Alliance Data Reports Record First-Quarter 2012 Results
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SUMMARY |
Quarter Ended |
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(in millions, except per share amounts) |
2012 |
2011 |
% Change |
Revenue |
$ 891.6 |
$ 740.4 |
20% |
Net income |
$ 115.2 |
$ 86.4 |
33% |
Net income per diluted share |
$ 1.86 |
$ 1.56 |
19% |
Diluted shares outstanding |
61.8 |
55.4 |
12% |
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Supplemental Non-GAAP Metrics (a): |
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Adjusted EBITDA |
$ 303.6 |
$ 256.4 |
18% |
Adjusted EBITDA, net of funding costs |
$ 275.3 |
$ 219.7 |
25% |
Core earnings |
$ 146.9 |
$ 112.6 |
30% |
Core earnings per diluted share |
$ 2.38 |
$ 2.03 |
17% |
(a) See "Financial Measures" below for a discussion of adjusted EBITDA, adjusted EBITDA, net of funding costs, adjusted EBITDA margin, core earnings, core earnings per diluted share and other non-GAAP financial measures.
CONSOLIDATED RESULTS
Revenue increased 20 percent to
Diluted shares outstanding were 61.8 million for the first quarter of 2012, an increase of 6.4 million dilutive shares as compared to the first quarter of 2011. The increase is primarily attributable to a 4.9 million share increase in 'phantom shares,' which are shares that the Company never has to economically settle, and a 2.7 million share increase in convertible debt warrants, partially offset by share repurchases over the last 12 months.
"We continued to see solid momentum in all three of our business segments. For Private Label, cardholder spending remained robust, increasing 20 percent compared to the first quarter of 2011 driving 7 percent growth in average credit card receivables. At
Heffernan continued, "On our fourth quarter 2011 earnings call, we discussed the desire to opportunistically bolster our liquidity 'war-chest.' During the first quarter of 2012, we did just that by adding over
SEGMENT REVIEW
AIR MILES® reward miles issued increased 11 percent during the first quarter of 2012 compared to the prior year quarter due to positive growth in consumer credit card spending and increased promotional activity in the gas and grocer sectors. AIR MILES reward miles redeemed increased 26 percent during the first quarter of 2012 compared to the prior year quarter. As expected, the introduction of a five-year expiry policy to the AIR MILES Reward Program on
The new instant reward program, AIR MILES® Cash, launched during the first quarter of 2012. To date, approximately 350,000 collectors have enrolled in the program, which is currently being offered at four sponsors - Shell, Metro,
During the quarter,
Epsilon: Revenue for the segment increased
Adjusted EBITDA increased 18 percent to
During the quarter, Epsilon signed a new multi-year agreement with
Private Label Services and Credit: Revenue increased 10 percent to
Adjusted EBITDA, net of funding costs increased 34 percent to
Credit sales increased 20 percent compared to the first quarter of 2011 as a result of strong cardholder spending coupled with the ramp-up of programs added during 2011. Average credit card receivables increased 7 percent compared to the first quarter of 2011 as customer payment rates stabilized on a year-over-year basis. Credit card receivables were
Private Label recently signed a new, long-term agreement to provide private label credit card services to Premier Designs, a leading direct sales and service company of high fashion jewelry. Under terms of the agreement,
Liquidity
Corporate liquidity remained strong with approximately
During the first quarter of 2012, the Company issued
