COLUMBUS, Ohio, July 23, 2020 /PRNewswire/ -- Alliance Data
Systems Corporation (NYSE: ADS), a leading provider of data-driven
marketing, loyalty and payment solutions, today announced results
for the second quarter ended June 30,
2020.
Commenting on second quarter results, Ralph Andretta, president and chief executive
officer of Alliance Data, said, "The second quarter was very
challenging due to this unusual environment. The actions we took in
2019 and at the outset of COVID-19 supported better than expected
performance for our overall business. Operating results at
LoyaltyOne® were mixed. At AIR
MILES®, expense reductions implemented late in 2019
and an enhanced product mix focused on items for the home resulted
in a 5 percent increase in adjusted EBITDA, net on a
constant-currency basis. At BrandLoyalty, revenue and
adjusted EBITDA, net were down for the second quarter as grocer
clients deferred loyalty spending into the second-half of 2020 and
early 2021. Our Card Services business performed ahead of
our COVID-19 expectations. Following a low point in April, activity
increased progressively throughout the quarter as stores reopened,
reaching a high point at the end of June. Payment trends remained
relatively stable across the majority of our cardmember base,
resulting in lower than expected delinquencies and net charge-offs.
Given the uncertainty around macro-economic trends for the
remainder of the year, we are maintaining an elevated reserve for
loan loss, exceeding 13% of end of period receivables, which is an
increase of more than 110 basis points from the first quarter of
2020. Expense management continues to play a large role in our
quarterly results and will continue to do so for the remainder of
the year. This is clearly illustrated with the approximately
$50 million of cost savings from
continuing operations across all of our business segments,
resulting in positive earnings in the quarter.
"During this challenging period, our teams continued to execute
effectively for cardmembers and clients across the enterprise,
while maintaining teleworking protocols and ensuring safe on-site
work environments. We have forbearance plans in place for
cardmembers in need and are engaging with them regularly. The vast
majority of our brick & mortar clients' stores are now open,
and we are working closely with clients on targeted programs and
strategies to drive sales. These efforts are designed to support
both store-based clients as well as ecommerce sales, as online
channels continue to perform well. Additionally, we took actions to
further reduce our cost structure and strengthen our credit risk
profile, positioning Alliance Data for improved performance in the
future."
SUMMARY
|
Quarter Ended June
30,
|
|
(in millions,
except per share amounts)
|
2020
|
2019
|
%
Change
|
|
Revenue
|
$979
|
$1,348
|
-27%
|
|
Income from
continuing operations before income
taxes ("EBT")
|
$47
|
$194
|
-76%
|
|
Income from
continuing operations
|
$38
|
$142
|
-73%
|
|
Net income
|
$38
|
$139
|
-72%
|
|
Income from
continuing operations per diluted
share ("EPS")
|
$0.81
|
$2.71
|
-70%
|
|
Net income per
diluted share
|
$0.81
|
$2.64
|
-69%
|
|
Diluted shares
outstanding
|
47.7
|
52.6
|
|
|
*******************************
|
|
|
|
|
Supplemental Non-GAAP
Metrics (a):
|
|
|
|
|
Adjusted
EBITDA
|
$258
|
$414
|
-38%
|
|
Adjusted
EBITDA, net of funding costs
("adjusted EBITDA, net")
|
$156
|
$310
|
-50%
|
|
Core earnings
per diluted share ("core EPS")
|
$1.86
|
$3.83
|
-51%
|
|
Pre-provision,
pre-tax earnings
|
$297
|
$451
|
-34%
|
|
(a) See
"Financial Measures" for a discussion
of non-GAAP Financial
Measures.
|
|
|
|
|
Consolidated revenue decreased 27% to $979 million compared to the second quarter of
2019. EBT decreased 76% to $47
million, while income from continuing operations decreased
73% to $38 million and EPS decreased
70% to $0.81, all compared to the
second quarter of 2019. Adjusted EBITDA, net decreased 50% to
$156 million as compared to the
second quarter of 2019. All metrics were lower than the prior year
due primarily to lower revenue driven by lower volumes attributable
to COVID-19.
SEGMENT RESULTS
Card Services: Revenue decreased 24% to
$828 million, reflecting lower sales
volumes and increased fee waivers due to COVID-19. Adjusted EBITDA,
net decreased 56% to $127 million due
to lower revenue, partly offset by a decline in operating expenses
and the $7 million year-over-year
decrease in the provision for loan loss. Net principal loss rates
were 7.6% in the second quarter, up 150 basis points
year-over-year, impacted by lower credit card receivables volume.
