable year for them, some improvement potentially, but with market dynamics being what they are, I'd say, more of a stable year for Brand Loyalty versus a big growth year like it was in 2019.

With Card Services, we've talked about -- I think we feel good about the primary assumptions behind what we've given you in terms of receivables, the gross yield outlook, especially with no acquired portfolios. I think the key variable there will be whether we're successful in introducing some new product capabilities in 2020.

We do think that that's important going forward, that we provide additional capabilities to our clients, that we take advantage of our relationships and contracts with our clients to introduce these new offerings, and that's something that's going to be a really key focus for us in 2020.

Okay. I guess one follow-up is just one of the concerns I get from investors is the confidence in the guidance, given there will be a new leader starting in about a week.

Maybe, Charles, if you could just talk about how aligned his vision is with the one that you've been set out in terms of working on? And maybe just, Tim, the confidence in the guide as well.

Yes. So obviously, there's been limited dialogue with Ralph since he's not joined the company at this point.

I would say though, that the board level -- the management level had just very small conversations with Ralph.

We believe we're taking a conservative outlook for the year, especially if you look at the core EPS of $20.50. And if you think about the share count reductions we've done over the course of 2019, the cost containment measures, we think we're taking a very conservative approach.

I'll let Tim comment in a minute. What we'd like to do, Sanjay, frankly, is to get back where we can move to a beat-and-raise versus chasing it the other way now for several years.

And by taking a conservative approach on both the top line and bottom line, I think what -- we've done that in 2020. Tim?

Yes. So obviously, the first driver of the 2020 guidance, the big driver is going to be that AR number, and we feel like we've taken a conservative approach, keeping the -- our forecast for a normalized AR at flat year-over-year.

You then add a fairly modest increase in the yields, and so we feel pretty comfortable about the revenue portion of Card. The big -- then obviously, go to expenses.

We've taken about $100 million out of Card Services expenses collectively across the organization, about $200 million out. Those are the big drivers.

The big then factor becomes a CECL number and we can control that CECL by that end-of-period AR number. So the $60 million that we called out as a CECL effect for 2020 certainly is dependent -- 100% dependent on how much we grow that end-of-period AR.

Can we talk strategically for a minute about your vision on growing the portfolio now? I know you're obviously taking a more conservative approach.

But what types of new business would you be willing to add in terms of profitability metrics, in terms of the type of actual customer now? I know you were getting away from [ them all ], but I'd be curious to hear a little more context into what goes into that conservative guide on the receivables side.

What types of new -- how much of that is new wins, new business that might be coming on? And what's the profile in terms of return on equity you're expecting now?

Sure. So if you go back to the last earnings call, there was quite a bit of discussion about our growth is coming from our newer vintages.

We continue to see that growth. But what we need to do on top of that, Darrin, is, one, get some growth back in the core, our older programs that have been somewhat stagnant.

We need to find a way to reenergize that. And then we need to look to onboard more clients over the course of 2020.

And what it may mean is we're looking to go to smaller clients, maybe only web-based, easier to onboard, not the difficulty of onboarding in store. So we'd get a smaller group, clients coming through that we can help ramp and grow.

And then on top of what we talked earlier, we need to look at are there other product capabilities our clients are looking for, capabilities we can provide. That's going to be a key for us going forward.

So I think it's going to be a balance across the board. We need to get some growth in the core, continued growth in our interim programs to newer programs, and then find new means to grow and our sandbox or increase it by going after some of these smaller, web-only clients or where we only support them on the web.

I think that's what we're looking for.

Yes, there's -- part of the reason we have been guiding to lower sales growth and obviously, AR growth, is that we can be much more selective about who we're going after on a new basis. But in some cases, there's partnerships that will get to the spot where we don't want to keep them anymore, the profitability is not there.

So by keeping a lower profile in that growth, then we are able to keep our profitability where we want that to be. So it is a combination of balancing the ROEs versus that growth.

