SEC Filing | Loyalty Ventures

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Confidential Treatment Requested by Loyalty Ventures Inc.
Pursuant to 17 C.F.R. Section 200.83

As Confidentially Submitted to the Securities and Exchange Commission on July 14, 2021

File No. 001-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934

Loyalty Ventures Inc.

(Exact Name of Registrant as Specified in Its Charter)

	Delaware (State or Other Jurisdiction of Incorporation or Organization)			87-1353472 (I.R.S. Employer Identification No.)
	c/o Alliance Data Systems Corporation 7500 Dallas Parkway, Suite 700 Plano, Texas (Address of Principal Executive Offices)			75024 (Zip Code)

(214) 494-3000
(Registrant’s telephone number, including area code)

Copies to:

Louis L. Goldberg
John B. Meade
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017

Securities registered or to be registered pursuant to Section 12(b) of the Act:

	Title of each class to be so registered			Name of each exchange on which each class is to be registered
	Common Stock, $0.01 par value

Securities to be registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ☐			Accelerated filer ☐
	Non-accelerated filer ☒			Smaller reporting company ☐
				Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Confidential Treatment Requested by Loyalty Ventures Inc.

Pursuant to 17 C.F.R. Section 200.83

Loyalty Ventures Inc. (“SpinCo”)

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND
ITEMS OF FORM 10

Certain information required to be included herein is incorporated by reference to specifically identified portions of the body of the information statement filed herewith as Exhibit 99.1 (the “information statement”). None of the information contained in the information statement shall be incorporated by reference herein or deemed to be a part hereof unless such information is specifically incorporated by reference.

Item 1.

Business.

The information required by this item is contained in the sections “Summary,” “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” “The Separation,” “Capitalization,” “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Executive Compensation,” “Management,” “Certain Relationships and Related Party Transactions,” “Where You Can Find More Information” and “Index to Financial Statements” (and the statements referenced therein) of the information statement. Those sections are incorporated herein by reference.

Item 1A.

Risk Factors.

The information required by this item is contained in the sections “Risk Factors” and “Special Note Regarding Forward-Looking Statements” of the information statement. Those sections are incorporated herein by reference.

Item 2.

Financial Information.

The information required by this item is contained in the sections “Summary,” “Risk Factors,” “Capitalization,” “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Index to Financial Statements” (and the statements referenced therein) of the information statement. Those sections are incorporated herein by reference.

Item 3.

Properties.

The information required by this item is contained in the section “Business—Properties” of the information statement. That section is incorporated herein by reference.

Item 4.

Security Ownership of Certain Beneficial Owners and Management.

The information required by this item is contained in the section “Ownership of Common Stock by Certain Beneficial Owners and Management” of the information statement. That section is incorporated herein by reference.

Item 5.

Directors and Executive Officers.

The information required by this item is contained in the section “Management” of the information statement. That section is incorporated herein by reference.

Item 6.

Executive Compensation.

The information required by this item is contained in the sections “Executive Compensation” and “Management” of the information statement. Those sections are incorporated herein by reference.

Item 7.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is contained in the sections “The Separation—Agreements with ADS,” “Certain Relationships and Related Party Transactions,” “Management,” “Executive Compensation”

Confidential Treatment Requested by Loyalty Ventures Inc.

Pursuant to 17 C.F.R. Section 200.83

and “Ownership of Common Stock by Certain Beneficial Owners and Management” of the information statement. Those sections are incorporated herein by reference.

Item 8.

Legal Proceedings.

The information required by this item is contained in the section “Business—Legal Proceedings” of the information statement. That section is incorporated herein by reference.

Item 9.

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

The information required by this item is contained in the sections “Summary,” “Risk Factors,” “The Separation,” “Dividend Policy,” “Capitalization” and “Description of Capital Stock” of the information statement. Those sections are incorporated herein by reference.

Item 10.

Recent Sales of Unregistered Securities.

The information required by this item is contained in the section “Description of Capital Stock—Distributions of Securities” of the information statement. That section is incorporated herein by reference.

Item 11.

Description of Registrant’s Securities to Be Registered.

The information required by this item is contained in the section “Description of Capital Stock” of the information statement. That section is incorporated herein by reference.

Item 12.

Indemnification of Directors and Officers.

The information required by this item is contained in the section “Management” of the information statement. That section is incorporated herein by reference.

Item 13.

Financial Statements and Supplementary Data.

The information required by this item is contained in the sections “Index to Financial Statements” (and the statements referenced therein) of the information statement. Those sections are incorporated herein by reference.

Item 14.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 15.

Financial Statements and Exhibits.

(a) Financial Statements

The information required by this item is contained in the sections “Index to Financial Statements” (and the statements referenced therein) of the information statement. That section is incorporated herein by reference.

Confidential Treatment Requested by Loyalty Ventures Inc.

Pursuant to 17 C.F.R. Section 200.83

(b) Exhibits

The following documents are filed as exhibits hereto:

	Exhibit Number			Exhibit Title
	2.1*			Form of Separation and Distribution Agreement between Alliance Data Systems Corporation and SpinCo
	3.1*			Form of Amended and Restated Articles of Incorporation of SpinCo
	3.2*			Form of Amended and Restated Bylaws of SpinCo
	10.1*			Form of Transition Services Agreement
	10.2*			Form of Tax Matters Agreement
	10.3*			Form of Employee Matters Agreement
	10.4*			Form of 2021 Omnibus Incentive Plan
	10.5*			Form of Indemnification Agreement for Officers and Directors
	21.1*			Subsidiaries of the Registrant
	99.1			Preliminary Information Statement dated July 14, 2021

To be filed by amendment.

Confidential Treatment Requested by Loyalty Ventures Inc.

Pursuant to 17 C.F.R. Section 200.83

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

By:

Name:
Title:

Date: , 2021

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Confidential Treatment Requested by Loyalty Ventures Inc.
Pursuant to 17 C.F.R. Section 200.83

Exhibit 99.1

(Subject to Completion, Dated July 14, 2021)

Alliance Data Systems Corporation
3075 Loyalty Circle
Columbus, Ohio 43219

, 2021

Dear ADS Stockholder:

On May 12, 2021, Alliance Data Systems Corporation (“ADS”) announced the next step in its strategic transformation and repositioning of ADS through the spinoff of its LoyaltyOne segment from ADS (the “Separation”), which is expected to become effective on , 2021. On the effective date of the Separation, Loyalty Ventures Inc., a Delaware corporation formed in anticipation of the Separation (“SpinCo”), will become an independent, publicly traded company and will hold, directly or indirectly through its subsidiaries, the assets and liabilities associated with the SpinCo business.

The Separation is subject to conditions as described in the enclosed information statement. Subject to the satisfaction or waiver of these conditions, the Separation will be completed by way of a pro rata distribution of 81% of the outstanding shares of SpinCo common stock to ADS’ stockholders of record as of the close of business on , 2021, the distribution record date (the “Distribution”).

Each ADS stockholder of record will receive one share of SpinCo common stock, $0.01 par value, for every shares of ADS common stock, par value $0.01 per share, held by such stockholder on the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued. At any time following the Distribution, stockholders may request that their shares of SpinCo common stock be transferred to a brokerage or other account. No fractional shares of SpinCo common stock will be issued. The distribution agent for the Distribution will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing prices and distribute the net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the Distribution.

ADS expects to receive a private letter ruling from the Internal Revenue Service (“IRS”) and an opinion from counsel to the effect that, among other things, the Distribution, together with certain related transactions, will qualify as a transaction that is tax-free for U.S. federal income tax purposes, except to the extent of any cash received in lieu of fractional shares.

The Distribution does not require ADS stockholder approval, nor do you need to take any action to receive your shares of SpinCo common stock. ADS’ common stock will continue to trade on the New York Stock Exchange under the ticker symbol “ADS.” SpinCo intends to apply to have its shares of common stock listed on the under the ticker symbol “LYLT.”

The enclosed information statement, which we are mailing to all ADS stockholders, describes the Separation in detail and contains important information about SpinCo, including the historical combined financial statements prepared on a carve-out basis. We urge you to read this information statement carefully.

We want to thank you for your continued support of ADS.

Sincerely,
By:
	Name:	Ralph J. Andretta
	Title:	President and Chief Executive Officer

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Loyalty Ventures Inc.
c/o Alliance Data Systems Corporation
7500 Dallas Parkway, Suite 700
Plano, Texas 75024

, 2021

Dear Future SpinCo Stockholder:

I am excited to welcome you as a future stockholder of our new company, SpinCo (“SpinCo”). Following the spinoff by Alliance Data Systems Corporation (“ADS”) of its LoyaltyOne segment as an independent, publicly traded company, we will continue to be a leading provider of tech-enabled, data-driven consumer loyalty solutions.

The spinoff will permit SpinCo to concentrate on its core competencies and growth opportunities in the loyalty space, and will provide SpinCo with increased flexibility and speed to design and implement corporate strategies unique to our business separate from the regulatory requirements of ADS. Further, SpinCo will be able to allocate resources, incentivize employees and deploy capital and reinvest its cash flow to capture our long-term opportunities.

At SpinCo, we design our loyalty solutions around specific clients’ needs and goals, with a focus on helping partners achieve their strategic and financial objectives from increased consumer basket size, shopper traffic and frequency and digital reach to enhanced program reporting and analytics. SpinCo will own and operate the AIR MILES Reward Program, Canada’s most recognized loyalty program, and Netherlands-based BrandLoyalty, a global provider of purpose-driven, tailor-made campaign-based loyalty solutions for grocers and other high-frequency retailers whose network spans across 6 continents and 54 countries.

I encourage you to learn more about SpinCo and our business by reading the attached information statement. We intend to apply to list our common stock on the under the ticker symbol “LYLT.” We look forward to earning your continued support for many years to come.

Sincerely,
By:
	Name:	Charles L. Horn
	Title:	President and Chief Executive Officer

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Confidential Treatment Requested by Loyalty Ventures Inc.
Pursuant to 17 C.F.R. Section 200.83

Preliminary Information Statement
(Subject to Completion, Dated July 14, 2021)

INFORMATION STATEMENT

SpinCo

Common Stock
($0.01 Par Value)

Alliance Data Systems Corporation (“ADS”) is furnishing this information statement in connection with the separation of its LoyaltyOne segment from its remaining business and the creation of an independent, publicly traded company, named Loyalty Ventures Inc. (“SpinCo”). SpinCo, directly or indirectly through its subsidiaries, will hold the assets, liabilities and legal entities comprising the SpinCo business after certain restructuring transactions are completed (the “Restructuring”). 81% of the outstanding shares of SpinCo common stock owned by ADS will be distributed to the stockholders of ADS (the “Distribution” and, together with the Restructuring, the “Separation”). SpinCo is currently an indirect, wholly-owned subsidiary of ADS.

Each holder of ADS common stock will receive one share of common stock of SpinCo for every shares of ADS common stock held as of the close of business on , 2021, the record date for the Distribution.

The distribution of SpinCo’s shares is expected to be completed after the market closing on , 2021 (the “Distribution Date”). Immediately after ADS completes the Distribution, SpinCo will be an independent, publicly traded company. We expect that, for U.S. federal income tax purposes, no gain or loss will be recognized by you, and no amount will be included in your income in connection with the Distribution, except to the extent of any cash you receive in lieu of fractional shares.

No vote or other action is required by you to receive shares of SpinCo common stock in the Separation. You will not be required to pay anything for the new shares or to surrender any of your shares of ADS common stock. We are not asking you for a proxy and you should not send us a proxy or your share certificates.

There currently is no trading market for SpinCo common stock. We expect to apply to have SpinCo’s shares of common stock listed on the under the ticker symbol “LYLT.” Assuming that the authorizes SpinCo’s common stock for listing, we anticipate that a limited market, commonly known as a “when-issued” trading market, for SpinCo’s common stock will commence on , 2021 and will continue up to and including the Distribution Date. We expect the “regular-way” trading of SpinCo’s common stock will begin on the first trading day following the Distribution Date.

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 17.

We are an “emerging growth company” as defined under the federal securities laws and, as such, may elect, and have elected, to comply with certain reduced public company reporting requirements for future filings.

Neither the U.S. Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is , 2021.

This Information Statement was first mailed to ADS stockholders on or about , 2021.

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Confidential Treatment Requested by Loyalty Ventures Inc.
Pursuant to 17 C.F.R. Section 200.83

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	Page
Note Regarding the Use of Certain Terms		ii
Special Note Regarding Forward-Looking Statements		iii
Summary		1
Risk Factors		17
The Separation		39
Dividend Policy		50
Capitalization		51
Unaudited Pro Forma Combined Financial Statements		52
Management’s Discussion and Analysis of Financial Condition and Results of Operations		56
Business		69
Management		80
Executive Compensation		86
Certain Relationships and Related Party Transactions		94
Ownership of Common Stock by Certain Beneficial Owners and Management		95
Description of Capital Stock		96
Where You Can Find More Information		101
Index to Combined Financial Statements		F-1

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NOT REGARDING THE USE OF CERTAIN TERMS

We use the following terms to refer to the items indicated:

•

“We,” “us,” “our,” “Company,” “Loyalty Ventures Inc.” and “SpinCo,” unless the context otherwise requires, refer to SpinCo, the entity that at the time of the Distribution will hold, directly or indirectly through its subsidiaries, the assets and liabilities associated with the Spin Business, as defined below, and whose shares ADS will distribute in connection with the Separation. Where appropriate in the context, the foregoing terms also include the subsidiaries of this entity; these terms may be used to describe the Spin Business prior to completion of the Separation.

•

The “Spin Business” refers to the business, operations, products, services and activities of ADS’ LoyaltyOne segment. See “Business” for more information.

•

Except where the context otherwise requires, the term “ADS” refers to Alliance Data Systems Corporation, the entity that owns SpinCo prior to the Separation and that after the Separation will be a separately traded public company consisting of its remaining operations.

•

The term “Distribution” refers to the distribution of 81% of the shares of SpinCo common stock owned by ADS to stockholders of ADS as of the record date.

•

The term “Restructuring” refers to the series of transactions, which will result in all of the assets, liabilities and legal entities comprising the Spin Business being owned directly, or indirectly through its subsidiaries, by SpinCo.

•

Except where the context otherwise requires, the term “Separation” refers to the separation of the Spin Business from ADS and the creation of an independent, publicly traded company, SpinCo, through (1) the Restructuring and (2) the Distribution.

•

The term “Distribution Date” means the date on which the Distribution occurs.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements under the captions “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and in other sections of this information statement that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections, forecasts or assumptions of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including the numerous risks discussed under the caption entitled “Risk Factors.”

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Except as required by law, neither ADS nor we are under any duty to update any of these forward-looking statements after the date of this information statement to conform our prior statements to actual results or revised expectations.

iii

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SUMMARY

This summary highlights information contained elsewhere in this information statement. This summary does not contain all of the information that you should consider. You should read this entire information statement carefully, especially the risks of owning our common stock discussed under “Risk Factors” and our audited combined financial statements, our unaudited pro forma combined financial statements and the respective notes to those statements appearing elsewhere in this information statement. Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement assumes the completion of all the transactions referred to in this information statement in connection with the Separation.

Overview

We are a leading provider of tech-enabled, data-driven consumer loyalty solutions. Our solutions are focused on helping partners achieve their strategic and financial objectives, from increased consumer basket size, shopper traffic and frequency and digital reach to enhanced program reporting and analytics. We design our loyalty solutions around specific clients’ needs and goals, which can be both transactional and emotional. The essence of loyalty is derived from a mix of emotions and memory. By activating these unconscious influences, we help financial services providers, retailers and other consumer-facing businesses create and increase customer loyalty across multiple touch points from traditional to digital to mobile and emerging technologies. We own and operate the AIR MILES Reward Program, Canada’s most recognized loyalty program, and Netherlands-based BrandLoyalty, a global provider of purpose-driven, tailor-made campaign-based loyalty solutions for grocers and other high-frequency retailers.

The AIR MILES Reward Program is an end-to-end loyalty platform, combining technology, data/analytics and other solutions to help our clients (who we call sponsors) drive increased engagement by consumers (who we call collectors) with their brand. The AIR MILES Reward Program operates as a full service coalition loyalty program for our sponsors. We provide all marketing, customer service, rewards and redemption management for our sponsors. We typically grant sponsors exclusivity in their market category, enabling them to realize incremental sales and increase market share as a result of their participation in the AIR MILES Reward Program. The AIR MILES Reward Program enables collectors to earn AIR MILES reward miles as they shop across a broad range of sponsors from financial institutions, grocery and liquor, e-commerce, specialty retail, pharmacy, petroleum retail, and home furnishings to hardware, that participate in the AIR MILES Reward Program. These AIR MILES reward miles can be redeemed by collectors for travel, entertainment, experiences, merchandise or other rewards. Through our AIR MILES cash program option, collectors can also instantly redeem their AIR MILES reward miles earned in the AIR MILES cash program option toward in-store purchases at participating sponsors, such as Shell Canada. We estimate approximately two-thirds of Canadian households actively participate in the AIR MILES Reward Program.

BrandLoyalty is a worldwide leader in campaign-based loyalty solutions that positively impact consumer behavior on a mass scale. We pride ourselves on being a business with purpose by connecting high-frequency retailers, supplier partners and consumers to create sustainable solutions for today’s challenges. We design, implement, conduct and evaluate innovative, digitally-enhanced, tailor-made loyalty campaigns. These campaigns are tailored for the specific client and are designed to reward key customer segments based on their spending levels during defined campaign periods. At BrandLoyalty, we aim to let all shoppers feel emotionally connected when they shop at our clients, by designing campaigns with the right mechanics and rewards that instantly change shopping behavior and engender loyalty. The rewards we offer come from top brands with high creative standards such as Disney, Zwilling, and vivo | Villeroy & Boch.

We will be headquartered in Dallas, Texas. At December 31, 2020, we had over 1,400 employees. For the year ended December 31, 2020, we generated $764.8 million in revenues, $75.1 million of net income and $173.4 million in adjusted EBITDA. Upon our separation from ADS, we expect to trade under the ticker symbol “LYLT” on the .

Our strategies

Our goal is to accelerate stakeholder value creation through the continued development of loyalty platforms for the tech-forward business and consumer era. We intend to pursue a variety of new omnichannel

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initiatives, including expanding geographies and verticals; further enriching tech and analytic capabilities; employing sustainable solutions; and seeking additional strategic partnerships.

Attract new clients and grow existing client base

The AIR MILES Reward Program continues to focus on broadening our sponsor base and expanding the network effects of the coalition. We seek to attract new sponsors and deepen existing relationships by enhancing our solutions portfolio. Deployment of enriched marketing and advertising capabilities will further sponsors’ ability to reach and engage collectors, increasing the value proposition for sponsors and reward suppliers alike. Diversifying the sponsor network, including expansion to non-traditional partnerships and alliances, will allow for a stronger and broader ecosystem to capture a larger portion of total consumer spend within the AIR MILES Reward Program. A core advantage to being a part of the AIR MILES Reward Program is the benefit to each partner as the coalition expands.

Similarly, we believe there is market opportunity for BrandLoyalty to grow its client base by adding new grocers in existing markets. Additional opportunity exists in the form of diversification into adjacent segments, such as convenience stores and pharmacies, which are a natural fit for BrandLoyalty due to the high frequency and spend profile of the customer base. Further expansion into new growing verticals like e-commerce and food delivery is also expected to present significant opportunities.

By diversifying and growing our ability to integrate advanced data analytics with marketing and loyalty services, we seek to position ourselves to serve the modern consumer, thus increasing the value proposition for our clients by delivering long-term integrated growth opportunities and ultimately delivering returns for our stakeholders.

Invest in technology to better engage consumers

The AIR MILES Reward Program continues to focus on driving collector engagement to enhance the benefit to the entire coalition of sponsors. The AIR MILES Reward Program has focused on enhancing digital initiatives targeting younger demographic channels as well as the broader collector base as a whole. By providing in-store and mobile access and increasing the relevancy of personalized, targeted, real-time offers, the AIR MILES Reward Program is improving effectiveness of digital campaigns and overall collector engagement. We will continue to invest in technology to deliver new digital products and solutions to improve collector engagement and the sponsor value proposition. An expansive collector and sponsor base results in an expanding database, which can be used to create and monetize new and innovative supplemental solutions for all partners of the ecosystem.

BrandLoyalty has built a first-class technology platform and an array of digital tools, including the Bright Loyalty Platform, the Analytical Framework, StorePal and other features to support its campaign-based loyalty solutions. The Analytical Framework provides full-cycle loyalty program design, real-time feedback and evaluation to adjust programs in progress or apply learnings to future designs. BrandLoyalty’s Bright Loyalty Platform provides shoppers the ability to collect and share points digitally, earn badges, play games, view leaderboards and level up to achieve better status and more exclusive perks. BrandLoyalty also offers StorePal to directly support in-store staff with program execution through state-of-the-art A.I. analysis and collaboration to improve in-store marketing, display placement, staff program knowledge and stock availability.

We believe opportunities exist to leverage the digital loyalty capabilities of BrandLoyalty’s platform and the highly advanced data science platform of the AIR MILES Reward Program to enhance the digital tools and capabilities of both businesses.

Expand into new geographies

We will seek to expand our geographic reach to accelerate growth. Our client-centered approach and almost 30-year operating history has resulted in unique, rich shopper and market data, which we use to generate insights for brands globally. There is substantial opportunity to reach untapped markets across the globe, which will serve as a growth lever in the near-term and solidify sustainable sources of revenue going forward. In the near term, BrandLoyalty expects to increase its presence in the United Kingdom, the United

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States and the Nordic region. We also intend to enhance our product offerings and geographic footprint through opportunistic acquisitions that complement our business. We will consider select acquisition opportunities that expand the breadth of our product portfolio, enhance our market positioning and accelerate our presence in attractive geographies, while maintaining alignment with our culture.

Our competitive strengths

Global tech-enabled loyalty leader

Over the past three decades, the AIR MILES Reward Program has built one of the largest loyalty rewards programs in Canada and established itself as a household name. The AIR MILES Reward Program operates as a unique and differentiated coalition loyalty platform. Through our advanced technological capabilities, our sponsors have access to both an extensive scale of customer insights and digital reach, providing a superior understanding of consumer behavior, media response, and trends. As of December 31, 2020, the AIR MILES Reward Program platform extends across 10 million collector accounts, with a sponsor base that covered approximately 80% of the average household spend categories across all regions of Canada. Today, our AIR MILES Reward Program partners with over 300 brands and offers collectors thousands of locations to earn. Our expansive national coverage through sponsor partnerships spans brick & mortar physical locations, online retailers and financial institutions to drive continued value to our collectors and, in turn, added awareness and recognition of the AIR MILES brand. The breadth of sponsors and reward suppliers enables collector engagement on a recurring basis and drives powerful network effects.