Our delinquency rate of 4.3% improved 90 basis points from the
prior year; delinquency rates benefitted from forbearance relief
granted in connection with the pandemic. In the second quarter, we
incurred a non-cash impairment charge of $34
million related to the underperformance of certain client
programs and consolidation of our office locations.
LoyaltyOne®: Revenue decreased 40% to
$151 million resulting from both
fewer short-term loyalty programs in market due to the impact of
COVID-19 and the sale of Precima® in
January 2020, which accounted for
$19 million of incremental revenue in
last year's second quarter. On a constant currency basis, while
revenue was down 38% to $155 million,
adjusted EBITDA, net decreased 11% to $45
million, benefitting from expense reductions and continuing
cost management. AIR MILES® revenue
decreased 28% on a constant currency basis, due primarily to the
sale of Precima, as well as lower service revenue. Issuance of
AIR MILES reward miles decreased 26%, reflecting
a decline in discretionary spending, including credit card spend
and delays in promotions by Sponsors. AIR MILES reward
miles redemptions decreased 42%, reflecting the
impact of the pandemic on travel-related categories, offset
somewhat by strength from merchandise redemptions.
BrandLoyalty revenue decreased 44% or $70 million on a constant currency basis due to a
decline in programs resulting from retailer delays related to the
deferral of major sporting events such as the UEFA Euro
Championships and the Olympics.
SUMMARY AND OUTLOOK
"Alliance Data is moving forward thoughtfully within today's
uncertain business environment, adapting to and supporting the
needs of our enterprise clients and cardmembers while strengthening
our financial position and investing strategically to drive future
growth," said Andretta."In Card Services, we are working
closely with clients on adjusting in-store and online strategies
and marketing plans that are most relevant to consumers' changing
shopping behaviors during this time. Home décor and beauty continue
to be strong-performing verticals. We have signed multi-year
Private Label Credit Card ("PLCC") renewals including The Tile
Shop, a specialty retailer of natural stone and man-made tiles and
related materials. We launched a new PLCC commercial card
program with Floor & Decor, offering financing plans and
enhanced controls and functionality for small business owners. We
also signed a new multi-channel PLCC agreement during the quarter
with SalonCentric, a wholly-owned subsidiary of L'Oréal.
SalonCentric is one of the largest U.S. wholesale distributors of
professional salon and beauty supplies, with nearly 600 stores
nationwide and a robust ecommerce channel.
"In our AIR MILES business, we are supporting Collectors
and Sponsors by pivoting the reward portfolio to reflect more
non-travel options. The business continues to renew with Sponsors,
including a multi-year national renewal with Shell Canada Products,
as it focuses on driving Collector engagement in key categories
such as gasoline, grocery and liquor, which are deemed essential
services. For our Netherlands-based BrandLoyalty
business, the grocery vertical remains strong as an essential
consumer shopping category."
Andretta continued, "Turning to expense management efforts, I am
pleased to report that we achieved year-over-year cost savings of
approximately $140 million in the
first half of 2020, and we expect to realize additional cost
savings in the second half of this year derived primarily from
ongoing operating and procurement efficiencies. Based on recent
trends and current visibility, we reaffirm our expectation that
Alliance Data will remain EBT and cash flow positive in 2020, with
sufficient liquidity to manage through a period of anticipated
significant stress. We expect to enter 2021 as a much leaner
organization with a flexible corporate structure that can respond
quickly to changes in market dynamics.
"Additionally, we are making strategic investments in people,
data management tools and digital capabilities that will further
improve our competitive position and drive future growth. We are
pleased to announce that financial services veteran Valerie ("Val")
Greer has joined Alliance Data as the Chief Commercial Officer,
responsible for attracting and retaining brand partners and
cardmembers, and driving profitable growth for the business. Most
recently, Val headed the co-brand card business at Citi and
was responsible for driving significant growth. The investments we
are making underscore our commitment to restoring revenue growth
and improved profitability over the long term," Andretta
concluded.
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, and
the guidance we give with respect to, our anticipated operating or
financial results, completion of strategic initiatives, future
dividend declarations, and future economic conditions, including,
but not limited to, fluctuation in currency exchange rates, market
conditions and COVID-19 impacts related to relief measures for
impacted borrowers and depositors, labor shortages due to
quarantine, reduction in demand from clients, supply chain
disruption for our reward suppliers and disruptions in the airline
or travel industries.