Available liquidity at the bank subsidiary level totaled
The Company has a board-approved program authorizing the repurchase of up to an aggregate amount of
2012 Outlook
Second Quarter 2012: The Company expects approximately 13 percent growth in revenue and 15 percent growth in core earnings for the second quarter of 2012. Core EPS is expected to increase approximately 5 percent to
Full Year: The Company is raising 2012 guidance for core earnings from
Financial Measures
In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, the Company presents financial measures that are non-GAAP measures, such as constant currency financial measures, adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA net of funding costs, core earnings and core earnings per diluted share (core EPS). 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. These metrics are an integral part of the Company's internal reporting to measure the performance of reportable segments and the overall effectiveness of senior management. Reconciliations to comparable GAAP financial measures are available in the accompanying schedules and on the Company's website. The financial measures presented are consistent with the Company's historical financial reporting practices. Core earnings and core earnings per diluted share 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
If you are unable to participate in the conference call, a replay will be available. To access the replay, please dial 855-859-2056 and enter "68345712". The replay will be available from two hours after the end of the call until
About
This release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may use words such as "anticipate," "believe," "estimate," "expect," "intend," "predict," "project" and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management's beliefs and assumptions, using information currently available to us. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these forward-looking statements are subject to risks, uncertainties and assumptions, including those discussed in our filings with the
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statements contained in this presentation reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We have no intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this presentation regarding
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
|||||
(In millions, except per share amounts) |
|||||
(Unaudited) |
|||||
Three Months Ended March 31, |
|||||
2012 |
2011 |
||||
Revenue |
$ |
891.6 |
$ |
740.4 |
|
Operating expenses: |
|||||
Cost of operations |
551.0 |
425.4 |
|||
Provision for loan loss |
49.3 |
67.7 |
|||
Depreciation and amortization |
38.7 |
35.4 |
|||
Total operating expenses |
639.0 |
528.5 |
|||
Operating income |
252.6 |
211.9 |
|||
Interest expense, net: |
|||||
Securitization funding costs |
22.3 |
31.0 |
|||
Interest expense on deposits |
6.0 |
5.7 |
|||
Interest expense on long-term and other debt, net |
37.4 |
34.8 |
|||
Total interest expense, net |
65.7 |
71.5 |
|||
Income before income taxes |
186.9 |
140.4 |
|||
Income tax expense |
71.7 |
54.0 |
|||
Net income |
$ |
115.2 |
$ |
86.4 |
|
Per share data: |
|||||
|
$ |
2.30 |
$ |
1.69 |
|
Diluted – Net income |
$ |
1.86 |
$ |
1.56 |
|
Weighted average shares outstanding – basic |
50.1 |
51.1 |
|||
Weighted average shares outstanding – diluted |
61.8 |
55.4 |
|
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CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
(In millions) |
||||||
(Unaudited) |
||||||
As of March 31, 2012 |
As of |
As of March 31, 2011 |
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ASSETS |
||||||