BrandLoyalty’s global network spans across 6 continents and 54 countries, partnering with approximately 200 retailers worldwide. BrandLoyalty offers thousands of locations for customers to earn and continues to maintain close relationships with retailers and build its client portfolio through its 20 sales offices. While BrandLoyalty operates centrally, understanding and building relationships in the local market enhances our delivery capability all over the world.

Rich consumer data platforms

Our robust data and analytics platforms utilizing SKU-level transactional data allow for personalized offerings to drive loyalty for retailers. The AIR MILES Reward Program data platform enables the collection and synthesis of thousands of attributes per collector, supporting hundreds of advanced analytic, predictive models and machine learning algorithms. Unique identifiers track spend across hundreds of retail partners and digital properties through almost 30 years of history. Our dataset provides visibility into collector activity across the coalition, supplemented with third party data, to gather a holistic view of the collector profile that enables us to benefit collectors with a more personalized experience and benefits sponsors by driving engagement through more effective, highly-targeted, relevant marketing and personalized campaigns and offers.

The BrandLoyalty data and analytics platform is optimized through a large historical database of campaign insights, extensive shopper research and market intelligence. BrandLoyalty’s proprietary analytical software is designed to maximize campaign performance by analyzing billions of consumer transactions from campaigns across the world to more accurately identify the appropriate consumer segment, reward product and price point for each retailer. Our data analytics support the retailer from start to finish by identifying the right campaign type, providing predictions and insights on campaigns in execution and evaluating campaigns following completion.

Strong technology platforms

Our technology platforms were built to support the services and solutions we deliver with underlying principles of agility, versatility, scalability, and security at every level. Our platforms allow us to design, adapt and optimize loyalty campaigns and deliver better value to our clients. Our platforms provide the ability to automate workflow and target customers in real time and across multiple collector-facing channels. Our data processing platform enables data science, data sharing, product building and model factory capabilities, which turn customer data into meaningful insights. Our traditional marketing and AI capabilities identify and match collectors and deliver personalization at scale through multiple digital channels.

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We have opportunities to integrate components of each platform within the other, creating meaningful opportunities to cross-sell the AIR MILES Reward Program and BrandLoyalty solutions. The AIR MILES Reward Program’s data lake, issuance engine, access to rewards and personalization platform combined with BrandLoyalty’s digital platform and campaign-based offerings gives us a unique position from which to offer a full suite of capabilities, both short-term and long-term, globally, while adhering to privacy laws, consumer expectations and client contract terms.

Deep, long-term relationships with clients and sponsors

We have maintained deep, long-standing relationships with large consumer-based businesses, including well-known worldwide brands, such as Shell Canada, Sobeys Inc., Bank of Montreal, Rewe and Albert Heijn.

For the AIR MILES Reward Program, we utilize our large collector base together with our data and analytical capabilities to deepen our existing relationships with our sponsors, some of which have been part of the program for almost 30 years, and continue to drive powerful benefits to collectors in the program. By continuing to engage our collectors with personalized marketing experiences and scaled rewards, our sponsors recognize the significant benefit to staying in the AIR MILES Reward Program and increasing their customer spend (issuance) opportunity. We believe that our success with sponsors and our ability to offer a variety of redemption options, both aspirational and instant, drive the appeal of AIR MILES Reward Program to collectors. By delivering a personalized and seamless digital experience, we provide collectors the ability to earn AIR MILES reward miles across an increasing network of sponsors and by offering them attractive redemption options, we create an efficient sales channel that brings brand awareness to reward suppliers.

At BrandLoyalty, we have had longstanding relationships with both the world’s leading grocery retailers who value our broad portfolio of offerings and full service approach as well as our high-quality rewards suppliers. We believe we have well-established positions with our clients, who have for many years entrusted us to enhance critical relationships with their customers and manage sensitive customer transaction data. We expect our strong client relationships will continue to drive our recurring revenue base, which we believe will contribute to our success and growth. The result is proven sales growth for retailers and strong connections between those retailers, their consumers and our exclusive merchandise and other reward suppliers.

Experienced management team with deep industry expertise

We have a strong executive management team with a proven track record, including decades of demonstrated leadership at the company. Our current executive management team has an average of over 13 years of industry experience. Charles Horn, who will serve as our president and chief executive officer following the Distribution, is currently an executive vice president at ADS and has overseen the LoyaltyOne segment since August 2019, in addition to the oversight of numerous other ADS board initiatives to include service as interim chief executive officer of ADS prior to Mr. Andretta’s appointment. Prior to 2019, Mr. Horn spent nearly a decade in the role of executive vice president and chief financial officer for ADS where his primary responsibilities included providing strategic direction to executive management and the board of directors, as well as evaluation and control of the capital structure of ADS, ensuring the company maintained transparency and consistency in financial reporting and accounting practices across the enterprise while serving as the key contact with the investment community. Blair Cameron will continue to serve as president of the AIR MILES Reward Program, overseeing the entire operations and strategy of the program. Mr. Cameron first joined the AIR MILES Reward Program team over 16 years ago, serving in roles of increasing responsibility. Claudia Mennen will continue to serve as BrandLoyalty’s chief executive officer. Following nearly 10 years of experience at PricewaterhouseCoopers and as chief financial officer and vice president of finance at two other companies, Ms. Mennen joined BrandLoyalty as its chief financial officer in early 2012 before also taking on the role of chief financial officer of the LoyaltyOne segment for ADS in 2018. In 2019, she became chief executive officer of BrandLoyalty, where she has led retail and loyalty strategies and operations.

The Separation

On May 12, 2021, ADS announced a plan to distribute to ADS’ stockholders 81% of the shares of common stock of a newly formed company, SpinCo, that would hold the Spin Business. SpinCo is currently

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an indirect, wholly-owned subsidiary of ADS and, at the time of the Distribution will hold, directly or indirectly through its subsidiaries, the assets and liabilities associated with the Spin Business.

The Separation will be achieved through the transfer of all the assets and liabilities of the Spin Business to SpinCo or its subsidiaries in the Restructuring and the distribution of 81% of the outstanding capital stock of SpinCo pro rata to holders of ADS common stock as of the close of business on , 2021, the record date for the Distribution. At the effective time of the Distribution, ADS stockholders will receive one share of SpinCo common stock for every shares of ADS common stock held on the record date. The Separation is expected to be completed on , 2021. Immediately following the Separation, ADS stockholders as of the record date for the Distribution will own 81% of the outstanding shares of common stock of SpinCo. ADS will retain a 19% ownership interest in SpinCo. ADS will vote its SpinCo common stock in the same proportion as the votes cast in respect of the common stock not owned by ADS on any matter presented for a vote of SpinCo’s stockholders. ADS’s SpinCo common stock will be voted in the same proportion as the votes cast in respect of the common stock not owned by ADS on any matter presented for a vote of SpinCo’s stockholders.

Before the Distribution, we will enter into a Separation and Distribution Agreement and several other ancillary agreements with ADS to effect the Separation and provide a framework for our relationship with ADS after the Separation. These agreements will provide for the allocation between SpinCo and ADS of ADS’ assets, liabilities and obligations (including with respect to employee matters, intellectual property matters, tax matters and certain other matters). SpinCo and ADS will also enter into a Transition Services Agreement, which will provide for various corporate, administrative and information technology services.

The ADS board of directors believes separating the Spin Business from ADS is in the best interests of ADS and its stockholders and has concluded the Separation will provide ADS and SpinCo with a number of potential opportunities and benefits, including the following:

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Strategic and Management Focus. Permit the management team of each company to focus on its own strategic priorities with financial targets that best fit its own business, opportunities, market development and geographical focus. We believe the Separation will enable each company’s management team to better position its businesses to capitalize on developing macroeconomic trends, increase managerial focus to pursue its individual strategies and leverage its key strengths to drive performance. The management of each resulting company will be able to concentrate on its core competencies and growth opportunities, and will have increased flexibility and speed to design and implement corporate strategies based on the characteristics of its business.

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Resource Allocation and Capital Deployment. Allow each company to allocate resources, incentivize employees and deploy capital to capture the significant long-term opportunities in their respective markets. The Separation will enable each company’s management team to implement a capital structure, dividend policy and growth strategy tailored to each unique business. Both businesses are expected to have direct access to the debt and equity capital markets to fund their respective growth strategies.

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Investor Choice. Provide investors, both current and prospective, with the ability to value the two companies based on their distinct business characteristics and make more targeted investment decisions based on those characteristics. Separating the two businesses will provide investors with a discrete investment opportunity so that investors interested in companies in our business will have the opportunity to acquire stock of SpinCo.

The distribution of our common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. For more information, see “Risk Factors — Risks Relating to the Separation” and “The Separation — Conditions to the Distribution” included elsewhere in this information statement.

Corporate information

SpinCo was incorporated in Delaware on June 21, 2021. SpinCo does not currently have any operations, has no assets and is not expected to conduct any operations until the completion of the Restructuring on or prior to the Distribution Date, pursuant to which the Spin Business assets will be contributed to and the

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Spin Business liabilities will be assumed by SpinCo in accordance with the Separation and Distribution Agreement and other agreements entered into in connection with the Separation. We are currently in the process of identifying office space for our corporate headquarters in the United States. For the time being, our principal executive offices are located at c/o Alliance Data Systems Corporation, 7500 Dallas Parkway, Suite 700, Plano, Texas 75024 and our telephone number is (214) 494-3000. Our website is . Our website and the information to be contained therein or connected thereto is not incorporated into this information statement or the registration statement of which it forms a part.

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QUESTIONS AND ANSWERS ABOUT THE SEPARATION

Please see “The Separation” for a more detailed description of the matters summarized below.

Q: Why am I receiving this document?

A: You are receiving this document because you are a holder of shares of ADS common stock on the record date for the Distribution and, as such, will be entitled to receive shares of SpinCo common stock upon completion of the transactions described in this information statement. We are sending you this document to inform you about the Separation and to provide you with information about SpinCo and its business and operations upon completion of the Separation.

Q: What do I have to do to participate in the Separation?

A: Nothing. You will not be required to pay any cash or deliver any other consideration in order to receive the shares of SpinCo common stock that you will be entitled to receive upon completion of the Separation. In addition, no stockholder approval will be required for the Separation and therefore you are not being asked to provide a proxy with respect to any of your shares of ADS common stock in connection with the Separation and you should not send us a proxy.

Q: Why is ADS separating the Spin Business from its other businesses?

A: The ADS board of directors believes separating our business from ADS’ other business will provide both companies with a number of potential opportunities and benefits, such as enabling (1) the management team of each company to focus on its own strategic priorities with financial targets that best fit its own business, opportunities, market development and geographical focus; (2) each company to allocate resources and deploy capital in a manner consistent with its own priorities; and (3) investors, both current and prospective, to value the two companies based on their distinct business characteristics and make more targeted investment decisions based on those characteristics.

Q: What is SpinCo?

A: SpinCo is a newly formed Delaware corporation that will hold the Spin Business, directly or indirectly through its subsidiaries, and be publicly traded on the following the Separation.

Q: How will ADS accomplish the Separation of SpinCo?

A: The Separation involves the Restructuring (i.e., the transfer of the assets and liabilities related to the Spin Business to SpinCo or its subsidiaries) and the Distribution (i.e., ADS’ distribution to its stockholders of 81% of the outstanding shares of SpinCo’s common stock). Following this Restructuring and Distribution, SpinCo will be a publicly traded company independent from ADS, and ADS will retain a 19% ownership interest in SpinCo. ADS’s SpinCo common stock will be voted in the same proportion as the votes cast in respect of the common stock not owned by ADS on any matter presented for a vote of SpinCo’s stockholders.

Q: What will I receive in the Distribution?

A: At the effective time of the Distribution, you will be entitled to receive one share of SpinCo common stock for every shares of ADS common stock held by you on the record date.

Q: How does my ownership in ADS change as a result of the Separation?

A: Your ownership of ADS stock will not be affected by the Separation.

Q: What is the record date for the Distribution?

A: The record date for the Distribution is , 2021, and ownership will be determined as of the close of business on that date. When we refer to the record date in this information statement, we are referring to that time and date.

Q: When will the Distribution occur?

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A: The Distribution is expected to occur on , 2021.

Q: As a holder of shares of ADS common stock as of the record date for the Distribution, how will shares of SpinCo be distributed to me?

A: At the effective time, we will instruct our transfer agent and distribution agent to make book-entry credits for the shares of SpinCo common stock that you are entitled to receive. Since shares of SpinCo common stock will be in uncertificated book-entry form, you will receive share ownership statements in place of physical share certificates.

Q: What if I hold my shares through a broker, bank or other nominee?

A: ADS stockholders who hold their shares through a broker, bank or other nominee will have their brokerage account credited with SpinCo common stock. For additional information, those stockholders should contact their broker or bank directly.

Q: Why is no ADS stockholder vote required to approve the Separation and its material terms?

A: ADS is incorporated in Delaware. Delaware law does not require a stockholder vote to approve the Separation because the Separation will be effected by a stock dividend and does not constitute a sale, lease or exchange of all or substantially all of the assets of ADS.

Q: How will fractional shares be treated in the Distribution?

A: You will not receive fractional shares of SpinCo common stock in the Distribution. The distribution agent will aggregate and sell on the open market the fractional shares of SpinCo common stock that would otherwise be issued in the Distribution, and if you would otherwise be entitled to receive a fractional share of SpinCo common stock in connection with the Distribution, you will instead receive the net cash proceeds of the sale attributable to such fractional share.

Q: What are the U.S. federal income tax consequences to me of the Distribution?

A: A condition to the closing of the Separation is ADS’ receipt of a private letter ruling from the IRS and an opinion of Davis Polk & Wardwell LLP, to the effect that the Distribution will qualify under the Internal Revenue Code of 1986, as amended (the “Code”), as a transaction that is tax-free to ADS and to its stockholders. On the basis that the Distribution so qualifies, for U.S. federal income tax purposes, you will not recognize any gain or loss, and no amount will be included in your income in connection with the Distribution, except with respect to any cash received in lieu of fractional shares. You should review the section entitled “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution” for a discussion of the material U.S. federal income tax consequences of the Distribution.

Q: How will I determine the tax basis I will have in my ADS shares after the Distribution and the SpinCo shares I receive in the Distribution?

A: Generally, for U.S. federal income tax purposes, your aggregate basis in your shares of ADS common stock and the shares of SpinCo common stock you receive in the Distribution (including any fractional shares for which cash is received) will equal the aggregate basis of ADS common stock held by you immediately before the Distribution. This aggregate basis should be allocated between your shares of ADS common stock and the shares of SpinCo common stock you receive in the Distribution (including any fractional shares for which cash is received) in proportion to the relative fair market value of each immediately following the Distribution. See “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

Q: How will ADS’ common stock and SpinCo’s common stock trade after the Separation?

A: There is currently no public market for SpinCo’s common stock. We expect to have SpinCo’s shares of common stock listed on the under the ticker symbol “LYLT.” ADS common stock will continue to trade on the New York Stock Exchange (“NYSE”) under the ticker symbol “ADS.”

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Q: If I sell my shares of ADS common stock before or on the Distribution Date, will I still be entitled to receive SpinCo shares in the Distribution with respect to the sold shares?

A: Beginning on or shortly before the record date and continuing up to and including the Distribution Date, we expect there will be two markets in ADS common stock: a “regular-way” market and an “ex-distribution” market. Shares of ADS common stock that trade on the “regular-way” market will trade with an entitlement to receive shares of our common stock to be distributed in the Distribution. Shares that trade on the “ex-distribution” market will trade without an entitlement to receive shares of our common stock to be distributed in the Distribution, so that holders who initially sell ADS shares ex-distribution will still be entitled to receive shares of SpinCo common stock even though they have sold their shares of ADS common stock before the Distribution, because the ADS shares were sold after the record date. Therefore, if you owned shares of ADS common stock on the record date and sell those shares on the “regular-way” market before the Distribution Date, you will also be selling the right to receive the shares of our common stock that would have been distributed to you in the Distribution. If you own shares of ADS common stock as of the close of business on the record date and sell these shares in the “ex-distribution” market on any date up to and including the Distribution Date, you will still receive the shares of our common stock that you would be entitled to receive in respect of your ownership of the shares of ADS common stock that you sold. You are encouraged to consult with your financial advisor regarding the specific implications of selling your ADS common stock prior to or on the Distribution Date.

Q: Will I receive a stock certificate for SpinCo shares distributed as a result of the Distribution?

A: No. Registered holders of ADS common stock who are entitled to participate in the Distribution will receive a book-entry account statement reflecting their ownership of SpinCo common stock. For additional information, registered stockholders in the U.S., Canada or Puerto Rico should contact ADS’ transfer agent, Computershare Trust Company, N.A. (“Computershare”), in writing at C/O: Shareholder Services, P.O. Box 505000, Louisville, Kentucky 40233-5000, Toll Free at 1-800-xxx-xxxx or through its website at www.computershare.com/investor. Stockholders from outside the U.S., Canada and Puerto Rico may call . See “The Separation—When and How You Will Receive the Distribution of SpinCo’s Shares.”

Q: Can ADS decide to cancel the Distribution of the SpinCo’s common stock even if all the conditions have been met?

A: Yes. ADS has the right to terminate, or modify the terms of, the Separation at any time prior to the Distribution, even if all of the conditions to the Distribution are satisfied.

Q: Do I have appraisal rights?

A: No, ADS stockholders do not have any appraisal rights in connection with the Separation.

Q: Will SpinCo incur any debt in connection with the Separation?

A: Yes. We intend to enter into new financing arrangements in anticipation of the Separation. We expect to incur approximately $ of new debt, which we intend to use the net proceeds to fund a cash transfer to ADS, or one or more of its subsidiaries, as part of the Restructuring. See “The Separation—Incurrence of Debt.”

Following the Separation, our debt obligations could restrict our business and may adversely impact our financial condition, results of operations or cash flows. In addition, our separation from ADS may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to the businesses collectively. Also, our business, financial condition, results of operations and cash flows could be harmed by a deterioration of our credit profile or by factors adversely affecting the credit markets generally. See “Risk Factors—Risks Relating to the Separation.”

Q: Does SpinCo intend to pay cash dividends?

A: We do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to reduce our debt as well as fund the development and expansion of our business. The declaration and amount of any dividends to

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holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, cash flows, capital requirements of our business, covenants associated with our debt obligations, legal requirements, industry practice and any other factors the board of directors deems relevant. See “Dividend Policy.”

Will the Separation affect the trading price of my ADS stock?

A: Yes. The trading price of shares of ADS common stock immediately following the Distribution is expected to be lower than immediately prior to the Distribution because the trading price will no longer reflect the value of the Spin Business. We cannot provide you with any assurance regarding the price at which the ADS shares will trade following the Separation.

Q: What will happen to outstanding ADS equity compensation awards?

A: In connection with the Separation, outstanding ADS equity awards will generally be equitably adjusted in a manner that is intended to preserve the aggregate intrinsic value of such awards as of immediately before and after the Distribution.

Specifically, we intend that, in connection with the Separation, (i) outstanding ADS equity awards held by individuals who will continue to be employed by or provide services to ADS will be equitably adjusted to reflect the difference in the value of ADS common stock before and after the Distribution in a manner that is intended to preserve the overall intrinsic value of the awards, and (ii) certain outstanding ADS equity awards held by individuals who are employed by or otherwise providing services to SpinCo, or whose employment or engagement will be transferred to SpinCo in connection with and prior to the Separation, .

The specific adjustment mechanics will be agreed between SpinCo and ADS and set forth in the Employee Matters Agreement that we intend to enter into with ADS prior to the Separation. See “Treatment of Outstanding Equity Compensation Awards.”

Q: What will the relationship between ADS and SpinCo be following the Separation?

A: After the Separation, ADS will retain a 19% ownership interest in SpinCo common stock, while each of ADS and SpinCo will be independent, publicly traded companies with their own management teams and boards of directors. ADS’s SpinCo common stock will be voted in the same proportion as the votes cast in respect of the common stock not owned by ADS on any matter presented for a vote of SpinCo’s stockholders. The chair of ADS’ board is expected to be the chair of SpinCo’s board for a single fixed term of up to three years, subject to IRS approval. In connection with the Separation, we will enter into a number of agreements with ADS that, among other things, govern the Separation and allocate responsibilities for obligations arising before and after the Separation, including, among others, obligations relating to our employees, taxes, liabilities and real and intellectual property. See “The Separation—Agreements with ADS.”

Q: Who is the transfer agent for SpinCo common stock?

A: Computershare will be the transfer agent for SpinCo common stock. Computershare’s mailing address is C/O: Shareholder Services, P.O. Box 505000, Louisville, Kentucky 40233-5000 and Computershare’s phone number for stockholders in the U.S., Canada or Puerto Rico is Toll Free 1-800-xxx-xxxx and for stockholders from outside the U.S., Canada and Puerto Rico is .

Q: Who is the distribution agent for the Distribution?

A: Computershare Trust Company, N.A.

Q: Who can I contact for more information?

A: If you have questions relating to the mechanics of the distribution of SpinCo shares, you should contact the distribution agent:

Computershare Trust Company, N.A.
C/O: Shareholder Services
P.O. Box 505000

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Louisville, Kentucky 40233-5000 United States
Toll-Free: 1-800-xxx-xxxx
International:

Before the Separation, if you have questions relating to the transactions described herein, you should contact ADS at:

Brian Vereb
Alliance Data Systems Corporation
3075 Loyalty Circle
Columbus Ohio 43219
investorrelations@alliancedata.com

After the Separation, if you have questions relating to the transactions described herein, you should contact SpinCo at:

John Chesnut

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SUMMARY OF THE SEPARATION

The following is a summary of the material terms of the Separation, including the Restructuring, the Distribution and certain other related transactions.

Distributing Company

ADS, a Delaware corporation. After the Distribution, ADS will retain a 19% ownership interest in SpinCo common stock.

Distributed Company

SpinCo, a Delaware corporation, is a wholly owned subsidiary of ADS and, at the time of the Distribution, will hold, directly or indirectly through its subsidiaries, all of the assets and liabilities of the Spin Business. After the Distribution, SpinCo will be an independent, publicly traded company.

Distributed Company Structure

SpinCo is a parent company. At the time of the Distribution it will own the shares of a number of subsidiaries operating its businesses.

