DALLAS, July 20, 2017 /PRNewswire/ -- Alliance Data
Systems Corporation (NYSE: ADS), a leading global provider of
data-driven marketing and loyalty solutions, today announced
results for the quarter ended June 30,
2017.
SUMMARY
|
Quarter Ended June
30,
|
(in millions,
except per share amounts)
|
2017
|
2016
|
%
Change
|
Revenue
|
$1,822
|
$1,749
|
+4%
|
Net income
|
$
138
|
$
141
|
-2%
|
Net income
attributable to Alliance Data
stockholders
per diluted share ("EPS") (a)
|
$
2.47
|
$
1.24
|
+99%
|
Diluted shares
outstanding
|
55.8
|
59.0
|
-5%
|
*******************************
|
|
|
|
Supplemental Non-GAAP
Metrics (b):
|
|
|
|
Adjusted
EBITDA
|
$
499
|
$
472
|
+6%
|
Adjusted
EBITDA, net of funding costs and non-
controlling interest ("adjusted EBITDA, net") (a)
|
$
433
|
$
422
|
+3%
|
Core earnings
attributable to Alliance Data
stockholders per diluted share ("core EPS") (a)
|
$
3.84
|
$
3.68
|
+4%
|
|
|
(a)
|
Profitability
measures shown above for 2016 are net of amounts attributable to
the minority interest in Netherlands-based BrandLoyalty, referred
to as 'non-controlling interest'.
|
(b)
|
See "Financial
Measures" below for a discussion of non-GAAP financial
measures.
|
Ed Heffernan, president and chief
executive officer of Alliance Data, commented, "It was a solid
second quarter as revenue increased 4 percent to $1.8 billion, consistent with guidance, while
core EPS also increased 4 percent to $3.84, ahead of guidance of flat growth.
"For the first time since 2015, Epsilon® delivered a
second-consecutive quarter of solid revenue and adjusted EBITDA
growth, while Card Services continued to deliver double-digit
revenue growth. Perhaps more noteworthy was Card Services'
ability to drive double-digit adjusted EBITDA, net growth, despite
having to absorb the costs of higher principal loss
rates. Within LoyaltyOne®, our retooling efforts of
the Canadian business model are working as adjusted EBITDA margins
returned to our mid-20 percent objective. However, our
BrandLoyalty business produced soft results.
"Current trends suggest that both Epsilon and Card Services will
produce stronger revenue growth than originally expected, but
incremental costs associated with the on-boarding of two new
significant clients at Epsilon and moving all collection activities
back in-house at Card Services will reduce the flow-through of this
incremental revenue to core EPS. As a result, we are only raising
top-line guidance for these two segments.
"On the other hand, BrandLoyalty's third quarter is not
developing as we originally expected due to timing issues. This
leaves us with about a $0.40 hole to
2017 core earnings. Notably, the fourth quarter of 2017 is
developing as expected and the first quarter of 2018 is shaping up
nicely, so it is essentially a shift of profitability into
2018."
Heffernan continued, "Based on these developments, we are
increasing 2017 revenue guidance from $7.7
billion to $7.8 billion, but lowering 2017 core EPS guidance
from $18.50 to $18.10, about a 2
percent decrease to reflect the timing issue at
BrandLoyalty. Based upon expectations of flat to lower
principal loss rates in 2018 and accelerating trends across the
majority of the Company, we are comfortable providing initial 2018
guidance of $8.7 billion in revenue,
up 12 percent, and $21.50 in core
EPS, up 19 percent, consistent with the 'slingshot' we have
discussed all year."
CONSOLIDATED RESULTS
Revenue increased 4 percent to $1.82
billion and EPS increased 99 percent to $2.47 for the second quarter of 2017. Excluding
$1.14 in accretion charges related to
the purchase of the remaining 20 percent interest in BrandLoyalty
from the second quarter of 2016, EPS increased 4 percent. Adjusted
EBITDA, net increased 3 percent to $433
million, while core EPS increased 4 percent to $3.84 for the second quarter of 2017.
SEGMENT REVIEW
LoyaltyOne: Revenue decreased 21 percent to
$280 million while adjusted EBITDA
decreased 28 percent to $57 million
for the second quarter of 2017, largely due to both the breakage
estimate reset in the fourth quarter of 2016 for AIR
MILES® and timing of client programs at BrandLoyalty.
Further, unfavorable foreign exchange rates reduced revenue and
adjusted EBITDA by approximately $11
million and $2 million,
respectively.
