QUOTE AND NEWS
Market Intelligence Center  Aug 15  Comment 
Option-trade picking algorithms patented by MarketIntelligenceCenter.com found a trading opportunity with Alliance Data Systems (ADS) that should provide a 5.39% return in just 127 days. Sell one Dec. '14 call at the $260.00 level for each 100...
Forbes  Jul 28  Comment 
Investors eyeing a purchase of Alliance Data Systems Corp. (NYSE: ADS) stock, but cautious about paying the going market price of $265.98/share, might benefit from considering selling puts among the alternative strategies at their disposal. One...
TheStreet.com  Jul 18  Comment 
NEW YORK (TheStreet) -- Alliance Data Systems Corp.  stock is down -0.53% to $273.55 in early market trading after it was downgraded to "neutral" from "outperform" at Robert W. Baird & Co., citing the company's easing tailwinds from interest...
SeekingAlpha  Jul 17  Comment 
Alliance Data Systems Corporation (NYSE:ADS) Q2 2014 Earnings Conference Call July 17, 2014 8:30 a.m. ET Executives Julie Prozeller - Investor Relations, FTI Consulting Ed Heffernan - President and Chief Executive Officer Charles...
TheStreet.com  Jul 17  Comment 
NEW YORK (TheStreet) -- Alliance Data Systems Corp. released its 2014 second quarter results and posted a 23% increase in revenue to $1.27 billion versus $1.03 billion from the year ago quarter. The company, which provides transaction-based,...
newratings.com  Jul 17  Comment 
WASHINGTON (dpa-AFX) - Marketing and customer loyalty solutions provider Alliance Data Systems Corp. (ADS) reported Thursday a profit for the second quarter that increased from last year, boosted by revenue growth across all its operational...
Market Intelligence Center  Jul 17  Comment 
The patented option-trade picking algorithms that power MarketIntelligenceCenter.com's Artificial Intelligence Center have selected a covered-call trade on Alliance Data Systems (ADS) that includes 5.49% downside protection. Sell one contract of...
Market Intelligence Center  Jul 14  Comment 
Option-trade picking algorithms patented by MarketIntelligenceCenter.com found a trading opportunity with Alliance Data Systems (ADS) that should provide a 3.74% return in just 68 days. Sell one Sep. '14 call at the $270.00 level for each 100...
Market Intelligence Center  Jun 30  Comment 
After Friday’s trading in Alliance Data Systems (ADS) the algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center picked out a trade that offers a 4.24% or 18.87% (for comparison purposes only), while providing 4.72%...
Market Intelligence Center  Jun 24  Comment 
After Monday’s trading in Alliance Data Systems (ADS) the algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center picked out a trade that offers a 2.51% or 17.31% (for comparison purposes only), while providing 5.83%...




 
TOP CONTRIBUTORS

This article refers to the company. For American Depository Share (ADS), a unit representing foreign ownership of a company, see American Depositary Share

Alliance Data Systems (NYSE: ADS) is a credit card company that offers light label credit cards to companies that can then distribute their own branded credit cards. For example, retailers such as Victoria's Secret, and J. Crew use ADS's credit cards.[1]

ADS administers customer loyalty programs for companies such as BMO Bank of Montreal, Citibank, and Hilton.[2] Alliance Data is also the provider of the AIR MILES credit card program in Canada which 70% of Canadian households use. Using various information they gather about customer transactions, Alliance Data works with clients to built customer loyalty programs and attract new customers.[3]This is a service Alliance Data has built through the acquisitions of Epsilon and Abacus, two leading providers of marketing data, over the last two years. [4]

Because Alliance Data provides private label credit cards, it ends up holding the balances of its clients customers. These balances are securitized and sold to the public markets. The average customer is a middle to upper class females between the ages of 35 and 49 and has a balance of $360.[5]

Business Overview

Alliance Data Systems provides customer loyalty programs, database marketing services, marketing consulting, and private label credit cards. It monitors client transactions and uses captured data to help clients acquire new customers and maintain existing customers in more effective ways than traditional mass marketing programs. [6] Companies use Alliance Data's services because most of these programs are difficult, time-consuming, and expensive to maintain in-house.