Record Date

The record date for the Distribution is on the close of business on , 2021.

Distribution Date

The Distribution Date is , 2021.

Distributed Securities

ADS will distribute 81% of the shares of SpinCo common stock outstanding immediately prior to the Distribution. Based on the approximately shares of ADS common stock outstanding on , 2021, and applying the distribution ratio of one share of SpinCo common stock for every shares of ADS common stock, ADS will distribute approximately shares of SpinCo common stock to ADS stockholders who hold ADS common stock as of the record date.

Distribution Ratio

Each holder of ADS common stock will receive one share of SpinCo common stock for every shares of ADS common stock held as of the close of business on , 2021.

Fractional Shares

ADS will not distribute any fractional shares of SpinCo common stock to ADS stockholders. Instead, as soon as practicable after the Distribution Date, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing prices and distribute the net cash proceeds, net of brokerage fees and commissions, transfer taxes and other costs and after making appropriate deductions of the amounts required to be withheld for U.S. federal income tax purposes, if any, from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the Distribution. The distribution agent will determine when, how, through which broker-dealers and at what prices to sell the aggregated fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any minimum sale price for the fractional shares or to any interest on the amounts of payments made in lieu of fractional shares. The receipt of cash in lieu of fractional shares generally will be taxable to the recipient stockholders for U.S. federal income tax purposes as described in “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

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Distribution Method

SpinCo common stock will be issued only by direct registration in book-entry form. Registration in book-entry form is a method of recording stock ownership when no physical paper share certificates are issued to stockholders, as is the case in this Distribution.

Conditions to the Distribution

The Distribution is subject to the satisfaction or waiver by ADS of the following conditions, as well as other conditions described in this information statement in “The Separation—Conditions to the Distribution”:

•

The board of directors of ADS will have approved the Distribution.

•

The SEC will have declared effective our registration statement on Form 10, of which this information statement is a part, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), no stop order suspending the effectiveness of our registration statement on Form 10 will be in effect, and no proceedings for such purpose will have been instituted or threatened by the SEC, and this information statement, will have been mailed to the holders of ADS common stock as of the record date for the Distribution;

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Our common stock to be delivered in the Distribution will have been approved for listing on the , subject to official notice of issuance;

•

ADS will have received a private letter ruling from the IRS and an opinion of Davis Polk & Wardwell LLP, in each case reasonably satisfactory to ADS, to the effect that, for U.S. federal income tax purposes, the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code;

•

Any material governmental approvals and consents and any material permits, registrations and consents from third parties, in each case, necessary to effect the distribution and to permit the operations of our business after the Distribution Date substantially as conducted as of the date of the Separation and Distribution Agreement will have been obtained; and

•

No event or development will have occurred or exist that, in the judgment of the ADS board of directors, in its sole and absolute discretion, makes it inadvisable to effect the Separation or other transactions contemplated by the Separation and Distribution Agreement or by any of the ancillary agreements contemplated by the Separation and Distribution Agreement.

The fulfillment of the conditions to the Distribution will not create any obligations on ADS’ part to effect the Separation, and the ADS board of directors has reserved the right, in its sole discretion, to abandon, modify or change the terms of the Separation, including by accelerating or delaying the timing of

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the consummation of all or part of the Distribution, at any time prior to the Distribution Date.

Stock Exchange Listing

We intend to have our shares of common stock authorized for listing on the under the ticker symbol “LYLT,” subject to official notice of issuance.

Dividend Policy

We do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the reduction of our debt as well as the development and expansion of our business. The declaration and amount of any dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, cash flows, capital requirements of our business, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors the board of directors deems relevant. For more information, see “Dividend Policy.”

Transfer Agent

Computershare Trust Company, N.A.

U.S. Federal Income Tax
Consequences

A condition to the closing of the Separation is ADS’ receipt of a private letter ruling from the IRS and an opinion of Davis Polk & Wardwell LLP to the effect that the Distribution will qualify under the Code as a transaction that is tax-free to ADS and to its stockholders. You should review the section entitled “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution” for a discussion of the material U.S. federal income tax consequences of the Distribution.

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SUMMARY RISK FACTORS

We are subject to a number of risks, including risks related to the Separation, including the Restructuring and the Distribution, and other related transactions. The following summary of our principal risks provides an overview of the uncertainty inherent in investing in us presents and is not exhaustive. This summary is qualified in its entirety by reference to the complete description of our risk factors set forth immediately below. Please read “Risk Factors” carefully for a more thorough description of these and other risks. With regard to strategic business risks and our competitive environment, we caution that the pervasive impacts of COVID-19 on the macroeconomic environment will continue to heighten all of our risks for an indeterminate duration.

Risks relating to the separation include failure to realize anticipated benefits, expenditure of limited resources, lack of independent operating history, incurrence of additional debt, discretionary actions of the ADS board of directors, inequitable indemnities, insufficient remedies or markets for our equity securities, conflicts of interest, and potential tax-related liabilities.

•

Our business may be harmed if anticipated benefits from the Separation fail to materialize or their realization is delayed.

•

Without history operating as an independent company, our historical combined financials and unaudited pro forma financial information may not necessarily be representative of the results we would have achieved as an independent, publicly traded company and may not be indicative of our future prospects.

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We may incur significant costs and diversion of executive management and other resources to create the infrastructure necessary to operate as an independent publicly traded company, or experience operational disruptions in connection with the Separation.

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Until the Distribution occurs, the ADS board of directors in its sole discretion may change the terms of the Separation to be less favorable to us.

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Following the Separation, our newly incurred debt obligations may restrict our business, increase our cost of debt funding and/or decrease our overall debt capacity and commercial credit availability.

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Reciprocal indemnifications with ADS in connection with the Separation may not equitably allocate responsibility, may be insufficient to insure us for liabilities incurred or may require us to divert cash to fund obligations to ADS.

•

Without rights to approve or dissenter’s rights in connection with the Separation, ADS stockholders may seek to sell their ADS and/or SpinCo shares, and the post-Distribution value may not equal or exceed the pre-Distribution value and there may not be a sufficient trading market for one or both companies.

•

Certain SpinCo directors, executive officers and other personnel may continue to own significant positions in ADS relative to their assets, giving rise to conflicts of interest during the transition.

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If the Restructuring, Separation and Distribution fail to qualify as tax-free due to a prior breach of any covenant or representation by us or if we fail to comply with the restrictions placed on us for subsequent periods, we may be responsible for significant tax-related liabilities.

Risks relating to our business strategy, competitive environment and operations include client concentration, loss of sponsors, clients, rewards suppliers or collector engagement, disruptions in reward quality or availability, failure to identify new business opportunities, changes in consumer preference or behavior, potential for data breach or other restrictions on the use of consumer information, operating in complex global legal environments and fluctuations in global economic conditions.

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Our ten largest clients represented just over half of our consolidated revenue in 2020, and BrandLoyalty’s client commitments are not long-term.

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Loss of sponsors, business by our clients, relationships with rewards suppliers or changes in collector redemption amounts or patterns may limit both growth and profitability.

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•

Airline or travel industry disruptions, including airline competition, market availability, operating restrictions, restructurings or insolvencies, could limit collector engagement in the AIR MILES Reward Program.

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Failure to accurately forecast consumer demand for our BrandLoyalty campaigns could result in excess inventories or inventory shortages.

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Inability to anticipate and respond to market trends and changes in consumer preferences for loyalty program features or rewards could reduce demand for our services.

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Failure of rewards suppliers to deliver in contracted quantities, in a timely manner and meeting quality standards could adversely affect our reputation with sponsors, clients and loyalty program participants.

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Opportunities to grow our business may be limited by inability to identify suitable acquisitions or new business opportunities, or to effectively integrate businesses we acquire.

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Failures in data protection, cyber and information security and protection of intellectual property rights could critically impair our products, services and ability to conduct business as well as expose us to legal claims.

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Consumer protection, data protection and data privacy and security laws restrict functionality that enhance loyalty and marketing program capabilities and their appeal to sponsors, clients and loyalty program participants.

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Complex international laws as well as operating in jurisdictions lacking developed regulatory and legal systems requires extensive effort to manage compliance.

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Global economic factors beyond our control may impact demand for our services and cause fluctuations in foreign currency exchange rates that impact our results of operations.

Risks relating to our indebtedness include maintaining adequate liquidity and servicing our outstanding indebtedness.

•

High levels of indebtedness may restrict our ability to compete, react to changes in our business and incur additional indebtedness to fund future needs.

Risks relating to our common stock include lack of an existing trading market, differences in our profile from that of ADS, restrictive provisions in our charter documents and potential for dilution.

•

No public market currently exists for our common stock, and the market price and trading volume of our common stock may be volatile, making resale of your SpinCo shares at or above the initial market price following the Separation difficult.

•

Because our common stock will not be included in the Standard & Poor’s Midcap 400 Index, or other stock indices, and is not expected to pay a recurring dividend, significant amounts of our common stock distributed to current ADS investors with defined investment policies requiring such features will likely need to be sold in the open market where there may not be offsetting demand.

•

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and certain provisions of Delaware law could delay or prevent a change in control of SpinCo.

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A large number of our shares are or will be eligible for future sale, which may dilute your percentage ownership in SpinCo and cause the market price of our common stock to decline.

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Confidential Treatment Requested by Loyalty Ventures Inc.
Pursuant to 17 C.F.R. Section 200.83

RISK FACTORS

You should carefully consider each of the following risks and all of the other information contained in this information statement. Some of these risks relate principally to our separation from ADS, while others relate principally to our business and the industry in which we operate or to the securities markets generally and ownership of our common stock. Our business, prospects, results of operations, financial condition or cash flows could be materially and adversely affected by any of these risks, and, as a result, the trading price of our common stock could decline.

Risks relating to the separation

We may not realize the anticipated benefits from the Separation, and the Separation could harm our business.

We may not be able to achieve the full strategic and financial benefits expected to result from the Separation, or such benefits may be delayed. The Separation is expected to enhance strategic and management focus, provide a distinct investment identity and allow us to efficiently allocate resources and deploy capital. We may not achieve these and other anticipated benefits for a variety of reasons, including, among others:

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The Separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business;

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Following the Separation, we may be more susceptible to economic downturns and other adverse events than if we were still a part of ADS;

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Following the Separation, our business will be less diversified than ADS’ business prior to the Separation and also experience a loss of scale and access to certain financial, managerial and professional resources that may have benefited us in the past; and

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The other actions required to separate the respective businesses could disrupt our operations.

If we fail to achieve some or all of the benefits expected to result from the Separation, or if such benefits are delayed, our business could be harmed.

We have no history of operating as an independent, publicly traded company, and our historical combined financials and unaudited pro forma financial information is not necessarily representative of the results that we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

Our historical combined and unaudited pro forma combined financial information included in this information statement have been derived from ADS’ consolidated financial statements and accounting records and are not necessarily indicative of our future results of operations, financial condition or cash flows, nor do they reflect what our results of operations, financial condition or cash flows would have been as an independent public company during the periods presented. In particular, the historical combined financial information included in this information statement is not necessarily indicative of our future results of operations, financial condition or cash flows primarily because of the following factors:

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Prior to the Separation, our business has been operated by ADS as part of its broader corporate organization, rather than as an independent company. ADS or one of its affiliates provide support for various functions including internal audit, finance, accounting, tax, human resources, procurement, information technology, and public company reporting functions ;

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Our historical combined financial results reflect the direct, indirect and allocated costs for such services historically provided by ADS, and these costs may significantly differ from the comparable expenses we would have incurred as an independent, publicly traded company;

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Our cost of debt and other capital may significantly differ from that which is reflected in our historical combined financial statements;

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The historical combined financial information may not fully reflect the costs associated with the Separation, including the costs related to being an independent public company;

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Our historical combined financial information does not reflect our obligations under the various transitional and other agreements we will enter into with ADS in connection with the Separation; and

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Currently, our business is integrated with that of ADS and we benefit from ADS’ size and scale in costs, employees and vendor and customer relationships. Thus, costs we will incur as an independent company may significantly exceed comparable costs we would have incurred as part of ADS and some of our customer relationships may be weakened or lost. For example, some of our contract counterparties may have contracted with us because we were part of ADS, and we may have difficulty obtaining favorable terms in our contractual arrangements in the future as a result of our separation from ADS.

We based the pro forma adjustments included in this information statement on available information and assumptions that we believe are reasonable and factually supportable; actual results, however, may vary. In addition, our unaudited pro forma combined financial information included in this information statement may not give effect to various ongoing additional costs we may incur in connection with being an independent public company. Accordingly, our unaudited pro forma combined financial statements do not reflect what our results of operations, financial condition or cash flows would have been as an independent public company and are not necessarily indicative of our future financial condition or results of operations.

Please refer to “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical combined financial statements and the notes to those statements included elsewhere in this information statement.

We will incur significant costs to create the corporate infrastructure necessary to operate as an independent public company.

ADS currently performs all or part of certain corporate functions for us, including internal audit, finance, accounting, tax, human resources, procurement, information technology, and public company reporting functions. The cost of these services allocated to us in our historical combined financial statements was based on management estimates and may not be indicative of the costs had we operated on a standalone basis, independent of ADS. Following the Separation, ADS will continue to provide certain of these services to us on a transitional basis, for a period of up to two years following the Distribution pursuant to a Transition Services Agreement that we will enter into with ADS. See “The Separation—Agreements with ADS—Transition Services Agreement.” ADS may not successfully execute all of these functions during the transition period or we may have to expend significant efforts or costs materially in excess of those estimated under the Transition Services Agreement. Any interruption in these services could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, at the end of this transition period, we will need to perform these functions ourselves or hire third parties to perform these functions on our behalf. The costs associated with performing or outsourcing these functions are not reflected in our historical combined financial statements. We expect to incur costs beginning in the fourth quarter of 2021 to establish the necessary infrastructure. A significant increase in the costs of performing or outsourcing these functions could materially and adversely affect our business, results of operations, financial condition and cash flows.

Furthermore, we may experience certain operational disruptions in connection with the Separation as we transition to operating as an independent public company, including information technology disruptions with respect to our public company reporting functions as certain data, software, information technology hardware and other information technology assets and systems are transitioned or re-allocated between us and ADS, or as we implement new systems or upgrades in connection with such transition. Our ability to effectively manage and meet our public company reporting obligations depends significantly on information technology systems, and any failure, disruption, interruption, malfunction or other issue with respect to such systems could have a material adverse effect on our business and results of operations.

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The obligations associated with being a public company will require significant resources and management attention.

Currently, we are not directly subject to the reporting and other requirements of the Exchange Act. Following the effectiveness of the registration statement of which this information statement forms a part, we will be directly subject to such reporting and other obligations under the Exchange Act and the rules of the . As an independent public company, we are required to, among other things:

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Prepare and distribute periodic reports, proxy statements and other stockholder communications in compliance with the federal securities laws and rules as well as requirements;

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Have our own board of directors and committees thereof, which comply with federal securities laws and rules as well as requirements;

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Institute our own financial reporting and disclosure compliance functions;

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Establish an investor relations function;

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Establish internal policies and procedures, including those relating to trading in our securities, disclosure controls and procedures and other domestic and international laws and regulations applicable to our business; and

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Comply with the financial reporting rules and regulations implemented by the SEC, the Sarbanes-Oxley Act, the Dodd-Frank Act and the Public Company Accounting Oversight Board.

These reporting and other regulatory and compliance obligations will place significant demands on our management and our administrative and operational resources, including accounting resources, and we expect to face increased legal, accounting, administrative and other costs and expenses relating to these demands that we had not incurred as a segment of ADS. Our investment in compliance with existing and evolving regulatory requirements will result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the Separation.

Prior to the Separation, our financial results were included within the consolidated results of ADS, and we were not directly subject to reporting and other requirements of the Exchange Act. These and other obligations will place significant demands on our management, administrative, and operational resources, including accounting and information technology resources. To comply with these requirements, we anticipate that we will need to duplicate information technology infrastructure, implement additional financial and management controls, reporting systems and procedures and hire additional accounting, finance, tax, treasury and information technology staff. If we are unable to do this in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired and our business could be harmed.

If we fail to maintain effective internal controls, we may not be able to report our financial results accurately or timely, or prevent or detect fraud, which could have a material adverse effect on our business or the market price of our securities.

In accordance with Section 404 of the Sarbanes-Oxley Act, our management will be required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in the annual reports we will file with the SEC on Form 10-K. Due to our “emerging growth company” status as defined in the Jumpstart Our Business Startups Act, or JOBS Act, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls until the later of our second annual report following the completion of the Separation or the date we no longer qualify as an “emerging growth company.” When required, this process will require significant documentation of policies, procedures and systems, review of that documentation by management and by our outside independent registered public accounting firm, and

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testing of our internal controls over financial reporting by our staff and our outside independent registered public accounting firm. This process will involve considerable time and attention, may strain our internal resources, and will increase our operating costs. We may experience higher than anticipated operating expenses and outside auditor fees during the implementation of these changes and thereafter. If management or our independent registered public accounting firm determines that our internal control over financial reporting is not effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the , the SEC or other regulatory authorities, which could require additional financial and management resources. In addition, if our controls are not effective, our ability to accurately and timely report our financial position could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements, a decline in our stock price, suspension or delisting of our common stock from the , and could have a material adverse effect on our business, financial condition, prospects and results of operations.

Until the Distribution occurs, ADS has sole discretion to change the terms of the Separation in ways that may be unfavorable to us.

Until the Distribution occurs, SpinCo’s business will remain a segment of ADS. Completion of the Separation remains subject to the satisfaction or waiver of certain conditions, some of which are in the sole and absolute discretion of ADS, including final approval by the ADS board of directors. Additionally, ADS has the sole and absolute discretion to change certain terms of the Separation, including the amount of any cash transfer we make to ADS, the amount of our indebtedness and the allocation of contingent liabilities, which changes could be unfavorable to us. In addition, ADS may decide at any time prior to the completion of the Separation not to proceed with the Separation and Distribution.

In connection with the Separation, ADS will indemnify us for certain liabilities and we will indemnify ADS for certain liabilities. If we are required to act under these indemnities to ADS, we may need to divert cash to meet those obligations, which could adversely affect our financial results. Moreover, the ADS indemnity may not be sufficient to insure us against the full amount of liabilities for which ADS will be allocated responsibility, and ADS may not be able to satisfy its indemnification obligations to us in the future.

Pursuant to the Separation and Distribution Agreement and other agreements with ADS, ADS will agree to indemnify us for certain liabilities, and we will agree to indemnify ADS for certain liabilities, as discussed further in “The Separation—Agreements with ADS.” Payments that we may be required to provide under indemnities to ADS are not subject to any cap, may be significant and could negatively affect our business, particularly under indemnities relating to our actions that could affect the tax-free nature of the Separation. Third parties could also seek to hold us responsible for any liabilities that ADS has agreed to retain, and under certain circumstances, we may be subject to continuing contingent liabilities of ADS following the Separation that arise relating to the operations of the Spin Business during the time that it was a business segment of ADS prior to the Separation, such as certain tax liabilities which relate to periods during which taxes of the Spin Business were reported as a part of ADS; any liabilities retained by ADS which relate to contracts or other obligations entered into jointly by the Spin Business and ADS’ retained business; and any liabilities arising from third-party claims in respect of contracts in which both ADS and the Spin Business supply goods or provide services.

After the Separation, we will only have limited access to the insurance policies maintained by ADS for events occurring prior to the Separation and ADS’ insurers may deny coverage to us under such policies. Furthermore, there can be no assurance that we will be able to obtain insurance coverage following the Separation on terms that justify its purchase, and any such insurance may not be adequate to offset costs associated with certain events.

In connection with the Separation, we will enter into agreements with ADS to address several matters associated with the Separation, including insurance coverage. The Separation and Distribution Agreement will provide that following the Distribution, SpinCo will no longer have insurance coverage under ADS insurance policies in connection with events occurring before, as of or after the Distribution, other than coverage for (i) events occurring prior to the Distribution and covered by occurrence-based policies of ADS

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as in effect as of the Distribution and (ii) events or acts occurring prior to the Distribution and covered by claims-made policies of ADS as in effect as of the Distribution. However, after the Separation, ADS’ insurers may deny coverage to us for losses associated with occurrences prior to the Separation. Accordingly, we may be required to temporarily or permanently bear the costs of such lost coverage. In addition, we will have to obtain our own insurance policies after the Distribution is complete.

Although we expect to have insurance policies in place as of the Distribution that cover certain, but not all, hazards that could arise from our operations, we can provide no assurance that we will be able to obtain such coverage, that the cost of such coverage will be similar to those incurred by ADS or that such coverage will be adequate to protect us from costs incurred with certain events. The occurrence of an event that is not insured or not fully insured could have a material adverse effect on our results of operations, financial condition and cash flows in the future. See “The Separation—Agreements with ADS.”

Transfer or assignment to us of some contracts and other assets will require the consent of a third-party. If such consent is not given, we may not be entitled to the benefit of such contracts, investments and other assets in the future.

Transfer or assignment of some of the contracts and other assets in connection with the Separation will require the consent of a third-party to the transfer or assignment. Similarly, in some circumstances, we are joint beneficiaries of contracts, and we will need to enter into a new agreement with the third-party to replicate the existing contract or assign the portion of the existing contract related to our business. While we anticipate that most of these contract assignments and new agreements will be obtained prior to the Separation, we may not be able to obtain all required consents or enter into all such new agreements, as applicable, until after the Distribution Date. Some parties may use the requirement of a consent to seek a fee or more favorable contractual terms from us, which could include our having to obtain letters of credit or other forms of credit support. If we are unable to obtain such consents or such credit support on commercially reasonable and satisfactory terms, we may be unable to obtain some of the benefits, assets and contractual commitments that are intended to be allocated to us as part of the Separation. In addition, where we do not intend to obtain consent from third-party counterparties based on our belief that no consent is required, the third-party counterparties may challenge the transaction on the basis that the terms of the applicable commercial arrangements require their consent. We may incur substantial litigation and other costs in connection with any such claims and, if we do not prevail, our ability to use these assets could be adversely impacted.

We cannot provide assurance that all such required third-party consents and new agreements will be procured or put in place, as applicable, prior to the Distribution Date. Consequently, we may not realize certain of the benefits that are intended to be allocated to us as part of the Separation.

After the Separation, some of our directors and officers may have actual or potential conflicts of interest because of their equity ownership in ADS.