AIR MILES revenue decreased 12 percent to $179 million for the second quarter of 2017
primarily due to a 13 percent decrease in AIR MILES reward miles
redeemed. AIR MILES reward miles issued also decreased 1 percent,
primarily due to the timing of promotional activity by certain
sponsors. Sponsor and collector engagement has been steadily
improving since the negative media attention surrounding the
then-planned expiration of AIR MILES reward miles at the end of
2016, and the outlook is for issuance growth in the back-half of
2017.
BrandLoyalty revenue decreased 32 percent to $101 million for the second quarter of 2017.
Quarterly results for BrandLoyalty can be uneven due to the nature
of its offering - short-term loyalty solutions generally 12 to 20
weeks in duration - and clients may shift the timing of programs
between quarters. This occurred during the quarter as several
programs executed in the second quarter of 2016 are scheduled for
the fourth quarter of 2017.
Epsilon: Revenue increased 5 percent to
$544 million, and adjusted EBITDA
increased 4 percent to $107 million
for the second quarter of 2017. Cost controls implemented last year
held the increase in payroll and benefits expense during the
quarter to approximately 1 percent.
The Automotive, Agency and digital CRM offerings contributed
double-digit revenue growth in the second quarter of 2017, a result
of both new wins and strength in existing client relationships.
Importantly, the Technology Platform offering, which is
approximately 25 percent of Epsilon's revenue, stabilized
appreciably with revenue down 3 percent for the second quarter of
2017 compared to down 13 percent in the fourth quarter of 2016. The
building backlog in this product category through new client wins
is expected to support growth in coming quarters.
Card Services: Revenue increased 13 percent to
$1.0 billion and adjusted EBITDA, net
increased 11 percent to $306 million
for the second quarter of 2017.
Gross yields were 25.0 percent for the second quarter of 2017,
down approximately 40 basis points from the prior comparable
period, due to an increase in the reserve for uncollectible, unpaid
finance charges billed. Operating expenses increased 4 percent to
$346 million, or 8.6 percent of
average receivables, an improvement of 90 basis points compared to
the second quarter of 2016. The loan loss provision increased 26
percent to $288 million for the
second quarter of 2017, driven by strong growth in average card
receivables and higher principal loss rates. Portfolio funding
costs were $65 million for the second
quarter of 2017, or 1.6 percent of average credit card receivables,
up 18 basis points from the second quarter of 2016.
Credit sales increased 6 percent to $7.5
billion for the second quarter of 2017, bolstered by a
modest increase in tender share. Average credit card receivables,
excluding amounts reclassified as assets held for sale, increased
17 percent to $15.7 billion compared
to the second quarter of 2016, while net principal loss rates for
the second quarter of 2017 were 6.2 percent, up 110 basis points
from last year, primarily due to lower recovery rates. The
delinquency rate was 5.05 percent at June
30, 2017, up 46 basis points from the same time last year,
and on track with the forecast provided in 2016.
2017 Guidance
Annual guidance for revenue is increasing from $7.7 billion to $7.8 billion, a 9 percent
increase over 2016. Core EPS is being reduced from $18.50 to $18.10, a
7 percent increase over 2016.
2018 Initial Guidance
The initial guidance for 2018 is revenue of $8.7 billion, representing a 12 percent growth
rate and core EPS of $21.50,
representing 19 percent growth over 2017.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Forward-looking
statements give our expectations or forecasts of future events and
can generally be identified by the use of words such as "believe,"
"expect," "anticipate," "estimate," "intend," "project," "plan,"
"likely," "may," "should" or other words or phrases of similar
import. Similarly, statements that describe our business strategy,
outlook, objectives, plans, intentions or goals also are
forward-looking statements. Examples of forward-looking
statements include, but are not limited to, statements we make
regarding our expected operating results, future economic
conditions including currency exchange rates, future dividend
declarations and the guidance we give with respect to our
anticipated financial performance.
We believe that our expectations are based on reasonable
assumptions. Forward-looking statements, however, are subject to a
number of risks and uncertainties that could cause actual results
to differ materially from the projections, anticipated results or
other expectations expressed in this release, and no assurances can
be given that our expectations will prove to have been correct.
These risks and uncertainties include, but are not limited to,
factors set forth in the Risk Factors section in our Annual Report
on Form 10-K for the most recently ended fiscal year, which may be
updated in Item 1A of, or elsewhere in, our Quarterly Reports on
Form 10-Q filed for periods subsequent to such Form 10-K.
