COLUMBUS, Ohio, Oct. 24, 2019 /PRNewswire/ -- Alliance Data
Systems Corporation (NYSE: ADS), a leading global provider of
data-driven marketing and loyalty solutions, today announced its
results for the third quarter, ended September 30, 2019.
SUMMARY
|
Quarter Ended
September 30,
|
(in millions,
except per share amounts)
|
2019
|
2018
|
%
Change
|
Revenue
|
$1,438
|
$1,423
|
1%
|
Income from
continuing operations
|
$122
|
$289
|
-58%
|
Net (loss)
income
|
($108)
|
$297
|
-136%
|
Income from
continuing operations per diluted share ("EPS")
|
$2.41
|
$5.25
|
-54%
|
Net (loss) income per
diluted share
|
($2.13)
|
$5.39
|
-140%
|
Diluted shares
outstanding
|
50.4
|
55.0
|
|
*******************************
|
|
|
|
Supplemental Non-GAAP
Metrics (a):
|
|
|
|
Adjusted
EBITDA
|
$481
|
$538
|
-11%
|
Adjusted
EBITDA, net of funding costs
("adjusted EBITDA, net")
|
$367
|
$439
|
-16%
|
Core earnings
per diluted share ("core EPS")
|
$5.05
|
$5.37
|
-6%
|
|
(a) See
"Financial Measures" for a discussion of non-GAAP financial
measures.
|
"Material progress has been made in executing our strategic plan
and business transformation initiatives. As expected in Card
Services, our third quarter results reflect performance
improvements across several key metrics, including net charge-offs,
credit card and loan receivables and credit sales. For
instance, recent new business wins contributed 6% to year-over-year
growth in reported credit sales. This represents the first
quarter of positive year-over-year comparisons for this line of
business in 2019," commented Melisa
Miller, president and chief executive officer of Alliance
Data.
"We continue to build on our foundation for a return to earnings
growth, and we are laser-focused on streamlining our operating
model. This includes reducing our cost structure, which we
expect will result in significant savings while continuing to
deliver differentiated solutions to the marketplace. We expect
ongoing cost reduction initiatives to produce more than
$100 million of incremental,
annualized cost savings, further enhancing our financial
performance.
"We have completed a number of our strategic initiatives—to
include the Epsilon® divestiture, certain portfolio
sales and corporate restructurings. With a view forward, we
believe our business will emerge well-positioned to return to more
consistent, sustainable earnings growth. We are uniquely positioned
in the markets we serve, and our sizeable addressable market and
lower operating costs will set the stage for performance
improvement in 2020 and beyond," Miller concluded.
CONSOLIDATED RESULTS
Revenue increased 1 percent to $1.44
billion as compared to the third quarter of 2018, while EPS
decreased to $2.41 for the third
quarter of 2019. Income from continuing operations was
negatively affected by restructuring charges and the loss on the
early extinguishment of debt, which impacted EPS by approximately
$1.86. Net income was further
affected by the after-tax loss on the Epsilon sale, which
negatively impacted net income per diluted share by approximately
$4.45. Adjusted EBITDA, net
decreased 16 percent to $367 million
compared to $439 million for the
third quarter of 2018. Core EPS decreased 6 percent to
$5.05 for the third quarter of 2019
versus $5.37 in third quarter of
2018.