Transaction and Credit clients include brands such as Hilton, Victoria's Secret, Canada Safeway, Shell Canada, Amex Bank of Canada, J.Crew, and Expedia. Marketing Services clients include BMO Bank of Montreal, Citibank, Bank Of America, and Amex Bank of Canada. These clients as well as nearly 800 others encompass a wide variety of markets including financial services, retail, grocery and convenience stories, technology, hospitality, travel, and pharmaceuticals. [7]

In Q1 2010, as a result of FAS 166 and 167 the company consolidated several trusts used to securitize credit card debt onto its balance sheet, which reduced the owners' equity in the company by 400 million although there was no change to the company's operations.[8]

Business & Financial Metrics[9]

In 2009, ADS earned a net income of $143.7 million on $1.96 billion in revenues. This represents a 30.3% decrease in net income from $206.4 million in 2008.

Business Segments[10][11]

ADS has four reportable business segments: Loyalty Services, Epsilon Marketing Services, Private Label Services, and Private Label Credit.

  • Loyalty Services (36.4% of total revenue): This segment provides customer loyalty programs for other businesses. Its most significant program is the "Air Miles" program, in which over 120 brand name sponsors participate.
  • Epsilon Marketing Services (26.2% of total revenue): This segment provides various forms of consumer-targeted direct marketing programs, including what the company believes to be "the world's largest permission-based email marketing platform."
  • Private Label Services (20.2% of total revenue): This segment provides retailers and other companies with their own private label and co-brand credit cards. The segment's clients include Victoria's Secret, Ann Taylor, Eddie Bauer, Pottery Barn, Pac Sun and The Buckle.
  • Private Label Credit (30.2% of total revenue): This segment handles the back office work required to maintain credit card deals initiated by the Private Label Services segment. The segment generates revenues by originating accounts and extending credit to cardholders. Since private label credit cards are usually no more than brand affinity tools - they aren't typically a cardholder's primary card - ADS credit cards typically have lower average balances than general purpose credit cards.

Most of ADS's revenue comes from its "Loyalty Services" segment.

Trends & Forces

ADS relies on a few large clients for revenue

Since ADS really relies on a few large clients to provide the majority of its revenue stream, a single client departure has a large impact on the company's performance. For example, Lane Bryant, which provided ADS's Credit Services segment with 7% of its total revenue, took its credit services in-house in November 2007.

In 2009, ADS's 10 largest clients represented approximately 46.6% of its total revenue.[12]

Competition

Marketing Services

  • Convergys (CVG) provides clients with customer data and works to optimize revenues and business processes. They offer similar serviceads to ADS's Marketing Services division.
  • Acxiom (ACXM) provides analytical data on consumers and helps clients project customers future purchasing patterns. These services are in competition with many provided by ADS's Marketing Services division.

Credit Services

Transaction Services

  • Total System Services (TSS) is a payment processing company and is one of the largest credit processors. It directly competes with ADS's Transaction Services for clients in the United States and Canada.
  • Global Payments (GPN) is a global payment processor that processes for clients in the US, Canada, Latin America, the UK, Europe, and Asia. It is partnered with HSBC in Asia which gives it access to 10 asian markets. GPN is a direct competitor to the services ADS provides.

References

  1. Alliance Data Systems (ADS) Form 10-K FY 2007, "Business" Page 3
  2. Alliance Data Systems (ADS) Form 10-K FY 2007, "Business" Page 3
  3. Alliance Data Systems (ADS) Form 10-K FY 2007, "Business" Page 3
  4. Alliance Data Systems (ADS) Form 10-K FY 2007, "Business" Page 3
  5. Alliance Data Systems (ADS) Form 10-K FY 2007, "Business" Page 7
  6. Alliance Data Systems (ADS) Form 10-K FY 2007, "Business" Page 3
  7. Alliance Data Systems (ADS) Form 10-K FY 2007, "Business" Page 3
  8. See the Q1 2010 Earnings Call Transcript and Q1 2010 10-Q.
  9. ADS 2009 10-K pg. 27  
  10. 10.0 10.1 ADS 2009 10-K pg. 38  
  11. ADS 2009 10-K pg. 4-7  
  12. ADS 2009 10-K pg. 11  
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