Our forward-looking statements speak only as of the date made,
and we undertake no obligation, other than as required by
applicable law, to update or revise any forward-looking statements,
whether as a result of new information, subsequent events,
anticipated or unanticipated circumstances or otherwise.
Financial Measures
In addition to the results presented in accordance with
generally accepted accounting principles, or GAAP, the Company may
present financial measures that are non-GAAP measures, such as
constant currency financial measures, adjusted EBITDA, adjusted
EBITDA margin, adjusted EBITDA, net of funding costs and
non-controlling interest, core earnings and core earnings per
diluted share (core EPS). Constant currency excludes the impact of
fluctuations in foreign exchange rates. The Company calculates
constant currency by converting our current period local currency
financial results using the prior period exchange rates. The
Company uses adjusted EBITDA and adjusted EBITDA, net as an
integral part of internal reporting to measure the performance and
operational strength of reportable segments and to evaluate the
performance of senior management. Adjusted EBITDA eliminates the
uneven effect across all reportable segments of non-cash
depreciation of tangible assets and amortization of intangible
assets, including certain intangible assets that were recognized in
business combinations, and the non-cash effect of stock
compensation expense. Similarly, core earnings and core EPS
eliminate non-cash or non-operating items, including, but not
limited to, stock compensation expense, amortization of purchased
intangibles, amortization of debt issuance and hedging costs,
mark-to-market gains or losses on interest rate derivatives,
changes to the expiry policy and regulatory settlements. The
Company believes that these non-GAAP financial measures, viewed in
addition to and not in lieu of the Company's reported GAAP results,
provide useful information to investors regarding the Company's
performance and overall results of operations.
Reconciliation of Non-GAAP Financial Measures
Reconciliations to comparable GAAP financial measures are
available in the accompanying schedules, which are posted as part
of this earnings release in both the News and Investors sections on
the Company's website (www.alliancedata.com). No reconciliation is
provided with respect to forward-looking annual guidance for 2017
or 2018 core EPS as the Company cannot reliably predict all
necessary components or their impact to reconcile core EPS to GAAP
EPS without unreasonable effort. The events necessitating a
non-GAAP adjustment are inherently unpredictable and may have a
material impact on the Company's future results.
The financial measures presented are consistent with the
Company's historical financial reporting practices. Core earnings
and core EPS represent performance measures and are not intended to
represent liquidity measures. The non-GAAP financial measures
presented herein may not be comparable to similarly titled measures
presented by other companies, and are not identical to
corresponding measures used in other various agreements or public
filings.
Conference
Call
Alliance Data will host a conference call on Thursday, July 20, 2017 at 8:30 a.m. (Eastern Time) to discuss the Company's
second-quarter 2017 results. The conference call will be available
via the Internet at www.alliancedata.com. There will be several
slides accompanying the webcast. Please go to the website at least
15 minutes prior to the call to register, download and install any
necessary software. The recorded webcast will also be available on
the Company's website.
If you are unable to participate in the conference call, a
replay will be available. To access the replay, please dial (855)
859-2056 or (404) 537-3406 and enter "77386550". The replay will be
available at approximately 11:45 a.m.
(Eastern Time) on Thursday, July 20,
2017.
About Alliance Data
Alliance Data® (NYSE: ADS) is a leading global
provider of data-driven marketing and loyalty solutions serving
large, consumer-based industries. The Company creates and deploys
customized solutions, enhancing the critical customer marketing
experience; the result is measurably changing consumer behavior
while driving business growth and profitability for some of today's
most recognizable brands. Alliance Data helps its clients create
and increase customer loyalty through solutions that engage
millions of customers each day across multiple touch points using
traditional, digital, mobile and emerging technologies. An S&P
500 and Fortune 500 company headquartered in Plano, Texas, Alliance Data consists of three
businesses that together employ more than 17,000 associates at
approximately 100 locations worldwide.
Alliance Data's card services business is a leading provider of
marketing-driven branded credit card programs. Epsilon®
is a leading provider of multichannel, data-driven technologies and
marketing services, and also includes Conversant®, a
leader in personalized digital marketing. LoyaltyOne®
owns and operates the AIR MILES® Reward Program,
Canada's premier coalition loyalty
program, and Netherlands-based
BrandLoyalty, a global provider of tailor-made loyalty programs for
grocers.
Investor information about Alliance Data's businesses may be
found here.