SEGMENT RESULTS
|
Quarter Ended
September 30,
|
(in
millions)
|
2019
|
2018
|
%
Change
|
Revenue:
|
|
|
|
Card
Services
|
$1,192
|
$1,163
|
+3%
|
LoyaltyOne
|
$246
|
$260
|
-6%
|
Total revenue
|
$1,438
|
$1,423
|
+1%
|
|
|
|
|
Adjusted EBITDA,
net:
|
|
|
|
Card
Services
|
$328
|
$414
|
-21%
|
LoyaltyOne
|
$58
|
$63
|
-8%
|
Corporate/other
|
($19)
|
($38)
|
-51%
|
Total adjusted EBITDA,
net
|
$367
|
$439
|
-16%
|
|
|
|
|
Card Services: Revenue increased 3 percent to
$1.19 billion, while adjusted EBITDA,
net decreased 21 percent to $328
million. Gross yields decreased 20 basis points to 24.7
percent on 3 percent growth of normalized average credit card
receivables (credit card receivables plus held-for-sale
receivables). The provision for loan loss increased 51 percent, or
$100 million, to $297 million. In the third quarter of 2018,
we had a decrease in our receivables and improved credit metrics,
which led to an allowance release. In the third quarter of
2019, we saw higher receivables and stable credit metrics leading
to an allowance build. Operating expenses remained flat
at $481 million. Excluding the
mark-to-market charges, operating expenses expressed as a
percentage of normalized average credit card receivables decreased
approximately 100 basis points to 8.7 percent of normalized average
credit card receivables.
LoyaltyOne®: Revenue decreased 6
percent to $246 million, while
adjusted EBITDA, net decreased 8 percent to $58 million for the third quarter of 2019
compared to the third quarter of 2018. Revenue increased 1 percent
compared with the prior year period when adjusted for unfavorable
foreign exchange rates and additional product redemptions now
recorded as net revenue. Adjusted EBITDA, net, on a constant
currency basis, decreased 6 percent due to product mix. AIR
MILES® reward miles issued were 1 percent below the 2018
third quarter due to decreased promotional activity. Initiatives
implemented during the quarter to lower operating costs at both the
AIR MILES Reward Program and BrandLoyalty resulted in approximately
$42 million in restructuring and
other charges.
Guidance/Outlook
Recent prime rate changes, an adjustment to the value of certain
held-for-sale credit card receivable portfolios, and lower average
receivables caused an aggregate reduction in expected core EPS.
As a result of these factors, the Company has lowered its
full-year 2019 core EPS guidance range to $16.75 to $17.00
(assumes no further interest rate reductions from the Federal Open
Market Committee). On a pro forma basis, which assumes the
full year effect of the lower share count, debt retirement and
company-wide expense reductions, expected core EPS guidance would
range from $20.50 to $20.75.
Since the receipt of the $3.5
billion net proceeds from the Company's sale of its Epsilon
segment, Alliance Data has retired $2.4
billion of corporate debt, which is expected to yield
annualized interest cost savings of approximately $120 million.
Additionally, as previously announced, Alliance Data
successfully completed a "modified Dutch Auction" tender offer,
repurchasing 5,050,505 shares at a price of $148.50 per share. The aggregate cost of that
transaction was approximately $750
million, exclusive of fees and expenses related to the
tender offer. The Company expects to opportunistically allocate the
remaining net proceeds of approximately $350
million based on management's assessment of potential
investments to accelerate organic growth, its cash requirements,
and the benefit from additional share buybacks.
Looking ahead, management continues to have confidence in the
successful execution of its business strategy transformation and
streamlining efforts, with the majority of initiatives completed or
in progress. These initiatives, designed to provide a leaner,
simplified operating model for all of Alliance Data's businesses,
will position the company for low-single digit revenue growth
in 2020 and mid-twenties to high-twenties year-over-year
improvement in our core EPS.
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
strategic initiatives, 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. Further
risks and uncertainties include, but are not limited to, the impact
of strategic initiatives on us or our business if any transactions
are undertaken, and whether the anticipated benefits of such
transactions can be realized as well as whether or if any share
repurchases are completed.
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, 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. Adjusted EBITDA also excludes
restructuring or strategic transaction costs and loss on the
extinguishment of debt. 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, restructuring or strategic transaction costs, loss on
the extinguishment of debt, amortization of debt issuance and
hedging costs. 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 2019
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, October 24, 2019 at 8:30 a.m. (Eastern Time) to discuss the Company's
third-quarter 2019 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 (800)
585-8367 or (416) 621-4642 and reference conference ID number
"1592308". The replay will be available at approximately
11:45 a.m. (Eastern Time) on
Thursday, October 24, 2019.
