Author Topic: ADS - Alliance Data Systems  (Read 112843 times)

LC

  • Hero Member
  • *****
  • Posts: 4248
Re: ADS - Alliance Data Systems
« Reply #500 on: February 25, 2020, 06:19:04 PM »
I have it in the back of my mind because of Andretta but personally I sold out for a quick 10% a while back. I'm not huge on the cards biz at this point of the cycle. Like I said earlier in this thread I think he's a capable CEO but it seems we are pretty late in the consumer credit cycle. These are still my personal thoughts:

Structurally the company has challenges of course, but I always found him capable and therefore anything under his control I would be confident he can manage effectively.

The big thing outside of his control is consumer credit tolerance.
"Lethargy bordering on sloth remains the cornerstone of our investment style."
----------------------------------------------------------------------------------------
brk.b | irm | nlsn | pm | t | v | xom


abitofvalue

  • Full Member
  • ***
  • Posts: 246
Re: ADS - Alliance Data Systems
« Reply #501 on: February 28, 2020, 06:45:06 AM »
Anyone know which contract this one is?  " the contract for one of our 10 largest clients, representing approximately 3% of our consolidated revenue for the year ended December 31, 2019, is effective through September 2020 and is not expected to renew."

Assume its already in their held-for-sale..

decko

  • Newbie
  • *
  • Posts: 18
Re: ADS - Alliance Data Systems
« Reply #502 on: March 03, 2020, 01:06:37 PM »
So, thoughts on minus -7%  to $79?      3.6 billion mkt cap.  900$ million plus in net income expected in 2020.  How devastating is the effect to ADS if a recession hits, which if it does the technical description of a recession varies greatly, or if it does not.  ?   I guess, opinions in general. 

kab60

  • Hero Member
  • *****
  • Posts: 1156
Re: ADS - Alliance Data Systems
« Reply #503 on: March 04, 2020, 03:41:22 AM »
It held up nicely doing the GFC because balances are smaller than general purpose credit cards and rates are higher, so people tend to pay them off first. But boy has it been a painful hold. My takeaway from the last CC was that they need to re-invest/bolt-on some tech to stay competitive, so it's not just that some of their clients struggle. They also need to improve their capabilities. Either way, it seems like disaster is very much priced in while some of the numbers are trending in the right direction. Steven 'insider trader' Cohen bought a large chunk recently, so I suppose he has a form of black edge... :) I sold 1/3 of my position in ADS (think I sold around 105) and took a large bet on Ulta Beauty in the fall, which was the first time I did anything right with ADS. Haven't bought more during the recent selloff, but it is intriguing. Allen Mecham also bought more in Q4, and he usually looks for business with cockroach-like abilities (like they're hard to kill), but this has mostly been a history of a business swarmed with cockroaches...

kab60

  • Hero Member
  • *****
  • Posts: 1156
Re: ADS - Alliance Data Systems
« Reply #504 on: March 05, 2020, 12:47:00 PM »
Added 1/3 to my position, it's getting slaughtered like you'd think it was an Airline... Epsilon sale wasn't too bad, if the world is coronavirused to death, cause they got a much better debt profile now (and it trade at like 3,5x fwd earnings...).

Didn't care much for Airmiles or Brandloyalty, that's suddenly a large relative store of value... There were a couple of interesting bits from a KBW fintech conference yesterday:

Sanjay Harkishin Sakhrani, Keefe, Bruyette, & Woods, Inc., Research Division - Managing Director [61]

 Got it. I'm going to shift gears and ask a question about some fun topics around capital and after that, we'll come to the audience for questions. So please, audience prepare some questions. Obviously, CET1 at the bank, really, really strong. When you pull up and you look at the holding company not as strong, how do you guys manage capital at the company? Because I think when you look -- when you think about some of the investor concerns, it's around capital at the holding company level, but that might not necessarily be warranted. So maybe you could just talk about it.

Timothy P. King, Alliance Data Systems Corporation - Executive VP & CFO [62]

 I think about it as a buy no meal kind of a bifurcated model. When I look at the banks, first and foremost, for a variety of reasons, has to be well capitalized, has to have passive safety and soundness with the FDIC. So very comfortable there. But then you move up to the corporate level, and you can't use a financial services model at a corporate level because we have nonfinancial services assets. Then I just look at it, where do I feel comfortable about, when that debt is coming due, do we have enough cash flow to support it short term, do I feel like that debt is not going to be put us in a spot where it doesn't let me sleep at night. For instance, redoing the whole balance sheet the last 6 months with moving all that debt out into 3 and 5 years makes me feel much more comfortable, and then look at how much cash flow we have spinning off. Collectively, call it, $600 million of free cash flow coming from the entity. And I look at the amount of debt we have at $2.8 billion at the parent, you start feeling very comfortable with that. But having said that, I know -- I've heard from a lot of folks today, that's causing consternation because that's you have this $2.8 billion, and then you look at your tangible book equity and the fact that you have negative equity at the parent company makes them feel a little uncomfortable. So obviously, Ralph, myself and the Board will be very clear about what we think we're going to do and make sure that we decide how or if we're going to pay down the debt or how we're going to do that, so we're clear with that.