Because of their current or former positions with ADS, following the Separation, some of our directors, executive officers and other employees may own shares of ADS common stock, and the individual holdings may be significant for some of these individuals compared to their total assets. This ownership may create, or may create the appearance of, conflicts of interest when these individuals are faced with decisions that could have different implications for ADS or us. For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between ADS and us regarding the terms of the agreements governing the Separation and the relationship thereafter between the companies.

The combined post-Distribution value of ADS and SpinCo shares may not equal or exceed the pre-Distribution value of ADS shares.

After the Separation, we expect that ADS common stock will continue to be traded on the NYSE. We expect to apply to list the shares of our common stock on the . We cannot assure you that the combined trading prices of ADS common stock and our common stock after the Separation, as adjusted for any changes in the combined capitalization of both companies, will be equal to or greater than the trading price of ADS common stock prior to the Separation. Until the market has fully evaluated the business of

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ADS without our business and potentially thereafter, the price at which ADS common stock trades may fluctuate significantly. Similarly, until the market has fully evaluated our business operated as an independent, publicly traded company and potentially thereafter, the price at which our common stock trades may fluctuate significantly.

We potentially could have received better terms from unaffiliated third parties than the terms we received in our agreements with ADS.

The agreements we entered into with ADS in connection with the Separation were negotiated while we were still part of ADS’ business. See “The Separation—Agreements with ADS.” Accordingly, during the period in which the terms of those agreements will have been negotiated, we did not have an independent board of directors or a management team independent of ADS. The terms of the agreements negotiated in the context of the Separation relate to, among other things, the allocation of assets, intellectual property, liabilities, rights and other obligations between ADS and us, and arm’s-length negotiations between ADS and an unaffiliated third-party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third-party.

ADS stockholders do not have dissenters’ rights with respect to the Separation.

ADS stockholders do not have any dissenters’ rights in connection with the Separation. Therefore, any ADS stockholders who disagree with the Separation will be left without recourse other than selling their SpinCo and/or ADS shares. Further, such stockholders may be unable to subsequently sell their shares at the prices they desire or at all.

If the Restructuring and Distribution, together with certain related transactions, do not qualify as transactions that are tax-free for U.S. federal income tax purposes or non-U.S. tax purposes, ADS and/or holders of ADS common stock could be subject to significant tax liability.

It is intended that the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code. The consummation of the Separation and the related transactions is conditioned upon the receipt of a private letter ruling from the IRS and opinion of Davis Polk & Wardwell LLP to the effect that such transactions will qualify for this intended tax treatment. In addition, it is intended that the Restructuring steps will qualify as transactions that are tax-free for U.S. federal income tax purposes. The private letter ruling and the opinion will rely on certain representations, assumptions and undertakings, including those relating to the past and future conduct of our business, and neither the private letter ruling nor the opinion would be valid if such representations, assumptions and undertakings were incorrect. Moreover, the private letter ruling does not address all the issues that are relevant to determining whether the Distribution will qualify for tax-free treatment. Notwithstanding the private letter ruling and the opinion, the IRS could determine that the Distribution should be treated as a taxable transaction for U.S. federal income tax purposes if it determines that any of the representations, assumptions or undertakings that were included in the request for the private letter ruling are false or have been violated or if it disagrees with the conclusions in the opinion that are not covered by the IRS ruling. For more information regarding the private letter ruling and the opinion see “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution—Private Letter Ruling and Tax Opinion.”

If the Restructuring and Distribution fail to qualify for tax-free treatment, for any reason, ADS and/or holders of ADS common stock would be subject to substantial U.S. federal income taxes as a result of the Restructuring, Distribution and certain related transactions. See “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution.”

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If the Restructuring or Distribution is taxable to ADS as a result of a breach by us of any covenant or representation made by us in the Tax Matters Agreement (as defined below), we will generally be required to indemnify ADS and this indemnification obligation, or the payment thereof, could have a material adverse effect on us.

As described above, it is intended that the Restructuring and Distribution, together with certain related transactions, will qualify as tax-free transactions to ADS and to holders of ADS common stock, except with respect to any cash received in lieu of fractional shares. If the Restructuring, Distribution and/or related transactions are not so treated or are taxable to ADS (see “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution”) due to a breach by us (or any of our subsidiaries) of any covenant or representation made by us in the Tax Matters Agreement, we will generally be required to indemnify ADS for all tax-related losses suffered by ADS. In addition, we will not control the resolution of any tax contest relating to taxes suffered by ADS in connection with the Separation, and we may not control the resolution of tax contests relating to any other taxes for which we may ultimately have an indemnity obligation under the Tax Matters Agreement. In the event that ADS suffers tax-related losses in connection with the Separation that must be indemnified by us under the Tax Matters Agreement, the indemnification liability, or the payment thereof, could have a material adverse effect on us.

We will be subject to significant restrictions on our actions following the Separation in order to avoid triggering significant tax-related liabilities.

The Tax Matters Agreement generally will prohibit us from taking certain actions that could cause the Distribution and certain related transactions to fail to qualify as tax-free transactions, including:

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During the two-year period following the Distribution Date (or otherwise pursuant to a “plan” within the meaning of Section 355(e) of the Code), we may not cause or permit certain business combinations or transactions to occur;

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During the two-year period following the Distribution Date, we may not discontinue the active conduct of our business (within the meaning of Section 355(b)(2) of the Code);

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During the two-year period following the Distribution Date, we may not sell or otherwise issue our common stock in certain circumstances;

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During the two-year period following the Distribution Date, we may not redeem or otherwise acquire any of our common stock, other than pursuant to open-market repurchases of less than 20% of our common stock (in the aggregate);

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During the two-year period following the Distribution Date, we may not amend our articles of incorporation (or other organizational documents) or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of our common stock; and

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More generally, we may not take any action that could reasonably be expected to cause the Separation and certain related transactions to fail to qualify as tax-free transactions for U.S. federal income tax purposes or for non-U.S. tax purposes.

If we take any of the actions above and such actions result in tax-related losses to ADS, we generally will be required to indemnify ADS for such tax-related losses under the Tax Matters Agreement. See “The Separation—Agreements with ADS—Tax Matters Agreement.” Due to these restrictions and indemnification obligations under the Tax Matters Agreement, we may be limited in our ability to pursue strategic transactions, equity or convertible debt financings or other transactions that may otherwise be in our best interests. Also, our potential indemnity obligation to ADS might discourage, delay or prevent a change of control that our stockholders may consider favorable.

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Risks relating to our business strategy and operations

Impacts related to the COVID-19 pandemic are expected to continue to pose risks to our business for the foreseeable future, heighten many of our known risks and may have a material adverse impact on our results of operations, financial condition and liquidity.

Following the declaration by the WHO in the first quarter of 2020 of COVID-19 as a global pandemic and the rapid spread of COVID-19, international, provincial, federal, state and local government or other authorities have instituted certain preventative measures, including border closures, travel bans, prohibitions on group events and gatherings, shutdowns or other operational restrictions on certain businesses, curfews, shelter-in-place orders, quarantines and recommendations to practice social distancing. Certain jurisdictions have begun reopening only to return to more stringent restrictions where increases in COVID-19 cases occur. These restrictions have continued to disrupt economic activity worldwide, resulting in volatility in the global capital markets, instability in the credit and financial markets, reduced commercial and consumer confidence and spending, widespread furloughs and layoffs, closure or restricted operating conditions for retail stores, labor shortages, disruption in supply chains (including availability of raw materials, ability to manufacture goods and delivery of finished products to suppliers and retailers), and near complete cessation of many hospitality and travel industry operations. Even as vaccines are introduced and administered, governmental restrictions are lifted and economies gradually reopen, the ongoing economic impacts, including government economic stimulus, and health concerns associated with the pandemic, the emergence of more transmissible variants and the global availability and efficacy of vaccines, may continue to affect consumer behavior, spending levels and retail preferences.

Specific impacts on our operations and financial results include, but are not limited to, the following:

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Short and long-term difficulties of our retail partners in consumer-based businesses due to restricted foot traffic, limitations of our e-commerce platform, trouble maintaining supply chain integrity for both availability of desired products and delivery to end consumers, and reduced consumer confidence and spending may result in reduced sales for our retail partners.

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Deferral of campaign-based loyalty programs or the inability to source or deliver rewards for these programs across borders may reduce or defer revenue or increase our costs of operations.

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Reduced demand for hospitality, airline and other travel-related rewards within the AIR MILES Reward Program due to the various COVID-19 restrictions negatively impacts redemption revenue as collectors both changed existing reward travel and are unable to schedule future reward travel with any certainty as to the duration of restrictions.

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Volatility in the financial markets may increase our cost of capital and/or limit its availability.

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Increased operational risk, including impacts to our data, customer care center and other network integrity and availability in addition to heightened cybercriminal activity and other cyberfraud risk, may affect our ability to timely and effectively meet the needs of our sponsors, collectors, retailers or other consumers across our lines of business.

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Increased risks to the health and safety of our associates and that of our third-party vendors may impact our ability to maintain service levels for our partners.

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 globally 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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To the extent the COVID-19 pandemic continues to adversely affect our business, results of operations, financial condition and liquidity, many of the other risks described in this “Risk Factors” section may also be heightened.

Our 10 largest clients represented 55% and 46%, respectively, of our combined revenue for the years ended December 31, 2020 and 2019, and the loss of any of these clients could cause a significant reduction in our combined revenue.

We depend on a limited number of large clients for a significant portion of our combined revenue. Our 10 largest clients represented approximately 55% and 46%, respectively, of our combined revenue during the years ended December 31, 2020 and 2019. The Bank of Montreal represented approximately 15% and 12% of our combined revenue during these same respective periods. Our contract with Bank of Montreal expires in 2023, subject to further automatic renewals as well as certain rights of either party to terminate following notice of default and cure provisions. A decrease in revenue from any of our significant clients, including Bank of Montreal, for any reason, including a decrease in pricing or activity, or a decision either to utilize another service provider or to no longer procure the services we provide, could have a material adverse effect on our combined revenue.

If redemptions by the AIR MILES Reward Program collectors are greater than expected, or if the costs related to redemption of AIR MILES reward miles increase, our profitability could be adversely affected.

Although our AIR MILES reward miles do not expire with the exception of cases of inactivity, as described in “Management’s Discussion and Analysis—Discussion of Critical Accounting Estimates,” a portion of our revenue is based on our estimate of the number of AIR MILES reward miles that will go unused by the collector base. The percentage of AIR MILES reward miles not expected to be redeemed is known as “breakage.”

Breakage is based on management’s estimate after viewing and analyzing various historical trends including vintage analysis, current run rates and other pertinent factors, such as the impact of macroeconomic factors and changes in the program structure, the introduction of new program options and changes to rewards offered. If there is any significant change in or failure by management to reasonably estimate breakage, or if actual redemptions are greater than our estimates, our profitability could be adversely affected. The AIR MILES Reward Program also exposes us to risks arising from potentially increasing reward costs. Our profitability could be adversely affected if costs related to redemption of AIR MILES reward miles increase. A 10% increase in the cost of redemptions would have resulted in a decrease in pre-tax income of $21.6 million for the year ended December 31, 2020.

The loss of our most active AIR MILES Reward Program collectors could adversely affect our growth and profitability.

Our most active AIR MILES Reward Program collectors drive a disproportionately large percentage of our AIR MILES reward miles issued. The loss of a significant portion of these collectors, for any reason, could impact our ability to generate significant revenue from sponsors. The continued appeal of our loyalty and rewards programs will depend in large part on our ability to remain affiliated with sponsors that are desirable to both existing and future collectors and to offer rewards that are both attainable and attractive.

Airline or travel industry disruptions, such as an airline insolvency, could negatively affect the AIR MILES Reward Program, our revenues and profitability.

Air travel is one of the appeals of the AIR MILES Reward Program to collectors. If one or more of our airline suppliers sharply reduces its fleet capacity and route network, we may not be able to satisfy our collectors’ demands for airline tickets. Tickets or other travel arrangements, if available, could be more expensive than a comparable airline ticket under our current supply agreements with existing suppliers, and the routes offered by other airlines or travel services may be inadequate, inconvenient or undesirable to the redeeming collectors. As a result, we may experience higher air travel redemption costs, and collector satisfaction with the AIR MILES Reward Program might be adversely affected.

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As a result of airline or travel industry disruptions, including, but not limited to, the current impacts of COVID-19, political instability, terrorist acts or war, some collectors could determine that air travel is too dangerous, burdensome or otherwise undesirable. Consequently, collectors might forego redeeming AIR MILES reward miles for air travel and therefore might not participate in the AIR MILES Reward Program to the extent they previously did, which could adversely affect our business, results of operations, financial condition and liquidity.

Our BrandLoyalty business does not generally have long-term agreements with its clients.

Our agreements for BrandLoyalty campaigns are generally short-term and must be renegotiated for each campaign. As a result, our relationship with our BrandLoyalty clients may change on short notice. Future agreements with respect to volume, pricing or new campaign rewards, among other things, are subject to negotiation with each client for each campaign. No assurance can be given that our clients will continue to do business with us at prior levels, if at all, and the loss of campaigns from certain retailers could have a material adverse effect on our business, results of operations, financial condition and liquidity.

If we fail to accurately forecast consumer demand for our BrandLoyalty campaigns we could experience excess inventories or inventory shortages, which could result in reduced operating margins and cash flows and adversely affect our business.

To meet anticipated demand for our campaign rewards, BrandLoyalty sources rewards inventory from key manufacturers and other suppliers in advance of client programs. There is a risk we may be unable to sell excess products ordered from manufacturers. Inventory levels in excess of consumer demand may result in inventory write-downs, and the sale of excess inventory at discounted prices could have a material adverse effect on our operating results, financial condition and cash flows. For example, in the year ended December 31, 2019, BrandLoyalty wrote down inventory by $18.4 million for the discontinuance of certain campaign rewards product lines. Conversely, if we underestimate consumer demand for our campaign rewards or if our key suppliers fail to timely supply campaign rewards, BrandLoyalty may experience inventory shortages. Inventory shortages might delay shipments or the ability to offer or the success of campaign-based loyalty programs, negatively impacting retailer and consumer relationships. A failure to accurately predict the level of demand for our campaign rewards could adversely affect BrandLoyalty’s business, results of operations, financial condition and liquidity.

Our AIR MILES Reward Program and BrandLoyalty businesses rely on relationships with the sponsors and rewards suppliers, respectively, with which we partner and a failure to maintain or renew relationships with our sponsors and suppliers could negatively affect our revenues and profitability.

The success of each of our AIR MILES Reward Program and BrandLoyalty businesses is dependent on maintaining relationships with their respective sponsors and rewards suppliers. These relationships are governed by agreements with fixed terms and varying provisions regarding termination, ranging from notice to events of default and cure. If we are unable to maintain or renew our relationships with our most significant sponsors and reward suppliers, the value proposition for sponsors and collectors in the AIR MILES Reward Program coalition and demand for BrandLoyalty’s campaign-based loyalty programs may be impacted; further, our sponsors and clients may elect an alternative provider for their loyalty programs, each of which could have a material adverse effect on our business, results of operations, financial condition and liquidity.

Competition in the markets for the services that we offer is intense and we expect it to intensify.

The markets for our loyalty program products and services are highly competitive and we expect the continued evolution of loyalty products and services, including the technological capabilities associated therewith, and competition to provide the same to intensify. We generally compete with advertising and other promotional and loyalty programs, both traditional and online, for a portion of a client’s total marketing budget. Competition may intensify as more competitors enter our market. Competitors may target our sponsors, collectors, clients and their consumers as well as draw rewards from our rewards suppliers. The continued attractiveness of our loyalty and rewards programs will also depend on our ability to remain

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affiliated with sponsors and clients that are desirable to consumers and to offer rewards that are both attainable and attractive. Our ability to generate significant revenue from sponsors and clients will depend on our ability to differentiate ourselves through the loyalty program products and services we provide and the attractiveness of our programs to collectors and consumers, including our ability to adapt to new or even disruptive technological developments. We may not be able to continue to compete successfully against current and emerging loyalty program providers in our space.

Our inability to anticipate and respond to market trends and changes in consumer preferences could adversely affect our financial results.

Our continued success depends on our ability to anticipate, gauge and react in a timely and cost-effective manner to changes in market trends and consumer preference for loyalty programs, their rewards and the associated technological capabilities. We must continually adapt our services to evolving distribution channels, relentlessly pursue a favorable mix of reward options, successfully manage our inventories, and consistently update and refine our approach with respect to how and where we offer our loyalty programs and services, including our ability to adapt to new or even disruptive technological developments. For example, within our AIR MILES Reward Program, failure to drive innovation to meet the evolving needs of sponsors and collectors with competitive program design and reward elements that offer sufficient flexibility to permit different segments of sponsors and collectors to reward their customers, meet their service expectations or offer desired rewards to remain their preferred loyalty program will limit engagement with the program. Engagement and issuance growth from current sponsors and collectors provides the necessary momentum to be successful expanding to new sponsors and collectors. Within BrandLoyalty, consumer preference and behavior evolve with the latest commercial trends and the popularity of characters and shows. This progression requires BrandLoyalty to constantly adapt its offering — to innovate and invest to maintain the relevance and strength of its campaign-based loyalty programs and associated rewards. Failure to do so could have a material adverse effect on our results of operations and financial condition.

The failure of our rewards suppliers to deliver products and services at contracted service levels or standards or in sufficient quantities and in a timely manner could adversely affect our relationship with our sponsors and clients, our reputation with loyalty program participants, and the financial results of our business.

The success of our loyalty programs requires that collectors redeeming AIR MILES reward miles and consumers seeking BrandLoyalty rewards receive timely delivery of any product or access of any service that constitutes the reward. The failure of our rewards suppliers to deliver products and services at contracted service levels or standards or in sufficient quantities and in a timely manner could adversely affect our relationship with our sponsors and clients and our reputation with loyalty program participants. BrandLoyalty works with contractors outside of the United States to manufacture or contract to manufacture certain reward products. We have in the past, and may in the future face unanticipated interruptions and delays. In that respect, we are subject to risks related to supply chains on a global scale, including industrial accidents, environmental events, strikes and other labor disputes, disruption in information systems, political instability, rapid changes in trade regulations or enforcement, shipping or other customs delays, product quality control, safety and environmental compliance issues and other regulatory issues, as well as natural disasters, global or local health crises international conflicts, terrorist acts and other external factors over which we have no control, such as closures or restricted operating conditions for manufacturers and the resultant supply chain disruptions. Any delay in the provision of rewards could damage our reputation, leading to a decrease in participation in our loyalty programs. We may also be required to find alternative, more expensive suppliers at short notice or otherwise incur other expenses to remediate the delay or failure in performance by the supplier. In addition, if a third party vendor fails to meet contractual requirements, such as compliance with our code of conduct, applicable laws or regulations and standards, including environmental, health and safety standards as well as product safety standards, our business operations could suffer economic or reputational harm that could result in an adverse effect on the financial results of our business.

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Economic factors beyond our control, and changes in the global economic environment, including fluctuations in inflation and currency exchange rates, could result in lower revenues, higher costs and reduced operating margins and earnings.

Downturns in the economy or the performance of retailers, due to economic factors beyond our control including the impact of COVID-19, may result in a decrease in the demand for our products and services. Virtually all of our loyalty program services are sold outside of the United States, and we conduct purchase and sale transactions in multiple currencies, which exposes our results to the volatility of global economic conditions, including inflation and fluctuations in foreign currency exchange rates. Additionally, there has been, and may continue to be, volatility in currency exchange rates as a result of the United Kingdom’s exit from the European Union, commonly referred to as “Brexit” or new or proposed U.S. policy changes that impact the U.S. Dollar value relative to other international currencies. Our international revenues and expenses generally are derived from sales and operations in foreign currencies, and these revenues and expenses could be affected by currency fluctuations, specifically amounts recorded in foreign currencies and translated into U.S. Dollars for consolidated financial reporting, as weakening of foreign currencies relative to the U.S. Dollar adversely affects the U.S. Dollar value of the Company’s foreign currency-denominated sales and earnings. Currency exchange rate fluctuations could also disrupt the business of the independent manufacturers that produce our rewards products by making their purchases of raw materials more expensive and more difficult to finance. Foreign currency fluctuations have adversely affected and could continue to have an adverse effect on our results of operations and financial condition.

We may hedge certain foreign currency exposures to lessen and delay, but not to completely eliminate, the effects of foreign currency fluctuations on our financial results. Since the hedging activities are designed to lessen volatility, they not only reduce the negative impact of a stronger U.S. Dollar or other trading currency, but they also reduce the positive impact of a weaker U.S. Dollar or other trading currency. Our future financial results could be significantly affected by the value of the U.S. Dollar in relation to the foreign currencies in which we conduct business. The degree to which our financial results are affected for any given time period will depend in part upon our hedging activities.

If we fail to identify suitable acquisitions or new business opportunities, or to effectively integrate the businesses we acquire it could negatively affect our business.

We believe that acquisitions and the identification and pursuit of new business opportunities will be a component of our growth strategy. However, we may not be able to locate and secure future acquisition candidates or to identify and implement new business opportunities on terms and conditions that are acceptable to us. If we are unable to identify attractive acquisition candidates or accretive new business opportunities, our growth could be limited.

In addition, there are numerous risks associated with acquisitions and the implementation of new businesses, including, but not limited to:

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the difficulty and expense that we incur in connection with the acquisition or new business opportunity;

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the inability to satisfy pre-closing conditions preventing consummation of the acquisition or new business opportunity;

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the potential for adverse consequences when conforming the acquired company’s accounting policies to ours;

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the diversion of management’s attention from other business concerns;

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the potential loss of customers or key employees of the acquired company;

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the impact on our financial condition due to the timing of the acquisition or new business implementation or the failure of the acquired or new business to meet operating expectations;

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the assumption of unknown liabilities of the acquired company;

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the uncertainty of achieving expected benefits of an acquisition including revenue, human resources, technological or other cost savings, operating efficiencies or synergies;

Furthermore, if the operations of an acquired or new business do not meet expectations, our profitability may decline and we may seek to restructure the acquired business or to impair the value of some or all of the assets of the acquired or new business.

Risks related to information technology, cybersecurity and privacy matters

Loss of data center or cloud computing capacity, interruption due to cyber-attacks, loss of network connectivity or inability to utilize proprietary software of third-party vendors could affect our ability to timely meet the needs of our clients and their customers.

