QUOTE AND NEWS
Benzinga  Apr 28  Comment 
On CNBC's Mad Money, Jim Cramer recommended Alliance Data Systems Corporation (NYSE: ADS) as a buy. He added that the stock has been struggling lately, but he thinks it's better than its current price indicates. Micron Technology, Inc....
Forbes  Apr 21  Comment 
Looking at options trading activity among components of the S&P 500 index, there is noteworthy activity today in Alliance Data Systems Corp. (NYSE: ADS), where a total volume of 3,670 contracts has been traded thus far today, a contract volume...
New York Times  Feb 27  Comment 
As a customer care supervisor, Abdifatah Mohamud mentors employees at Alliance Data Systems, which manages companies’ credit card and loyalty programs.
Benzinga  Feb 18  Comment 
Shares of Alliance Data Systems Corporation (NYSE: ADS) were trading higher by around 4 percent on Thursday after the company announced that its Board of Directors approved a $500 million increase to an already existing stock repurchase...
Benzinga  Feb 12  Comment 
Analysts at Stifel Nicolaus initiated coverage of The Kroger Co (NYSE: KR) with a Buy rating. The target price for Kroger is set to $45. Kroger shares closed at $36.42 on Thursday. Analysts at Citigroup initiated coverage on AgroFresh...
newratings.com  Jan 28  Comment 
WASHINGTON (dpa-AFX) - Alliance Data Systems Corp. (ADS) Thursday announced 133 percent surge in fourth quarter net income to $178 million from $76 million last year. On a per share basis, earnings attributable to the company increased 169 percent...




 
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  
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki