Bread Financial Holdings, Inc. (BFH) Earnings Call Transcript & Summary

All right. Let's get started after lunch. Good afternoon, everyone. I hope you all had a good lunch, and we're ready for the second half of our lineup today. Our next panelists are from Alliance Data, which has seen some significant changes over the past couple of years, culminating with the spin-off of its loyalty business this past December. Today, we have the President and CEO, Ralph Andretta, as well as key members of his executive team, including recently appointed CFO, Perry Beberman; as well as Chief Commercial Officer, Val Greer. It's great to have you guys with us.

Thank you.

Maybe we start with sort of recent events. Obviously, we're a couple of months into the quarter. I'm just curious how you see things unfolding. There's obviously a lot of volatility in the macro environment. Maybe you could just give us some sense of how you think it affects you guys?

Yes. So I think I would say -- so first quarter performance has been strong from a sales perspective. So we haven't seen sales suffer yet at all in the first quarter. Credit remained stable, so we haven't seen that impact as well. We're starting to see -- I think January, we saw a little less foot traffic because of Omicron and literally, the weather. That's recovering a bit in February, and we're seeing good momentum into March. Val, Perry? Anything to add?

No, I think macro speaking, obviously, everyone is watching inflation. And when I think about inflation, it impacts probably more of your nondiscretionary spend in terms of what consumers need to do. And we've seen this over history. We've all been in this business for over 30 years. We've been through a number of cycles. And I put it akin to when gas prices were up 10 years ago or so, people rotated out of liquor stores and restaurants and into more groceries and things like that. So -- but then when gas prices came down, you started to see liquor sales go back up and more restaurant eating go up. So I think consumers will rebalance how they spend. And so with inflation, it draws a little bit more credit seekers, it will draw a little bit more revolve behavior. We're starting to see some more revolve behavior. So I think overall, the credit normalization is a good thing if you manage credit risk appropriately.

And as you see sort of the commodity prices go up, right, like you don't feel like that has a significant impact on discretionary spending?

It might a little bit, right? So if you think about at the pump, our clientele probably is going to feel that a little bit. And if you think about what the Ukraine -- with Ukrainian exports, wheat and corn, you may see an increase at the -- in the grocery store. So maybe a little less discretionary income, but you're also going to see more credit seekers, and more credit seekers helps our business. And you'll see maybe a little bit higher revolve and more people seeking lines of credit.

Got it. So Ralph, you joined ADS right ahead of the pandemic, right? Hopefully, this conference marks the -- or begins normalcy, right, is what I hope because we started the period of non-normalcy. But maybe you could just talk about your experiences through this abnormal rollercoaster time period.

So we had the pandemic war. I'm waiting for locusts. But the pandemic was -- I was at Alliance Data for 3 weeks and then the pandemic hit. So we quickly said we have to have a strategy that's kind of recover, rebuild and regrow. And 3 things became apparent to me early on in the pandemic, was: one, who's my leadership team and where are my field generals? And who are the people I can count on? And who are the people, more importantly, I can't count on and I have to change? So we've changed our leadership team, like Val has been here 18 months; I've been here 24 months; Perry, 6, 7 months in. And so we've changed our leadership team. We're industry veterans and know how to operate this business. Secondly, we -- ADS had a lot of legacy baggage and the pandemic gave me the opportunity to kind of shed that baggage. Real estate, for example, we were long on real estate unnecessarily. So we shed half our real estate. We reconfigured our offices to work in an environment that was more suitable to us. And again, we're seeing the benefits of that as we move forward. And third, it became a parent that we were a one-trick pony in the marketplace, and we needed to diversify our portfolio of products. And so we did that. And you could have done 3 things in the pandemic: you could have stood still, you could have treaded water or you could have made change. And we elected to make change during the process. So I've been really pleased with the changes we've made. We've got a robust pipeline, a leadership that knows how to work that pipeline, a leadership that is very partner-centric, and we created new products. Who knew, we have a proprietary product we never had before. It's 18 months old. It's got 1 million customers. And it's moving on in terms of receivables -- and the $700 million worth of receivables. Just we created that product because we needed to -- we had portfolios that were going bankrupt, and I didn't want the AR to run off and we grew it. So it was interesting times. As tough as it was, we made a lot of change, but mostly, we cared for the health and welfare of our associates, that was first and foremost.

Great. And any specific lessons learned?

Yes. Across the 3 of them, 1 is you know who your generals are quickly and act quickly on those that are not going to make it. Don't belabor the point and just make the change quickly and get the talent in that you need as fast as you can, and then just move forward. I think that was an interesting lesson for us. You have to lead from the front. So we were front and center for our employees. They needed to know. They needed confidence, and we did that. And transparency with the Board was key. So we completely changed our Board out during the pandemic, right? So we got rid -- we had aging venture capitalists on our Board. Now we have a Board that is gender and ethnicity, good representation, and they have good verticals. So we have bankers on the board. We have people that are focused on human capital. We have strategists on the Board. We have technologists on the Board. So the Board now is -- helps us -- they challenge us and help us operate. And they were really held at kind of an arm's distance from prior leadership. And that was a real help during the pandemic, to have those guys engage with you and making change.

So the pandemic also changed the way consumers sort of consumed, right? And obviously, you guys have evolved your business model to make those adjustments. Maybe you could just talk about the journey, where we are, how much more diversification is going to occur over the next years.

So I'm going to ask Val to talk about our diversification. So it's been a really nice 2-year journey. I'd like Val to talk about it.

Sure. Thanks, Ralph. So 3, 4 years ago, we were pretty singularly focused around private label. You fast forward to today, and we've really expanded our consumer offerings across a pretty wide variety of products. So you think about our product suite today. We've got buy now, pay later, which encompasses both installment lending and split pay. And that product tends to be very relevant to some of the younger generational segments, Gen Z, millennials, who are very much focused around cash management and budget. We've also expanded our capabilities and built out both our co-brand product as well as our proprietary product. And so today, we're able to capture a lot larger swath of that general purpose spend. So you think about dining, travel, gas, grocery, pharmacy. So now we're capturing a share of that spend on our products. We also made sure that we were investing in rewards. And so making sure that those products were relevant to our target audience, and that includes rewards, whether it was cash back rewards or sales discounts, access to special events or point redemption for merchandise gift cards and travel. We also implemented what we call a unified SDK, which allowed our merchant partners to consume all of those products in 1 integration. So making it very simple for them. When they implement that SDK, they have access now to installment lending, co-brand, private label, split pay, and they can pull down on the products that are most relevant for their customer, which increases that top of funnel conversion rate, at the same time, allowing the merchant to really manage that product mix so that they drive the most economic value from the products as well as the longest lifetime customer value. So that's been a really important part of what we've done. I think we've also really expanded and diversified away from a heavy focus on retail mall-based partnerships. So if you look at some of our most recent announcements, we made an announcement with the NFL. That's 44 million fans and fanatics that we have access to. We'll be in their stadiums and their clubs and on their digital properties. We also announced a partnership with B&H Photo, who, I think, many of you know, is one of the premier e-commerce digital sites and has a massive 1 store here in New York. So super excited to be distributing through their omnichannel. We also made announcements with a very large dealer network that includes folks like Midas and Big O Tires under the TBC name, so national footprint, thousands of dealer operations. So really have expanded and diversified. And if you think about it, most of our merchants are not a single channel. They're both in-store and online. And you look at the change in consumer behavior through the pandemic, and consumers have become very strong omnichannel shoppers. So today, they may start that shopping journey online. They may then go to the store, check out the fabric, make sure that they feel good about it, order it and then have it shipped. They may start their shopping journey on mobile, do curbside pickup. And so they've really kind of accelerated the whole omnichannel of this shopping journey, and we've made sure that we've been investing to be part of that omnichannel journey with our partners.

I think if you had to characterize ADS today as opposed to 2 years ago, we are a proactive company instead of a reactive company. If you think about, we're proactive with products. We have secured 90% of our receivables for 2023 and probably 3 quarters to 2026. So that was never done before. Like we -- so we're looking out in the future and that all comes to -- we've got a robust pipeline, we're proactive on renewals, which we're demonstrating to our existing partners, let's grow the pie together. And past habits would have been, we're just going to give you a little bigger piece of our pie. And now we're talking about growing the pie, and we're seeing that with a lot of our partners.

I mean you guys have been in the industry for quite some time, and obviously, at a competitor. How would you compare your platform to some of the competition at this point, the incumbents as well as the fintechs?

So I categorize our company pretty simply. I think we are a regulated company with the heart of a fintech. We're able to pivot. We're able to kind of clear out the bureaucracy and react quickly to the market. We have a pretty -- the purchase of the Bread platform makes us agile, and we can deliver pretty quickly. And because we're not as large or bureaucratic as some of our competitors, we make decisions, and we execute on those decisions. That's a good bet, right? You make a decision, that's a good thing. You're going to live by that decision. And this -- 3 of the decision makers are here, and there's a couple of others, and that's it. We -- and with risk management as our core. So I view us as pivotal and kind of athletic in our decision-making.

Yes. I would say we've really been on this modernizing our technology journey, right? So we'll be moving to Fiserv for the back-end processing. That frees up a lot for us. We also bought Bread, which gives us a platform that is very modern. So it's all API-driven. It's headless, so you can integrate at any point in the process along that platform, which just provides a very seamless, integrated experience then. If you think about some of our partnerships that we've recently announced and that we'll be launching, ones like Sezzle, they're actually integrating into our platform. So there's a fintech provider, great platform that they have on their own, and yet they chose to integrate into ours for that installment lending piece because it is so modern.

Perry, anything to bring to life on the number side as a result of all of this?

Yes, no, the numbers are strong, right? So one of the things that I found incredibly appealing when joining this crew here was, wow, this is a $15 billion, $16 billion portfolio. To grow off of that, you just have to win your fair share of deals out there, know what you're doing. As Ralph mentioned, we have a proprietary card now that is pretty small. There's an opportunity to grow. So when you think about our numbers, we put our guidance of high single to low-double-digit growth for this year, and getting to $20 billion of average AR next year in 2023. And the line of sight into that is pretty clear for us. When you think about the sales cycle for partnerships, we already have over $2 billion of additional receivables coming into 2022 by the end of the year just from partnerships -- that new partnerships have been announced already and some that are not yet announced, but will be in the future. And so I think about what that sets us up for momentum into next year, coupled with normalization of consumer behavior, where you expect some payment rate normalization, and then organic growth from the partners we have, we heard Val and Ralph talk about growing the pie and growing with the partners, I think we are really set up for positive success on that front.

Can we talk about how big a contributor Bread is to those aspirations. Maybe you could just talk about -- you have the aspiration of getting to $10 billion in gross volumes in 2023. Like how conceivable -- how easy -- how much of a layup is it to get there?

Yes. The way I think about it is when the $10 billion was put out there, I'd call it aspirational. And things have changed in the economy as well as pricing in the industry. There's been, what I'll call, some irrational pricing that has emerged. And I give a lot of credit to Val and Ralph and the team is we're being disciplined. You heard Val say we did a partnership with Sezzle. Well, split pay right now, there's some irrational things happening. And some of it may be, you pull back on that, let things shake out. We're leaning in on the installment loans where there's a bit longer duration, a little bit more AR, receivables that come with that, but a little less churn of the volume. So we're looking at that in terms of where we can be opportunistic, leaning where it makes sense, pull back in other places. Because one thing: when you've got a balance, or I'll say, a full suite of lending products, you can rebalance and lever in, lever out. But we're focused on disciplined financial returns. Remember, we're a bank. We have capital. We've got to deliver returns. We're not being valued on, "Hey, just grow top line revenue or just on GMV." So where others, I'll say, more some of the fintechs, you're not seeing that discipline and you see some significant signing bonuses being put out there where we can look at over a 2-, 3-year window and say, that's deeply negative. Not something we're interested in, and you pull back on that because we're not going to get rewarded for putting a lot of dilutive business onto our books.

So it sounds like things are -- on the competitive side are heating up a little bit more in the installment buy now, pay later area...

Split pay is where [indiscernible], but Val probably can offer a little more.

Yes, it's interesting because people do talk about BNPL as like a thing, but it's really 2 very distinct things, right? It is installment lending and it is the pay in four split pay product. And where we've seen some of this irrational behavior is really around the split pay. And I think everybody knows who the providers are out there that are very strong in the split pay side. And I think the other thing we've been really focused on is making sure that we're regulatory-compliant. And so we were very early in leaning in, in this space. We have products out there that are regulatory-compliant, that have also maintained that customer experience and flow that is so part and parcel of what the fintechs brought. So retaining that was super important to us. But as Perry said, going in there and paying tens of millions of dollars for a single name on a 2-year deal, that doesn't make sense to us.

And how about selling it through the channels -- through the partnerships that you formed like the Fiservs and the RBC. Are those going pretty well?

Yes. So taking that step back, yes. So the Bread, we really have the 3 models, right? One is the direct merchant model where we will sign dozens of merchants every quarter then bring them on directly to us. The other is our distribution partners, and then the third is, Platform-as-a-Service. So under our direct model, we'll sign more merchants this quarter than we did last quarter and same quarter year-over-year. That includes also really great names like Wayfair. So Wayfair will come on as 1 of their 2 prime lenders at the end of the quarter. Then we think about our distribution partnerships, which include both Fiserv and Sezzle. So with Fiserv, we are integrated directly into their Clover application, which allows us -- and in their dashboard. So it allows us to acquire new merchants and new customers directly integrated into Fiserv and there are thousands of merchant partners. So we've been piloting that, and we'll look to scale that out later this year. And then Sezzle, we talked a little bit about that earlier, but they are integrating directly. So we have 2 fintech platforms that will be integrated very seamlessly, and all of their merchants will have access into our installment lending product as part and parcel of that experience. So super excited about that, and that will roll out at the end of the quarter.

Perfect. Maybe you could talk a little bit about the competitive dynamics. You guys have seen a couple of portfolios transition away from you. Some have come in. Maybe you could just give us a sense of what you're seeing out there in terms of the push and pull. Ralph, you want to start?

Yes. So just a couple of things. So if you think about 2021 for ADS, it was the best year we've ever had on signings and renewals ever. And Val and team deserve all the credit. I joke we went 20 in 1. So we're better than Coach K from that perspective. We had a really, really good year. But the competition is irrational, particularly the higher portfolios. I mean, you -- I assume your next question would be about BJ's. So -- but they are -- there's competition. But what we won't do is overbid and overpay for a portfolio that we cannot invest in, that's dilutive to our economics. And I'll take 2 portfolios. We renewed Ulta, which was a really terrific renewal for us. We demonstrated to Ulta that we can grow this pie and there's economics in it for both of us. And that's the kind of partner you want. You want the kind of a partner that's just -- that's not there to take a bigger piece of your pie, that's there to kind of have, "Okay, let's do this together." That's important. And the beauty of our business is we can compete with those -- the Capital Ones and Citi and Synchrony, we can compete with those guys, and we -- NFL was a win from Barclays. And we'll announce another one during the course of the year there will be a win from a big bank. But we can also compete at the small and midsized level. And I call that that string of pearls. So there, a $50 million, $100 million portfolio, no customization, good margins. You put 5 or 10 of those together, it's a $1 billion portfolio where you're making good margins on. And you know 1 of those or 2 of those can be a diamond in the rough. It's going to be the next Ulta, and you're going to grow that portfolio. So we can compete kind of up and down that business chain. That makes us very formidable in the marketplace.

And, Sanjay, I'd add, sometimes, you think people act like the competition is new in the credit card space. I've been at this since late '89, and in the 90s, all these dotcoms were coming on and the airlines and competing for co-brands, I mean, I'm sitting next to 2 people who took Costco away from American Express and took it to Citi. I mean competition has always been robust in the co-brand space. And so it's nothing new. And I think what's new for Alliance Data is Ralph and Val and the team that Val has built to win more deals. In fact, if you think about NFL following Dennis McCarthy because he helped them grow from in the past and maybe it wasn't being as nurtured as well. It is a relationship business in co-brand. And what I've been impressed with is we're winning deals where we're not the highest bidders. We're not the ones putting out the highest economic terms, but they believe in this team to grow that business and portfolio better than others would, and they realize they'll have better economics in the end from that.

Yes. No, it's always when investors have questions around them, the question is, is there something structurally different about these big banks, right, that they can go out and aggressively compete. And I think that's sort of the deliberation here.

Yes. I think so much short term. So let's think about that, right? This is -- look through every cycle. And when big banks have big provision releases, they're heat-seeking missiles that are not grounded necessarily in disciplined financial returns. Meaning they're looking at -- and I've seen it where they've done these promotions where balance transfers, 0%, 0 fee balance transfers, and they go long in duration because they can because they've got these big releases or they'll do crazy incentives, hundred thousand-plus point incentives to take on new customers, which are -- they're never going to make their money back on these customers. But once it's behind them -- the expense is behind them, they're good because they had the provision release to cover them off and then they'll enjoy revenues in the future. So I think what you're watching is a little bit of that playing out in a short window during an economic cycle where you have provision releases. So that's from experience of doing this through many cycles, and you've probably seen it too, over time.

And the plus side is you've got 90% of your portfolio now under contract.

Correct. And 3/4 to 2026.

Yes. I was going to say, I think that's a really important part, right? And it's how do you differentiate yourself, right? So to your point, 3/4 now of our assets are secured through the end of 2025. And we've got -- last year, we renewed 2 of our big partnerships, Signet big brands like Zales and Kay Jewelers, ascena, with great brands like TORA that is double-digit growth in that particular segment. This year, we renewed Ulta, which Ralph already talked about. And so I think what are those differentiators for us that we bring into the market that have allowed us to renew that sizable of an AR as well as win from our competition, whether it was the B&H and the TBC from Synchrony, the NFL from Barclays; we've got others that you'll recognize soon, is really 3 things, right? One is what we talked about, which is our broader product suite that can be accessed very seamlessly through that unified SDK, to get that top of funnel conversion and product optimization and lifetime customer value. Those are 3 things incredibly important to our merchant partners. I think the other one is really the underwriting that we bring to the table. So we have a card in 1 of 6 adults in the U.S. That is a lot of data, and we've been in the business for a long time, and we've been through the cycle. So that's informed our credit models in a very interesting way that allows us to really differentiate who we're bringing in the door on a low and grow and then move those customers into the stickier product set. And the third is really around data and the analytics and machine learning and artificial intelligence that informs that decision engine on the product offering. So those are really great investments that we've brought to the table that do differentiate us in the market.

That's great. So Ralph, you talked about the general purpose card portfolio and how it's grown from 0. Maybe you can just talk about the aspirations there. I mean what's the long-term growth story around general purpose cards?

So we'll lean in, in 2022 to general purpose card. We see a real market there for us. It's a competitive market, but I think we -- the way we underwrite and focus on revolvers and the rewards we give them, I see a -- quite frankly, I see a part of our portfolio will be that proprietary card, general purpose card.

Now is it just a supplementary product when you lose a portfolio or something goes in banks? Or you're going to grow it?

We're going to grow. We're going to go public facing and grow it.

And that seems like a really challenging proposition. I'd love to understand how you are going to win.

It is. And we're not after the high FICOs and the transactors where we like that [ matching ] of revolvers. And Val referenced it before, 1 in 6 people have our card in their wallet. We have data and analytics. We have sophisticated underwriting. So we can underwrite a bit deeper than the larger banks because we get paid for that risk. We don't underwrite to a loss rate. We underwrite for profitability. And we get -- and within our risk appetite framework and safety and soundness, we get paid for that risk. And I think that will help us in the marketplace some kind of the -- some untapped opportunity in the marketplace.

Anything to add?

Yes. I would just say, if you look in that space, there's a lot of competition at the top end, right? And so you have the big banks going after very affluent customers. Perry referenced, 100,000 miles or 100,000 points. And that is not the space that we're playing in. And so the space that we're playing in is a little bit less cluttered, and we took a bit of a differentiated approach. So where we play, you'll often see others have like an annual fee or a very low reward. And we really went in and said, "Look, if you give consumers the right value in that space, you'll drive the right behaviors and you won't need an annual fee." So for us, in that space, we've got top of wallet behavior. We have consumers shopping in 10 or more categories on their product. And so we've got that right risk reward and engagement structure to be competitive, and that's what we're going to grow and expand on.

Great. Maybe we could just talk a little bit about buy now, pay later under the context of, #1, you're starting to see consolidation in the space, right? I'm curious what that means, how you guys look at it. And secondly, Obviously, there's some regulatory headlines around what's happening in the space and how you think it affects you. I mean, I assume it levels the playing field for you guys a little bit, so like you're more competitive, but I'll leave it to you.

Yes. So let me start, and I'm going to ask Val to fill in. So whenever there is price compression or regulatory scrutiny, you're going to see some consolidation in the marketplace. And it's always where you tend to be a one-trick pony. That's the only product you have. If you look at that, we have a diverse product set. So we are not reliant only on buy now, pay later. We've talked about -- Val talked about our product set. One of the things we -- first thing we did with the acquisition of Bread, because we're a bank and we're regulated, is to ensure that that platform was compliant. So Bank Secrecy Act, AML, making sure we're treating customers fairly. All the things you'd have to do on the Card Act, we did that, right? And we're very focused on that. So when the CFPB came out with their questionnaire, we were on top of that, even though we weren't asked, we jumped on that. So, okay, where are we -- where are we compliant, how do we close the gaps? And we've been doing this for years. We're regulated, and we have those -- that expertise within our organization to do that. Others are going to be -- when the regulators come knocking on your door and say, "Okay, you've got to be compliant." That just stifles growth because all your efforts are to retrofit, not grow. And I think we're in a good place where we feel we have a compliant platform. We have regular risk reviews and all the things you need to -- and most importantly, we can demonstrate to the regulators that we're compliant.