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, pre-provision pre-tax
earnings, 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. In addition, adjusted EBITDA eliminates the
effect of the gain (loss) on the sale of a business, strategic
transaction costs, asset impairments and restructuring and other
charges. Adjusted EBITDA, net is equal to adjusted EBITDA
less securitization funding costs and interest expense on deposits.
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,
non-cash interest, gain (loss) on the sale of a business, strategic
transaction costs, asset impairments, and restructuring and other
charges. 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). 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 23, 2020 at 8:30 a.m. (Eastern Time) to discuss the Company's
second quarter 2020 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 enter "7947787". The replay will be
available at approximately 11:45 a.m.
(Eastern Time) on Thursday, July 23, 2020.
About Alliance Data
Alliance Data® (NYSE: ADS) is a leading provider of
data-driven marketing, loyalty and payment solutions serving large,
consumer-based industries. The Company creates and deploys
customized solutions that measurably change consumer behavior while
driving business growth and profitability for some of today's most
recognizable brands. Alliance Data helps its partners create and
increase customer loyalty across multiple touch points using
traditional, digital, mobile and emerging technologies. A FORTUNE
500 and S&P MidCap 400 company headquartered in Columbus, Ohio, Alliance Data consists of
businesses that together employ over 8,500 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. More information about Alliance Data can be found at
www.AllianceData.com.
Follow Alliance Data on Twitter, Facebook, LinkedIn, Instagram
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,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
979.3
|
|
|
$
|
1,348.5
|
|
|
$
|
2,361.1
|
|
|
$
|
2,682.7
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
operations
|
|
|
479.0
|
|
|
|
712.1
|
|
|
|
1,002.2
|
|
|
|
1,390.8
|
|
|
Provision for loan
loss
|
|
|
250.1
|
|
|
|
257.3
|
|
|
|
906.0
|
|
|
|
509.5
|
|
|
Depreciation and
amortization
|
|
|
41.3
|
|
|
|
41.8
|
|
|
|
80.1
|
|
|
|
88.2
|
|
|
Asset
impairments
|
|
|
34.2
|
|
|
|
—
|
|
|
|
34.2
|
|
|
|
—
|
|
|
Total operating
expenses
|
|
|
804.6
|
|
|
|
1,011.2
|
|
|
|
2,022.5
|
|
|
|
1,988.5
|
|
|
Operating
income
|
|
|
174.7
|
|
|
|
337.3
|
|
|
|
338.6
|
|
|
|
694.2
|
|
|
Interest expense,
net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization funding
costs
|
|
|
42.7
|
|
|
|
51.6
|
|
|
|
92.6
|
|
|
|
108.8
|
|
|
Interest expense on
deposits
|
|
|
58.9
|
|
|
|
53.2
|
|
|
|
119.2
|
|
|
|
102.0
|
|
|
Interest expense on
long-term and other debt, net
|
|
|
26.1
|
|
|
|
38.7
|
|
|
|
54.4
|
|
|
|
76.6
|
|
