Alliance Data Systems Corporation
) reported adjusted earnings per share (EPS) of $2.74 in the second
quarter of 2014. Earnings surpassed the Zacks Consensus Estimate of
$2.57 by 6.6% and improved 21% year over year.
Including amortization of purchased intangibles, non-cash interest
expenses of $48.3 million and non cash interest expense of $8.1
million, Alliance Data reported net income of $137.4 million or
$2.19 per share in the quarter. This compares favorably with $116.4
million or $1.71 per share in the year-ago quarter.
Alliance Data posted better-than-expected results courtesy of
strong performance across all its segments.
During the quarter under review, Alliance Data generated revenues
of $1.27 billion. Revenues were up 23% year over year, driven by
double-digit increase in LoyaltyOne and Private Label Services and
Credit, and high single-digit increase in Epsilon. The top line
surpassed the Zacks Consensus Estimate of $1.25 billion.
Operating expenses increased nearly 29.5% year over year to $982.7
million in the quarter, primarily due to an increase in cost of
operations and higher provision for loan losses.
Second-quarter adjusted earnings before interest tax depreciation
and amortization (EBITDA) were $332 million, up 8% year over year.
The upside was aided by an improvement in all three segments.
The magnitude of increase in total revenue was higher than the
magnitude of increase in expenses, leading to an increase in
operating income by 4.9% year over year to $282.5 million.
: Segment revenues totaled $355.6 million, up 62% year over year.
Adjusted EBITDA was $77.4 million, up 17% from the year-ago
AIR MILES' reward miles issued remained flat year over year.
: Segment revenues were $357.1 million in the second quarter, up 8%
year over year.
Adjusted EBITDA was $67.7 million, up 6% year over year.
Private Label Services and Credit
: Revenues from the segment came in at $557.3 million, up 16% year
Adjusted EBITDA was $210.4 million, up 5% year over year.
Alliance Data exited the second quarter with cash and cash
equivalents of $631.2 million, down 35% from the 2013-end level.
Debt increased 5.7% to $2.96 billion at quarter end from $2.80
billion reported at 2013 end.
Cash from operations in the first half was $587.3 million, up 10.7%
year over year.
Capital expenditure of Alliance Data increased to $77.3 million in
the first half from $59 million in the year-ago period.
2014 Guidance Raised
Revenue expectation was raised to $5.30 billion from $5.25 billion
guided earlier. It translates into a year-over-year increase of 23%
(9% organic growth).
Core EPS expectation was raised to $12.35 from $12.25 (up 23% year
For third-quarter 2014, the company expects to deliver core
earnings of $3.25 per share on revenues of $1.30 billion.
While the top line represents 19% (9% organic) growth, the bottom
line reflects a 22% improvement.
Alliance Data has outperformed the earnings expectation as well as
The company is well poised for the upcoming quarters based on
continued strong performances across the segments and a solid
financial position. Revenues continue to exceed the $1 billion
mark. Core EPS also managed to outperform.
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. The company has expanded its dotz
loyalty program to 10 markets and seeks to enter three additional
markets during 2014 taking the tally to 13.
Furthermore, continued share repurchase programs at Alliance Data
are also expected to boost its bottom line, thereby enhancing
Alliance Data currently carries a Zacks Rank #3 (Hold).
Better-ranked financial transaction services providers include
Total System Services, Inc
). While Total System sports a Zacks Rank #1 (Strong Buy), Xoom
Corporation and Visa carry a Zacks Rank #2 (Buy). All these are
slated to release their earnings in the upcoming week.
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