Sanjay Harkishin Sakhrani, Keefe, Bruyette, & Woods, Inc., Research Division - Managing Director [63]

 So when we think about sort of your regulators, they are myopically looking at the bank. They're not really focused at the holding company level at all.

Timothy P. King, Alliance Data Systems Corporation - Executive VP & CFO [64]

 They do have -- they do look to the bank parent as a source of strength. And I think it's actually a fairly strong indication, they look at the bank parent, I think there is a positive, not a negative from the bank parent. For instance, there's a $750 million line of credit we have at the parent that if ever need be, we could obviously have that available for the banks to make sure the banks have, if they hit an economic downturn, we had to infuse capital down there, is that ability to do that. The regulators are very comfortable from what we've heard. They obviously don't object, and that's how you feel okay. And looking at the bank parent, they're obviously going to watch that. They feel we're in a good spot there.

Sanjay Harkishin Sakhrani, Keefe, Bruyette, & Woods, Inc., Research Division - Managing Director [65]

 Is there any itch to buy back stock given the stock's valuation here? Or not really because you want to shore up capital?

Timothy P. King, Alliance Data Systems Corporation - Executive VP & CFO [66]

 The itch got a whole lot large in the last week.

Sanjay Harkishin Sakhrani, Keefe, Bruyette, & Woods, Inc., Research Division - Managing Director [67]

 Absolutely.

Timothy P. King, Alliance Data Systems Corporation - Executive VP & CFO [68]

 The big drop. Look, it's a conversation we got to have with a more large group. The -- there's a number of investors who said to us, and this is -- look, we run this company for the investors. A number of investors have come and said, we are concerned about your capital structure. The prior questions you had and the amount of debt you have there and the double leverage. But I don't know if we have to address one versus the other. When you start spending $600 million off, you could potentially do some type of share repurchase and some type of debt repayment. I just think we need to be very clear and make that decision and then articulate it to The Street, and that's obviously a work in progress.

chompsterama

  • Newbie
  • *
  • Posts: 28
Re: ADS - Alliance Data Systems
« Reply #505 on: March 06, 2020, 01:28:09 PM »
You are either really brave or really gullible to believe anything Tim King (or anyone else at ADS) says about the business.  The guy has been so wrong about his business so many times.  He is also the guy that defended and was proud of a giant share repurchase at 100% above today's price.   

vinod1

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1374
    • My Blog
Re: ADS - Alliance Data Systems
« Reply #506 on: March 06, 2020, 04:30:59 PM »
Step 1. Management: Says something optimistic.

Step 2. Shareholders: Let me buy, this is not priced in.

Step 3: Market: Send stock price down 20%

Step 4: Shareholders: Management is stupid, incompetent fools. We can never trust these guys.

Step 5: Management: Says something optimistic about something else.

Step 6: Shareholders: Yeah! Let me buy more, stock is down and managemnet is optimistic.

And so the cycle goes on.
The fundamental algorithm of life: repeat what works. –Charlie Munger

stahleyp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3484
Re: ADS - Alliance Data Systems
« Reply #507 on: March 06, 2020, 07:02:52 PM »
You are either really brave or really gullible to believe anything Tim King (or anyone else at ADS) says about the business.  The guy has been so wrong about his business so many times.  He is also the guy that defended and was proud of a giant share repurchase at 100% above today's price.   

Do you have a position?
Paul

kab60

  • Hero Member
  • *****
  • Posts: 1156
Re: ADS - Alliance Data Systems
« Reply #508 on: March 06, 2020, 10:12:26 PM »
You are either really brave or really gullible to believe anything Tim King (or anyone else at ADS) says about the business.  The guy has been so wrong about his business so many times.  He is also the guy that defended and was proud of a giant share repurchase at 100% above today's price.   
Probably a combination. Tim is an idiot, but he should know he'll be gone sooner rather than later if he fumbles one more time. Capital structure looks fine, Air Miles and Brand Loyalty could probably take out almost all corporate debt if they wanted to - or buy back half the Company at these levels.

NotSoWise

  • Newbie
  • *
  • Posts: 41
Re: ADS - Alliance Data Systems
« Reply #509 on: March 07, 2020, 03:21:26 AM »
Bad or mediocre managers play delaying game - every day longer they keep a job is a win for them. The longer the better, since they know they may not find another fool to hire them afterwards. Mike Fries from LBTYK is a good example - every day he keeps his job is a win win for him.

My experience is to avoid shi..t managers, because if top is shi..t the bottom for sure is not better. Bad guys are not hiring good guys (less competition + good guys dont want to work for fools). I paid for this insight handsomely.