|
Total interest
expense, net
|
|
|
127.7
|
|
|
|
143.5
|
|
|
|
266.2
|
|
|
|
287.4
|
|
|
Income from
continuing operations before income taxes
|
|
$
|
47.0
|
|
|
$
|
193.8
|
|
|
$
|
72.4
|
|
|
$
|
406.8
|
|
|
Income tax
expense
|
|
|
8.6
|
|
|
|
51.4
|
|
|
|
4.0
|
|
|
|
86.1
|
|
|
Income from
continuing operations
|
|
|
38.4
|
|
|
|
142.4
|
|
|
|
68.4
|
|
|
|
320.7
|
|
|
Loss from
discontinued operations, net of taxes
|
|
|
—
|
|
|
|
(3.4)
|
|
|
|
—
|
|
|
|
(32.6)
|
|
|
Net income
|
|
$
|
38.4
|
|
|
$
|
139.0
|
|
|
$
|
68.4
|
|
|
$
|
288.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – basic
|
|
|
47.6
|
|
|
|
51.3
|
|
|
|
47.6
|
|
|
|
52.1
|
|
|
Weighted average
shares outstanding – diluted
|
|
|
47.7
|
|
|
|
52.6
|
|
|
|
47.7
|
|
|
|
52.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic – Income from
continuing operations
|
|
$
|
0.81
|
|
|
$
|
2.72
|
|
|
$
|
1.44
|
|
|
$
|
6.08
|
|
|
Basic – Loss from
discontinued operations
|
|
|
—
|
|
|
|
(0.07)
|
|
|
|
—
|
|
|
|
(0.62)
|
|
|
Basic – Net
income
|
|
$
|
0.81
|
|
|
$
|
2.65
|
|
|
$
|
1.44
|
|
|
$
|
5.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted – Income from
continuing operations
|
|
$
|
0.81
|
|
|
$
|
2.71
|
|
|
$
|
1.43
|
|
|
$
|
6.07
|
|
|
Diluted – Loss from
discontinued operations
|
|
|
—
|
|
|
|
(0.07)
|
|
|
|
—
|
|
|
|
(0.62)
|
|
|
Diluted – Net
income
|
|
$
|
0.81
|
|
|
$
|
2.64
|
|
|
$
|
1.43
|
|
|
$
|
5.45
|
|
|
ALLIANCE DATA SYSTEMS
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
millions)
(Unaudited)
|
|
|
|
June 30,
2020
|
|
December 31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
4,960.0
|
|
$
|
3,874.4
|
|
Credit card and loan
receivables:
|
|
|
|
|
|
|
|
Credit card and loan
receivables
|
|
|
15,809.0
|
|
|
19,463.1
|
|
Allowance for loan
loss
|
|
|
(2,096.3)
|
|
|
(1,171.1)
|
|
Credit card and loan
receivables, net
|
|
|
13,712.7
|
|
|
18,292.0
|
|
Credit card
receivables held for sale
|
|
|
83.1
|
|
|
408.0
|
|
Redemption settlement
assets, restricted
|
|
|
617.5
|
|
|
600.8
|
|
Right of use assets -
operating
|
|
|
249.4
|
|
|
264.3
|
|
Intangible assets,
net
|
|
|
109.6
|
|
|
153.3
|
|
Goodwill
|
|
|
944.3
|
|
|
954.9
|
|
Other
assets
|
|
|
2,190.8
|
|
|
1,947.1
|
|
Total
assets
|
|
$
|
22,867.4
|
|
$
|
26,494.8
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
$
|
894.3
|
|
$
|
922.0
|
|
Deposits
|
|
|
11,221.5
|
|
|
12,151.7
|
|
Non-recourse
borrowings of consolidated securitization entities
|
|
|
5,007.6
|
|
|
7,284.0
|
|
Long-term and other
debt
|
|
|
3,203.1
|
|
|
2,849.9
|
|
Operating lease
liabilities
|
|
|
299.5
|
|
|
314.3
|
|
Other
liabilities
|
|
|
1,086.8
|
|
|
1,384.6
|
|
Total
liabilities
|
|
|
21,712.8
|
|
|
24,906.5
|
|
Stockholders'
equity
|
|
|
1,154.6
|
|
|
1,588.3
|
|
Total liabilities and
stockholders' equity
|
|
$
|
22,867.4
|
|
$
|
26,494.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLIANCE DATA SYSTEMS