Lowering a growth profile that is conservative, we're able to maintain the profitability we think we should be at.

And is that still 30%-type ROE?

Well, as we indicated for 2020, we think we'll be a little bit slower than that. I do think the opportunity for us to rebuild it back to the 30%-plus.

But in terms of our outlook for 2020, slightly lower.

And just 1 quick follow-up would be, when you think about the portfolio or the larger pieces of your current portfolio, I know [ LOne ] had some things, maybe potentially changing Victoria's Secret. I mean did you include any concern -- any potential risk on any meaningful client that might change their minds on how they're doing things in your outlook?

And just if you could give us a little more color on the bridge on yields, that would be -- and then I'll go back to the queue.

So any known or anticipated risk we have already considered. So guidance is, again, I think, in our ways, pretty conservative.

Yes. So if you think about -- the comfort with the yields, Darrin, I think there's 4 things that factor into that.

One, currently, the market is not anticipating any Fed decreases. We -- certainly, the slower growth allows us to season our files, and so we get back to the yield increasing.

We do not have any renewal pressure in 2020. And certainly, we have, over the course of the last 3 to 4 yields -- years, removed the lower-yielding files.

So we feel very comfortable that we should be able to get some increase in our yields, and that's why we're guiding to a 20 to 50 basis point improvement in the yields.

Charles, you mentioned your priorities, one of which is investment in the Card Services business. And I wonder if you could elaborate a little bit on kind of how you rank-order those investments, particularly in the context of perhaps changing the profile of some of the new Card Services customers you're going after?

You mentioned web-only. How do you feel you're positioned competitively, tech-wise, data security-wise, et cetera?

Is that an area of focus?

I'll start with the data security. I think we feel very good that we are where we need to be, if not better on data security.

On the tech, I can say that I think we need to make some investment. That's what we talked about here today, is we probably didn't invest quite enough over the last 3 or 4 years in capabilities, such as around digital.

Some of the onboarding initiatives, it takes too long to onboard clients at this point. And we need a platform that's more friendly if we want to offer the alternative products, let's say it's equal pay.

Or if we want to go through and onboard smaller clients, that's really not the way we're set up.

So it's going to be a key initiative for us going forward because we want to expand our client base. We want to have more capabilities.

We want to move frontline on the websites, so our clients see us quicker rather than just waiting to the very end and they see us in the shopping cart basket. Those are the things we really need to focus on in 2020.

Okay. And do you think that's a 1-year process, such that you see the benefit of that next year?

It depends. So in the guidance, we're not really considering there's a lot of benefit there.

But it's really going to be a decision at the board management level, whether you build or buy. It's just going to be very simple.

Okay. And then one quick follow-up.

I don't think I heard it. Did you mention what the corporate leverage ratio is today?

We didn't. It's about 1.4% right now.

Times. 1.4x.

1.4x? Okay.

So that -- you think that would leave you room to continue to return capital?

Yes.

Yes, we should be in good shape in the way we've extended our debt, Andrew.

The -- just following up on the corporate leverage and the cash flow. With loan growth in the low single digits, obviously the Loyalty business is a pure free cash flow business.

You deleveraged quite a bit or you generated a lot of excess capital. Do you plan to return capital or -- this year to shareholders?

Do you plan to buy back stock? Or are you just going to continue to reduce leverage in the near term?

Well, Bob, I'll say 2 things there. One on dividends, we definitely are going to continue our dividend stream.

[ There should be a ] release go out today on that topic.

Two, I would say, we always look for opportunities to return to our shareholders. It may be a case this year, we feel it's still more important to hit our debt structure a little bit more at the parent level or we -- as we talked about, we know we need to invest in our businesses, part of the reason we divested Epsilon.

So I'd still say it's going to be in a lower priority, but I'm not going to say that share repurchases are not out of the question.

Just -- and then, I guess, with -- in your guidance, I mean there was news that Myer is -- Citigroup won the Myer business from Alliance Data Systems. Victoria's Secret's up for sale.