Follow Alliance Data on Twitter, Facebook, LinkedIn and
YouTube.
ALLIANCE DATA SYSTEMS
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
(In millions, except
per share amounts)
|
(Unaudited)
|
|
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended June 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Revenue
|
|
$
|
1,821.8
|
|
|
$
|
1,748.8
|
|
|
$
|
3,700.8
|
|
|
$
|
3,425.0
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations
|
|
|
1,056.8
|
|
|
|
1,070.8
|
|
|
|
2,143.5
|
|
|
|
2,102.4
|
|
|
Provision for loan
loss
|
|
|
288.1
|
|
|
|
227.8
|
|
|
|
603.2
|
|
|
|
399.7
|
|
|
Depreciation and
amortization
|
|
|
125.5
|
|
|
|
129.6
|
|
|
|
250.3
|
|
|
|
258.0
|
|
|
Total operating
expenses
|
|
|
1,470.4
|
|
|
|
1,428.2
|
|
|
|
2,997.0
|
|
|
|
2,760.1
|
|
|
Operating
income
|
|
|
351.4
|
|
|
|
320.6
|
|
|
|
703.8
|
|
|
|
664.9
|
|
|
Interest expense,
net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization funding
costs
|
|
|
36.6
|
|
|
|
30.0
|
|
|
|
71.8
|
|
|
|
60.4
|
|
|
Interest expense on
deposits
|
|
|
28.6
|
|
|
|
20.2
|
|
|
|
54.6
|
|
|
|
37.4
|
|
|
Interest expense on
long-term and other debt, net
|
|
|
72.3
|
|
|
|
53.5
|
|
|
|
136.3
|
|
|
|
104.7
|
|
|
Total interest
expense, net
|
|
|
137.5
|
|
|
|
103.7
|
|
|
|
262.7
|
|
|
|
202.5
|
|
|
Income before income
tax
|
|
$
|
213.9
|
|
|
$
|
216.9
|
|
|
$
|
441.1
|
|
|
$
|
462.4
|
|
|
Income tax
expense
|
|
|
76.2
|
|
|
|
76.2
|
|
|
|
157.0
|
|
|
|
162.8
|
|
|
Net income
|
|
$
|
137.7
|
|
|
$
|
140.7
|
|
|
$
|
284.1
|
|
|
$
|
299.6
|
|
|
Less: Net income
attributable to non-controlling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.8
|
|
|
Net income
attributable to common stockholders
|
|
$
|
137.7
|
|
|
$
|
140.7
|
|
|
$
|
284.1
|
|
|
$
|
297.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
|
$
|
137.7
|
|
|
$
|
140.7
|
|
|
$
|
284.1
|
|
|
$
|
297.8
|
|
|
Less: Accretion of
redeemable non-controlling interest
|
|
|
—
|
|
|
|
67.6
|
|
|
|
—
|
|
|
|
83.5
|
|
|
Net income
attributable to common stockholders after accretion of redeemable
non-controlling interest
|
|
$
|
137.7
|
|
|
$
|
73.1
|
|
|
$
|
284.1
|
|
|
$
|
214.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – basic
|
|
|
55.6
|
|
|
|
58.8
|
|
|
|
56.0
|
|
|
|
59.3
|
|
|
Weighted average
shares outstanding – diluted
|
|
|
55.8
|
|
|
|
59.0
|
|
|
|
56.3
|
|
|
|
59.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic – Net income
attributable to common stockholders
|
|
$
|
2.48
|
|
|
$
|
1.24
|
|
|
$
|
5.07
|
|
|
$
|
3.61
|
|
|
Diluted – Net income
attributable to common stockholders
|
|
$
|
2.47
|
|
|
$
|
1.24
|
|
|
$
|
5.05
|
|
|
$
|
3.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLIANCE DATA SYSTEMS
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
millions)
|
(Unaudited)
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,945.9
|
|
$
|
1,859.2
|
|
Credit card and loan
receivables:
|
|
|
|
|
|
|
|
Credit card and loan
receivables
|
|
|
16,321.9
|
|
|
16,543.9
|
|
Allowance for loan
loss
|
|
|
(1,069.3)
|
|
|
(948.0)
|
|
Credit card and loan
receivables, net
|
|
|
15,252.6
|
|
|
15,595.9
|
|
Credit card and loan
receivables held for sale
|
|
|
384.0
|
|
|
417.3
|
|
Redemption settlement
assets, restricted
|
|
|
547.2
|
|
|
324.4
|
|
Intangible assets,
net
|
|
|
875.9
|
|
|
1,003.3
|
|
Goodwill
|
|
|
3,848.4
|
|
|
3,800.7
|
|
Other
assets
|
|
|
2,874.3
|
|
|
2,513.3
|
|
Total
assets
|
|
$
|
25,728.3
|
|
$
|
25,514.1