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
millions)
(Unaudited)
|
|
|
|
Six Months
Ended
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
Cash Flows from
Operating Activities:
|
|
Net income
|
|
$
|
68.4
|
|
|
$
|
288.1
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
Depreciation and
amortization
|
|
|
80.1
|
|
|
|
161.5
|
|
Deferred income
taxes
|
|
|
131.4
|
|
|
|
(47.6)
|
|
Provision for loan
loss
|
|
|
906.0
|
|
|
|
509.5
|
|
Non-cash stock
compensation
|
|
|
11.0
|
|
|
|
51.3
|
|
Amortization of
deferred financing costs
|
|
|
18.3
|
|
|
|
22.1
|
|
Change in operating
assets and liabilities, net of sale of business
|
|
|
(179.8)
|
|
|
|
(38.3)
|
|
Other
|
|
|
32.1
|
|
|
|
143.1
|
|
Net cash provided by
operating activities
|
|
|
1,067.5
|
|
|
|
1,089.7
|
|
|
|
Cash Flows from
Investing Activities:
|
|
Change in redemption
settlement assets
|
|
|
(18.7)
|
|
|
|
(2.0)
|
|
Change in credit card
and loan receivables
|
|
|
3,053.4
|
|
|
|
(20.9)
|
|
Proceeds from sale of
business
|
|
|
25.4
|
|
|
|
—
|
|
Sale of credit card
portfolios
|
|
|
289.5
|
|
|
|
539.3
|
|
Purchase of credit
card portfolios
|
|
|
—
|
|
|
|
(936.5)
|
|
Capital
expenditures
|
|
|
(26.1)
|
|
|
|
(92.2)
|
|
Other
|
|
|
16.5
|
|
|
|
(2.0)
|
|
Net cash provided by
(used in) investing activities
|
|
|
3,340.0
|
|
|
|
(514.3)
|
|
|
|
Cash Flows from
Financing Activities:
|
|
Borrowings under debt
agreements
|
|
|
650.0
|
|
|
|
2,077.3
|
|
Repayments of
borrowings
|
|
|
(300.7)
|
|
|
|
(1,974.8)
|
|
Net (decrease)
increase in deposits
|
|
|
(936.4)
|
|
|
|
742.8
|
|
Non-recourse
borrowings of consolidated securitization entities
|
|
|
350.0
|
|
|
|
2,193.3
|
|
Repayments/maturities
of non-recourse borrowings of consolidated securitization
entities
|
|
|
(2,630.0)
|
|
|
|
(3,117.2)
|
|
Payment of deferred
financing costs
|
|
|
(3.0)
|
|
|
|
(18.8)
|
|
Purchase of treasury
shares
|
|
|
—
|
|
|
|
(222.8)
|
|
Dividends
paid
|
|
|
(40.4)
|
|
|
|
(67.0)
|
|
Other
|
|
|
(1.1)
|
|
|
|
(9.4)
|
|
Net cash used in
financing activities
|
|
|
(2,911.6)
|
|
|
|
(396.6)
|
|
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
|
|
(2.9)
|
|
|
|
8.2
|
|
Change in cash, cash
equivalents and restricted cash
|
|
|
1,493.0
|
|
|
|
187.0
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
|
|
3,958.1
|
|
|
|
3,967.7
|
|
Cash, cash equivalents
and restricted cash at end of period
|
|
$
|
5,451.1
|
|
|
$
|
4,154.7
|
|
_____________________
|
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
June 30,
|
|
|
|
|
|
Six Months
Ended
June 30,
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
2020
|
|
2019
|
|
Change
|
|
|
Segment
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LoyaltyOne
|
|
$
|
151.1
|
|
|
$
|
251.5
|
|
|
(40)
|
%
|
|
$
|
349.2
|
|
$
|
455.3
|
|
(23)
|
%
|
|
Card
Services
|
|
|
828.2
|
|
|
|
1,096.9
|
|
|
(24)
|
|
|
|
2,011.9
|
|
|
2,227.3
|
|
(10)
|
|
|