Our ability, and that of our third-party service providers, to protect our data centers against damage, loss or performance degradation from fire, power loss, network failure, cyber-attacks, including ransomware or denial of service attacks, and other disasters is critical. In order to provide many of our services, we must be able to store, retrieve, process and manage large amounts of data as well as periodically expand and upgrade our technology capabilities. Any damage to our data centers or cloud computing environments, or those of our third-party service providers, any failure of our network links that interrupts our operations or any impairment of our ability to use our software or the proprietary software of third party vendors, including impairments due to cyber-attacks, could adversely affect our ability to meet our clients’ needs and their confidence in utilizing us for future services.

Failure to safeguard data could affect our reputation and may expose us to legal claims.

Information security risks for those businesses like us that hold and rely on large amounts of data continue to increase. Although we have extensive physical and cyber security controls and associated procedures, our networks have in the past been, and in the future may be, subject to unauthorized access or access attempts. In such instances of unauthorized access or access attempts, the integrity of our data has been and may again be affected. Should our sponsors, collectors, or our customers or their consumers, have security and privacy concerns that lead them to resist providing the personal data necessary to support our loyalty and marketing programs, our business would be negatively impacted. In addition, any unauthorized release of customer information or any public perception that we released consumer information without authorization could subject us to legal claims or regulatory enforcement actions.

Legislation relating to consumer privacy and data security may affect our ability to collect data that we use in providing our loyalty and marketing services, which, among other things, could negatively affect our ability to satisfy our clients’ needs.

Data protection and consumer privacy laws and regulations continue to evolve, increasing restrictions on our ability to collect and disseminate customer information. In addition, the enactment of new or amended legislation or industry regulations pertaining to consumer, public or private sector privacy issues could have a material adverse impact on our marketing services, including placing restrictions upon the collection, sharing and use of information that is currently legally permissible.

In the United States, the federal Do-Not-Call Implementation Act makes it more difficult to telephonically communicate with prospective and existing customers. Similar measures were implemented in Canada beginning September 1, 2008. Regulations in both the United States and Canada give consumers the ability to “opt out,” through a national do-not-call registry and state do-not-call registries, of having telephone solicitations placed to them by companies that do not have an existing business relationship with the consumer. In addition, regulations require companies to maintain an internal do-not-call list for those who do not want the companies to solicit them through telemarketing. These regulations could limit our ability to provide services and information to our clients. Failure to comply with these regulations could have a negative impact on our reputation and subject us to significant penalties. Further, the Federal Communications Commission has approved interpretations of rules related to the federal Telephone Consumer Protection Act defining robo-calls broadly, which may affect our ability to contact customers and may increase our litigation exposure.

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In the United States, the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 restricts our ability to send commercial electronic mail messages, the primary purpose of which is advertising or promoting a commercial product or service, to our customers and prospective customers. The act requires that a commercial electronic mail message provide the customers with an opportunity to opt-out from receiving future commercial electronic mail messages from the sender.

In the United States, California enacted the California Consumer Privacy Act, or CCPA, which went into effect on January 1, 2020. The CCPA provides individual privacy rights for California consumers and places increased privacy and security obligations on entities handling certain personal data of consumers and households. The CCPA requires disclosures to consumers about companies’ data collection, use and sharing practices; provides consumers ways to opt-out of certain sales or transfers of personal information; and provides consumers with additional causes of action. The CCPA prohibits companies from discriminating against consumers who have opted out of the sale of their personal information, subject to a narrow exception. The CCPA provides for certain monetary penalties and for enforcement of the statute by the California Attorney General or by consumers whose rights under the law are not observed. It also provides for damages, as well as injunctive or declaratory relief, if there has been unauthorized access, theft or disclosure of personal information due to failure to implement reasonable security procedures.

In November 2020, California voters passed Proposition 24, known as the California Privacy Rights Act or CPRA. The CPRA, which will amend existing CCPA requirements, and goes into effect in most meaningful respects on January 1, 2023 with a one-year lookback period, includes limitations on the sharing of personal information for cross context behavioral advertising and the use of “sensitive” personal information; the creation of a new correction right; and the establishment of a new agency to enforce California privacy law.

The enactment of the CCPA is prompting similar legislative developments in other states in the United States, creating the potential for a patchwork of overlapping but different state laws. These developments could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business, results of operations, and financial condition. For example, in March 2021, Virginia enacted the Virginia Consumer Data Protection Act, and in June 2021, Colorado passed the Colorado Privacy Act, comprehensive privacy statutes that share similarities with the CCPA and CPRA and are set to become effective on January 1, 2023 and July 1, 2023, respectively. Many other states are currently reviewing or proposing the need for greater regulation of the collection, sharing, use and other processing of consumer data for marketing purposes or otherwise, and there remains increased interest at the federal level as well, including two federal privacy regulations introduced in Congress in late 2020.

In Canada, the Personal Information Protection and Electronic Documents Act, or PIPEDA, requires an organization to obtain a consumer’s consent to collect, use or disclose personal information. Under this act, consumer personal information may be used only for the purposes for which it was collected. We allow our customers to voluntarily “opt-out” from receiving either one or both promotional and marketing mail or promotional and marketing electronic mail. Heightened consumer awareness of, and concern about, privacy may result in customers “opting-out” at higher rates than they have historically. This would mean that a reduced number of customers would receive bonus and promotional offers and therefore those customers may collect fewer AIR MILES reward miles. The Government of Canada has tabled the Digital Charter Implementation Act to modernize Canada’s existing private sector privacy law (PIPEDA).

Canada’s Anti-Spam Legislation, or CASL, may restrict our ability to send “commercial electronic messages,” defined to include text, sound, voice and image messages to email, or similar accounts, where the primary purpose is advertising or promoting a commercial product or service to our customers and prospective customers. CASL requires, in part, that a sender have consent to send a commercial electronic message, and provide the customers with an opportunity to opt out from receiving future commercial electronic email messages from the sender.

On May 25, 2018, the General Data Protection Regulation, or GDPR, a European Union-wide legal framework to govern data collection, use and sharing and related consumer privacy rights came into force. The GDPR replaced the European Union Directive 95/46/EC and applies to and binds the EU Member States

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and the European Economic Area countries, which includes a total of 30 countries. The GDPR details greater compliance obligations on organizations, including the implementation of a number of processes and policies around data collection and use. These, and other terms of the GDPR, could limit our ability to provide services and information to our customers. In addition, the GDPR includes significant penalties for non-compliance.

In general, the GDPR, and other European Union and Member State specific privacy and data governance laws, could also lead to adaptation of our technologies or practices to satisfy local privacy requirements and standards that may be more stringent than in the U.S. Similarly, it is possible that in the future, U.S. and foreign jurisdictions may adopt legislation or regulations that impair our ability to effectively track consumers’ use of our advertising services, such as the FTC’s proposed “Do-Not-Track” standard or other legislation or regulations similar to EU Directive 2009/136/EC, commonly referred to as the “Cookie Directive,” which directs EU Member States to ensure that accessing personal information on an internet user’s computer, such as through a cookie, is allowed only if the internet user has given his or her consent. Changes in technology from technology manufacturers and web browser providers, like Apple and Google, may also impact our tracking abilities and advertising services.

In July 2020, the Court of Justice of the European Union, or CJEU, ruled the EU-US Privacy Shield Framework, one of the primary safeguards that allowed U.S. companies to import personal data from the EU to the U.S., was invalid. The CJEU’s decision also raised questions about whether the most commonly used mechanism for cross-border transfers of personal data out of the European Economic Area, namely, the European Commission’s Standard Contractual Clauses, can lawfully be used for personal data transfers from the EU to the U.S. or other third countries the European Commission has determined do not provide adequate data protections under their laws. On June 4, 2021, the European Commission adopted new Standard Contractual Clauses, which impose on companies additional obligations relating to data transfers, including the obligation to conduct a transfer impact assessment and, depending on a party’s role in the transfer, to implement additional security measures and to update internal privacy practices. If we elect to rely on the new Standard Contractual Clauses for data transfers, we may be required to incur significant time and resources to update our contractual arrangements and to comply with new obligations. If we are unable to implement a valid mechanism for personal data transfers from the EU, we will face increased exposure to regulatory actions, substantial fines and injunctions against processing personal data from the EU. Additionally, other countries outside of the EU have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, which could increase the cost and complexity of delivering our services and operating our business. The type of challenges we face in the EU will likely also arise in other jurisdictions that adopt regulatory frameworks of equivalent complexity.

On January 31, 2020, the United Kingdom left the European Union and entered into a Brexit transition period. Following December 31, 2020, and the expiry of transitional arrangements between the UK and EU, the data protection obligations provided in the GDPR continue to apply to UK-related processing of personal data in substantially unvaried form under the so-called ‘UK GDPR’ (i.e., the GDPR as it continues to form part of UK law by virtue of section 3 of the EU (Withdrawal) Act 2018, as amended). However, going forward, there is increasing risk for divergence in application, interpretation and enforcement of the data protection laws as between the UK and EU.

In addition to the jurisdictions noted above, there is also rapid development of new privacy laws and regulations elsewhere around the globe, including amendments of existing data protection laws, to the scope of such laws and penalties for noncompliance. Failure to comply with these international data protection laws and regulations could have a negative impact on our reputation and subject us to significant penalties.

While all 50 U.S. states and the District of Columbia have enacted data breach notification laws, there is currently no such U.S. federal law generally applicable to our businesses. Data breach notification legislation and regulations relating to mandatory reporting came into force in Canada on November 1, 2018. Data breach notification laws have been proposed widely and exist in other specific countries and jurisdictions in which we conduct business. Legislative and regulatory measures, such as mandatory breach notification provisions, impose, among other elements, strict requirements on reporting time frames and providing notice to individuals.

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All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection technologies, training employees and engaging consultants, which are likely to increase over time. In addition, such requirements may require us to modify or restrict our data processing practices and policies, distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation, as well as proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, damages, penalties or judgments, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Risks related to other legal and regulatory matters

Legislation relating to consumer protection may affect our ability to provide our loyalty and marketing services, which, among other things, could negatively affect our ability to satisfy our clients’ needs.

The enactment of new or amended legislation or industry regulations pertaining to consumer protection, or any failure to comply with such changes, could have a material adverse impact on our loyalty and marketing services. Such changes could result in a negative impact to our reputation, an adverse effect on our profitability or an increase in our litigation exposure.

For example, Ontario’s Protecting Rewards Points Act (Consumer Protection Amendment), 2016, and additional related regulations, prohibit suppliers from entering into or amending consumer agreements to provide for the expiry of rewards points due to the passage of time alone, while permitting the expiry of rewards points if the underlying consumer agreement is terminated and that agreement provides that reward points expire upon termination. Similar legislation pertaining to the expiry of rewards points due to the passage of time alone is also in effect in Quebec as well as limitations on changes to the valuation of rewards points.

Our failure to protect our intellectual property rights may harm our competitive position, litigation to protect our intellectual property rights or defend against third party allegations of infringement or license violations may be costly, any of which could negatively impact our business, results of operations and profitability.

Third parties may infringe or misappropriate our trademarks or other intellectual property rights, which could have a material adverse effect on our business, financial condition or operating results. The actions we take to protect our trademarks and other proprietary rights may not be adequate. Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. Any infringement or misappropriation could harm any competitive advantage we currently derive or may derive from our proprietary rights. Third parties may also assert claims for infringement or violation of the terms of a license agreement to which we are a party against us. Any claims and an adverse determination in any resulting litigation could subject us to significant liability for damages and require us to either design around a third party’s patent or license alternative technology from another party. In addition, litigation is time consuming and expensive to defend and could result in the diversion of our time and resources. Further, our competitors or other third parties may independently design around or develop similar technology, or otherwise duplicate our services or products in a way that would preclude us from asserting our intellectual property rights against them. In addition, our contractual arrangements may not effectively prevent disclosure of our intellectual property or confidential and proprietary information or provide an adequate remedy in the event of an unauthorized disclosure, any of which could result in liability to us and negatively impact our business, results of operations, financial condition and profitability.

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Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses.

We are involved, from time to time, in litigation, other legal claims, regulatory actions or other proceedings or actions by governmental authorities involving matters associated with or incidental to our business in the ordinary course, including, among other things, matters involving customer or vendor disputes, breaches of contractual obligations, class actions or purported class actions, trademark and other intellectual property protection and licensing disputes, import/export regulations, taxation, and employment matters. The resolution of currently pending matters could subject us to significant fines, penalties, obligations to change our business practices or other requirements resulting in increased expenses, diminished earnings and damage to our reputation. We contest liability and/or the amount of damages as appropriate in each pending matter. The outcome of pending and future matters could be material to our results of operations, financial condition and cash flows depending on, among other factors, the level of our earnings for that period.

We are subject to risks related to our international operations.

We maintain significant operations internationally, operating in greater than 50 countries. As of December 31, 2020, substantially all of our revenues and long-lived assets were attributable to our operations outside the United States. Our international operations are subject to many risks and uncertainties, including:

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fluctuations in foreign currency exchange rates, which have affected and may in the future affect our results of operations, reported earnings, the value of our foreign assets, the relative prices at which we and foreign competitors offer solutions in the same markets and the cost of certain inventory and non-inventory items required by our operations;

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changes in foreign laws, regulations and policies, including restrictions on foreign investment, trade, import and export license requirements, quotas, trade barriers and other protection measures imposed by foreign countries, as well as changes in U.S. laws and regulations relating to tariffs and taxes, foreign trade and investment by our international operations;

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lack of a developed legal system, elevated levels of corruption, strict currency controls, adverse tax consequences or foreign ownership requirements, difficult or lengthy regulatory approvals, or lack of enforcement for non-compete agreements in certain jurisdictions;

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difficulties and costs associated with complying with, and enforcing remedies under, a wide variety of complex, and potentially conflicting, domestic and international laws, treaties and regulations, including the European Union’s General Data Protection Regulation (“GDPR”), the U.S. Foreign Corrupt Practices Act (“FCPA”), Canada’s Corruption of Foreign Public Officials Act (“CFPOA”), the U.K. Bribery Act 2010 (“UKBA”) and different regulatory structures and changes in regulatory environments;

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potentially reduced protection for, and difficulty enforcing, intellectual property rights, especially in jurisdictions that do not respect and protect intellectual property rights to the same extent as the United States;

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failure to effectively and immediately implement processes and policies across our diverse operations and employee base;

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adverse weather conditions, social, economic and geopolitical conditions, such as political instability, environmental hazards, natural disasters, terrorist attacks, war or other military action or violent revolution;

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significant health hazards or pandemics, which could result in closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in certain areas;

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industry and contractual standards that are specific by region and which may generate different or additional business risk to operate; and

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disruption due to labor disputes.

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We are also subject to the interpretation and enforcement by governmental agencies of international laws, rules, regulations or policies, including any changes thereto, such as restrictions on trade, import and export license requirements, privacy and data protection laws, and tariffs and taxes, which may require us to adjust our operations in certain markets where we do business. We face legal and regulatory risks in all jurisdictions where we operate; in particular, we cannot predict with certainty the outcome of various contingencies or the impact that pending or future legislative and regulatory changes may have on our business.

Furthermore, our extensive international operations may result in violations, or allegations of violations, of the FCPA, UKBA or CFPOA and similar international anti-bribery laws, which could adversely affect our reputation and business. These laws generally prohibit companies and their intermediaries from making improper payments to government officials or other third parties for the purpose of obtaining or retaining business. As part of our business, we or our partners may do business with state-owned enterprises, the employees and representatives of which may be considered foreign officials for purposes of the FCPA, UKBA or CFPOA. There can be no assurance that our policies, procedures, training and compliance programs will effectively prevent violation of all U.S. and international laws and regulations with which we are required to comply. Violations of such laws and regulations, or any of the other factors outlined above, could subject us to penalties that could adversely affect our reputation, business, financial condition or results of operations.

Risks relating to our indebtedness

Our level of indebtedness could materially adversely affect our ability to generate sufficient cash to repay our outstanding debt, our ability to react to changes in our business and our ability to incur additional indebtedness to fund future need.

We will have a high level of indebtedness, which requires a high level of interest and principal payments. Subject to the limits contained in our debt instruments, we may be able to incur substantial additional indebtedness from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our level of indebtedness could intensify. Our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness. Our higher level of indebtedness, combined with our other financial obligations and contractual commitments, could:

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make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under the agreements governing our indebtedness;

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require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions or other new business and other corporate purposes;

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increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage or require us to dispose of assets to raise funds if needed for working capital;

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limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;

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limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions or other new business and other corporate purposes;

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delay investments and capital expenditures;

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cause any refinancing of our indebtedness to be at higher interest rates and require us to comply with more onerous covenants, which could further restrict our business operations; and

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prevent us from raising the funds necessary to repurchase all notes tendered to us upon the occurrence of certain changes of control.

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Restrictions imposed by the agreements governing our outstanding or future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities.

The terms of the agreements governing our debt limit us and our subsidiaries from engaging in specified types of transactions. These covenants limit our and our subsidiaries’ ability, among other things, to:

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incur additional debt;

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declare or pay dividends, redeem stock or make other distributions to stockholders

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make investments;

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create liens or use assets as security in other transactions;

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merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets;

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enter into transactions with affiliates;

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sell or transfer certain assets; and

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enter into any consensual encumbrance or restriction on the ability of certain of our subsidiaries to pay dividends or make loans or sell assets to us.

As a result of these covenants and restrictions, we may be limited in how we conduct our business and we may be unable to raise additional indebtedness to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.

Risks relating to our common stock

Because there has not been any public market for our common stock, the market price and trading volume of our common stock may be volatile and you may not be able to resell your shares at or above the initial market price of our common stock following the Separation.

Prior to the Separation, there will have been no trading market for shares of our common stock. An active trading market may not develop or be sustained for our common stock after the Separation, and we cannot predict the prices at which our common stock will trade after the Separation. The market price of our common stock could fluctuate significantly due to a number of factors, many of which are beyond our control, including:

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Our different profile from ADS, such as not being included in Standard & Poor’s Midcap 400 Index or similar index, not paying a recurring dividend and not being a financial institution;

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Fluctuations in our quarterly or annual earnings results or those of other companies in our industry;

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Failures of our operating results to meet the estimates of securities analysts or the expectations of our stockholders, or changes by securities analysts in their estimates of our future earnings;

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Announcements by us or our sponsors, clients, suppliers or competitors;

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Changes in market valuations or earnings of other companies in our industry;

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Changes in laws or regulations which adversely affect our industry or us;

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General economic, industry and stock market conditions;

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Future significant sales of our common stock by our stockholders or the perception in the market of such sales;

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Future issuances of our common stock by us; and

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The other factors described in these “Risk Factors” and elsewhere in this information statement.

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These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

The trading market for our common stock may also be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth company status will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

A large number of our shares are or will be eligible for future sale, which may cause the market price of our common stock to decline.

Upon completion of the Separation, we estimate that we will have outstanding an aggregate of approximately shares of our common stock (based on shares of ADS common stock outstanding on , 2021). All of those shares (other than those held by our “affiliates”) will be freely tradable without restriction or registration under the Securities Act of 1933, as amended (the “Securities Act”). Shares held by our affiliates, which include our directors and executive officers, can be sold subject to volume, manner of sale and notice provisions of Rule 144 under the Securities Act. We estimate that our directors and executive officers, who may be considered “affiliates” for purposes of Rule 144, will beneficially own approximately shares of our common stock immediately following the Separation. We are unable to predict whether large amounts of our common stock will be sold in the open market following the Separation. We are also unable to predict whether a sufficient number of buyers will be in the market at that time. As discussed in the immediately following risk factor, certain index funds will likely be required to sell shares of our common stock that they receive in the Separation. In addition, other ADS stockholders may sell the shares of our common stock they receive in the Separation for various reasons. For example, such stockholders may not believe our business profile or level of market capitalization as an independent company fits their investment profile.

Because our common stock will not be included in the Standard & Poor’s Midcap 400 Index, and it may not be included in other stock indices, significant amounts of our common stock will likely need to be sold in the open market where there may not be offsetting demand.

A portion of ADS’ outstanding common stock is held by index funds tied to the Standard & Poor’s Midcap 400 Index and other stock indices. Based on a review of publicly available information as of , 2021, we believe approximately % of ADS’ outstanding common stock is held by index funds. Because our common stock will not be included in the Standard & Poor’s Midcap 400 Index, and it may not be included in other stock indices at the time of the Separation, index funds currently holding shares of ADS common stock will likely be required to sell the shares of our common stock they receive in the

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Separation. There may not be sufficient buying interest to offset sales by those index funds. Accordingly, our common stock could experience a high level of volatility immediately following the Separation and, as a result, the price of our common stock could be adversely affected.

Provisions in our amended and restated articles of incorporation and amended and restated bylaws and certain provisions of Delaware law could delay or prevent a change in control of SpinCo.

The existence of certain provisions of our amended and restated articles of incorporation and amended and restated bylaws and Delaware law could discourage, delay or prevent a change in control of SpinCo that a stockholder may consider favorable. These include provisions:

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Providing for a classified board of directors;

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Providing that our directors may be removed by our stockholders only for cause while our board is classified;

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Providing that the removal of our directors without cause after our board is de-classified must be approved by the holders of at least % of the voting power of SpinCo;

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Providing the right to our board of directors to issue one or more classes or series of preferred stock without stockholder approval;

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Authorizing a large number of shares of stock that are not yet issued, which would allow our board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us;

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Prohibiting stockholders from calling special meetings of stockholders or taking action by written consent; and

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Establishing advance notice and other requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted on by stockholders at the annual stockholder meetings.

We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions apply even if a takeover offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in our and our stockholders’ best interests. See “Description of Capital Stock.”

Our amended and restated bylaws will designate Delaware as the exclusive forum for certain litigation that may be initiated by our stockholder and will contain an exclusive federal forum provision for certain claims under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us and limit the market price of our common stock.

Pursuant to our amended and restated bylaws, as will be in effect upon the completion of the Separation, unless we consent in writing to the selection of an alternative forum, a state court located within the state of Delaware (or, if no state court located within the state of Delaware has jurisdiction, the federal court for the district of Delaware) shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our directors or officers or other employees or agents to us or to our stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty; (iii) any action asserting a claim against us or any of our directors or officers or other employees or agents arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws; (iv) any action asserting a claim related to or involving us that is governed by the internal affairs doctrine; or (v) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the Delaware General Corporation Law. Our amended and restated bylaws provide that the foregoing Delaware exclusive forum provisions do not apply to any action asserting claims under the Exchange Act or the Securities Act. The

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forum selection clause in our amended and restated bylaws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us and limit the market price of our common stock.

