Author Topic: ADS - Alliance Data Systems  (Read 94586 times)

glorysk87

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Re: ADS - Alliance Data Systems
« Reply #480 on: November 14, 2019, 05:05:11 PM »
Thanks for the pushback, it's highly appreciated. Just noticed they changed the wording in the most recent 10-Q regarding allowance for loan losses. Doesn't square with how they've downplayed things on the conference calls. Will probably take a big hit to equity (as the bears have said all along). These guys suck. :)

"While the Company is currently unable to reasonably estimate the impact of the new adoption, the Company expects the adoption of the standard on to significantly increase its consolidated financial statements allowance for loan loss. Any adjustments to the change in the allowance for loan loss at adoption would be recorded through a cumulative-effect adjustment to retained earnings."

FWIW I spoke with IR shortly after the quarter and she definitively said that their estimate for CECL impact WAS included in their guidance. Whether you believe that or not is up to you.

Other assumptions that went into the guidance were as follows:
1) Originally built in 2 rate increases, instead got rate decreases - $40mm reduction
2) Mark to market on held to sale - $50mm reduction
3) $500mm lower A/R than expected - $40mm reduction

This has been my 2nd biggest losing position in my time investing, and I'm still mulling over whether to sell it and take the short-term loss or whether to hang tight as it seems that A/R is finally inflecting upwards.


Spekulatius

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Re: ADS - Alliance Data Systems
« Reply #481 on: November 14, 2019, 07:12:32 PM »
Thanks for the pushback, it's highly appreciated. Just noticed they changed the wording in the most recent 10-Q regarding allowance for loan losses. Doesn't square with how they've downplayed things on the conference calls. Will probably take a big hit to equity (as the bears have said all along). These guys suck. :)

"While the Company is currently unable to reasonably estimate the impact of the new adoption, the Company expects the adoption of the standard on to significantly increase its consolidated financial statements allowance for loan loss. Any adjustments to the change in the allowance for loan loss at adoption would be recorded through a cumulative-effect adjustment to retained earnings."

FWIW I spoke with IR shortly after the quarter and she definitively said that their estimate for CECL impact WAS included in their guidance. Whether you believe that or not is up to you.

Other assumptions that went into the guidance were as follows:
1) Originally built in 2 rate increases, instead got rate decreases - $40mm reduction
2) Mark to market on held to sale - $50mm reduction
3) $500mm lower A/R than expected - $40mm reduction

This has been my 2nd biggest losing position in my time investing, and I'm still mulling over whether to sell it and take the short-term loss or whether to hang tight as it seems that A/R is finally inflecting upwards.

Why wouldn’t you sell it, take the short term loss and rebuy it 31 days later? You could buy a similar stock I stead, if you believe the sector takes of. Unless you believe there is an immediate catalyst, taking a short term loss seems to be a good idea. At least that’s what I would be doing.
« Last Edit: November 18, 2019, 03:17:47 PM by Spekulatius »
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abitofvalue

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Re: ADS - Alliance Data Systems
« Reply #482 on: November 15, 2019, 10:45:14 AM »
Can someone help me square the math on their October DQ rate...  I am getting much higher numbers (6.5%) than their reported DQ rate of 5.9%. 

https://www.sec.gov/Archives/edgar/data/1101215/000110121519000229/exhibit_99-1.htm

Assuming there is no reporting or calc error, which cant be ruled out with them, is there some weird active receivable adjustment i am missing..  6.5 vs 5.9% is a world of a difference.

 

frank87

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Re: ADS - Alliance Data Systems
« Reply #483 on: November 15, 2019, 10:51:06 AM »
Can someone help me square the math on their October DQ rate...  I am getting much higher numbers (6.5%) than their reported DQ rate of 5.9%. 

https://www.sec.gov/Archives/edgar/data/1101215/000110121519000229/exhibit_99-1.htm

Assuming there is no reporting or calc error, which cant be ruled out with them, is there some weird active receivable adjustment i am missing..  6.5 vs 5.9% is a world of a difference.

They sent out a revised update because of a typo: delinquent receivables were actually 1,012,305 and not 1,102,305.

kab60

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Re: ADS - Alliance Data Systems
« Reply #484 on: November 15, 2019, 12:49:11 PM »
Thanks for the pushback, it's highly appreciated. Just noticed they changed the wording in the most recent 10-Q regarding allowance for loan losses. Doesn't square with how they've downplayed things on the conference calls. Will probably take a big hit to equity (as the bears have said all along). These guys suck. :)

"While the Company is currently unable to reasonably estimate the impact of the new adoption, the Company expects the adoption of the standard on to significantly increase its consolidated financial statements allowance for loan loss. Any adjustments to the change in the allowance for loan loss at adoption would be recorded through a cumulative-effect adjustment to retained earnings."

FWIW I spoke with IR shortly after the quarter and she definitively said that their estimate for CECL impact WAS included in their guidance. Whether you believe that or not is up to you.