Corporate/Other
|
|
|
—
|
|
|
|
0.1
|
|
|
nm
|
*
|
|
|
—
|
|
|
0.1
|
|
nm
|
*
|
|
Total
|
|
$
|
979.3
|
|
|
$
|
1,348.5
|
|
|
(27)
|
%
|
|
$
|
2,361.1
|
|
$
|
2,682.7
|
|
(12)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Earnings
Before Taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LoyaltyOne
|
|
$
|
24.0
|
|
|
$
|
27.5
|
|
|
(13)
|
%
|
|
$
|
70.6
|
|
$
|
50.5
|
|
40
|
%
|
|
Card
Services
|
|
|
70.3
|
|
|
|
262.8
|
|
|
(73)
|
|
|
|
102.4
|
|
|
529.7
|
|
(81)
|
|
|
Corporate/Other
|
|
|
(47.3)
|
|
|
|
(96.5)
|
|
|
(51)
|
|
|
|
(100.6)
|
|
|
(173.4)
|
|
(42)
|
|
|
Total
|
|
$
|
47.0
|
|
|
$
|
193.8
|
|
|
(76)
|
%
|
|
$
|
72.4
|
|
$
|
406.8
|
|
(82)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted
EBITDA, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LoyaltyOne
|
|
$
|
43.9
|
|
|
$
|
51.0
|
|
|
(14)
|
%
|
|
$
|
101.7
|
|
$
|
106.1
|
|
(4)
|
%
|
|
Card
Services
|
|
|
127.1
|
|
|
|
287.2
|
|
|
(56)
|
|
|
|
174.2
|
|
|
582.1
|
|
(70)
|
|
|
Corporate/Other
|
|
|
(14.8)
|
|
|
|
(28.6)
|
|
|
(48)
|
|
|
|
(36.2)
|
|
|
(62.0)
|
|
(42)
|
|
|
Total
|
|
$
|
156.2
|
|
|
$
|
309.6
|
|
|
(50)
|
%
|
|
$
|
239.7
|
|
$
|
626.2
|
|
(62)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance
Indicators:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
sales
|
|
$
|
4,799
|
|
|
$
|
7,551
|
|
|
(36)
|
%
|
|
$
|
10,898
|
|
$
|
13,867
|
|
(21)
|
%
|
|
Average
receivables
|
|
$
|
16,116
|
|
|
$
|
16,798
|
|
|
(4)
|
%
|
|
$
|
17,205
|
|
$
|
16,824
|
|
2
|
%
|
|
Gross yield
|
|
|
20.4
|
%
|
|
|
23.9
|
%
|
|
(3.5)
|
%
|
|
|
23.2
|
%
|
|
24.0
|
%
|
(0.8)
|
%
|
|
Net principal loss
rate
|
|
|
7.6
|
%
|
|
|
6.1
|
%
|
|
1.5
|
%
|
|
|
7.3
|
%
|
|
6.3
|
%
|
1.0
|
%
|
|
Delinquency
rate
|
|
|
4.3
|
%
|
|
|
5.2
|
%
|
|
(0.9)
|
%
|
|
|
4.3
|
%
|
|
5.2
|
%
|
(0.9)
|
%
|
|
AIR MILES reward miles
issued
|
|
|
1,053
|
|
|
|
1,423
|
|
|
(26)
|
%
|
|
|
2,369
|
|
|
2,681
|
|
(12)
|
%
|
|
AIR MILES reward miles
redeemed
|
|
|
608
|
|
|
|
1,050
|
|
|
(42)
|
%
|
|
|
1,602
|
|
|
2,139
|
|
(25)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Adjusted EBITDA
and Adjusted EBITDA, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
38.4
|
|
|
$
|
142.4
|
|
|
$
|
68.4
|
|
|
$
|
320.7
|
|
|
Income tax
expense
|
|
|
8.6
|
|
|
|
51.4
|
|
|
|
4.0
|
|
|
|
86.1
|
|
|
Total interest
expense, net
|
|
|
127.7
|
|
|
|
143.5
|
|
|
|
266.2
|
|
|
|
287.4
|
|
|
Depreciation and other
amortization
|
|
|
20.3
|
|
|
|
19.3
|
|
|
|
37.7
|
|
|
|
39.9
|
|
|
Amortization of
purchased intangibles
|
|
|
21.0
|
|
|
|
22.5
|
|
|
|
42.4
|
|
|
|
48.3
|
|
|
Stock compensation
expense
|
|
|
6.2
|
|
|
|
10.2
|
|
|
|
11.0
|
|
|
|
21.6
|
|
|
Gain on sale of
business, net of strategic transaction costs
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
(8.0)
|
|
|
|
—
|
|
|
Strategic transaction
costs (2)
|
|
|
2.6
|
|
|
|
2.7
|
|
|
|
3.3
|
|
|
|
2.7
|
|
|
Asset impairments
(3)
|
|
|
34.2
|