Yes. The only thing I would add to that is, it sounds easy, right? When we say we're compliant because we know what we're doing. But it was a very thoughtful journey, which is why we think it will take others some time, right? Because what you don't want to do is lose that great customer experience that the fintechs brought to the market by layering in all of the compliance that we see and adhere to. So it was a very thoughtful journey for us to marry those 2 together in a way that we feel like we're well positioned as the rest of that kind of shakes out through the industry.

Great. I'm going to open it up to the audience, but I want to touch on credit first. Obviously, credits remained very strong through the pandemic, and no one would have sort of postulated credit would have performed the way it did, but not for the government, I guess. Thank you, government. But maybe, Perry, you could just talk about how you feel about the consumers' health. Do you see some deterioration among the lower bands at some places? I'm wondering if that's -- you're seeing any aftereffects from your standpoint? And maybe as we see a little bit of a shakeout in buy now, pay later how it might affect you guys.

Great question. So one thing -- let's roll back a little bit. So right now, across all of our VantageScores, we're up about 10% in, say, greater than 660, and everyone's still feeling these elevated scores. And what happened was, pre-pandemic, we were -- all the scores were trudging along, doing very well. And then the government stimulus came along and scores elevated. And so now what you're seeing is a migration of scores coming back down. But that's just getting back to pre-pandemic norm. So when we think about normalization, it's not as if it's normalization because of the credit situation going on. This is just a renormalization. When we think about how we underwrite, we didn't fall for the head fake. When scores got elevated -- anyone who's been through cycles before, you see this every cycle. When things are bad, they -- obviously scores go down. And then if there's some sort of stimulus, something going well, scores elevate. You've just got to try to underwrite and see through it because you're underwriting for the expected loss for the future. So -- and we've got 30 years of history on a lot of customers. So we're able to see what to expect. And normalization that's occurring, to your point, yes, it's a bit more in the near prime, as you would think because those were the most -- most benefited from the government stimulus who used it to pay down their debt or used it for more, what I'll call, nondiscretionary purchase, things like that. So now you're starting to see that normalization occur. And what I would say, for our portfolio, we're seeing it. You can see it in our delinquency metrics that we published. And it's -- but it's coming back at a very modest pace, but even better than what we thought. So when we look at our internal forecast, things are coming and still going up as we thought they would, but just a little better than where we had anticipated. So I'm still encouraged by it. Again, if hyperinflation kicked in, something that was a bigger shock, and the customer and consumer didn't have the ability to pivot between purchase decisions, that becomes a little more concerning. But, in the near term, I think interest rates seem like they're going to modestly increase over time, inflation -- that should offset some of the inflation, and so hopefully, the consumer fares well through that.

Yes. And if you think about where we were pre-pandemic, where we are now, we have a different mix of products. So as -- we were probably on the high side going into the pandemic. And think about our mix of products now, that will naturally bring down our loss rates from that perspective.

Great. So let me stop here. We've got a minute left or so. Any questions in the audience? Please raise your hand. I am doing a good job. So I have 1 final question, I think, inside that 1 minute is capital. Obviously, loyalty business is going to help the capital ratio, gets you on a solid footing. Maybe you can just give us a sense of how we should think about capital management going forward?

Sure. Let me start and ask Perry. So the spin of Loyalty 1 gave us a really good shot in the arm. It helped us pay down debt at the parent. But it also strengthened our balance sheet because a lot of goodwill had left our balance sheet. So we got -- as our balance sheet got a shot at B1, right? But that's just the beginning. We need to strengthen our balance sheet more. And the way you do that is good, solid, repeatable earnings. So my capital priorities since day 1 are the same. One is to invest in this business, critically important. Two is to pay down that debt and strengthen the balance sheet. And three is to obviously return capital to shareholders, if we return value to shareholders. We do that in the form of a dividend now. As we go through the year, we'll talk to the board about our dividend. But until we reach competitive ROTC ratios, you won't see that big buyback come through.

Anything to add, Perry?

I wouldn't add anything to that.

Great. So I guess we're out of time. Thank you, guys. Appreciate it. I got through a lot. Thank you.

Thank you.

Thank you.

Thank you.