Other assumptions that went into the guidance were as follows:
1) Originally built in 2 rate increases, instead got rate decreases - $40mm reduction
2) Mark to market on held to sale - $50mm reduction
3) $500mm lower A/R than expected - $40mm reduction

This has been my 2nd biggest losing position in my time investing, and I'm still mulling over whether to sell it and take the short-term loss or whether to hang tight as it seems that A/R is finally inflecting upwards.
Thanks for the details, not sure what to believe with these guys.

Isn't it strange that they're able to give guidance on 2020 (including CECL) when they can't come up with a number in the recent 10Q? Their guidance range isn't very wide, so they must have narrowed it down, but I suppose it's possible they didn't have en exact number when they released results (shit, am I giving them the benefit of doubt again?).

Not sure how much significant is, but their allowance for loan losses is around 1b, so significant should be a meaningful hit I'd venture. I like the business, I like the valuation, but I hate that I don't know whether or not management is to be trusted. I'm holding, but it's my biggest loser ever - by far.

frank87

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Re: ADS - Alliance Data Systems
« Reply #485 on: November 15, 2019, 04:26:45 PM »
Thanks for the pushback, it's highly appreciated. Just noticed they changed the wording in the most recent 10-Q regarding allowance for loan losses. Doesn't square with how they've downplayed things on the conference calls. Will probably take a big hit to equity (as the bears have said all along). These guys suck. :)

"While the Company is currently unable to reasonably estimate the impact of the new adoption, the Company expects the adoption of the standard on to significantly increase its consolidated financial statements allowance for loan loss. Any adjustments to the change in the allowance for loan loss at adoption would be recorded through a cumulative-effect adjustment to retained earnings."

FWIW I spoke with IR shortly after the quarter and she definitively said that their estimate for CECL impact WAS included in their guidance. Whether you believe that or not is up to you.

Other assumptions that went into the guidance were as follows:
1) Originally built in 2 rate increases, instead got rate decreases - $40mm reduction
2) Mark to market on held to sale - $50mm reduction
3) $500mm lower A/R than expected - $40mm reduction

This has been my 2nd biggest losing position in my time investing, and I'm still mulling over whether to sell it and take the short-term loss or whether to hang tight as it seems that A/R is finally inflecting upwards.
Thanks for the details, not sure what to believe with these guys.

Isn't it strange that they're able to give guidance on 2020 (including CECL) when they can't come up with a number in the recent 10Q? Their guidance range isn't very wide, so they must have narrowed it down, but I suppose it's possible they didn't have en exact number when they released results (shit, am I giving them the benefit of doubt again?).

Not sure how much significant is, but their allowance for loan losses is around 1b, so significant should be a meaningful hit I'd venture. I like the business, I like the valuation, but I hate that I don't know whether or not management is to be trusted. I'm holding, but it's my biggest loser ever - by far.

To be fair, CECL doesn't matter that much...it doesn't affect real losses and it won't constrain capital. ADS's problem is the decline of their traditional customer base + the decline in relative usage of private label cards vs general purpose and co-brand cards. Still, the price of the stock is so low that it's pricing in perpetual decline.

abitofvalue

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Re: ADS - Alliance Data Systems
« Reply #486 on: November 16, 2019, 12:02:06 PM »
Can someone help me square the math on their October DQ rate...  I am getting much higher numbers (6.5%) than their reported DQ rate of 5.9%. 

https://www.sec.gov/Archives/edgar/data/1101215/000110121519000229/exhibit_99-1.htm

Assuming there is no reporting or calc error, which cant be ruled out with them, is there some weird active receivable adjustment i am missing..  6.5 vs 5.9% is a world of a difference.

They sent out a revised update because of a typo: delinquent receivables were actually 1,012,305 and not 1,102,305.

thanks.. what a clown show.

NotSoWise

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Re: ADS - Alliance Data Systems
« Reply #487 on: November 18, 2019, 01:36:33 PM »
Alliance Data has new CEO... check the press release.

The new guy looks good on paper. But when he comes in Feb'20 he will make new reserves for sure.
« Last Edit: November 18, 2019, 01:41:38 PM by NotSoWise »

maybe4less

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Re: ADS - Alliance Data Systems
« Reply #488 on: November 18, 2019, 03:53:55 PM »
Alliance Data has new CEO... check the press release.

The new guy looks good on paper. But when he comes in Feb'20 he will make new reserves for sure.

They also affirmed guidance in that press release. Does that imply that they had already incorporated the recent Fed cut into their guidance?

kab60

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Re: ADS - Alliance Data Systems
« Reply #489 on: November 19, 2019, 05:15:38 AM »
That was somewhat of a surprise - but a pleasant one. Surprised he is committing to 2020 guidance. Yaaah. Anyway, he's 58 years old. I don't think this stays independent for too long.