Do you have anything built in for client losses? And what happened with the Myer business?

So we'll start with Victoria's Secret. All we can really say there is, we believe we're in good shape for any initiatives they may undertake.

With Myer, that goes back to mid last year. And so it was in held for sale last year.

It was a client relationship renewal year. But for whatever reason, we just couldn't quite get comfortable with terms that they were looking for.

They get a better opportunity or offer from Citibank and so we moved on. That influenced, obviously, our 2019 numbers and been fully considered in our 2020 numbers.

Yes. So Bob, you recall that in the Q2 call, we had a portfolio go into held for sale.

That was the Myer portfolio. So we've, I would say, fully contemplated it in all of 2019 and 2020's guidance.

And then just if I could on Ralph coming on board as a -- I would assume he's listening in on this. But the -- his hiring, Alliance Data has been known to have very good data assets, work well with retailers, we've had good feedback from a number of your customers.

Is -- why was he -- was his background in Loyalty at American Express, I mean, running Private Label, I guess, at Citi. What was it?

And is -- does Ralph -- do you expect substantial changes? Or do you expect to build on the key assets?

Does he understand the key assets that the company has?

No. He's had limited access to the company at this point, and it's just had to be that way.

My take is, he brings a very strong operational background to ADS, which is very needed. I think he will continue on the digital initiatives which fully support some of the paths we're taking.

So I think it's not going to be steady-as-you-go.

I think he will make changes as appropriate to make the company more efficient. But I do think he believes in the underlying backbone of the company, how we go to market, the digital initiatives we're looking to achieve.

And so I think overall, he's going to be tightly aligned but looking to run a more efficient company than maybe we ran in the past.

When we just think about the go-forward expense as a percentage of average receivables, and we think about what you've talked about as far as the expense investment versus the expense saves, do you still believe that it's possible that the net of these 2 could have a lower expense base total ADS in 2020? Is that part of the -- is it -- that's kind of the way that it shakes out?

Yes, absolutely. So when we start quoting the expense saves that we're going to realize that is going to be net of the investments.

Certainly, as we look -- and that's, of course, going to depend on how we invest in -- if we buy a business, a large business, more than a couple of tens of millions of dollars, that would have some effect on that. But the incremental investments, we should be able to get our expense savings as I outlined.

Okay. And then if you just think about the capabilities that you had discussed a little bit on the call thus far, what is part of the franchise that you think is -- I wouldn't say lacking but would like to enhance to the point where you feel like you may need a bolt-on capability or purchase somebody in a bolt-on transaction.

Yes. So I think it really comes down to the 2 things we somewhat talked about before, the digital initiatives would be #1.

And then #2 would be speed to market, the ability to onboard clients much quicker than what we've been able to do.

You can have a really good pipeline, but if you can only onboard 2 or 3 clients a year, that's just not quite good enough. So it's really speed to market is going to be a key emphasis as well.

Yes, Dominick. It really is -- the 2 constituents we're going to have is the consumer and the retail partner.

And in both cases, we want to be more appealing and easier for our consumer, more appealing. And then with the retail partners, Charles has outlined, we want to make that easier.

So it really comes down to just faster, better with those 2 constituents.

Okay, great. And if I could just sneak just one more in here.

Thinking about the gross losses versus net losses in the quarter and the guidance of perhaps 20 to 30 basis points increase, is that coming from gross losses expectations changing? Or is it really the recovery rates?

And can you just talk about the 2 dynamics there heading into the year and what you've seen in those moving parts?

Yes. I'd say it's going to be more trending toward the gross loss versus the recoveries.

Recovery rates will be pretty much the same year-over-year. What it comes back to -- we talked about the acquired portfolio we did in the second quarter of '19, close to over $900 million.

We have seen some deterioration coming through in terms of its delinquency trends under its current servicer. So we do expense that, we'll put a little pressure in the first quarter prior to our converting them, and then we'll see it come back in.