Cash and cash equivalents |
$ |
399.0 |
$ |
216.2 |
$ |
300.4 |
Credit card receivables, net |
4,986.7 |
5,197.7 |
4,374.9 |
|||
Redemption settlement assets(1) |
494.8</span> |
515.8 |
483.9 |
|||
Intangible assets, net |
365.8 |
383.6 |
302.0 |
|||
Goodwill |
1,455.1 |
1,449.4 |
1,229.0 |
|||
Other assets |
1,200.9 |
1,217.5 |
1,339.3 |
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<p style="MARGIN: 0in" class="prnews_p"> Total assets |
$ |
8,902.3 |
$ |
8,980.2 |
$ |
8,029.5 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||
Deferred revenue |
$ |
1,213.9 |
$ |
1,226.4 |
$ |
1,238.3 |
Deposits |
1,287.8 |
1,353.8 |
830.7 |
|||
Asset-backed securities debt – owed to securitization investors |
2,909.8 |
3,260.3 |
3,299.4 |
|||
Debt(2) |
2,428.8 |
2,183.5 |
2,009.2 |
|||
Other liabilities |
768.4 |
780.2 |
600.9 |
|||
Total liabilities |
8,608.7 |
8,804.2 |
7,978.5 |
|||
Stockholders' equity |
293.6 |
176.0 |
51.0 |
|||
Total liabilities and stockholders' equity |
$ |
8,902.3 |
$ |
8,980.2 |
$ |
8,029.5 |
(1)
(2) Included in debt is a discount of
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||
(In millions) |
||||
(Unaudited) |
||||
Three Months Ended |
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2012 |
2011 |
|||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
$ |
115.2 |
$ |
86.4 |
Adjustments to reconcile net income to net cash provided by operating activities: |
||||
Depreciation and amortization |
38.7 |
35.4 |
||
Deferred income taxes |
8.0 |
7.8 |
||
Provision for loan loss |
49.3 |
67.7 |
||
Non-cash stock compensation |
12.3 |
9.1 |
||
Amortization of discount on convertible senior notes |
19.8 |
17.7 |
||
Change in operating assets and liabilities, net of acquisitions |
16.3 |
6.9 |
||
Other |
(20.0) |
(20.6) |
||
Net cash provided by operating activities |
239.6 |
210.4 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Change in redemption settlement assets |
34.6 |
4.4 |
||
Change in credit card receivables |
257.5 |
433.0 |
||
Purchase of credit card receivables |
(97.7) |
(42.7) |
||
Capital expenditures |
(31.4) |
(18.6) |
||
Change in cash collateral, restricted |
16.0 |
(132.6) |
||
Other |
15.2 |
|||
Net cash provided by investing activities |
134.8 |
258.7 |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Borrowings under debt agreements |
699.5 |
202.0 |
||
Repayment of borrowings |
(474.0) |
(77.3) |
||
Issuances of deposits |
136.8 |
75.0 |
||
Repayments of deposits |
(202.8) |
(103.4) |
||
Borrowings from asset-backed securities |
– |
174.5 |
||
Repayments/maturities of asset-backed securities |
(350.5) |
(535.2) |
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Proceeds from issuance of common stock |
6.9 |
12.5 |
||
Purchase of treasury shares |
(2.5) |
(61.4) |
||
Other |
(6.3) |
5.7 |
||
Net cash used in financing activities |
(192.9) |
(307.6) |
||
Effect of exchange rate changes on cash and cash equivalents |
1.3 |
(0.2) |
||
Change in cash and cash equivalents |
182.8 |
161.3 |
||
Cash and cash equivalents at beginning of period |
216.2 |
139.1 |
||
Cash and cash equivalents at end of period |
$ |
399.0 |
$ |
300.4 |
|
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SUMMARY FINANCIAL HIGHLIGHTS |
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(In millions) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
|||||||
March 31, |
|||||||
2012 |
2011 |
Change |
|||||
Segment Revenue: |
|||||||
|
$ |
257.8 |
$ |
217.7 |
18 |
% |
|
Epsilon |
227.9 |
155.7 |
46 |
% |
|||
Private Label Services and Credit |
407.3 |
368.9 |
10 |
% |
|||
Corporate/Other |
0.4 |
0.3 |
33 |
% |
|||
Intersegment Eliminations |
(1.8) |
(2.2) |
nm |
||||