|
|
|
—
|
|
|
|
34.2
|
|
|
|
—
|
|
|
Restructuring and
other charges (4)
|
|
|
(1.2)
|
|
|
|
22.4
|
|
|
|
(7.7)
|
|
|
|
30.3
|
|
|
Adjusted
EBITDA
|
|
$
|
257.8
|
|
|
$
|
414.4
|
|
|
$
|
451.5
|
|
|
$
|
837.0
|
|
|
Less: Funding costs
(5)
|
|
|
101.6
|
|
|
|
104.8
|
|
|
|
211.8
|
|
|
|
210.8
|
|
|
Adjusted EBITDA, net
of funding costs
|
|
$
|
156.2
|
|
|
$
|
309.6
|
|
|
$
|
239.7
|
|
|
$
|
626.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
38.4
|
|
|
$
|
142.4
|
|
|
$
|
68.4
|
|
|
$
|
320.7
|
|
|
Add back: non-cash/
non-operating items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
|
|
6.2
|
|
|
|
10.2
|
|
|
|
11.0
|
|
|
|
21.6
|
|
|
Amortization of
purchased intangibles
|
|
|
21.0
|
|
|
|
22.5
|
|
|
|
42.4
|
|
|
|
48.3
|
|
|
Non-cash interest
(6)
|
|
|
8.8
|
|
|
|
9.5
|
|
|
|
18.3
|
|
|
|
18.7
|
|
|
Gain on sale of
business, net of strategic transaction costs
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
(8.0)
|
|
|
|
—
|
|
|
Strategic transaction
costs (2)
|
|
|
2.6
|
|
|
|
2.7
|
|
|
|
3.3
|
|
|
|
2.7
|
|
|
Asset impairments
(3)
|
|
|
34.2
|
|
|
|
—
|
|
|
|
34.2
|
|
|
|
—
|
|
|
Restructuring and
other charges (4)
|
|
|
(1.2)
|
|
|
|
22.4
|
|
|
|
(7.7)
|
|
|
|
30.3
|
|
|
Income tax effect
(7)
|
|
|
(21.3)
|
|
|
|
(8.3)
|
|
|
|
(37.5)
|
|
|
|
(39.1)
|
|
|
Core
earnings
|
|
$
|
88.7
|
|
|
$
|
201.4
|
|
|
$
|
124.4
|
|
|
$
|
403.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – diluted
|
|
|
47.7
|
|
|
|
52.6
|
|
|
|
47.7
|
|
|
|
52.9
|
|
|
Core earnings per
share – diluted
|
|
$
|
1.86
|
|
|
$
|
3.83
|
|
|
$
|
2.61
|
|
|
$
|
7.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-provision
pre-tax earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes
|
|
$
|
47.0
|
|
|
$
|
193.8
|
|
|
$
|
72.4
|
|
|
$
|
406.8
|
|
|
Provision for loan
loss
|
|
|
250.1
|
|
|
|
257.3
|
|
|
|
906.0
|
|
|
|
509.5
|
|
|
Pre-provision pre-tax
earnings
|
|
$
|
297.1
|
|
|
$
|
451.1
|
|
|
$
|
978.4
|
|
|
$
|
916.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents gain on
sale of Precima in January 2020, net of strategic transaction
costs. Precima was included in the Company's LoyaltyOne
segment.
|
(2)
|
Represents costs for
professional services associated with strategic
initiatives.
|
(3)
|
Represents asset
impairment charges recorded in the second quarter of 2020, related
to deferred contract costs and certain right of use
assets.
|
(4)
|
Represents costs
associated with restructuring and other exit activities. In 2020,
the amounts consist of adjustments to our liability associated with
restructuring and other charges recorded for cost saving
initiatives executed in 2019.
|
(5)
|
Represents interest
expense on deposits and securitization funding costs.
|
(6)
|
Represents
amortization of debt issuance costs.
|
(7)
|
Represents the tax
effect including the related non-GAAP measure adjustments using the
expected effective annual tax rate.