So I'd say, if anything, it's just going to be slightly up on the gross yield -- gross losses, with a little bit somewhat consistency in the recovery streams.

A couple, just on the portfolio. Charles, I -- maybe not to beat a dead horse, I realize you don't like to talk about specific contract terms.

But are you able to share with us whether or not, as it relates to L Brands or the [ VS ] contract, whether there's any kind of change of control provision that is -- does the contracts survive a change of control or automatically get [ nullified ]?

Yes, you somewhat answered it for us, which is we can't really expand on what we say beyond we believe that we're in really good shape.

Got it. No, appreciate it.

And just 1 follow-up. Trying to get a sense -- just to give us, I guess, a sense for order of magnitude.

You've got upwards of 150 different retail clients. When we think about flattish AR growth broadly, can you give us a sense for, I guess, how much growth is anticipated next year from the -- just the ramping up of the '17, '18 and '19 vintages?

And therefore, how much of that is being offset perhaps by expectations for declining balances for -- in aggregate programs older than that?

I guess the easiest way to answer then, take away some of the noise of the growover from selling these receivables as we'd expect our credit sales in 2020 to be up in the 4% to 5% range. And that would be somewhat indicative of what your base is doing.

So as your normalized receivables could be flat or slightly up because of the growover, we sold $2.1 billion of receivables in 2019. So that were there before, now they're not.

I'd say that the best indication of what's going on in the underlying business is the credit sales growth of 4% to 5% for next year.

So just a quick follow-up on the delinquencies. So you mentioned there were some challenges with one of the acquired portfolio.

But can you just provide some color on how the underlying trends are excluding that one particular portfolio? How the delinquency trends are?

And then just as we think about seasoning of some of the newer portfolios that you've acquired or newer portfolios that have come on over the last year or 2, how should we think about seasoning of those portfolios and the impact on delinquencies going into 2020?

Sure. So you -- basically, if you're to bifurcate the book of business, the acquired and the nonacquired, I think, is what you're asking.

The -- obviously, the pressure is coming from those acquired books of business. The rest of the book is very stable.

In fact, I'd say, even including that, 14 basis points variance year-over-year is not a particularly significant movement in our delinquency rate. But that 14 basis point is being caused by that -- the acquired portfolio.

And once we get that in our system, we think we'll be able to get that back in line with the rest of the portfolio.

That's very helpful. And then maybe just quickly on the reserve rate.

How should we think about the reserve rate going by the end of 2020, including the impact of CECL?

Yes. So the reserve rates will be up about 50% on a balance sheet.

You're going to -- of course, you're going to increase your balance sheet on day 1 for all the existing receivables that we have. And then, of course, you'll build -- and we, of course, have guided $60 million of extra build over the course of 2020 for the new receivables.

So in essence, it would be up 50% that we would have expected with the same -- different accounting in 2019.

Great. So just one quick follow-up on guidance and then a follow-up to that question, if you don't mind.

The -- so I just wanted to be explicit in terms of the EPS guidance does not contemplate share repurchase for this year. Is that correct?

That would be correct.

Okay. So maybe -- could you just maybe help us understand what sort of incrementally you're contemplating in terms of changes or improvements to the funding structure?

Is it continued deposit growth, replacing term debt? Or how do we think about the dynamics of the liability structure going forward?

Yes. I'd say the liability structure for 2020 is fairly stable.

We launched that deposit product, which is the big difference that we had in 2019, but we are learning our way into that market to make sure we can maximize that. So we don't anticipate changing our percentages between deposits, retail, brokered, conduit, term debt on the Card side.

As we get into 2020, we will start leaning much more heavily into the deposit product because we will know how to maximize that. So this is a test-and-learn year for us, and we'll get that deposit product to direct-to-consumer up to about 30%.

What we'd look for in 2020 is to see a little expansion in the NIM. As we talked about before, we do expect to see some improvements in the gross yields.