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
$
|
935.9
|
|
$
|
931.5
|
|
Deposits
|
|
|
8,722.5
|
|
|
8,391.9
|
|
Non-recourse
borrowings of consolidated securitization entities
|
|
|
6,561.4
|
|
|
6,955.4
|
|
Long-term and other
debt
|
|
|
6,422.9
|
|
|
5,601.4
|
|
Other
liabilities
|
|
|
1,660.8
|
|
|
1,975.7
|
|
Total
liabilities
|
|
|
24,303.5
|
|
|
23,855.9
|
|
Stockholders'
equity
|
|
|
1,424.8
|
|
|
1,658.2
|
|
Total liabilities and
equity
|
|
$
|
25,728.3
|
|
$
|
25,514.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLIANCE DATA SYSTEMS
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
millions)
|
(Unaudited)
|
|
|
|
Six Months
Ended June
30,
|
|
|
|
2017
|
|
|
2016
(1)
|
|
|
|
|
|
Cash Flows from
Operating Activities:
|
|
Net income
|
|
$
|
284.1
|
|
|
$
|
299.6
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
250.3
|
|
|
|
258.0
|
|
Deferred income
taxes
|
|
|
(61.0)
|
|
|
|
(14.0)
|
|
Provision for loan
loss
|
|
|
603.2
|
|
|
|
399.7
|
|
Non-cash stock
compensation
|
|
|
45.2
|
|
|
|
41.4
|
|
Amortization of
deferred financing costs
|
|
|
21.2
|
|
|
|
16.8
|
|
Change in operating
assets and liabilities
|
|
|
(179.3)
|
|
|
|
(328.3)
|
|
Originations of loan
receivables held for sale
|
|
|
(3,923.1)
|
|
|
|
(3,386.5)
|
|
Sales of loan
receivables held for sale
|
|
|
3,920.7
|
|
|
|
3,393.9
|
|
Other
|
|
|
73.1
|
|
|
|
74.3
|
|
Net cash provided by
operating activities
|
|
|
1,034.4
|
|
|
|
754.9
|
|
|
|
Cash Flows from
Investing Activities:
|
|
Change in redemption
settlement assets
|
|
|
(207.9)
|
|
|
|
18.4
|
|
Change in restricted
cash
|
|
|
(433.8)
|
|
|
|
(0.3)
|
|
Change in credit card
and loan receivables
|
|
|
(286.4)
|
|
|
|
(352.6)
|
|
Purchase of credit
card portfolios
|
|
|
—
|
|
|
|
(749.1)
|
|
Capital
expenditures
|
|
|
(116.8)
|
|
|
|
(107.6)
|
|
Other
|
|
|
23.9
|
|
|
|
22.4
|
|
Net cash used in
investing activities
|
|
|
(1,021.0)
|
|
|
|
(1,168.8)
|
|
|
|
Cash Flows from
Financing Activities:
|
|
Borrowings under debt
agreements
|
|
|
5,856.9
|
|
|
|
2,449.9
|
|
Repayments of
borrowings
|
|
|
(5,103.8)
|
|
|
|
(1,766.2)
|
|
Issuances of
deposits
|
|
|
1,801.4
|
|
|
|
2,431.8
|
|
Repayments of
deposits
|
|
|
(1,469.3)
|
|
|
|
(1,168.3)
|
|
Non-recourse
borrowings of consolidated securitization entities
|
|
|
1,465.0
|
|
|
|
1,205.0
|
|
Repayments/maturities
of non-recourse borrowings of consolidated securitization
entities
|
|
|
(1,860.0)
|
|
|
|
(1,690.0)
|
|
Acquisition of
non-controlling interest
|
|
|
—
|
|
|
|
(360.7)
|
|
Payment of deferred
financing costs
|
|
|
(44.1)
|
|
|
|
(11.1)
|
|
Purchase of treasury
shares
|
|
|
(499.9)
|
|
|
|
(522.6)
|
|
Dividends
paid
|
|
|
(58.0)
|
|
|
|
—
|
|
Other
|
|
|
(15.1)
|
|
|
|
(11.3)
|
|
Net cash provided by
financing activities
|
|
|
73.1
|
|
|
|
556.5
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
0.2
|
|
|
|
5.9
|
|
Change in cash and
cash equivalents
|
|
|
86.7
|
|
|
|
148.5
|
|
Cash and cash
equivalents at beginning of period
|
|
|
1,859.2
|
|
|
|
1,168.0
|
|
Cash and cash
equivalents at end of period
|
|
$
|
1,945.9
|
|
|
$
|
1,316.5
|
|
|
|
(1)
|
Adjusted to reflect
the adoption of Accounting Standards Update ("ASU") 2016-09,
"Improvements to Employee Share-Based Payment Accounting." The
effect of the adoption of the standard was to increase cash flows
from operating activities by $23.8 million and to decrease cash
flows from financing activities by $23.8 million for the six months
ended June 30, 2016.
