Alliance Data Systems Corporation
) reported adjusted earnings of $2.67 per share in the third
quarter of 2013. The earnings lagged the Zacks Consensus Estimate
by a penny but were ahead of the year-ago figure by 15.6%.
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Including amortization of purchased intangibles of $33.1 million,
non-cash interest expenses of $19.2 million, and an income tax
benefit of $18.6 million, Alliance Data reported net income of
$132.9 million or $2.01 per share in the quarter. This compared
favorably with $119 million or $1.84 per share in the year-ago
Alliance Data posted better-than-expected results based on strong
performances across all its segments.
During the quarter under review, Alliance Data generated revenues
of $1.09 billion. Revenues were up 20% year over year, driven by
double-digit increase at Epsilon and Private Label Services and
Credit. The top-line comfortably surpassed the Zacks Consensus
Estimate of $1.07 billion.
Operating expenses escalated nearly 24.7% year over year to
$807.6 million in the third quarter of 2013, primarily due to
18.7% increase in cost of operations and 11.9% increase in
Third-quarter adjusted Earnings before Interest Tax Depreciation
and Amortization (EBITDA) were $357.7 million, up 12.6% year over
year. The upside was aided by improvement in all three segments.
Operating income of Alliance Data increased 9.2% year over year
to $288.8 million in the quarter.
: Segment revenues totaled $213 million, down 1% year over year.
Adjusted EBITDA was $62.2 million, up 3% from the year-ago
During the reported quarter, operating income increased 3% year
over year to $54.7 million.
AIR MILES' reward miles issued increased 11% in the quarter.
: Segment revenues were $356 million in the third quarter, up 48%
year over year.
Adjusted EBITDA was $78.5 million in the third quarter, up 22%
year over year.
Third-quarter operating income was $38.9 million, up 8.3% from
the year-ago period.
Private Label Services and Credit:
Revenues from the segment came in at $531 million, up 16% year
Adjusted EBITDA was $246.2 million in the quarter, up 15% year
Third-quarter operating income improved 14.8% year over year to
Alliance Data exited the quarter with cash and cash equivalents
of $784 million, declining 11.1% from the 2012-end level.
Debt declined 6% to $2.68 billion at the end of the third quarter
of 2013 from $2.85 billion reported at 2012 end.
Cash from operations of Alliance Data in the first nine months of
2013 was $798.8 million, down 7.3% from the year-ago period.
Capital expenditure increased to $91 million in the first nine
months of 2013 from $77.3 million in the year-ago period.
2013 Guidance Raised
Alliance Data raised its revenue expectation to $4.3 billion from
$4.275 billion. The new guidance represents 18% increase from
2012. Organic revenue growth is projected at 8%.
Core EPS was revised upward to $9.90 from $9.85. The new guidance
represents a 14% year-over-year improvement.
Shares outstanding are projected at 66.6 million, up 4% from the
Unveiling 2014 Guidance
Revenue is projected at $4.64 billion, up 8% year over year.
Core EPS is estimated at $12.00 (up 21% year over year) and net
EPS is estimated at $9.64 (up 31% year over year).
Shares outstanding are expected to be 61.5 million.
Alliance Data failed to meet the earnings expectation but was
well ahead of its year-ago earnings. However, the top-line fared
well on both counts.
The company remains well poised for the upcoming quarters based
on continued strong performances across the segments and a solid
financial position. Revenues in the reported quarter exceeded the
$1 billion mark for the fourth time. Core EPS also managed to
outperform the guidance.
Continued focus on strategic acquisitions to grow inorganically,
the national rollout of its dotz coalition loyalty program in
Brazil, and inking of long-term deals are expected to drive solid
numbers ahead for Alliance Data. Alliance Data has expanded its
dotz loyalty program to two new markets in Brazil's southern
region - the State of Santa Catarina and the city of Curitiba in
the State of Parana, taking the tally to 7. It also plans to
enter 2 additional markets by year-end.
Alliance Data currently carries a Zacks Rank #2 (Buy). Financial
service transaction providers
Total System Services, Inc.
) are scheduled to release their results on Oct 22, Oct 30 and
Oct 31 respectively. All these shares have the same Zacks Rank as