For claims brought under the Securities Act, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder and our articles will provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). Application of our Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. This provision will not apply to suits brought to enforce any duty or liability created by the Securities Act or the Exchange Act, or the rules and regulations thereunder.

The Federal Forum Provision described above is intended to apply to the fullest extent permitted by law. However, the enforceability of forum selection provisions in the governing documents of other companies has been challenged in legal proceedings, and it is possible that a court could find the Federal Forum Provision to be inapplicable or unenforceable with respect to actions arising under the Securities Act.

Your percentage ownership in SpinCo may be diluted in the future.

In the future, your percentage ownership in SpinCo may be diluted because of equity issuances for acquisitions, strategic investments, capital market transactions or otherwise, including equity awards that we may grant to our directors, officers and employees. Our compensation committee may grant additional equity awards to our employees after the Separation. These awards would have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.

In addition, our amended and restated articles of incorporation authorize us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, powers, preferences and relative, participating, optional and other rights, and such qualifications, limitations or restrictions as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, we could grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or dividend, distribution or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. See “Description of Capital Stock — Preferred Stock.”

Our common stock is and will be subordinate to all of our future indebtedness and any preferred stock, and effectively subordinated to all indebtedness and preferred equity claims against our subsidiaries.

Shares of our common stock are common equity interests in us and, as such, will rank junior to all of our future indebtedness and other liabilities. Additionally, holders of our common stock may become subject to the prior dividend and liquidation rights of holders of any class or series of preferred stock that our board of directors may designate and issue without any action on the part of the holders of our common stock. Furthermore, our right to participate in a distribution of assets upon any of our subsidiaries’ liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors and preferred stockholders, if any.

We cannot assure you that our board of directors will declare dividends in the foreseeable future.

We do not currently intend to pay any cash dividends on our capital stock for the foreseeable future. The declaration and payment of dividends, if any, will always be subject to the discretion of our board of directors. The timing and amount of any dividends declared will depend on, among other things, our earnings, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy and the terms of our outstanding indebtedness. We may incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including as a result of the risks described herein.

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THE SEPARATION

General

On May 12, 2021, ADS announced that it was moving forward with a plan to distribute to ADS’ stockholders 81% of the shares of common stock of SpinCo through the Separation, including the Restructuring and the Distribution. SpinCo is currently a wholly owned subsidiary of ADS and, at the time of the Distribution, ADS will hold, through its subsidiaries, the assets and liabilities associated with the Spin Business. The Separation will be achieved through the transfer of all the assets and liabilities of the Spin Business to SpinCo or its subsidiaries through the Restructuring and the distribution of 81% of the outstanding capital stock of SpinCo to holders of ADS common stock on the record date of , 2021 through the Distribution. At the effective time of the Distribution, ADS stockholders will receive one share of SpinCo common stock for every shares of ADS common stock held on the record date. The Separation is expected to be completed on , 2021. Immediately following the Separation, ADS stockholders as of the record date will own 81% of the outstanding shares of common stock of SpinCo. ADS will retain a 19% ownership interest in SpinCo. ADS will vote its SpinCo common stock in the same proportion as the votes cast in respect of the common stock not owned by ADS on any matter presented for a vote of SpinCo’s stockholders. ADS’s SpinCo common stock will be voted in the same proportion as the votes cast in respect of the common stock not owned by ADS on any matter presented for a vote of SpinCo’s stockholders.

As part of the Separation, we will enter into a Separation and Distribution Agreement and several other agreements to effect the Separation and provide a framework for our relationship with ADS after the Separation. These agreements will provide for the allocation between us and ADS of the assets, liabilities and obligations of ADS and its subsidiaries, and will govern the relationship between SpinCo and ADS after the Separation. At the Effective Time and subject to IRS approval, the chair of the board of ADS will be the chair of the Company’s board. In addition to the Separation and Distribution Agreement, the other principal agreements to be entered into with ADS include:

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A Tax Matters Agreement;

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A Transition Services Agreement; and

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An Employee Matters Agreement.

The Separation as described in this information statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see “— Conditions to the Distribution” below. We cannot provide any assurances that ADS will complete the Separation.

Reasons for the Separation

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Strategic and Management Focus. Permit the management team of each company to focus on its own strategic priorities with financial targets that best fit its own business and opportunities, market development and geographical focus. We believe the Separation will enable each company’s management team to better position its businesses to capitalize on developing macroeconomic trends, increase managerial focus to pursue its individual strategies and leverage its key strengths to drive performance. The management of each resulting company will be able to concentrate on its core competencies and growth opportunities, and will have increased flexibility and speed to design and implement corporate strategies based on the characteristics of its unique business.

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structure, dividend policy and growth strategy tailored to each unique business. Both businesses are expected to have direct access to the debt and equity capital markets to fund their respective growth strategies.

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Investor Choice. Provide investors, both current and prospective, with the ability to value the two companies based on their distinct business characteristics and make more targeted investment decisions based on those differences. Separating the two businesses will provide investors with a more targeted investment opportunity so that investors interested in companies in the loyalty space will have the opportunity to acquire stock of SpinCo while those focused on financial institutions may acquire stock of ADS.

The financial terms of the Separation, including the new indebtedness expected to be incurred by SpinCo or entities that are, or will become, prior to the completion of the Separation, subsidiaries of SpinCo, and the amount of the cash transfer to ADS has been, or will be, determined by the ADS board of directors based on a variety of factors, including establishing an appropriate pro forma capitalization for SpinCo as a stand-alone company considering the historical earnings of the Spin Business and the level of indebtedness relative to earnings of comparable companies.

The number of shares you will receive

For every shares of ADS common stock you own as of the close of business on , 2021, the record date for the Distribution, you will receive one share of SpinCo common stock on the Distribution Date for the Separation.

Treatment of fractional shares

The distribution agent will not distribute any fractional shares of our common stock to ADS stockholders. Instead, as soon as practicable on or after the Distribution Date for the Separation, the distribution agent for the Distribution will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing prices and distribute the net cash proceeds from the sales, net of brokerage fees and commissions, transfer taxes and other costs and after making appropriate deductions of the amounts required to be withheld for U.S. federal income tax purposes, if any, pro rata to each holder who would otherwise have been entitled to receive a fractional share in the Distribution. The distribution agent will determine when, how, through which broker-dealers and at what prices to sell the aggregated fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any minimum sale price for the fractional shares or to any interest on the amounts of payments made in lieu of fractional shares. The receipt of cash in lieu of fractional shares generally will be taxable to the recipient stockholders for U.S. federal income tax purposes as described below in “The Separation—Material U.S. Federal Income Tax Consequences of the Distribution—The Distribution.”

When and how you will receive the distribution of SpinCo shares

ADS will distribute the shares of our common stock on , 2021 to holders of record as of the close of business on the record date for the Distribution. The Distribution is expected to be completed following the market closing on the Distribution Date for the Separation. ADS’ transfer agent and registrar, Computershare, will serve as transfer agent and registrar for the SpinCo common stock and as distribution agent in connection with the Distribution.

If you own ADS common stock as of the close of business on the record date for the Distribution, the shares of SpinCo common stock that you are entitled to receive in the Distribution will be issued electronically, as of the Distribution Date for the Separation, to your account as follows:

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Registered Stockholders. If you own your shares of ADS stock directly, either in book-entry form through an account at Computershare and/or if you hold paper stock certificates, you will receive your shares of SpinCo common stock by way of direct registration in book-entry form. Registration in book-entry form is a method of recording stock ownership when no physical paper share certificates are issued to stockholders, as will be the case in the Distribution.

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On or shortly after the Distribution Date for the Separation, the distribution agent will mail to you an account statement that indicates the number of shares of SpinCo common stock that have been registered in book-entry form in your name.

Stockholders having any questions concerning the mechanics of having shares of our common stock registered in book-entry form may contact Computershare at the address set forth in “Summary — Questions and Answers About the Separation” in this information statement.

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Beneficial Stockholders. Many ADS stockholders hold their shares of ADS common stock beneficially through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the stock in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your ADS common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares of SpinCo common stock that you are entitled to receive in the Distribution. If you have any questions concerning the mechanics of having shares of common stock held in “street name,” we encourage you to contact your bank or brokerage firm.

Results of the Separation

After the Separation, we will be an independent, publicly traded company that directly or indirectly holds the assets and liabilities of the Spin Business. Immediately following the Separation, we expect to have approximately stockholders of record, based on the number of registered stockholders of ADS common stock on , 2021, applying a distribution ratio of one share of our common stock for every shares of ADS common stock. We expect to have approximately shares of SpinCo common stock outstanding. The actual number of shares to be distributed will be determined on the record date.

Before the completion of the Separation, we will enter into a Separation and Distribution Agreement and several other agreements with ADS to effect the Separation and provide a framework for our relationship with ADS after the Separation. These agreements will provide for the allocation between SpinCo and ADS of ADS’ assets, liabilities and obligations subsequent to the Separation (including with respect to transition services, employee matters, intellectual property matters and tax matters). At the Effective Time and subject to IRS approval, the chair of the board of ADS will be the chair of the Company’s board.

For a more detailed description of these agreements, see “—Agreements with ADS” below. The Separation will not affect the number of outstanding shares of ADS common stock or any rights of ADS stockholders.

Incurrence of debt

We intend to enter into new financing arrangements in anticipation of the Separation. We expect to incur approximately $ of new debt, which we intend to use to the net proceeds to fund a cash transfer to ADS as part of the Restructuring, which ADS will use to pay down a portion of the outstanding term loans under its credit agreement.

Material U.S. federal income tax consequences of the Distribution

The following is a discussion of the material U.S. federal income tax consequences of the Distribution to U.S. Holders (as defined below) of ADS common stock. This discussion is based on the Code, applicable Treasury regulations, administrative interpretations and court decisions as in effect as of the date of this information statement, all of which may change, possibly with retroactive effect. For purposes of this discussion, a “U.S. Holder” is a beneficial owner of ADS common stock that is for U.S. federal income tax purposes:

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A citizen or resident of the U.S.;

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A corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the U.S., any state therein or the District of Columbia; or

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An estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

This discussion addresses only the consequences of the Distribution to U.S. Holders that hold ADS common stock as a capital asset. It does not address all aspects of U.S. federal income taxation that may be important to a U.S. Holder in light of that stockholder’s particular circumstances or to a U.S. Holder subject to special rules, such as:

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A financial institution, regulated investment company or insurance company;

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A tax-exempt organization;

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A dealer or broker in securities, commodities or foreign currencies;

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A stockholder that holds ADS common stock as part of a hedge, appreciated financial position, straddle, conversion, or other risk reduction transaction;

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A stockholder that holds ADS common stock in a tax-deferred account, such as an individual retirement account; or

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A stockholder that acquired ADS common stock pursuant to the exercise of options or similar derivative securities or otherwise as compensation.

If a partnership, or any entity treated as a partnership for U.S. federal income tax purposes, holds ADS common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partners and the activities of the partnership. A partner in a partnership holding ADS common stock should consult its tax advisor.

A U.S. Holder who acquired different blocks of ADS common stock at different times and at different prices generally must apply the rules described in the following sections separately to each identifiable block of shares of ADS common stock. A U.S. Holder who holds ADS common stock with differing bases or holding periods should consult its tax adviser.

This discussion of material U.S. federal income tax consequences is not a complete analysis or description of all potential U.S. federal income tax consequences of the Distribution. This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. In addition, it does not address any U.S. federal, estate, gift or other non-income tax or any non-U.S., state or local tax consequences of the Distribution. Accordingly, each holder of ADS common stock should consult his, her or its tax advisor to determine the particular U.S. federal, state or local or non-U.S. income or other tax consequences of the Distribution to such holder.

Private letter ruling and tax opinion

The consummation of the Separation, along with certain related transactions, is conditioned upon the receipt of a private letter ruling from the IRS. Although a private letter ruling from the IRS generally is binding on the IRS, if the factual representations or assumptions made in the private letter ruling request are inaccurate or incomplete in any material respect, ADS will not be able to rely on the ruling. Furthermore, the IRS will not rule on whether a distribution such as the Distribution satisfies certain legal requirements necessary to obtain tax-free treatment under Section 355 of the Code. Rather, the private letter ruling will be based on representations by ADS that those requirements have been satisfied, and any inaccuracy in those representations could invalidate the ruling.

The consummation of the Separation, along with certain related transactions, is further conditioned upon the receipt of opinion of Davis Polk & Wardwell LLP substantially to the effect that the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code, which we refer to as the “Tax Opinion.” In rendering the Tax Opinion to be given as of the closing of the Separation, which we refer to as the “Closing Tax Opinion,” Davis Polk & Wardwell LLP will rely on (i) customary representations and covenants made by us and ADS, including those contained in certificates of officers of us and ADS, and (ii) specified assumptions, including an assumption regarding the

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completion of the Separation and certain related transactions in the manner contemplated by the transaction agreements. In addition, Davis Polk & Wardwell’s ability to provide the Closing Tax Opinion will depend on the absence of changes in existing facts or law between the date of this information statement and the closing date of the Distribution. If any of the representations, covenants or assumptions on which Davis Polk & Wardwell LLP will rely is inaccurate, Davis Polk & Wardwell LLP may not be able to provide the Closing Tax Opinion or the tax consequences of the Separation could differ from those described below. The opinion of Davis Polk & Wardwell LLP does not preclude the IRS or the courts from adopting a contrary position.

The Distribution

Assuming that the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code, and that the Restructuring steps will qualify as transactions that are tax-free for U.S. federal income tax purposes, in general, for U.S. federal income tax purposes:

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The Separation will not result in the recognition of income, gain or loss to ADS or us;

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No gain or loss will be recognized by, and no amount will be included in the income of, U.S. Holders of ADS common stock upon the receipt of our common stock in the Distribution;

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The aggregate tax basis of the shares of our common stock (including fractional shares deemed received and exchanged for cash, as described below) distributed in the Distribution to a U.S. Holder of ADS common stock will be determined by allocating the aggregate tax basis such U.S. Holder has in the shares of ADS common stock immediately before such Distribution between such ADS common stock and our common stock in proportion to the relative fair market value of each immediately following the Distribution;

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The holding period of any shares of our common stock received by a U.S. Holder of ADS common stock in the Distribution will include the holding period of the shares of ADS common stock held by a U.S. Holder prior to the Distribution; and

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A U.S. Holder of ADS common stock that receives cash in lieu of a fractional share of our common stock will recognize capital gain or loss, measured by the difference between the cash received for such fractional share and the U.S. Holder’s tax basis in that fractional share, determined as described above, and such gain or loss will be long-term capital gain or loss if the U.S. Holder’s holding period in the ADS common stock is more than one year as of the closing date of the Distribution.

In general, if the Distribution, together with certain related transactions, does not qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code, the Distribution will be treated as a taxable dividend to holders of ADS common stock in an amount equal to the fair market value of our common stock received, to the extent of such holder’s ratable share of ADS’ earnings and profits. In addition, if the Separation does not qualify as a tax-free transaction, ADS will recognize taxable gain, which could result in significant tax to ADS.

Even if the Separation were otherwise to qualify as a tax-free transaction, the Distribution will be taxable to ADS under Section 355(e) of the Code if 50% or more of either the total voting power or the total fair market value of the stock of ADS or our common stock is acquired as part of a plan or series of related transactions that includes the Distribution. If Section 355(e) applies as a result of such an acquisition, ADS would recognize taxable gain as described above, but the Distribution would generally be tax-free to you. Under some circumstances, the Tax Matters Agreement would require us to indemnify ADS for the tax liability associated with the taxable gain. See “—Agreements with ADS—Tax Matters Agreement.”

Under the Tax Matters Agreement, we will generally be required to indemnify ADS for the resulting taxes in the event that the Separation and/or related transactions fail to qualify for their intended tax treatment due to any action by us or any of our subsidiaries (see “—Agreements with ADS—Tax Matters

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Agreement”). If the Separation were to be taxable to ADS, the liability for payment of such tax by ADS or by us under the Tax Matters Agreement could have a material adverse effect on ADS or us, as the case may be.

Information reporting and backup withholding

U.S. Treasury regulations generally require holders who own at least 5% of the total outstanding stock of ADS (by vote or value) and who receive our common stock pursuant to the Distribution to attach to their U.S. federal income tax return for the year in which the Distribution occurs a detailed statement setting forth certain information relating to the tax-free nature of the Distribution. ADS and/or we will provide the appropriate information to each holder upon request, and each such holder is required to retain permanent records of this information. In addition, payments of cash to a U.S. Holder of ADS common stock in lieu of fractional shares of our common stock in the Distribution may be subject to information reporting. Such payments that are subject to information reporting may also be subject to backup withholding, unless such U.S. Holder provides the withholding agent with a correct taxpayer identification number and otherwise complies with the requirements of the backup withholding rules. Backup withholding does not constitute additional tax, but merely an advance payment, which may be refunded or credited against a U.S. Holder’s U.S. federal income tax liability, provided the required information is timely supplied to the IRS.

Appraisal rights

No ADS stockholder will have any appraisal rights in connection with the Separation.

Listing and trading of our common stock

As of the date of this information statement, there is no public market for our common stock. We expect to apply for listing of our common stock on the under the ticker symbol “LYLT.”

Trading between record date and Distribution Date

Beginning on the record date for the Distribution and continuing up to and including the Distribution Date for the Separation, we expect there will be two markets in ADS common stock: a “regular-way” market and an “ex-distribution” market. Shares of ADS common stock that trade on the “regular-way” market will trade with an entitlement to receive shares of SpinCo common stock in the Distribution. Shares that trade on the “ex-distribution” market will trade without an entitlement to receive shares of SpinCo common stock in the Distribution. Therefore, if you sell shares of ADS common stock in the “regular-way” market after the close of business on the record date for the Distribution and up to and including through the Distribution Date, you will be selling your right to receive shares of SpinCo common stock in the Distribution. If you own shares of ADS common stock as of the close of business on the record date for the Distribution and sell those shares in the “ex-distribution” market, up to and including through the Distribution Date, you will still receive the shares of SpinCo common stock that you would be entitled to receive in respect of your ownership, as of the record date, of the shares of ADS common stock that you sold.

Furthermore, beginning on , 2021 and continuing up to and including the Distribution Date for the Separation, we expect there will be a “when-issued” market in our common stock. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for shares of SpinCo common stock that will be distributed to ADS stockholders on the Distribution Date. If you own shares of ADS common stock as of the close of business on the record date, you would be entitled to receive shares of our common stock in the Distribution. You may trade this entitlement to receive shares of SpinCo common stock, without trading the shares of ADS common stock you own, in the “when-issued” market. On the first trading day following the Distribution Date, we expect “when- issued” trading with respect to SpinCo common stock will end and “regular-way” trading in SpinCo common stock will begin.

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Conditions to the Distribution

We expect the Distribution will be effective on , 2021, the Distribution Date, provided that, among other conditions described in the Separation and Distribution Agreement, the following conditions will have been satisfied or waived by ADS in its sole discretion:

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The Separation-related restructuring transactions contemplated by the Separation and Distribution Agreement (the “Restructuring Transactions”) and the consummation of certain new SpinCo financing arrangements contemplated by the Separation and Distribution Agreement will each have been completed;

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The ADS board of directors will have approved the Distribution and will not have abandoned the Distribution or terminated the Separation and Distribution Agreement at any time prior to the Distribution;

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The SEC will have declared effective our registration statement on Form 10, of which this information statement is a part, under the Exchange Act, no stop order suspending the effectiveness of our registration statement on Form 10 will be in effect and no proceedings for such purpose will have been instituted or threatened by the SEC, and this information statement, will have been mailed to the holders of ADS common stock as of the record date for the Distribution;

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All actions and filings necessary or appropriate under applicable federal, state or other securities laws or “blue sky” laws and the rules and regulations thereunder will have been taken and, where applicable, become effective or accepted;

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Our common stock to be delivered in the Distribution will have been approved for listing on the , subject to official notice of issuance;

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The SpinCo board of directors, as named in this information statement, will have been duly appointed;

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Each of the ancillary agreements contemplated by the Separation and Distribution Agreement will have been executed and delivered by the parties thereto;

•

ADS will have received a private letter ruling from the IRS and an opinion of Davis Polk & Wardwell LLP (each of which will not have been revoked or modified in any material respect), in each case reasonably satisfactory to ADS, to the effect that, for U.S. federal income tax purposes, the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Code and a tax-free distribution within the meaning of Section 355 of the Code;

•

No applicable law will have been adopted, promulgated or issued that prohibits the consummation of the distribution or any of the transactions contemplated by the Separation and Distribution Agreement;

•

Any material governmental approvals and consents and any material permits, registrations and consents from third parties, in each case, necessary to effect the distribution and to permit the operation of the Spin Business after the Distribution substantially as conducted as of the date of the Separation and Distribution Agreement will have been obtained;

•

No event or development will have occurred or exist that, in the judgment of the ADS board of directors, in its sole and absolute discretion, makes it inadvisable to effect the Distribution or other transactions contemplated by the Separation and Distribution Agreement; and

•

Certain necessary actions to complete the Separation will have occurred, including (a) the amended and restated articles of incorporation and amended and restated bylaws of SpinCo, in substantially the form attached as exhibits to the registration statement of which this information statement forms a part, will be in effect and (b) ADS will have entered into a distribution agent agreement with a distribution agent or otherwise provided instructions to a distribution agent regarding the Distribution.

The fulfillment of the foregoing conditions will not create any obligations on ADS’ part to effect the Separation, and the ADS board of directors has reserved the right, in its sole discretion, to abandon, modify

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or change the terms of the Separation, including by accelerating or delaying the timing of the consummation of all or part of the Distribution, at any time prior to the Distribution Date.

Agreements with ADS

As part of the Separation, we will enter into a Separation and Distribution Agreement and several other agreements with ADS to effect the Separation and provide a framework for our relationships with ADS after the Separation. These agreements will provide for the allocation between us and ADS of the assets, liabilities and obligations of ADS and its subsidiaries, and will govern the relationships between SpinCo and ADS subsequent to the Separation (including with respect to transition services, employee matters, intellectual property matters and tax matters).

In addition to the Separation and Distribution Agreement (which will contain many of the key provisions related to our Separation from ADS and the distribution of our shares of common stock to ADS stockholders), these agreements include, among others:

•

A Tax Matters Agreement;

•

A Transition Services Agreement; and

•

An Employee Matters Agreement.

The forms of the principal agreements described below have been filed as exhibits to the registration statement of which this information statement forms a part. The following descriptions of these agreements are summaries of the material terms of these agreements.