About 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, FORTUNE 500 and FORTUNE 100 Best Companies to Work For
company headquartered in Columbus,
Ohio, Alliance Data consists of businesses that together
employ over 10,000 associates at more than 50 locations
worldwide.
Alliance Data's card services business is a provider of
market-leading private label, co-brand, and business credit card
programs. LoyaltyOne® owns and operates the AIR MILES®
Reward Program, Canada's most
recognized loyalty program, and Netherlands-based BrandLoyalty, a global
provider of tailor-made loyalty programs for grocers. In
July 2019 Alliance Data completed the
sale of its Epsilon® business to Publicis Groupe.
Follow Alliance Data on Twitter, Facebook, LinkedIn, Instagram
and YouTube.
ALLIANCE DATA SYSTEMS
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In millions, except
per share amounts)
(Unaudited)
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,437.6
|
|
|
$
|
1,423.1
|
|
|
$
|
4,120.3
|
|
|
$
|
4,202.0
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations
|
|
|
719.3
|
|
|
|
697.6
|
|
|
|
2,110.0
|
|
|
|
1,960.7
|
|
Provision for loan
loss
|
|
|
297.3
|
|
|
|
196.8
|
|
|
|
806.8
|
|
|
|
846.3
|
|
Depreciation and
amortization
|
|
|
44.9
|
|
|
|
48.9
|
|
|
|
133.2
|
|
|
|
146.3
|
|
Loss on extinguishment
of debt
|
|
|
71.9
|
|
|
|
—
|
|
|
|
71.9
|
|
|
|
—
|
|
Total operating
expenses
|
|
|
1,133.4
|
|
|
|
943.3
|
|
|
|
3,121.9
|
|
|
|
2,953.3
|
|
Operating
income
|
|
|
304.2
|
|
|
|
479.8
|
|
|
|
998.4
|
|
|
|
1,248.7
|
|
Interest expense,
net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization funding
costs
|
|
|
51.4
|
|
|
|
56.1
|
|
|
|
160.3
|
|
|
|
163.4
|
|
Interest expense on
deposits
|
|
|
62.5
|
|
|
|
43.4
|
|
|
|
164.4
|
|
|
|
115.6
|
|
Interest expense on
long-term and other debt, net
|
|
|
26.1
|
|
|
|
37.3
|
|
|
|
102.7
|
|
|
|
118.5
|
|
Total interest
expense, net
|
|
|
140.0
|
|
|
|
136.8
|
|
|
|
427.4
|
|
|
|
397.5
|
|
Income from
continuing operations before income taxes
|
|
$
|
164.2
|
|
|
$
|
343.0
|
|
|
$
|
571.0
|
|
|
$
|
851.2
|
|
Income tax
expense
|
|
|
42.6
|
|
|
|
54.3
|
|
|
|
128.8
|
|
|
|
158.8
|
|
Income from
continuing operations
|
|
|
121.6
|
|
|
|
288.7
|
|
|
|
442.2
|
|
|
|
692.4
|
|
(Loss) income from
discontinued operations, net of taxes (1)
|
|
|
(229.2)
|
|
|
|
7.8
|
|
|
|
(261.7)
|
|
|
|
(14.2)
|
|
Net (loss)
income
|
|
$
|
(107.6)
|
|
|
$
|
296.5
|
|
|
$
|
180.5
|
|
|
$
|
678.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – basic
|
|
|
48.8
|
|
|
|
54.8
|
|
|
|
51.1
|
|
|
|
55.2
|
|
Weighted average
shares outstanding – diluted
|
|
|
50.4
|
|
|
|
55.0
|
|
|
|
52.1
|
|
|
|
55.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic – Income from
continuing operations
|
|
$
|
2.47
|
|
|
$
|
5.27
|
|
|
$
|
8.49
|
|
|
$
|
12.55
|
|
Basic – (Loss) income
from discontinued operations
|
|
|
(4.69)
|
|
|
|
0.14
|
|
|
|
(5.12)
|
|
|
|
(0.25)
|
|
Basic – Net (loss)
income
|
|
$
|
(2.22)
|
|
|
$
|
5.41
|
|
|
$
|
3.37
|
|
|
$
|
12.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted – Income from
continuing operations
|
|
$
|
2.41
|
|
|
$
|
5.25
|
|
|
$
|
8.50
|
|
|
$
|
12.51
|
|
Diluted – (Loss)
income from discontinued operations
|
|
|
(4.54)
|
|
|
|
0.14
|
|
|
|
(5.03)
|
|
|
|
(0.26)
|
|
Diluted – Net (loss)
income
|
|
$
|
(2.13)
|
|
|
$
|
5.39
|
|
|
$
|
3.47
|
|
|
$
|
12.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
________________________________________
|
|
(1)
|
Includes the
allocation of interest expense associated with the Company's $500.0
million mandatory repayment of its revolving credit facility and
$1.9 billion in senior notes outstanding, as well as the post-tax
loss on the sale of Epsilon, which was completed on July 1,
2019.
|
ALLIANCE DATA SYSTEMS
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
millions)
(Unaudited)
|
|
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
4,512.5
|
|
$
|
3,817.4
|
|
Credit card and loan
receivables:
|
|
|
|
|
|
|
|
Credit card and loan
receivables
|
|
|
17,927.9
|
|
|
17,855.0
|
|
Allowance for loan
loss
|
|
|
(1,065.5)
|
|
|
(1,038.3)
|
|
Credit card and loan
receivables, net
|
|
|
16,862.4
|
|
|
16,816.7
|
|
Credit card
receivables held for sale
|
|
|
1,418.6
|
|
|
1,951.6
|
|
Redemption settlement
assets, restricted
|
|
|
593.6
|
|
|
558.6
|
|
Right of use assets -
operating
|
|
|
255.2
|
|
|
—
|
|
Intangible assets,
net
|
|
|
174.4
|
|
|
217.4
|
|
Goodwill
|
|
|
937.3
|
|
|
954.8
|
|
Other
assets
|
|
|
2,403.8
|
|
|
1,913.8
|
|
Assets of
discontinued operations
|
|
|
—
|
|
|
4,157.4
|
|
Total
assets
|
|
$
|
27,157.8
|
|
$
|
30,387.7
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
$
|
897.3
|
|
$
|
875.3
|
|
Deposits
|
|
|
12,502.1
|
|
|
11,793.7
|
|
Non-recourse
borrowings of consolidated securitization entities
|
|
|
6,894.4
|
|
|
7,651.7
|
|
Long-term and other
debt
|
|
|
2,846.1
|
|
|
5,725.4
|
|
Operating lease
liabilities
|
|
|
306.3
|
|
|
—
|
|
Other
liabilities
|
|
|
2,214.7
|
|
|
1,749.1
|
|
Liabilities of
discontinued operations
|
|
|
—
|
|
|
260.4
|
|
Total
liabilities
|
|
|
25,660.9
|
|
|
28,055.6
|
|
Stockholders'
equity
|
|
|
1,496.9
|
|
|
2,332.1
|
|
Total liabilities and
stockholders' equity
|
|
$
|
27,157.8
|
|
$
|
30,387.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLIANCE DATA SYSTEMS
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
millions)
(Unaudited)
|
|
|
|
Nine Months
Ended
September
30,
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
Cash Flows from
Operating Activities:
|
|
Net income
|
|
$
|
180.5
|
|
$
|
678.2
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
|
|
206.4
|
|
|
366.2
|
|
Deferred income
taxes
|
|
|
(187.0)
|
|
|
(30.3)
|
|
Provision for loan
loss
|
|
|
806.8
|
|
|
846.3
|
|
Non-cash stock
compensation
|
|
|
54.3
|
|
|
64.2
|
|
Amortization of
deferred financing costs
|
|
|
32.6
|
|
|
36.2
|
|
Gain on sale of
business
|
|
|
(512.2)
|
|
|
—
|
|
Loss on extinguishment
of debt
|
|
|
71.9
|
|
|
—
|
|
Asset impairment
charges
|
|
|
49.3
|
|
|
—
|
|
Change in operating
assets and liabilities, net of sale of business
|
|
611.8
|
|
|
(221.5)
|
|
Originations of loan
receivables held for sale
|
|
|
—
|
|
|
(4,799.0)
|
|
Sales of loan
receivables held for sale
|
|
|
—
|
|
|
4,928.8
|
|
Other
|
|
|
215.8
|
|
|
156.3
|
|
Net cash provided by
operating activities
|
|
|
1,530.2
|
|
|
2,025.4
|
|
|
|
Cash Flows from
Investing Activities:
|
|
Change in redemption
settlement assets
|
|
|
(7.0)
|
|
|
(37.4)
|
|
Change in credit card
and loan receivables
|
|
|
(678.2)
|
|
|
(708.1)
|
|
Proceeds from sale of
business
|
|
|
4,369.6
|
|
|
—
|
|
Purchase of credit
card portfolios
|
|
|
(924.8)
|
|
|
—
|
|
Sale of credit card
portfolios
|
|
|
980.0
|
|
|
55.4
|
|
Capital
expenditures
|
|
|
(119.2)
|
|
|
(149.3)
|
|
Other
|
|
|
30.1
|
|
|
(21.3)
|
|
Net cash provided by
(used in) investing activities
|
|
|
3,650.5
|
|
|
(860.7)
|
|
|
|
Cash Flows from
Financing Activities:
|
|
Borrowings under debt
agreements
|
|
|
2,092.3
|
|
|
3,207.3
|
|
Repayments of
borrowings
|
|
|
(4,979.8)
|
|
|
(3,466.0)
|
|
Net increase in
deposits
|
|
|
709.4
|
|
|
421.3
|
|
Non-recourse
borrowings of consolidated securitization entities
|
|
|
3,576.8
|
|
|
2,577.3
|
|
Repayments/maturities
of non-recourse borrowings of consolidated securitization
entities
|
|
|
(4,332.2)
|
|
|
(3,915.0)
|
|
Payment of debt
extinguishment costs
|
|
|
(46.1)
|
|
|
—
|
|
Payment of deferred
financing costs
|
|
|
(27.1)
|
|
|
(21.3)
|
|
Purchase of treasury
shares
|
|
|
(975.9)
|
|
|
(197.0)
|
|
Dividends
paid
|
|
|
(97.4)
|
|
|
(94.5)
|
|
Other
|
|
|
(16.1)
|
|
|
(18.1)
|
|
Net cash used in
financing activities
|
|
|
(4,096.1)
|
|
|
(1,506.0)
|
|
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
|
|
(0.6)
|
|
|
(3.1)
|
|
Change in cash, cash
equivalents and restricted cash
|
|
|
1,084.0
|
|
|
(344.4)
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
|
|
3,967.7
|
|
|
4,314.7
|
|
Cash, cash equivalents
and restricted cash at end of period
|
|
$
|
5,051.7
|
|
$
|
3,970.3
|
|
|
_________________________
|
Note: The cash
flow statement is presented with the combined cash flows from
discontinued operations with cash flows from continuing operations
within each cash flow statement category.