We saw pressure early in 2019 on our funding rates. We saw that start to moderate as the Fed cuts came in place in the back half of the year.

So I think you're not going to see a great deal of movement in your funding costs beyond just the change in volume.

I wanted to start on the EPS guide. It sounds like there are a number of moving pieces between the previous core EPS guide of mid-to-high 20-ish percent growth to the 22% growth now.

And I was hoping you could parse out some of the drivers. Can you gave us a bit of a bridge between the 2?

I'd say that the biggest thing we've probably done is if you look at it going toward the low end of the range, what we said in the third quarter, you could get close to the $20.50 we talked about today.

One of the things we wanted to make sure with the changes that have been going on at ADS is that we provide a conservative guidance for 2020. We believe we have done so with the $20.50 core EPS.

So we probably maybe put a little more conservatism factor in it than what we had going back to the second or third quarter.

Got it. Okay.

And then just moving to loan receivable growth. At the last call, it sounded like the longer-term expectations were for receivables growth, more in the high single-digits range.

Is it fair to say that growth in receivables can reaccelerate in 2021? Or is the mid-single-digit range kind of now the best way to think about growth going forward?

It could reaccelerate into 2021. Obviously, we're guiding towards the end-of-period of 2020 of up mid-single digits because that sets us up for the 2021 period.

We want to make sure we are balancing out the ROEs, the income versus that growth. So obviously, if we find attractive file, if we can get the right returns, we could get a little more growth in 2021.

Okay. On the portfolio and the growth rate, so this quarter or this year, you've been -- this past year, you've been pretty strong on selling receivables.

And I'm just kind of wondering, as we look into 2020, are you contemplating any more sales of nonstrategic receivables and any more moves to held for sale and -- as part of the guidance?

And then if we were to think instead of receivables being -- AR being flattish year-over-year, if you were to grow, any thoughts on what that would have done with EPS? Because I know now that we have CECL, maybe growth is -- gets penalized in the near-term?

Or just how to think about that and how to think about what you've modeled in for sales?

So we can start off with the held for sale. As you saw, we were very active in 2019, really got active Q3, Q4.

We have a small carryover into the first quarter of next year, but I think most of that or if not all of it, will be gone. Currently, there is nothing scheduled or anticipated will go into held for sale in 2020.

Obviously, client performance can influence that and our clients' own financial position can influence that. But there's nothing scheduled at this point to go into held for sale for 2020.

The big -- and if you start thinking about the growth on 2020 versus the 2019 on the average, and then we're guiding to flat, the big effect of CECL is going to be the end of period, of course, the mid- to high-single digits on that growth rate has the effect on CECL. So if we were able to grow our average receivables and keep our end-of-period guidance the same, that would be incremental to our income.

Okay, got you. And then just one quick follow-up.

On the change to 2020 guidance in this report versus the prior quarter. Just the portfolio yield and the loss rate.

So I understand the explanations on why the loss retired for the growth math. But just kind of -- so last quarter, you were calling for a flat portfolio yield and a flat loss rates.

I'm just kind of wondering if you can bridge what changed in your thinking there.

You're pretty much right, Vincent, which is we lowered a little bit the AR growth rate, lowered a little bit the revenue impact, especially once we took out Precima, and we did slightly increase the loss rate expectation for 2020 over 2019.

Yes. And just to reiterate, it's the same thing.

If you slow your growth rate down, your yields improve, but your loss rates get worse.

Great. My question is on the -- actually, it came from one of the last callers.

On the loans held for sale, I saw that versus Q3, that declined about $1 billion. Was there much noise in that -- well, I guess, what I'm trying to ask is, did that -- was that just reflect about $1 billion of sales?

Or was anything added to held for sale in the fourth quarter?

It was just all pure sales.

And this maybe ultimately a better question for Ralph. But Charles, there seems to be a pretty big push from a lot of the traditional banks and tech companies creating what I would consider to be much more robust loyalty programs than what we've seen in the past.