|
ALLIANCE DATA SYSTEMS
CORPORATION
|
SUMMARY FINANCIAL
HIGHLIGHTS
|
(In
millions)
|
(Unaudited)
|
|
|
|
Three Months
Ended
June 30,
|
|
|
|
|
|
Six Months
Ended June 30,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
2017
|
|
2016
|
|
Change
|
|
|
Segment
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LoyaltyOne
|
|
$
|
280.0
|
|
|
$
|
352.3
|
|
|
(21)
|
%
|
|
$
|
613.0
|
|
$
|
706.9
|
|
(13)
|
%
|
|
Epsilon
|
|
|
543.8
|
|
|
|
518.8
|
|
|
5
|
|
|
|
1,073.1
|
|
|
1,012.1
|
|
6
|
|
|
Card
Services
|
|
|
1,005.0
|
|
|
|
885.8
|
|
|
13
|
|
|
|
2,028.2
|
|
|
1,721.3
|
|
18
|
|
|
Corporate/Other
|
|
|
—
|
|
|
|
0.1
|
|
|
nm
|
*
|
|
|
—
|
|
|
0.2
|
|
nm
|
*
|
|
Intersegment
Eliminations
|
|
|
(7.0)
|
|
|
|
(8.2)
|
|
|
nm
|
*
|
|
|
(13.5)
|
|
|
(15.5)
|
|
nm
|
*
|
|
Total
|
|
$
|
1,821.8
|
|
|
$
|
1,748.8
|
|
|
4
|
%
|
|
$
|
3,700.8
|
|
$
|
3,425.0
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted
EBITDA, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LoyaltyOne
|
|
$
|
56.7
|
|
|
$
|
79.3
|
|
|
(28)
|
%
|
|
$
|
115.4
|
|
$
|
153.0
|
|
(25)
|
%
|
|
Epsilon
|
|
|
106.8
|
|
|
|
102.6
|
|
|
4
|
|
|
|
191.8
|
|
|
183.4
|
|
5
|
|
|
Card
Services
|
|
|
305.5
|
|
|
|
276.4
|
|
|
11
|
|
|
|
636.2
|
|
|
583.9
|
|
9
|
|
|
Corporate/Other
|
|
|
(35.6)
|
|
|
|
(36.8)
|
|
|
(3)
|
|
|
|
(70.5)
|
|
|
(59.3)
|
|
19
|
|
|
Total
|
|
$
|
433.4
|
|
|
$
|
421.5
|
|
|
3
|
%
|
|
$
|
872.9
|
|
$
|
861.0
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Indicators:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card statements
generated
|
|
|
71.4
|
|
|
|
69.7
|
|
|
2
|
%
|
|
|
143.6
|
|
|
135.3
|
|
6
|
%
|
|
Credit
sales
|
|
$
|
7,515.4
|
|
|
$
|
7,098.8
|
|
|
6
|
%
|
|
$
|
14,094.6
|
|
$
|
13,277.0
|
|
6
|
%
|
|
Average
receivables
|
|
$
|
15,739.9
|
|
|
$
|
13,505.3
|
|
|
17
|
%
|
|
$
|
15,712.7
|
|
$
|
13,521.0
|
|
16
|
%
|
|
AIR MILES reward miles
issued
|
|
|
1,422.6
|
|
|
|
1,432.5
|
|
|
(1)
|
%
|
|
|
2,658.6
|
|
|
2,718.7
|
|
(2)
|
%
|
|
AIR MILES reward miles
redeemed
|
|
|
1,076.5
|
|
|
|
1,232.2
|
|
|
(13)
|
%
|
|
|
2,302.8
|
|
|
2,516.1
|
|
(8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* nm-not
meaningful
|
|
ALLIANCE DATA SYSTEMS
CORPORATION
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
|
(In millions, except
per share amounts)
|
(Unaudited)
|
|
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended June 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Adjusted EBITDA
and Adjusted EBITDA, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
137.7
|
|
|
$
|
140.7
|
|
|
$
|
284.1
|
|
|
$
|
299.6
|
|
|
Income tax
expense
|
|
|
76.2
|
|
|
|
76.2
|
|
|
|
157.0
|
|
|
|
162.8
|
|
|
Total interest
expense, net
|
|
|
137.5
|
|
|
|
103.7
|
|
|
|
262.7
|
|
|
|
202.5
|
|
|
Depreciation and other
amortization
|
|
|
45.2
|
|
|
|
41.1
|
|
|
|
89.9
|
|
|
|
80.9
|
|
|
Amortization of
purchased intangibles
|
|
|
80.3
|
|
|
|
88.5
|
|
|
|
160.4
|
|
|
|
177.1
|
|
|
Stock compensation
expense
|
|
|
21.7
|
|
|
|
21.5
|
|
|
|
45.2
|
|
|
|
41.4
|
|
|
Adjusted
EBITDA
|
|
$
|
498.6
|
|
|
$
|
471.7
|
|
|
$
|
999.3
|
|
|
$
|
964.3
|
|
|
Less: Funding costs
(1)
|
|
|
65.2
|
|
|
|
50.2
|
|
|
|
126.4
|
|
|
|
97.8
|
|
|
Less: Adjusted EBITDA
attributable to non-controlling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.5
|
|
|
Adjusted EBITDA, net
of funding costs and non-controlling interest
|
|
$
|
433.4
|
|
|
$
|
421.5
|
|
|
$
|
872.9
|
|
|
$
|
861.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
137.7
|
|
|
$
|
140.7
|
|
|
$
|
284.1
|
|
|
$
|
299.6
|
|
|
Add back: non-cash/
non-operating items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
|
|
21.7
|
|
|
|
21.5
|
|
|
|
45.2
|
|
|
|
41.4
|
|
|
Amortization of
purchased intangibles
|
|
|
80.3
|
|
|
|
88.5
|
|
|
|
160.4
|
|
|
|
177.1
|
|
|
Non-cash interest
(2)
|
|
|
14.0
|
|
|
|
6.3
|
|
|
|
24.3
|
|
|
|
12.7
|
|
|
Income tax effect
(3)
|
|
|
(39.5)
|
|
|
|
(39.6)
|
|
|
|
(77.9)
|
|
|
|
(78.5)
|
|
|
Core
earnings
|
|
|
214.2
|
|
|
|
217.4
|
|
|
|
436.1
|
|
|
|
452.3
|
|
|
Less: Core earnings
attributable to non-controlling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4.0
|
|
|
Core earnings
attributable to common stockholders
|
|
$
|
214.2
|
|
|
$
|
217.4
|
|
|
$
|
436.1
|
|
|
$
|
448.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – diluted
|
|
|
55.8
|
|
|
|
59.0
|
|
|
|
56.3
|
|
|
|
59.6
|
|
|
Core earnings
attributable to common stockholders per share - diluted
|
|
$
|
3.84
|
|
|
$
|
3.68
|
|
|
$
|
7.75
|
|
|
$
|
7.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents interest
expense on deposits and securitization funding costs.
|
(2)
|
Represents
amortization of debt issuance and hedging costs.
|
(3)
|
Represents the tax
effect for the related non-GAAP measure adjustments using the
expected effective tax rate.