|
ALLIANCE DATA SYSTEMS
CORPORATION
SUMMARY FINANCIAL
HIGHLIGHTS
(In
millions)
(Unaudited)
|
|
|
|
Three Months
Ended
September 30,
|
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|
Segment
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LoyaltyOne
|
|
$
|
245.5
|
|
$
|
260.2
|
|
(6)%
|
|
$
|
700.7
|
|
$
|
735.1
|
|
(5)%
|
|
Card
Services
|
|
|
1,192.0
|
|
|
1,162.9
|
|
3
|
|
|
3,419.3
|
|
|
3,466.5
|
|
(1)
|
|
Corporate/Other
|
|
|
0.1
|
|
|
—
|
|
nm*
|
|
|
0.3
|
|
|
0.4
|
|
nm*
|
|
Total
|
|
$
|
1,437.6
|
|
$
|
1,423.1
|
|
1%
|
|
$
|
4,120.3
|
|
$
|
4,202.0
|
|
(2)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted
EBITDA, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LoyaltyOne
|
|
$
|
58.2
|
|
$
|
63.4
|
|
(8)%
|
|
$
|
164.3
|
|
$
|
186.8
|
|
(12)%
|
|
Card
Services
|
|
|
328.0
|
|
|
414.3
|
|
(21)
|
|
|
910.1
|
|
|
1,068.6
|
|
(15)
|
|
Corporate/Other
|
|
|
(18.9)
|
|
|
(38.8)
|
|
(51)
|
|
|
(80.9)
|
|
|
(104.2)
|
|
(22)
|
|
Total
|
|
$
|
367.3
|
|
$
|
438.9
|
|
(16)%
|
|
$
|
993.5
|
|
$
|
1,151.2
|
|
(14)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Indicators:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
sales
|
|
$
|
7,824
|
|
$
|
7,376
|
|
6%
|
|
$
|
21,690
|
|
$
|
21,749
|
|
—%
|
|
Credit sales -
active
|
|
$
|
7,009
|
|
$
|
6,142
|
|
14%
|
|
$
|
19,229
|
|
$
|
17,602
|
|
9%
|
|
Average
receivables
|
|
$
|
17,449
|
|
$
|
17,580
|
|
(1)%
|
|
$
|
17,032
|
|
$
|
17,624
|
|
(3)%
|
|
Gross yield
|
|
|
24.7%
|
|
|
24.9%
|
|
(0.2)%
|
|
|
24.3%
|
|
|
24.9%
|
|
(0.6)%
|
|
Net principal loss
rate
|
|
|
5.6%
|
|
|
5.9%
|
|
(0.3)%
|
|
|
6.0%
|
|
|
6.3%
|
|
(0.3)%
|
|
Delinquency
rate
|
|
|
5.9%
|
|
|
5.8%
|
|
0.1%
|
|
|
5.9%
|
|
|
5.8%
|
|
0.1%
|
|
AIR MILES reward miles
issued
|
|
|
1,344
|
|
|
1,361
|
|
(1)%
|
|
|
4,025
|
|
|
4,032
|
|
—%
|
|
AIR MILES reward miles
redeemed
|
|
|
1,078
|
|
|
1,076
|
|
—%
|
|
|
3,217
|
|
|
3,322
|
|
(3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* nm-not
meaningful
|
ALLIANCE DATA SYSTEMS
CORPORATION
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
(In millions, except
per share amounts)
(Unaudited)
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
|
Adjusted EBITDA
and Adjusted EBITDA, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
121.6
|
$
|
288.7
|
|
|
$
|
442.2
|
$
|
692.4
|
|
|
Income tax
expense
|
|
|
42.6
|
|
54.3
|
|
|
|
128.8
|
|
158.8
|
|
|
Total interest
expense, net
|
|
|
140.0
|
|
136.8
|
|
|
|
427.4
|
|
397.5
|
|
|
Depreciation and other
amortization
|
|
|
19.9
|
|
20.7
