Dallas-based Alliance Data Systems reported fourth quarter (4Q/15) revenue increased 16.9% year-on-year (YOY) to $1749 million. Net income skyrocketed 157% to $172 million for 4Q/15.
For the fourth quarter Card Services revenue rose 20% to $785 million; Epsilon revenue increased 38% to $608 million; and LoyaltyOne revenue decreased 9% to $364 million, but up 6% on the FX basis.
CARD SERVICES, f/k/a Private Label Services and Credit operating expenses increased 10% YOY to $291 million, representing 9.3% of average receivables compared to 10.5% in 4Q/14. The loan loss provision increased 44% YOY to $206 million, driven by strong growth in average card receivables and a 90 basis points (bps) increase in principal loss rates from historical lows. Portfolio funding costs were $42 million for 4Q/15, or 1.3% of average credit card receivables, 10 bps better than 4Q/14. Credit sales increased 22% YOY to $7.8 billion for the quarter, supported by an 11% increase in core cardholder spending as tender share gains continued. Average credit card receivables increased 25% YOY to $12.5 billion compared to one-year ago, while net principal loss rates for 4Q/15 were 4.7%, up 90 bps from last year. The increase is primarily due to the seasoning of the large 2013 vintage, which consisted mostly of start-up programs, and lower recoveries.
EPSILON performance was aided by the Conversant acquisition. Excluding Conversant, revenue and adjusted EBITDA increased 7% and 5%, respectively, for 4Q/15, driven by strength in technology solutions.
The first-half of 2015 was devoted to the transition of Conversant’s business model from its historic site-based advertising approach to a richer, data-driven, audience-based approach. While the transition process is still ongoing, the negative impact of pruning these lower margin offerings is largely gone. Importantly, cross-selling efforts to Epsilon’s and Card Services’ clients continue to go well with a signed backlog at year-end exceeding $90 million in annual contract value.
LOYALTYONE’s AIR MILES reward miles issuance decreased 8% compared to 4Q/14, as sponsor promotional activity was more heavily weighted to the first-half of 2015 compared to second-half for 2014. AIR MILES reward miles redeemed decreased 2% compared to 4Q/14, primarily correlated with the decrease in AIR MILES reward miles issued. The instant reward program option, AM Cash, represented 21% and 29% of miles issued and redeemed, respectively, for 4Q/15. BrandLoyalty’s North American expansion efforts continue to develop. Currently, contracts aggregating in excess of $45 million have been signed in Canada, and a pilot program is expected to launch in the U.S. during the first quarter.
The Company is maintaining its 2016 constant currency guidance of $7.2 billion in revenue, a 12 percent increase compared to 2015, and $17.00 in core EPS, a 13 percent increase compared to 2015.
4Q/14: $1496 million
1Q/15: $1601 million
2Q/15: $1501 million
3Q/15: $1589 million
4Q/15: $1749 million
4Q/14: $67 million
1Q/15: $164 million
2Q/15: $130 million
3Q/15: $130 million
4Q/15: $172 million
Source: Alliance Data Systems
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