|
|
|
Three Months Ended
June 30, 2020
|
|
|
|
LoyaltyOne
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
23.8
|
|
|
$
|
171.9
|
|
|
$
|
(21.0)
|
|
|
$
|
174.7
|
|
Depreciation and
amortization
|
|
|
18.4
|
|
|
|
22.1
|
|
|
|
0.8
|
|
|
|
41.3
|
|
Stock compensation
expense
|
|
|
1.5
|
|
|
|
1.8
|
|
|
|
2.9
|
|
|
|
6.2
|
|
Gain on sale of
business, net of strategic transaction costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Strategic transaction
costs
|
|
|
0.1
|
|
|
|
—
|
|
|
|
2.5
|
|
|
|
2.6
|
|
Asset
impairments
|
|
|
—
|
|
|
|
34.2
|
|
|
|
—
|
|
|
|
34.2
|
|
Restructuring and
other charges
|
|
|
0.1
|
|
|
|
(1.3)
|
|
|
|
—
|
|
|
|
(1.2)
|
|
Adjusted
EBITDA
|
|
|
43.9
|
|
|
|
228.7
|
|
|
|
(14.8)
|
|
|
|
257.8
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
101.6
|
|
|
|
—
|
|
|
|
101.6
|
|
Adjusted EBITDA,
net
|
|
$
|
43.9
|
|
|
$
|
127.1
|
|
|
$
|
(14.8)
|
|
|
$
|
156.2
|
|
|
|
|
Three Months Ended
June 30, 2019
|
|
|
|
LoyaltyOne
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
28.3
|
|
|
$
|
367.6
|
|
|
$
|
(58.6)
|
|
|
$
|
337.3
|
|
Depreciation and
amortization
|
|
|
19.6
|
|
|
|
20.8
|
|
|
|
1.4
|
|
|
|
41.8
|
|
Stock compensation
expense
|
|
|
2.9
|
|
|
|
3.6
|
|
|
|
3.7
|
|
|
|
10.2
|
|
Strategic transaction
costs
|
|
|
0.2
|
|
|
|
—
|
|
|
|
2.5
|
|
|
|
2.7
|
|
Restructuring and
other charges
|
|
|
—
|
|
|
|
—
|
|
|
|
22.4
|
|
|
|
22.4
|
|
Adjusted
EBITDA
|
|
|
51.0
|
|
|
|
392.0
|
|
|
|
(28.6)
|
|
|
|
414.4
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
104.8
|
|
|
|
—
|
|
|
|
104.8
|
|
Adjusted EBITDA,
net
|
|
$
|
51.0
|
|
|
$
|
287.2
|
|
|
$
|
(28.6)
|
|
|
$
|
309.6
|
|
|
|
|
Six Months Ended
June 30, 2020
|
|
|
|
LoyaltyOne
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
70.3
|
|
|
$
|
314.2
|
|
|
$
|
(45.9)
|
|
|
$
|
338.6
|
|
Depreciation and
amortization
|
|
|
36.6
|
|
|
|
41.8
|
|
|
|
1.7
|
|
|
|
80.1
|
|
Stock compensation
expense
|
|
|
2.5
|
|
|
|
3.6
|
|
|
|
4.9
|
|
|
|
11.0
|
|
Gain on sale of
business, net of strategic transaction costs
|
|
|
(8.0)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8.0)
|
|
Strategic transaction
costs
|
|
|
0.2
|
|
|
|
—
|
|
|
|
3.1
|
|
|
|
3.3
|
|
Asset
impairments
|
|
|
—
|
|
|
|
34.2
|
|
|
|
—
|
|
|
|
34.2
|
|
Restructuring and
other charges
|
|
|
0.1
|
|
|
|
(7.8)
|
|
|
|
—
|
|
|
|
(7.7)
|
|
Adjusted
EBITDA
|
|
|
101.7
|
|
|
|
386.0
|
|
|
|
(36.2)
|
|
|
|
451.5
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
211.8
|
|
|
|
—
|
|
|
|
211.8
|
|
Adjusted EBITDA,
net
|
|
$
|
101.7
|
|
|
$
|
174.2
|
|
|
$
|
(36.2)
|
|
|
$
|
239.7
|
|
|
|
|
Six Months Ended
June 30, 2019
|
|
|
|
LoyaltyOne
|
|
|
Card
Services
|
|
|
Corporate/
Other
|
|
|
Total
|
|
Operating income
(loss)
|
|
$
|
52.4
|
|
|
$
|
740.5
|
|
|
$
|
(98.7)
|
|
|
$
|
694.2
|
|
Depreciation and
amortization
|
|
|
39.8
|
|
|
|
45.0
|
|
|
|
3.4
|
|
|
|
88.2
|
|
Stock compensation
expense
|
|
|
5.8
|
|
|
|
7.4
|
|
|
|
8.4
|
|
|
|
21.6
|
|
Strategic transaction
costs
|
|
|
0.2
|
|
|
|
—
|
|
|
|
2.5
|
|
|
|
2.7
|
|
Restructuring
charges
|
|
|
7.9
|
|
|
|
—
|
|
|
|
22.4
|
|
|
|
30.3
|
|
Adjusted
EBITDA
|
|
|
106.1
|
|
|
|
792.9
|
|
|
|
(62.0)
|
|
|
|
837.0
|
|
Less: Funding
costs
|
|
|
—
|
|
|
|
210.8
|
|
|
|
—
|
|
|
|
210.8
|
|
Adjusted EBITDA,
net
|
|
$
|
106.1
|
|
|
$
|
582.1
|
|
|
$
|
(62.0)
|
|
|
$
|
626.2
|
|
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