|
|
|
|
59.8
|
|
59.8
|
|
|
Amortization of
purchased intangibles
|
|
|
25.0
|
|
28.2
|
|
|
|
73.4
|
|
86.5
|
|
|
Stock compensation
expense
|
|
|
3.0
|
|
9.7
|
|
|
|
24.6
|
|
35.2
|
|
|
Strategic transaction
costs (1)
|
|
|
2.3
|
|
—
|
|
|
|
5.0
|
|
—
|
|
|
Restructuring and
other charges (2)
|
|
|
54.9
|
|
—
|
|
|
|
85.1
|
|
—
|
|
|
Loss on extinguishment
of debt (3)
|
|
|
71.9
|
|
—
|
|
|
|
71.9
|
|
—
|
|
|
Adjusted
EBITDA
|
|
$
|
481.2
|
$
|
538.4
|
|
|
$
|
1,318.2
|
$
|
1,430.2
|
|
|
Less: Funding costs
(4)
|
|
|
113.9
|
|
99.5
|
|
|
|
324.7
|
|
279.0
|
|
|
Adjusted EBITDA, net
of funding costs
|
|
$
|
367.3
|
$
|
438.9
|
|
|
$
|
993.5
|
$
|
1,151.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
121.6
|
$
|
288.7
|
|
|
$
|
442.2
|
$
|
692.4
|
|
|
Add back: non-cash/
non-operating items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
|
|
3.0
|
|
9.7
|
|
|
|
24.6
|
|
35.2
|
|
|
Amortization of
purchased intangibles
|
|
|
25.0
|
|
28.2
|
|
|
|
73.4
|
|
86.5
|
|
|
Non-cash interest
(5)
|
|
|
10.5
|
|
9.0
|
|
|
|
29.2
|
|
31.0
|
|
|
Strategic transaction
costs (1)
|
|
|
2.3
|
|
—
|
|
|
|
5.0
|
|
—
|
|
|
Restructuring and
other charges (2)
|
|
|
54.9
|
|
—
|
|
|
|
85.1
|
|
—
|
|
|
Loss on extinguishment
of debt (3)
|
|
|
71.9
|
|
—
|
|
|
|
71.9
|
|
—
|
|
|
Income tax effect
(6)
|
|
|
(34.4)
|
|
(40.1)
|
|
|
|
(73.4)
|
|
(84.2)
|
|
|
Core
earnings
|
|
$
|
254.8
|
$
|
295.5
|
|
|
$
|
658.0
|
$
|
760.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – diluted
|
|
|
50.4
|
|
55.0
|
|
|
|
52.1
|
|
55.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core earnings per
share – diluted
|
|
$
|
5.05
|
$
|
5.37
|
|
|
$
|
12.64
|
$
|
13.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
___________________________________
|
|
(1)
|
Represents costs for
professional services associated with strategic
initiatives.
|
(2)
|
Represents costs
associated with restructuring or other exit activities.
|
(3)
|
Represents loss on
extinguishment of debt resulting from the redemption price of the
senior notes and the write-off of
deferred issuance costs related to the July 2019 extinguishment of
$1.9 billion outstanding senior notes and a mandatory
payment of $500.0 million of the Company's revolving credit
facility.
|
(4)
|
Represents interest
expense on deposits and securitization funding costs.
|
(5)
|
Represents
amortization of debt issuance costs.
|
(6)
|
Represents the tax
effect including the related non-GAAP measure adjustments using the
expected effective annual tax rate.