$ |
891.6 |
$ |
740.4 |
20 |
% |
||
Segment Adjusted EBITDA: |
|||||||
|
$ |
58.4 |
$ |
58.3 |
– |
% |
|
Epsilon |
39.8 |
33.7 |
18 |
% |
|||
Private Label Services and Credit |
224.4 |
183.3 |
22 |
% |
|||
Corporate/Other |
(19.0) |
(17.4) |
9 |
% |
|||
Intersegment Eliminations |
– |
(1.5) |
nm |
||||
$ |
303.6 |
$ |
256.4 |
18 |
% |
||
Key Performance Indicators: |
|||||||
Private Label statements generated |
37.1 |
34.7 |
7 |
% |
|||
Average receivables |
$ |
5,321.5 |
$ |
4,968.5 |
7 |
% |
|
Credit sales |
$ |
2,343.5 |
$ |
1,953.7 |
20 |
% |
|
AIR MILES reward miles issued |
1,229.8 |
1,110.5 |
11 |
% |
|||
AIR MILES reward miles redeemed |
1,249.8 |
988.6 |
26 |
% |
|||
nm-not meaningful |
|
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RECONCILIATION OF NON-GAAP INFORMATION |
|||||
(In millions, except per share amounts) |
|||||
(Unaudited) |
|||||
Three Months Ended |
|||||
Adjusted EBITDA and Adjusted EBITDA, net of funding costs: |
2012 |
2011 |
|||
Net income |
$ |
115.2 |
$ |
86.4 |
|
Income tax expense |
71.7 |
54.0 |
|||
Total interest expense, net |
65.7 |
71.5 |
|||
Depreciation and other amortization |
17.6 |
16.8 |
|||
Amortization of purchased intangibles |
21.1 |
18.6 |
|||
EBITDA |
291.3 |
247.3 |
|||
Stock compensation expense |
12.3 |
9.1 |
|||
Adjusted EBITDA |
$ |
303.6 |
$ |
256.4 |
|
Less: funding costs (1) |
(28.3) |
(36.7) |
|||
Adjusted EBITDA, net of funding costs |
$ |
275.3 |
$ |
219.7 |
|
Core Earnings: |
|||||
Net income |
$ |
115.2 |
$ |
86.4 |
|
Add back non-cash non-operating items: |
|||||
Stock compensation expense |
12.3 |
9.1 |
|||
Amortization of purchased intangibles |
21.1 |
18.6 |
|||
Non-cash interest expense (2) |
16.4 |
13.6 |
|||
Income tax effect (3) |
(18.1) |
(15.1) |
|||
Core earnings |
$ |
146.9 |
$ |
112.6 |
|
Weighted average shares outstanding – diluted |
61.8 |
55.4 |
|||
Core earnings per share – diluted |
$ |
2.38 |
$ |
2.03 |
|
(1) Represents interest expense on deposits and securitization funding costs.
(2) Represents amortization of imputed interest expense associated with our convertible debt, amortization of debt issuance costs, and valuation adjustments on financial instruments (i.e. gain on mark to market of interest rate derivatives).
(3) Represents the tax effect for the related non-GAAP measure adjustments (tax deductible stock compensation expense, amortization of purchased intangibles, non-cash interest expense) using the Company's effective tax rate for each respective period.
|
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RECONCILIATION OF SEGMENT ADJUSTED EBITDA |
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(In millions) |
||||||||
(Unaudited) |
||||||||
Three Months Ended |
||||||||
Operating |
Depreciation |
Stock |
Adjusted |
|||||
|
$ |
51.2 |
$ |
5.1 |
$ |
2.1 |
$ |
58.4 |
Epsilon |
11.8 |
24.4 |
3.6 |
39.8 |
||||
Private Label Services and Credit |
214.0 |
8.5 |
1.9 |
224.4 |
||||
Corporate/Other |
(24.4) |
0.7 |
4.7 |
(19.0) |
||||
Intersegment Eliminations |
– |
– |
– |
– |
||||
$ |
252.6 |
$ |
38.7 |
$ |
12.3 |
$ |
303.6 |
Three Months Ended |
||||||||
Operating |
Depreciation |
Stock |
Adjusted |
|||||
|
$ |
51.1 |
$ |
5.2 |
$ |
2.0 |
$ |
58.3 |
Epsilon |
11.5 |
19.9 |
2.3 |
33.7 |
||||
Private Label Services and Credit |
172.7 |
9.0 |
1.6 |
183.3 |
||||
Corporate/Other |
(21.9) |
1.3 |
3.2 |
(17.4) |
||||
Intersegment Eliminations |
(1.5) |
– |
– |
(1.5) |
||||
$ |
211.9 |
$ |
35.4 |
$ |
9.1 |
$ |
256.4 |
|
(1) Represents segment adjusted EBITDA and is equal to operating income plus depreciation, amortization and stock compensation expense.
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