The Separation and Distribution Agreement

The Separation and Distribution Agreement will govern the overall terms of the Separation. Generally, the Separation and Distribution Agreement will include ADS’ and our agreements relating to the restructuring steps to be taken to complete the Separation, the assets and rights to be transferred, liabilities to be assumed and related matters.

Subject to the receipt of required governmental and other consents and approvals and the satisfaction of other closing conditions, in order to accomplish the Separation, the Separation and Distribution Agreement will provide for ADS and us to transfer specified assets between the companies that will operate the Spin Business after the Distribution, on the one hand, and ADS’ remaining businesses, on the other hand. The Separation and Distribution Agreement will require ADS and us to use reasonable efforts to obtain consents, approvals and amendments required to assign the assets and liabilities that are to be transferred pursuant to the Separation and Distribution Agreement.

Unless otherwise provided in the Separation and Distribution Agreement or any of the related ancillary agreements, all assets will be transferred on an “as is, where is” basis. Generally, if the transfer of any assets or any claim or right or benefit arising thereunder requires a consent that will not be obtained before the distribution for the Separation, or if the transfer or assignment of any such asset or such claim or right or benefit arising thereunder would be ineffective or would adversely affect the rights of the transferor thereunder so that the intended transferee would not in fact receive all such rights, the party retaining any asset that otherwise would have been transferred shall hold such asset in trust for the use and benefit of the party entitled thereto and retain such liability for the account of the party by whom such liability is to be assumed, and take such other action as may be reasonably requested by the party to which such asset is to be transferred, or by whom such liability is to be assumed, as the case may be, in order to place such party, insofar as reasonably possible, in the same position as would have existed had such asset or liability been transferred prior to the Distribution.

The Separation and Distribution Agreement will specify those conditions that must be satisfied or waived by ADS prior to the completion of the Separation, which are described further above in “—Conditions to the Distribution.” In addition, ADS will have the right to determine the date and terms of the Separation, and will have the right, at any time until completion of the distribution, to determine to abandon or modify the distribution and to terminate the Separation and Distribution Agreement.

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In addition, the Separation and Distribution Agreement will govern the treatment of indemnification, insurance and litigation responsibility and management. Generally, the Separation and Distribution Agreement will provide for uncapped cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of ADS’ retained businesses with ADS. The Separation and Distribution Agreement will also establish procedures for handling claims subject to indemnification and related matters.

Tax Matters Agreement

In connection with the Separation, we and ADS will enter into a tax matters agreement (the “Tax Matters Agreement”) that will govern the parties’ respective rights, responsibilities and obligations with respect to taxes, including taxes arising in the ordinary course of business, and taxes, if any, incurred as a result of the failure of the Distribution (and certain related transactions) to qualify for tax-free treatment for U.S. federal income tax purposes. The Tax Matters Agreement will also set forth the respective obligations of the parties with respect to the filing of tax returns, the administration of tax contests and assistance and cooperation on tax matters.

In general, the Tax Matters Agreement will govern the rights and obligations that we and ADS have after the Separation with respect to taxes for both pre- and post-closing periods. Under the Tax Matters Agreement, ADS generally will be responsible for all of our pre-closing income taxes that are reported on combined tax returns with ADS or any of its affiliates. We will generally be responsible for all other income taxes and all non-income taxes primarily related to SpinCo that are due and payable after the Separation.

The Tax Matters Agreement will further provide that:

•

Without duplication for our indemnification obligations described in the prior paragraph, we will generally indemnify ADS against (i) taxes arising in the ordinary course of business for which we are responsible (as described above) and (ii) any liability or damage resulting from a breach by us or any of our affiliates of a covenant or representation made in the Tax Matters Agreement; and

•

ADS will indemnify us against taxes for which ADS is responsible under the Tax Matters Agreement (as described above).

In addition to the indemnification obligations described above, the indemnifying party will generally be required to indemnify the indemnified party against any interest, penalties, additions to tax, losses, assessments, settlements or judgments arising out of or incident to the event giving rise to the indemnification obligation, along with costs incurred in any related contest or proceeding.

Further, the Tax Matters Agreement generally will prohibit us and our affiliates from taking certain actions that could cause the Separation and certain related transactions to fail to qualify for their intended tax treatment, including:

•

During the two-year period following the Distribution Date, we may not discontinue the active conduct of our business (within the meaning of Section 355(b)(2) of the Code);

•

During the two-year period following the Distribution Date, we may not sell or otherwise issue our common stock in certain circumstances;

•

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•

In the event that the Separation and certain related transactions fail to qualify for their intended tax treatment, in whole or in part, and ADS is subject to tax as a result of such failure, the Tax Matters Agreement will determine whether ADS must be indemnified for any such tax by us. As a general matter, under the terms of the Tax Matters Agreement, we are required to indemnify ADS for any tax-related losses in connection with the Separation due to any action by us or any of our subsidiaries following the Separation. Therefore, in the event that the Separation and/or related transactions fail to qualify for their intended tax treatment due to any action by us or any of our subsidiaries, we will generally be required to indemnify ADS for the resulting taxes.

Transition Services Agreement

The Transition Services Agreement will set forth the terms on which ADS will provide to us, and we will provide to ADS, on a transitional basis, certain services or functions that the companies historically have shared. Transition services will include various corporate, administrative and information technology services. The Transition Services Agreement will provide for the provision of specified transition services, generally for a period of up to two years following the Distribution. Compensation for transition services will be determined using an internal cost allocation methodology based on cost or cost plus a margin.

Employee Matters Agreement

We intend to enter into an Employee Matters Agreement with ADS prior to the Separation that will govern each company’s respective compensation and benefit obligations with respect to current and former employees, directors and consultants. The Employee Matters Agreement will set forth general principles relating to employee matters in connection with the Separation, such as the placement of employees, the assumption and retention of liabilities and related assets, expense reimbursements, workers’ compensation, leaves of absence, the provision of comparable benefits, employee service credit, the sharing of employee information and duplication or acceleration of benefits.

The Employee Matters Agreement generally will allocate liabilities and responsibilities relating to employee compensation and benefit plans and programs with ADS retaining liabilities (both pre- and post-Distribution) and responsibilities with respect to ADS participants who will remain with ADS and SpinCo assuming liabilities and responsibilities with respect to participants who will transfer to SpinCo in connection with the Separation. The Employee Matters Agreement will provide that, following the Distribution, SpinCo active employees generally will no longer participate in benefit plans sponsored or maintained by ADS and will commence participation in SpinCo benefit plans.

The Employee Matters Agreement will also provide that (i) the Distribution does not constitute a change in control under ADS’ plans, programs, agreements or arrangements and (ii) the Distribution and the assignment, transfer or continuation of the employment of employees with another entity will not constitute a severance event under applicable plans, programs, agreements or arrangements.

Transferability of shares of our common stock

The shares of our common stock that you will receive in the Distribution will be freely transferable, unless you are considered an “affiliate” of ours under Rule 144 under the Securities Act. Persons who can be considered our affiliates after the Separation generally include individuals or entities that directly, or indirectly through one or more intermediaries, control, are controlled by or are under common control with us, and may include certain of our officers and directors. In addition, individuals who are affiliates of ADS on the Distribution Date may be deemed to be affiliates of ours. We estimate that our directors and executive officers, who may be considered “affiliates” for purposes of Rule 144, will beneficially own approximately shares of our common stock immediately following the Separation. See “Ownership of Common Stock by Certain Beneficial Owners and Management” included elsewhere in this information statement. Our affiliates may sell shares of our common stock received in the Distribution only:

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•

Under a registration statement that the SEC has declared effective under the Securities Act; or

•

Under an exemption from registration under the Securities Act, such as the exemption afforded by Rule 144.

•

In general, under Rule 144 as currently in effect, an affiliate will be entitled to sell, within any three-month period, a number of shares of our common stock that does not exceed the greater of:

•

One percent of our common stock then outstanding; or

•

The average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 for the sale.

Rule 144 also includes notice requirements and restrictions governing the manner of sale for sales by our affiliates. Sales may not be made under Rule 144 unless certain information about us is publicly available.

Reason for furnishing this information statement

This information statement is being furnished solely to provide information to ADS stockholders who are entitled to receive shares of our common stock in the Distribution. The information statement is not, and is not to be construed as, an inducement or encouragement to buy, hold or sell any of our securities. We believe the information contained in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither ADS nor we undertake any obligation to update such information except in the normal course of our respective public disclosure obligations.

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DIVIDEND POLICY

We do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to pay down our outstanding indebtedness and fund the development and expansion of our business. The declaration and amount of any dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, cash flows, capital requirements of our business, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors the board of directors deems relevant. In addition, our ability to pay cash dividends on our capital stock may be limited by the terms of any future debt or preferred securities we issue or any credit facilities we enter into.

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CAPITALIZATION

The following table sets forth our cash and equivalents and our capitalization as of December 31, 2020 on a historical and pro forma basis to give effect to the Separation, the incurrence of debt and other matters, as discussed in “The Separation.”

The pro forma adjustments are based upon available information and assumptions that management believes are reasonable; however, such adjustments are subject to change based on the finalization of the terms of the Separation and the agreements which define our relationship with ADS after the completion of the Separation. In addition, such adjustments are estimates and may not prove to be accurate.

You should read the information in the following table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Combined Financial Statements” and our historical combined financial statements and the related notes included elsewhere in this information statement.

We are providing the capitalization table for information purposes only. The capitalization table below may not reflect the capitalization or financial condition that would have resulted had we been operating as an independent, publicly traded company on December 31, 2020 and is not necessarily indicative of our future capitalization or financial condition.

	As of December 31, 2020
	Actual			Pro Forma (Unaudited)
	(In thousands, except share amounts)
Cash and equivalents		$	278,841		$
Indebtedness:
Short-term:
Short-term borrowings			—
Long-term:
Long-term debt			—
Total indebtedness			—
Equity:
Common stock, par value $0.01; shares authorized, shares issued and outstanding, pro forma			—
Additional paid-in-capital			—
Parent’s net investment			1,093,920
Accumulated other comprehensive income			381
Total equity		$	1,094,301		$
Total capitalization		$	1,094,301		$

We have not yet finalized our post-Distribution capitalization. We will have cash on hand in an amount to be determined at or prior to the time of the Distribution. We expect that at the time of the Distribution, we will have significant third-party indebtedness. We intend to update our financial information to reflect our post-Distribution capitalization in a subsequent amendment to this information statement.

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UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The unaudited pro forma combined financial statements (the “Unaudited Pro Forma Combined Financial Statements”) of SpinCo presented below have been derived from the historical combined financial statements (the “Combined Financial Statements”) of SpinCo included elsewhere in this information statement. The pro forma information gives effect to the Separation and Distribution, the incurrence of debt and other related transactions outlined below. The pro forma adjustments include but are not limited to:

•

the effect of SpinCo’s anticipated post-separation capital structure, including the incurrence of indebtedness of approximately $ ;

•

the distribution of shares of SpinCo’s common stock by ADS to its stockholders and the elimination of the Parent’s net investment; and

•

the impact of, and transactions contemplated by, the Separation Agreement and the other transaction agreements to be entered into by ADS and SpinCo in connection with the Separation and Distribution.

It is preliminarily estimated that the costs related to the Separation to be incurred during SpinCo’s transition to being a stand-alone public company will be approximately $ million to $ million and will be paid by ADS.

The following unaudited pro forma condensed combined financial statements give effect to the Separation and related adjustments in accordance with Article 11 of the Securities and Exchange Commission’s Regulations S-X. The pro forma adjustments are based on available information and assumptions that SpinCo’s management believes are reasonable; however, such adjustments are subject to change as the costs of operating as a stand-alone company are determined. In addition, such adjustments are estimates and may not prove to be accurate. The Unaudited Pro Forma Combined Financial Statements of SpinCo also includes certain adjustments that give effect to autonomous entity adjustments which are necessary to reflect the operations and financial positions of SpinCo as an autonomous entity.

The unaudited pro forma combined statement of operations (the “Unaudited Pro Forma Combined Statement of Operations”) of SpinCo for the fiscal year ended December 31, 2020 has been prepared as though the Separation and Distribution occurred on January 1, 2020. The unaudited pro forma combined balance sheet (the “Unaudited Pro Forma Combined Balance Sheet”) of SpinCo as of December 31, 2020 has been prepared as though the Separation and Distribution occurred on December 31, 2020. The Unaudited Pro Forma Combined Financial Statements of SpinCo are for illustrative purposes only, and do not reflect what SpinCo’s financial position and results of operations would have been had the Separation and Distribution occurred on the dates indicated and are not necessarily indicative of SpinCo’s future financial position and future results of operations.

The Unaudited Pro Forma Combined Financial Statements of SpinCo should be read in conjunction with the Combined Financial Statements of SpinCo and accompanying notes, “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this information statement. The Unaudited Pro Forma Combined Financial Statements of SpinCo constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included elsewhere in this information statement.

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Unaudited Pro Forma Combined Statement of Operations of SpinCo

	For The Year Ended December 31, 2020
	Historical			Pro Forma Adjustments			Adjusted
	(in thousands)
Revenues
Redemption, net		$	473,067		$			$
Services			264,050
Other			27,689
Total revenue			764,806
Operating expenses
Cost of operations (exclusive of depreciation and amortization disclosed separately below)			587,615
General and administrative			14,315
Depreciation and other amortization			28,988
Amortization of purchased intangibles			48,953
Total operating expenses			679,871
Operating income			84,935
Gain on sale of a business			(10,876)
Interest (income) expense, net			(834)			(a)
Income before income taxes and loss from investment in unconsolidated subsidiaries			96,645
Provision (benefit) for income taxes			21,324			(c)
Loss from investment in unconsolidated subsidiaries – related party, net of tax			246
Net income		$	75,075		$			$
Pro forma earnings per share
Basic						(d)
Diluted						(d)
Pro forma weighted average shares outstanding:
Basic
Diluted

See Notes to Unaudited Pro Forma Combined Financial Statements of SpinCo.

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Unaudited Pro Forma Combined Balance Sheet of SpinCo

	As of December 31, 2020
	Historical			Pro Forma Adjustments			Adjusted
	(in thousands)
ASSETS
Cash and cash equivalents		$	278,841		$	(b)
Accounts receivable, net			270,559
Inventories, net			164,306
Redemption settlement assets, restricted			693,461
Other current assets			23,000
Total current assets			1,430,167
Property and equipment, net			97,916
Right of use assets – operating			113,870
Deferred tax asset, net			70,137
Intangible assets, net			5,097
Goodwill			735,898
Investment in unconsolidated subsidiaries – related party			854
Other non-current assets			4,125			(b)
Total assets		$	2,458,064		$
LIABILITIES AND EQUITY
Accounts payable		$	74,818		$	(g)
Accrued expenses			67,056
Deferred revenue			898,475
Current operating lease liabilities			9,942
Current portion of long-term and other debt			—			(b)
Other current liabilities			64,990
Total current liabilities			1,115,281
Deferred revenue			105,544
Long-term operating lease liabilities			117,648
Long-term and other debt			—			(b)
Other liabilities			25,290
Total liabilities			1,363,763
Commitments and contingencies
Stockholders’ equity:
Common stock			—			(e)
Additional paid-in capital			—			(f)
Parent’s net investment			1,093,920			(f)
Accumulated other comprehensive income (loss)			381
Total equity			1,094,301
Total liabilities and equity		$	2,458,064		$

See Notes to Unaudited Pro Forma Combined Financial Statements of SpinCo.

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF SPINCO

Reflects interest expense related to $ million of indebtedness that SpinCo expects to enter into in connection with the Separation and Distribution and amortization of anticipated financing fees of $ million to be paid by SpinCo. The expected interest rate on the debt is approximately . SpinCo estimates that interest expense would have been $ million for the year ended December 31, 2020. Interest expense may be higher or lower if SpinCo’s actual interest rate changes. SpinCo estimates that amortization of the financing fees would have been $ million for the year ended December 31, 2020.

Reflects $ million of borrowings expected to be incurred in connection with the Separation net of anticipated financing fees to be paid by SpinCo of $ million. The financing fees related to the debt are shown as a reduction to long-term debt, net of the current portion. SpinCo plans to dividend the net proceeds of $ million to ADS in connection with the Separation and Distribution. SpinCo also intends to enter into a $ million revolving credit facility to support our business after consummation of the Separation and Distribution, but does not expect to draw on this facility immediately. The financing fees related to the revolving credit facility are reflected as another non-current asset in the Unaudited Pro Forma Combined Balance Sheet of SpinCo.

Reflects the tax effects of the pro forma adjustments to pre-tax income at the applicable statutory income tax rates in the respective jurisdictions. The effective tax rate of SpinCo could be different (either higher or lower) depending on activities subsequent to the distribution.

The number of SpinCo common shares used to compute basic earnings per share for the year ended December 31, 2020 is based on the number of ADS shares outstanding on December 31, 2020, assuming a distribution ratio of one share of SpinCo for every share of ADS. The number of ADS shares used to determine the assumed distribution reflects the ADS shares outstanding as of the balance sheet date, which is the most current information as of the date of those financial statements. While the actual future impact of potential dilution from SpinCo shares related to equity awards granted to SpinCo’s employees under ADS share-based plans will depend on various factors, pro forma diluted shares outstanding were not adjusted as SpinCo does not currently have an estimate of the future dilutive impact.

Reflects shares with a par value of $0.01 per share. This number of shares is based on the number of ADS shares outstanding as of December 31, 2020 and an expected distribution ratio of one share of SpinCo for every shares of ADS.

Represents the elimination of Parent’s net investment and adjustments to capital in excess of par value.

Reflects the tax effects of pro forma adjustments on tax-sensitive assets and liabilities based on the applicable statutory income tax rates in the respective jurisdictions. Further, it reflects adjustments to (i) net operating loss carryforwards which will not transfer with SpinCo upon the separation and distribution and (ii) uncertain tax positions for which ADS will continue to be legally liable upon the separation and distribution.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our audited combined financial statements and the notes thereto, included elsewhere in this information statement, as well as the information presented under “Unaudited Pro Forma Combined Financial Statements,” and “Business.” The following discussion and analysis includes forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed elsewhere in this information statement. See in particular “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Overview

Background

On May 12, 2021, ADS announced the repositioning of ADS through the spinoff of the Spin Business from its remaining businesses to create an independent, publicly traded company. Directly or indirectly through our subsidiaries, we will hold the assets and liabilities of the Spin Business after the Separation. Each holder of ADS common stock will receive one share of common stock of SpinCo for every shares of ADS

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common stock held as of the close of business on the record date for the Distribution. Following the Separation, we will be an independent, publicly traded company, and ADS will retain a 19% interest in us. For additional information, see “The Separation.” ADS’s SpinCo common stock will be voted in the same proportion as the votes cast in respect of the common stock not owned by ADS on any matter presented for a vote of SpinCo’s stockholders.

Basis of presentation

We have historically operated as part of ADS and not as a standalone company, and we were a reportable segment of ADS. Combined financial statements representing the historical operations of SpinCo’s business have been derived from the historical accounting records of ADS and are presented on a carve-out basis. Our combined financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The combined financial statements may not be indicative of future performance and do not necessarily reflect what the financial position, results of operations, and cash flows would have been had we operated as an independent, publicly traded company during the periods presented, particularly because of changes we expect to experience in the future as a result of the Separation, including changes in the financing, cash management, operations, cost structure and personnel needs of our business.

The cash and equivalents held by ADS at the corporate level are not specifically identifiable and therefore have not been reflected in the combined balance sheet. ADS’ third-party long-term debt and the related interest expense have not been allocated for any of the periods presented as it was not the legal obligor of such debt.

All revenues and expenses as well as assets and liabilities directly associated with the business activity of the SpinCo business are included in the combined financial statements. The combined financial statements also include allocations of certain general and administrative expenses from ADS. ADS allocated $14.3 million, $14.8 million and $14.0 million of corporate overhead costs that directly or indirectly benefit SpinCo’s business for the years ended December 31, 2020, 2019 and 2018, respectively that are included in general and administrative expense within our combined statements of income. These assessments relate to information technology, finance, accounting, tax services, human resources, and other functional support. These allocations were determined based on management estimates on the number of employees and non-employee costs associated with the use of these functions by us and may not be indicative of the costs that we would otherwise incur on a standalone basis or had we operated independently of ADS.

COVID-19

Following the declaration by the WHO in the first quarter of 2020 of COVID-19 as a global pandemic 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 negatively impacted our results of operations and year-over-year comparisons. For the year ended December 31, 2020, AIR MILES reward miles issuances and redemptions declined 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 non-travel options, aiming to drive higher merchandise redemptions. In addition, the AIR MILES Reward Program is working with airline partners to plan for the increasing return of airline travel during the second half of 2021. At BrandLoyalty, new program activity is increasing with consumers actively engaged in loyalty campaigns, with particular success in products focused on the home. However, both the uncertainty remaining with the U.K. and many

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Asian and European countries still subject to varying degrees of restrictions as well as recent disruptions to port services in southern China amid COVID-19 resurgences exacerbating already challenged global supply chain conditions, could negatively impact our results of operations in the second half of 2021.

Despite the roll-out 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.

Results of operations

	Years Ended December 31,									% Change
	2020			2019			2018			2020 to 2019		2019 to 2018
	(in thousands, except percentages)
Revenues
Redemption, net		$	473,067		$	637,321		$	676,279		(26)%		(6)%
Services			264,050			367,647			368,170		(28)		—
Other			27,689			28,163			23,929		(2)		18
Total revenue			764,806			1,033,131			1,068,378		(26)		(3)
Operating expenses
Cost of operations (exclusive of depreciation and amortization disclosed separately below)			587,615			847,552			824,203		(31)		3
General and administrative			14,315			14,823			14,049		(3)		6
Depreciation and other amortization			28,988			32,152			32,585		(10)		(1)
Amortization of purchased intangibles			48,953			48,027			52,238		2		(8)
Total operating expenses			679,871			942,554			923,075		(28)		2
Operating income			84,935			90,577			145,303		(6)		(38)
Gain on sale of a business			(10,876)			—			—		nm*		nm*
Interest (income) expense, net			(834)			2,335			5,528		(136)		(58)
Income before income taxes and loss from investment in unconsolidated subsidiaries – related party			96,645			88,242			139,775		10		(37)
Provision (benefit) for income taxes			21,324			11,331			(2,867)		88		(495)
Loss from investment in unconsolidated subsidiaries – related party, net of tax			246			1,681			5,033		(85)		(67)
Net income		$	75,075		$	75,230		$	137,609		—%		(45)%
Key Operating Metrics:
AIR MILES reward miles issued			4,963.8			5,511.1			5,500.0		(10)%		—%
AIR MILES reward miles redeemed			3,127.8			4,415.7			4,482.0		(29)%		(1)%
Supplemental Information:
Average CAD to USD foreign currency exchange rate			0.75			0.75			0.77		(1)%		(2)%
Average EUR to USD foreign currency exchange rate			1.14			1.12			1.18		2%		(5)%

not meaningful

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Year ended December 31, 2020 compared to the year ended December 31, 2019

Revenue. Total revenue decreased $268.3 million, or 26%, to $764.8 million for the year ended December 31, 2020 from $1,033.1 million for the year ended December 31, 2019. The decrease was due to the following:

•

Redemption. Redemption revenue is recognized at the point in time when the customer redeems for a reward. Revenue decreased $164.3 million, or 26%, to $473.1 million for the year ended December 31, 2020 as redemption revenue from our campaign-based loyalty solutions decreased $158.1 million due to a decline in programs in market across most regions due to the impact of COVID-19 and the reorganization of BrandLoyalty’s sales personnel. In response to COVID-19, certain of our clients have delayed their campaign-based loyalty solutions. Redemption revenue for the AIR MILES Reward Program was also negatively impacted by the 29% decline in AIR MILES reward miles redeemed.