|
|
|
Three Months Ended
June 30, 2017
|
|
|
|
LoyaltyOne
|
|
|
Epsilon
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
34.5
|
|
|
$
|
20.0
|
|
|
$
|
341.3
|
|
|
$
|
(44.4)
|
|
|
$
|
351.4
|
|
Depreciation and
amortization
|
|
|
19.5
|
|
|
|
77.9
|
|
|
|
26.1
|
|
|
|
2.0
|
|
|
|
125.5
|
|
Stock compensation
expense
|
|
|
2.7
|
|
|
|
8.9
|
|
|
|
3.3
|
|
|
|
6.8
|
|
|
|
21.7
|
|
Adjusted
EBITDA
|
|
|
56.7
|
|
|
|
106.8
|
|
|
|
370.7
|
|
|
|
(35.6)
|
|
|
|
498.6
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
—
|
|
|
|
65.2
|
|
|
|
—
|
|
|
|
65.2
|
|
Less: Adjusted EBITDA
attributable to non‑controlling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Adjusted EBITDA,
net
|
|
$
|
56.7
|
|
|
$
|
106.8
|
|
|
$
|
305.5
|
|
|
$
|
(35.6)
|
|
|
$
|
433.4
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2016
|
|
|
|
LoyaltyOne
|
|
|
Epsilon
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
54.2
|
|
|
$
|
10.8
|
|
|
$
|
300.7
|
|
|
$
|
(45.1)
|
|
|
$
|
320.6
|
|
Depreciation and
amortization
|
|
|
22.5
|
|
|
|
82.4
|
|
|
|
22.4
|
|
|
|
2.3
|
|
|
|
129.6
|
|
Stock compensation
expense
|
|
|
2.6
|
|
|
|
9.4
|
|
|
|
3.5
|
|
|
|
6.0
|
|
|
|
21.5
|
|
Adjusted
EBITDA
|
|
|
79.3
|
|
|
|
102.6
|
|
|
|
326.6
|
|
|
|
(36.8)
|
|
|
|
471.7
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
—
|
|
|
|
50.2
|
|
|
|
—
|
|
|
|
50.2
|
|
Less: Adjusted EBITDA
attributable to non‑controlling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Adjusted EBITDA,
net
|
|
$
|
79.3
|
|
|
$
|
102.6
|
|
|
$
|
276.4
|
|
|
$
|
(36.8)
|
|
|
$
|
421.5
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2017
|
|
|
|
LoyaltyOne
|
|
|
Epsilon
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
72.0
|
|
|
$
|
18.4
|
|
|
$
|
704.3
|
|
|
$
|
(90.9)
|
|
|
$
|
703.8
|
|
Depreciation and
amortization
|
|
|
38.6
|
|
|
|
155.8
|
|
|
|
51.9
|
|
|
|
4.0
|
|
|
|
250.3
|
|
Stock compensation
expense
|
|
|
4.8
|
|
|
|
17.6
|
|
|
|
6.4
|
|
|
|
16.4
|
|
|
|
45.2
|
|
Adjusted
EBITDA
|
|
|
115.4
|
|
|
|
191.8
|
|
|
|
762.6
|
|
|
|
(70.5)
|
|
|
|
999.3
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
—
|
|
|
|
126.4
|
|
|
|
—
|
|
|
|
126.4
|
|
Less: Adjusted EBITDA
attributable to non‑controlling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Adjusted EBITDA,
net
|
|
$
|
115.4
|
|
|
$
|
191.8
|
|
|
$
|
636.2
|
|
|
$
|
(70.5)
|
|
|
$
|
872.9
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2016
|
|
|
|
LoyaltyOne
|
|
|
Epsilon
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
109.9
|
|
|
$
|
(1.7)
|
|
|
$
|
632.1
|
|
|
$
|
(75.4)
|
|
|
$
|
664.9
|
|
Depreciation and
amortization
|
|
|
43.4
|
|
|
|
167.1
|
|
|
|
42.4
|
|
|
|
5.1
|
|
|
|
258.0
|
|
Stock compensation
expense
|
|
|
5.2
|
|
|
|
18.0
|
|
|
|
7.2
|
|
|
|
11.0
|
|
|
|
41.4
|
|
Adjusted
EBITDA
|
|
|
158.5
|
|
|
|
183.4
|
|
|
|
681.7
|
|
|
|
(59.3)
|
|
|
|
964.3
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
—
|
|
|
|
97.8
|
|
|
|
—
|
|
|
|
97.8
|
|
Less: Adjusted EBITDA
attributable to non‑controlling interest
|
|
|
5.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.5
|
|
Adjusted EBITDA,
net
|
|
$
|
153.0
|
|
|
$
|
183.4
|
|
|
$
|
583.9
|
|
|
$
|
(59.3)
|
|
|
$
|
861.0
|
|
Contacts:
|
Investors/Analysts
|
|
Tiffany
Louder
|
|
Alliance
Data
|
|
214-494-3048
|
|
Tiffany.Louder@alliancedata.com
|
|
|
|
Media
|
|
Shelley
Whiddon
|
|
Alliance
Data
|
|
214-494-3811
|
|
Shelley.Whiddon@alliancedata.com
|
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SOURCE Alliance Data Systems Corporation