Solid results across all the segments continue to drive Alliance Data's sturdy numbers. The top line fared well on both counts driven by double-digit increase across all the segments and exceeded the $1 billion mark, making it a fifth similar milestone for the company. Core EPS also managed to outperform the Zacks Consensus Estimate. The company's growth trajectory seems impressive based on its inorganic background. Further, the company has been strengthening its balance sheet to gain financial flexibility. This will allow Alliance Data to capitalize on strategic opportunities. We are optimistic about the Dotz coalition loyalty program in Brazil that expanded to 9 regions and aims to expand into 4 additional regions in 2014. Its continued share repurchase programs are also expected to boost its bottom line, thereby enhancing shareholder value. However, we are skeptical about the company's increasing expenses and dependence on limited clients for a major portion of its revenues. We thus remain Neutral on Alliance Data.
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Overview:
Headquartered in Plano, TX and founded in 1996, Alliance Data Systems Corporation is the largest private label credit card processing firm for mid-market specialty retail stores in the U.S. It provides transaction, marketing and credit services in the United States, Canada and internationally. Using transaction-rich data, Alliance Data creates and manages customized solutions that change consumer behavior and enable its clients to create and enhance customer loyalty to build stronger, mutually beneficial relationships with their customers. The company is a leading player among its competitors. Alliance Data is one of the largest third party payment processors in the United States and the second largest third party private label card issuer as measured by accounts. In Canada, it owns and operates the premier coalition loyalty-marketing program (AIR MILES).
The company operates in three reportable segments: LoyaltyOne, Epsilon and Private Label Services and Credit.
Private Label Services and Credit (47% of 2013 revenues) provides risk management solutions, account origination, funding, transaction processing, customer care and collections services for the company's private label retail credit card programs.
Epsilon (32%) provides integrated direct marketing solutions that combine database marketing technology and analytics with a broad range of direct marketing services
Loyalty Services (21%) represents the company's Canadian AIR MILES program, the largest consumer coalition program in Canada and generates revenues primarily from the same. This segment's results can be impacted by changes in the foreign currency exchange rate between the U.S. dollar and the Canadian dollar.
Source: Company
As of Dec 31, 2013, the company had total assets of $13.2 billion (up 10% year over year), long-term debt of $2.4 billion (up 20% year over year) and shareholder equity of $855.8 million (up 61.9% year over year).
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