•

Services. Service revenue is associated with the overall management of the loyalty programs and is generally recognized over time. Revenue decreased $103.6 million, or 28%, to $264.1 million for the year ended December 31, 2020 primarily due to the sale of Precima® in January 2020, which resulted in a $78.5 million decrease in revenue as compared to the prior year. COVID-19 negatively impacted service revenue for the year ended December 31, 2020, resulting in lower volumes, including a decline in the number AIR MILES reward miles issued, a decline in ancillary fees from a reduction in travel, and a decline in the number of campaign-based loyalty programs in market, which impacted revenue by $8.7 million, $6.7 million and $7.8 million, respectively.

•

Other. Other revenue includes investment income and other ancillary revenue earned. Revenue decreased $0.5 million, or 2%, to $27.7 million for the year ended December 31, 2020, primarily due to the sale of Precima in January 2020, which resulted in a $0.8 million decrease in other revenue as compared to the prior year.

Cost of operations. Cost of operations decreased $259.9 million, or 31%, to $587.6 million for the year ended December 31, 2020 as compared to $847.6 million for the year ended December 31, 2019. The decline in the cost of operations was impacted by the following:

•

a decrease in the cost of redemptions of $114.2 million resulting from the decrease in redemption revenue noted above;

•

the sale of Precima resulted in a decrease in cost of operations by $78.4 million;

•

restructuring and other charges of $50.8 million incurred during the year ended December 31, 2019.

•

Cost of operations also decreased due to cost saving initiatives executed in 2019 and 2020, with reduction of expenses across several categories, as well as the impact of COVID-19, which resulted in a reduction of certain expenses such as travel and entertainment and associate engagement.

General and administrative. General and administrative expenses decreased $0.5 million, or 3%, to $14.3 million for the year ended December 31, 2020 as compared to $14.8 million for the year ended December 31, 2019, due to cost saving initiatives implemented by ADS in 2019 and 2020.

Depreciation and other amortization. Depreciation and other amortization decreased $3.2 million, or 10%, to $29.0 million for the year ended December 31, 2020, as compared to $32.2 million for the year ended December 31, 2019. In 2019, $4.4 million of depreciation and amortization expense was associated with Precima, which was sold in January 2020. The decline in depreciation and other amortization was offset in part by additional assets placed into service from recent capital expenditures.

Amortization of purchased intangibles. Amortization of purchased intangibles increased $0.9 million, or 2%, to $49.0 million for the year ended December 31, 2020, as compared to $48.0 million for the year ended December 31, 2019, due to the increase in the Euro relative to the U.S. dollar.

Gain on sale of a business. In January 2020, ADS sold Precima, a provider of retail strategy and customer data applications, resulting in a pre-tax gain of $10.9 million.

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Interest (income) expense, net. Total interest expense, net decreased $3.2 million, or 136%, to interest income of $(0.8) million for the year ended December 31, 2020 as compared to interest expense of $2.3 million for the year ended December 31, 2019. The net decrease was due to the repayment of the related party notes payable and BrandLoyalty’s credit facility in September 2019, as a result of which there was no outstanding debt throughout 2020.

Taxes. Provision for income taxes increased $10.0 million, or 88%, to $21.3 million for the year ended December 31, 2020 from $11.3 million for the year ended December 31, 2019. The effective tax rate for the current year was 22.1% as compared to 12.8% for the prior year. The lower effective tax rate in the prior year included a decrease in tax reserves resulting from the expiration of statutes of limitation and the resolution of tax audit issues in various foreign jurisdictions.

Loss from unconsolidated subsidiaries — related party. Loss from unconsolidated subsidiaries — related party decreased $1.4 million, or 85%, to $0.2 million for the year ended December 31, 2020 from $1.7 million for the year ended December 31, 2019. The decrease was attributable to the sale of our investment in ICOM Information & Communications L.P. (“ICOM”) in February 2019, as ICOM operated at a loss. As of December 31, 2020, our remaining investment in unconsolidated subsidiaries — related party was in Comenity Canada L.P., which we expect to transfer to the Parent and its consolidated subsidiaries prior to the spin.

Year ended December 31, 2019 compared to the year ended December 31, 2018

Revenue. Total revenue decreased $35.2 million, or 3%, to $1,033.1 million for the year ended December 31, 2019 from $1,068.4 million for the year ended December 31, 2018. The net decrease was due to the following:

•

Redemption. Redemption revenue in recognized at the point is time when the customer redeems for a reward. Revenue decreased $39.0 million, or 6%, to $637.3 million for the year ended December 31, 2019. Redemption revenue from our coalition loyalty program decreased $46.4 million due to the net presentation of $43.0 million of revenue from the outsourcing of additional rewards inventory during the year ended December 31, 2019 and a 1% decline in the number of AIR MILES reward miles redeemed. For the fulfillment of certain rewards where the AIR MILES Reward Program does not control the goods or services before they are transferred to the collector, revenue is recorded on a net basis. In 2019, the AIR MILES Reward Program outsourced the fulfillment of certain merchandise rewards, which resulted in revenue presented net of cost of redemptions, as compared to on a gross revenue basis in 2018 when the AIR MILES Reward Program controlled the good or service before it was transferred to the collector. Redemption revenue from our campaign-based loyalty solutions increased $7.4 million due to strong performance in Europe, Asia and Brazil.

•

Services. Service revenue is associated with the overall management of the loyalty programs and is generally recognized over time. Revenue decreased $0.5 million to $367.6 million for the year ended December 31, 2019 due to a decline in AIR MILES Reward Program issuance revenue of $14.4 million, impacted in part by the change in estimate of the life of a mile in 2017. This decrease was offset in part by an $8.1 million increase in servicing revenue associated with our campaign-based loyalty solutions in market as well as growth in our marketing services of $4.2 million.

•

Other. Other revenue includes investment income and other ancillary revenue earned. Revenue increased $4.2 million, or 18%, to $28.2 million for the year ended December 31, 2019 due to an increase in investment income on restricted cash.

Cost of operations. Cost of operations increased $23.3 million, or 3%, to $847.6 million for the year ended December 31, 2019 as compared to $824.2 million for the year ended December 31, 2018 due primarily to $50.8 million of restructuring and other charges incurred during the year ended December 31, 2019. See Note 12, “Restructuring and Other Charges,” of the Notes to Combined Financial Statements, for more information. Additionally, data processing expense increased $21.2 million, driven by an increase in outsourced technology costs. These increases were offset in part by the net presentation of $43.0 million in cost of redemptions within our coalition loyalty program as discussed above.

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General and administrative. General and administrative expenses increased $0.8 million, or 6%, to $14.8 million for the year ended December 31, 2019 as compared to $14.0 million for the year ended December 31, 2018 due to higher consulting costs.

Depreciation and other amortization. Depreciation and other amortization decreased $0.4 million, or 1%, to $32.2 million for the year ended December 31, 2019, as compared to $32.6 million for the year ended December 31, 2018, due to certain fully depreciated property and equipment, offset in part by additional assets placed into service from recent capital expenditures.

Amortization of purchased intangibles. Amortization of purchased intangibles decreased $4.2 million, or 8%, to $48.0 million for the year ended December 31, 2019, as compared to $52.2 million for the year ended December 31, 2018, primarily due to the decline in the Euro relative to the U.S. dollar.

Interest expense, net. Total interest expense, net decreased $3.2 million, or 58%, to $2.3 million for the year ended December 31, 2019 as compared to $5.5 million for the year ended December 31, 2018 as a result of the repayment of its related party debt in September 2019, as well as the pay down of the BrandLoyalty credit agreement.

Taxes. Provision for income taxes was $11.3 million for the year ended December 31, 2019, as compared to a benefit of $(2.9) million for the year ended December 31, 2018, primarily related to discrete tax benefit associated with the restructuring of certain non-US intangibles.

Loss from unconsolidated subsidiaries — related party. Loss from unconsolidated subsidiaries — related party decreased $3.4 million, or 67%, to $1.7 million for the year ended December 31, 2019 from $5.0 million for the year ended December 31, 2018. The decrease was attributable to the sale of our investment in ICOM in February 2019, as ICOM operated at a loss for all of 2018.

Use of non-GAAP financial measures

Adjusted EBITDA is a non-GAAP financial measure equal to net income, the most directly comparable financial measure based on accounting principles generally accepted in the United States of America, or GAAP, plus loss from investment in unconsolidated subsidiaries — related party, provision for income taxes, interest (income) expense, net, depreciation and other amortization, the amortization of purchased intangibles and stock compensation expense. Adjusted EBITDA excludes the gain on the sale of Precima, strategic transaction costs, which represent costs for professional services associated with strategic initiatives, and restructuring and other charges. In 2018, adjusted EBITDA also excluded the gain on the sale of our investment in dotz. These costs, as well as stock compensation expense, were not included in the measurement of segment adjusted EBITDA as the chief operating decision maker did not factor these expenses for purposes of assessing segment performance and decision making with respect to resource allocations.

We use adjusted EBITDA as an integral part of our internal reporting to measure the performance of our reportable segments and to evaluate the performance of our senior management, and we believe it provides useful information to our investors regarding our performance and overall results of operations. Adjusted EBITDA is considered an important indicator of the operational strength of our businesses. Adjusted EBITDA eliminates the uneven effect across all business segments of considerable amounts of non-cash depreciation of tangible assets and amortization of intangible assets, including certain intangible assets that were recognized in business combinations. A limitation of this measure, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses. Management evaluates the costs of such tangible and intangible assets, such as capital expenditures, investment spending and return on capital and therefore the effects are excluded from adjusted EBITDA. Adjusted EBITDA also eliminates the non-cash effect of stock compensation expense.

Adjusted EBITDA is not intended to be a performance measure that should be regarded as an alternative to, or more meaningful than, net income as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. In addition, adjusted EBITDA is not intended to represent funds available for dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

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Adjusted EBITDA presented herein may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in our various agreements.

	Years Ended December 31,
	2020			2019			2018
	(in thousands)
Net income		$	75,075		$	75,230		$	137,609
Loss from investment in unconsolidated subsidiaries – related party, net of tax			246			1,681			5,033
Provision for (benefit from) income taxes			21,324			11,331			(2,867)
Interest (income) expense, net			(834)			2,335			5,528
Depreciation and other amortization			28,988			32,152			32,585
Amortization of purchased intangibles			48,953			48,027			52,238
Stock compensation expense			7,017			9,076			13,333
Gain on sale of a business, net of strategic transaction costs(1)			(7,816)			—			—
Strategic transaction costs(2)			329			981			—
Restructuring and other charges(3)			108			50,780			—
Gain on sale of an investment(4)			—			—			(9,517)
Adjusted EBITDA		$	173,390		$	231,593		$	233,942

(1)

Represents gain on sale of Precima in January 2020, net of strategic transaction costs. Precima was included in our AIR MILES Reward Program segment. See Note 4, “Dispositions,” of the Notes to Combined Financial Statements for more information.

(2)

Represents costs for professional services associated with strategic initiatives.

(3)

Represents costs associated with restructuring or other exit activities. See Note 12, “Restructuring and Other Charges,” of the Notes to the Combined Financial Statements for more information.

(4)

Represents gain on sale of an investment in CBSM-Companhia Brasileira De Servicos De Marketing, the operator of the dotz coalition loyalty program, in June 2018.

Segment revenue and adjusted EBITDA

	Years Ended December 31,									% Change
	2020			2019			2018			2020 to 2019		2019 to 2018
	(in thousands, except percentages)
Revenue:
AIR MILES Reward Program		$	277,121		$	384,021		$	434,934		(28)%		(12)%
BrandLoyalty			487,685			649,110			633,444		(25)		2
Corporate/Other			—			—			—		—		—
Total		$	764,806		$	1,033,131		$	1,068,378		(26)%		(3)%
Adjusted EBITDA:
AIR MILES Reward Program		$	144,025		$	165,168		$	174,927		(13)%		(6)%
BrandLoyalty			42,161			79,376			69,748		(47)		14
Corporate/Other			(12,796)			(12,951)			(10,733)		(1)		21
Total		$	173,390		$	231,593		$	233,942		(25)%		(1)%

Year ended December 31, 2020 compared to the year ended December 31, 2019

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•

AIR MILES Reward Program. Revenue decreased $106.9 million, or 28%, to $277.1 million for the year ended December 31, 2020 as the sale of Precima in January 2020 resulted in a $79.3 million decrease in revenue. Redemption revenue and servicing revenue were negatively impacted by a 10% decline in AIR MILES reward miles issued and a 29% decline in AIR MILES reward miles redeemed due to the macroeconomic impacts of COVID-19.

•

BrandLoyalty. Revenue decreased $161.4 million, or 25%, to $487.7 million for the year ended December 31, 2020, due to a decline in programs in market across most regions due to the impact of COVID-19 as well as the reorganization of sales personnel.

Adjusted EBITDA. Adjusted EBITDA decreased $58.2 million, or 25%, to $173.4 million for the year ended December 31, 2020 from $231.6 million for the year ended December 31, 2019. The net decrease was due to the following:

•

AIR MILES Reward Program. Adjusted EBITDA decreased $21.1 million, or 13%, to $144.0 million for the year ended December 31, 2020, due to revenue declines discussed above, offset in part by improved expense management, including cost saving initiatives executed in 2019. For the year ended December 31, 2020, the $7.8 million gain on the sale of Precima, net of transaction costs was excluded from adjusted EBITDA. For the year ended December 31, 2019, restructuring and other charges of $3.5 million and strategic transaction costs of $1.0 million were excluded from adjusted EBITDA.

•

BrandLoyalty. Adjusted EBITDA decreased $37.2 million, or 47%, to $42.2 million for the year ended December 31, 2020 primarily due to the decrease in revenue as discussed above. For the year ended December 31, 2019, restructuring and other charges of $47.3 million were excluded from adjusted EBITDA.

•

Corporate/Other. Adjusted EBITDA remained relatively flat, improving slightly to $(12.8) million for the year ended December 31, 2020 as compared to $(13.0) million for the year ended December 31, 2019.

Year ended December 31, 2019 compared to the year ended December 31, 2018

Revenue. Total revenue decreased $35.2 million, or 3%, to $1,033.1 million for the year ended December 31, 2019 from $1,068.4 million for the year ended December 31, 2018. The decrease was due to the following:

•

AIR MILES Reward Program. Revenue decreased $50.9 million, or 12%, to $384.0 million for the year ended December 31, 2019, impacted by a decline in redemption revenue of $46.4 million driven by a $43.0 million decrease in revenue related to the outsourcing of additional rewards inventory recorded on a net basis and a 1% decline in AIR MILES reward miles redeemed.

•

BrandLoyalty. Revenue increased $15.7 million, or 2%, to $649.1 million for the year ended December 31, 2019, due to additional programs in market and strong program performance, particularly in Europe, Asia and Brazil.

Adjusted EBITDA. Adjusted EBITDA decreased $2.3 million, or 1%, to $231.6 million for the year ended December 31, 2019 from $233.9 million for the year ended December 31, 2018. The net decrease was due to the following:

•

AIR MILES Reward Program. Adjusted EBITDA decreased $9.8 million, or 6%, to $165.2 million for the year ended December 31, 2019. Adjusted EBITDA was negatively impacted by the decline in revenue. Restructuring and other charges of $3.5 million and strategic transaction costs of $1.0 million were excluded from adjusted EBITDA for the year ended December 31, 2019 and a $9.5 million gain on the sale of an investment was excluded from adjusted EBITDA for the year ended December 31, 2018.

•

BrandLoyalty. Adjusted EBITDA increased $9.6 million, or 14%, to $79.4 million for the year ended December 31, 2019 primarily due to the margin from the increases in revenue noted above. Restructuring and other charges of $47.3 million were excluded from adjusted EBITDA for the year ended December 31, 2019.

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•

Corporate/Other. Adjusted EBITDA decreased $2.2 million to $(13.0) million for the year ended December 31, 2019 from $(10.7) million for the year ended December 31, 2018 due to an increase in incentive compensation.

Liquidity and capital resources

Historically, our primary source of liquidity has been cash generated from operating activities. We expect to expand those sources with the use of our new credit facility and issuances of debt or equity securities. Our primary uses of cash are for ongoing business operations, repayments of our debt, capital expenditures, and investments.

We believe that internally generated funds and other sources of liquidity discussed below will be sufficient to meet working capital needs, capital expenditures, and other business requirements for at least the next 12 months. We believe we will meet known or reasonably likely future cash requirements through the combination of cash flows from operating activities, available cash balances and available borrowings through the issuance of third-party debt. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities; however, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms in the future. In addition, the continued volatility in the financial and capital markets due to COVID-19 may limit our access to, or increase our cost of, capital or make capital unavailable on terms acceptable to us or at all.

Our ability to fund our operating needs will depend on our future ability to continue to generate positive cash flow from operations and obtain debt financing on acceptable terms.

Cash flow activity

Operating Activities. We generated cash flow from operating activities of $216.3 million, $105.7 million, and $65.4 million for the years ended December 31, 2020, 2019, and 2018, respectively. The year-over-year increases in operating cash flows of $110.6 million and $40.3 million for the years ended December 31, 2020 and 2019, respectively, was primarily due to decreases in working capital. In 2020, the decreases in working capital were due in most part by COVID-19 impacts in the market.

Investing Activities. Cash used in investing activities was $65.7 million, $53.0 million and $78.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. Significant components of investing activities are as follows:

•

Redemption settlement assets, restricted. The cash used from redemption settlement assets, restricted was $40.7 million, $9.5 million and $42.2 million for the years ended December 31, 2020, 2019, and 2018, respectively. The increase in cash used was attributable to an increase in investments, as AIR MILES reward miles issued were greater than AIR MILES reward miles redeemed.

•

Capital expenditures. Cash paid for capital expenditures was $24.3 million, $41.5 million and $34.0 million for the years ended December 31, 2020, 2019, and 2018, respectively. We anticipate that capital expenditures will be less than 5% of annual revenue.

•

Proceeds from the sale of investment in unconsolidated subsidiaries — related party. In 2019, we sold our investment in ICOM to a subsidiary of ADS for $4.0 million.

•

Investments in unconsolidated subsidiaries — related party. We made investments in unconsolidated subsidiaries — related party of $0.7 million, $6.1 million, and $0.8 million for the years ended December 31, 2020, 2019, and 2018, respectively. We made contributions to Comenity Canada L.P. of $0.7 million, $0.7 million, and $0.8 million for the years ended December 31, 2020, 2019, and 2018, respectively. In 2019, we also made a contribution to ICOM of $5.3 million to fund certain losses.

Financing Activities. Cash used in financing activities was $2.6 million, $42.9 million and $23.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

•

Debt. In 2019, a capital contribution of $288.7 million received from ADS was used to repay existing amounts under BrandLoyalty’s credit agreement and amounts owed under certain note

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payable agreements to subsidiaries of ADS. In 2018, BrandLoyalty made net repayments of $6.4 million under its credit agreement, and we paid a cash dividend to ADS of $6.8 million

•

Net transfers to Parent. Cash used in financing transactions reflecting transactions with ADS were $2.6 million, $28.4 million and $10.7 million for the years ended December 31, 2020, 2019, and 2018 respectively.

Debt

In connection with the Separation, we expect to incur $ of new debt, which we intend to use the net proceeds to fund a cash transfer to ADS, or one or more of its subsidiaries, as part of the Restructuring. The debt may also restrict our business and may adversely impact our financial condition, results of operations or cash flows. In addition, our separation from ADS’ other businesses may increase the overall cost of debt funding and decrease the overall debt capacity and commercial credit available to us.

BrandLoyalty Credit Agreement

In September 2019, we repaid the €115.0 million in term loans outstanding under the BrandLoyalty credit agreement, originally scheduled to mature in June 2020, and repaid the €32.5 million amount outstanding under the revolving line of credit.

In April 2020, BrandLoyalty terminated its existing facility and entered into a new credit agreement that provides for a committed revolving line of credit of €30.0 million ($36.6 million as of December 31, 2020), an uncommitted revolving line of credit of €30.0 million ($36.6 million as of December 31, 2020), and an accordion feature permitting BrandLoyalty to request an increase in either the committed or uncommitted line of credit up to €80.0 million ($97.7 million as of December 31, 2020) in aggregate. The revolving lines of credit mature in April 2023, subject to BrandLoyalty’s request to extend for two additional one-year terms at the absolute discretion of the lenders at the time of such requests. As of December 31, 2020, there were no amounts outstanding under these revolving lines of credit.

In the first quarter of 2021, BrandLoyalty and certain of its subsidiaries, as borrowers and guarantors, amended its credit agreement to extend the maturity date by one year from April 3, 2023 to April 3, 2024.

See Note 14, “Debt,” of the Notes to Combined Financial Statements for additional information regarding our debt.

Contractual Obligations

In the normal course of business, we enter into various contractual obligations that may require future cash payments. Our future cash payments associated with our contractual obligations and commitments to make future payments by type and period as of December 31, 2020 are summarized below:

	2021			2022			2023			2024			2025			Thereafter			Total
	(in thousands)
Operating leases		$	15,450		$	16,038		$	14,669		$	13,796		$	13,252		$	92,846		$	166,051
ASC 740 obligations(1)			—			—			—			—			—			—			—
Purchase obligations(2)			102,375