Alliance Data Systems Corporation
) reported adjusted earnings of $1.84 per share for fourth
quarter 2012, comfortably beating the Zacks Consensus Estimate of
$1.68. Results augmented approximately 8% year over year.
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Including stock compensation expenses of $12.9 million,
amortization of purchased intangibles of $28.1 million, non-cash
interest expense of $26.5 million, non-cash mark-to-market gain
on interest rate derivatives of $6.9 million and an income tax
benefit of $22.6 million, the company reported a net income of
$83.6 million or $1.27 per share in the quarter, compared with
$65.9 million or $1.12 per share in the year-ago period.
Alliance Data posted better-than-expected results based on strong
performances across all segments.
Revenues in the fourth quarter were $972 million, up 15% year
over year. The upside was buoyed by a double-digit increase at
Epsilon and Private Label Services and Credit. Results surpassed
the Zacks Consensus Estimate of $941 million.
Operating expenses escalated nearly 13% year over year to $755.2
million in the fourth quarter of 2012, primarily due to a 15%
increase in cost of operations and 22% increase in depreciation
Fourth quarter adjusted earnings before Interest Tax Depreciation
and Amortization (EBITDA) was $277 million, up 20% year over
year. The growth was aided by improvement in all three segments.
Operating income increased 19% year over year to $216.7 million
in the quarter.
Full Year Highlights
Adjusted earnings were $8.71 per share, exceeding the Zacks
Consensus Estimate of $8.17. It also outperformed the year-ago
number by 14% and the guidance of $8.60.
Net income was $6.58 per share, up 21% from 2011.
Revenue improved 15% over 2011 to $3.6 billion. Adjusted
EBITDA increased 18% to $1.2 billion in 2012.
Segment Update for the Quarter under Review
The segment revenues totaled $216 million, up 1% year over year.
Adjusted EBITDA was $56.8 million, up 24% from the year-ago
During the reported quarter, operating income jumped 26% year
over year to $49.6 million.
AIR MILES reward miles issued increased 6% in the quarter.
: Segment revenues were $292 million in the fourth quarter, up
15% year over year.
Adjusted EBITDA was $69.4 million in the fourth quarter, up 9%
year over year.
Fourth quarter operating income was $37.9 million, up 4.4% from
the year-ago period.
Private Label Services and Credit
: Revenues from the segment came in at $466.4 million, up 23%
year over year.
Adjusted EBITDA was $178.3 million in the quarter, up 24% year
Fourth quarter operating income improved 21% year over year to
Alliance Data exited 2012 with cash and cash equivalents of
$893.4 million, exhibiting more than a fourfold increase from
$216.2 million at 2011 end.
Debt increased nearly 31% to $2.8 billion at 2012 end from $2.2
billion reported at 2011 end.
Cash from operations in 2012 totaled $1.13 million, up 12% from
the year-ago period.
Capital expenditures increased to $116.4 million in 2012 from
$73.5 million in the year-ago period.
First Quarter of 2013
Alliance Data expects revenue to increase 17% year over year
while earnings are estimated to grow 12%.
Core EPS is expected at $2.50, up 5% year over year.
2013 Guidance Raised
Alliance Data expects to generate revenue of $4.2 billion, up 15%
from the 2012 level, largely driven by the Hyper Marketing
Core EPS is estimated at $9.65, up 12% year over year while EPS
is projected at $7.35, up 11% year over year. Share outstanding
are projected at 65.6 million.
Alliance Data remains well poised for the upcoming quarters based
on continued strong performances across the segments and a solid
Continued focus on strategic acquisitions to grow inorganically,
the national rollout of its dotz coalition loyalty program in
Brazil (plans to enter 5 additional markets in 2013), and inking
long-term deals are expected to drive sold numbers ahead.
The recent acquisition of Hyper Marketing will not only add
Epsilon brands including Mars, Unilever, The Home Depot, and
Kellogg to its portfolio but also enhance Epsilon's digital
capabilities to further develop primary digital channels. The
company also has a new $400 million share buyback program under
Alliance Data currently carries a Zacks Rank #3 (Hold). Among
other financial transaction service providers,
Heartland Payment Systems, Inc
) carrying Zacks Rank #1 (Strong Buy) and
Fidelity National Information Services, Inc
) with a Zacks Rank #2 (Buy) are yet to announce their earnings