|
|
|
Three Months Ended
September 30, 2019
|
|
|
|
LoyaltyOne
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating (loss)
income
|
|
$
|
(4.4)
|
|
|
$
|
413.9
|
|
|
$
|
(105.3)
|
|
|
$
|
304.2
|
|
Depreciation and
amortization
|
|
|
19.8
|
|
|
|
23.5
|
|
|
|
1.6
|
|
|
|
44.9
|
|
Stock compensation
expense
|
|
|
0.7
|
|
|
|
2.4
|
|
|
|
(0.1)
|
|
|
|
3.0
|
|
Strategic transaction
costs
|
|
|
0.1
|
|
|
|
—
|
|
|
|
2.2
|
|
|
|
2.3
|
|
Restructuring and
other charges
|
|
|
42.0
|
|
|
|
2.1
|
|
|
|
10.8
|
|
|
|
54.9
|
|
Loss on
extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
71.9
|
|
|
|
71.9
|
|
Adjusted
EBITDA
|
|
|
58.2
|
|
|
|
441.9
|
|
|
|
(18.9)
|
|
|
|
481.2
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
113.9
|
|
|
|
—
|
|
|
|
113.9
|
|
Adjusted EBITDA,
net
|
|
$
|
58.2
|
|
|
$
|
328.0
|
|
|
$
|
(18.9)
|
|
|
$
|
367.3
|
|
|
|
|
|
Three Months Ended
September 30, 2018
|
|
|
|
LoyaltyOne
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
40.3
|
|
|
$
|
484.9
|
|
|
$
|
(45.4)
|
|
|
$
|
479.8
|
|
Depreciation and
amortization
|
|
|
21.0
|
|
|
|
26.0
|
|
|
|
1.9
|
|
|
|
48.9
|
|
Stock compensation
expense
|
|
|
2.1
|
|
|
|
2.9
|
|
|
|
4.7
|
|
|
|
9.7
|
|
Adjusted
EBITDA
|
|
|
63.4
|
|
|
|
513.8
|
|
|
|
(38.8)
|
|
|
|
538.4
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
99.5
|
|
|
|
—
|
|
|
|
99.5
|
|
Adjusted EBITDA,
net
|
|
$
|
63.4
|
|
|
$
|
414.3
|
|
|
$
|
(38.8)
|
|
|
$
|
438.9
|
|
|
|
|
|
Nine Months Ended
September 30, 2019
|
|
|
|
LoyaltyOne
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
47.9
|
|
|
$
|
1,154.5
|
|
|
$
|
(204.0)
|
|
|
$
|
998.4
|
|
Depreciation and
amortization
|
|
|
59.7
|
|
|
|
68.5
|
|
|
|
5.0
|
|
|
|
133.2
|
|
Stock compensation
expense
|
|
|
6.5
|
|
|
|
9.7
|
|
|
|
8.4
|
|
|
|
24.6
|
|
Strategic transaction
costs
|
|
|
0.3
|
|
|
|
—
|
|
|
|
4.7
|
|
|
|
5.0
|
|
Restructuring and
other charges
|
|
|
49.9
|
|
|
|
2.1
|
|
|
|
33.1
|
|
|
|
85.1
|
|
Loss on
extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
71.9
|
|
|
|
71.9
|
|
Adjusted
EBITDA
|
|
|
164.3
|
|
|
|
1,234.8
|
|
|
|
(80.9)
|
|
|
|
1,318.2
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
324.7
|
|
|
|
—
|
|
|
|
324.7
|
|
Adjusted EBITDA,
net
|
|
$
|
164.3
|
|
|
$
|
910.1
|
|
|
$
|
(80.9)
|
|
|
$
|
993.5
|
|
|
|
|
|
Nine Months Ended
September 30, 2018
|
|
|
|
LoyaltyOne
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
114.2
|
|
|
$
|
1,261.1
|
|
|
$
|
(126.6)
|
|
|
$
|
1,248.7
|
|
Depreciation and
amortization
|
|
|
64.5
|
|
|
|
76.0
|
|
|
|
5.8
|
|
|
|
146.3
|
|
Stock compensation
expense
|
|
|
8.1
|
|
|
|
10.5
|
|
|
|
16.6
|
|
|
|
35.2
|
|
Adjusted
EBITDA
|
|
|
186.8
|
|
|
|
1,347.6
|
|
|
|
(104.2)
|
|
|
|
1,430.2
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
279.0
|
|
|
|
—
|
|
|
|
279.0
|
|
Adjusted EBITDA,
net
|
|
$
|
186.8
|
|
|
$
|
1,068.6
|
|
|
$
|
(104.2)
|
|
|
$
|
1,151.2
|
|
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