And so I would just like to get your kind of updated thoughts as to why you think there's relevancy in the Private Label program today? And I know I heard you mention on the call that expanding and creating new products, in particular around technology, is important.

But are you saying the guidance is conservative enough, and therefore you'd leave room to make those kinds of investments? Or are you saying already that you're contemplating those kinds of investments?

So the guidance would incorporate largely what we're anticipating doing in 2020. We would probably look at it a little bit differently than you, Dan.

We don't think we're necessarily losing on the value proposition of the loyalty program, our ability to target key consumers to go in and take the program. So we don't think that's it.

Is there a situation where some of the fintech companies are coming in and getting better placement of websites than us? That is true.

And they can be a little bit quicker to market, which is part of the reason we've talked about being quicker to market. So I think it's more of a case where the competition has picked up with fintech.

I don't think it's at the cost of loyalty. We still think we're superior in the way we run [indiscernible] but the ease of use has given them a slight advantage that we need to address, and we think we can address it quite quickly.

Okay. And then I just want to make sure I understood one thing.

You said Ralph, he joins next week, but you're saying he's had very limited access to the company. So that kind of suggests that he's got to go through a learning process.

So when we talk about this company being in transition last year, I mean, it does kind of beg the question if it's not also going to be in a situation of transition this year.

So -- and along that same lines, like how has the conversations been with clients in terms of kind of keeping them in a holding pattern? I mean I understand they're kind of contractually obligated to a certain level, but it has been a little bit rudderless here as of late.

So I'd just love to see or hear if there's any kind of contentiousness that's been out in the market with you guys?

So first, I'd say, I think the learning experience will be very small, if any, based upon his background with American Express, [ they had ] loyalty operations obviously. Citibank, he ran North American operations.

I think that's a very short learning curve with the clients.

I can tell you I'm not aware of any contentious issues regarding the clients. No one's saying we have major problems with the change in leadership.

I think they're looking for the quality offering or we continue to support them. Are we supporting the brand and growing receivables?

That's what they're looking for.

Maybe I'll start on the strategic front. You had the comment in the press release that you're going to continue to evaluate strategic alternatives going forward.

And I just wanted to ask, is this meant to signal any incremental change at the board level on the strategic front? Or are the strategic conversations at the board level still the same type of discussions that we've been having, call it, for the past year or so?

It's the latter, it's the same. I mean we've been having these conversations going back to 2018 as to where we want to redirect the company, where do we want to make investment in the company.

And all we can really say is we're still continuing that process. You saw when we divested Epsilon in 2019.

We sold a little -- small business called Precima in January 2020. We continue to evaluate what's going to best tell our story, simplify our story, as well as what is the best return of capital to investors, and what is going to give us the best overall growth profile going forward.

We still believe Card is the growth driver for the company. We know we need to invest in it.

Part of the reason that we sold Epsilon is we've not invested sufficiently in Epsilon because we needed to invest in Card Services.

So I think we'll continue to evaluate all opportunities. We'll look at anything that's going to be accretive to our shareholders.

And long term, we're going to look for what is the best growth driver for the company.

Understood. And maybe just one more.

I was hoping to clarify the guidance in Card on the expenses, just given all of the noise in the expense base from the held-for-sale portfolios. How are you thinking about dollars of expenses in the Card segment in 2020 versus 2019?

And when you talk about the operating leverage being down year-over-year or the operating expense as a percentage of receivables, are you talking about the number including or excluding the onetime charges and held-for-sale marks that we had last year?

So if you look at the OpEx percentage, excluding the mark-to-market on held-for-sale, it was 9.14% for 2019. What we're saying is that we think that will drop 50 -- 30 -- I'm sorry, 30 -- just let me find it.

50 to 70 basis points in 2020. And that's consistent with the expense reductions we've already put in place and what we think we can continue to do to drive efficiencies within the business.

Well, we appreciate you participating on the call today. And if you have questions, feel free to call.

Thank you.