Author Topic: ADS - Alliance Data Systems  (Read 95578 times)

abitofvalue

  • Full Member
  • ***
  • Posts: 237
Re: ADS - Alliance Data Systems
« Reply #230 on: February 07, 2019, 09:18:04 PM »

jeez.. i thought card would be down in '19 but that guidance was :barf:


I am amazed that ppl continue to quote management's answers as though these guys have lots of credibility and a good record predicting their business...  They have talked about Epsilon / LoyaltyOne getting better for 2 yrs+ and had to be dragged kicking and screaming to sell Epsilon.. note that Epsilon / LoyaltyOne remain no-growth meh businesses..  Credit took longer than they thought to stabilize at 6%... (if you believe it has stabilized)..

Now they are making an absurd push to get ppl to focus on 'active' receivables and their impressive 15%+ growth..  shouldnt the shitty contracts and receivables they signed up count?  what happens in 2 yrs when some of the 15-18 vintage growth slows or retailers blow-up? We just move them out and continue highlighting the strong 'active' receivable growth? 

Have they explained why Core EPS is the right metric and share based comp should be added back..  doesnt seem like most of their peers do that. What are multiples on a true apples-to-apples basis... 

Best i can tell, the bull case seems to come down to can they get meaningfully above $4B+ for Epsilon. Otherwise, this aint a $2 handle stock..

CFO is on his way out.. i suspect CEO is looking to sell the whole damn thing. doubt he wants to be running a pure-play card operation...



Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 1037
Re: ADS - Alliance Data Systems
« Reply #231 on: February 08, 2019, 07:49:19 AM »

jeez.. i thought card would be down in '19 but that guidance was :barf:


I am amazed that ppl continue to quote management's answers as though these guys have lots of credibility and a good record predicting their business...  They have talked about Epsilon / LoyaltyOne getting better for 2 yrs+ and had to be dragged kicking and screaming to sell Epsilon.. note that Epsilon / LoyaltyOne remain no-growth meh businesses..  Credit took longer than they thought to stabilize at 6%... (if you believe it has stabilized)..

Now they are making an absurd push to get ppl to focus on 'active' receivables and their impressive 15%+ growth..  shouldnt the shitty contracts and receivables they signed up count?  what happens in 2 yrs when some of the 15-18 vintage growth slows or retailers blow-up? We just move them out and continue highlighting the strong 'active' receivable growth? 

Have they explained why Core EPS is the right metric and share based comp should be added back..  doesnt seem like most of their peers do that. What are multiples on a true apples-to-apples basis... 

Best i can tell, the bull case seems to come down to can they get meaningfully above $4B+ for Epsilon. Otherwise, this aint a $2 handle stock..

CFO is on his way out.. i suspect CEO is looking to sell the whole damn thing. doubt he wants to be running a pure-play card operation...

I agree with you about management's credibility, and almost included a comment to this effect in my reply to ABM. The CEO reminds me of Mike Fries in that he stays very positive even in the face of very "meh" results.

Their "core EPS" # is horse****. A recent Morningstar report: "investors should totally ignore the company's non-GAAP 'core EPS'"

I agree with much of you wrote, but expectations have come way down, right? Five years ago stock was @ $280.

BeerBBQ

  • Full Member
  • ***
  • Posts: 136
Re: ADS - Alliance Data Systems
« Reply #232 on: February 08, 2019, 08:25:11 AM »



CFO is on his way out..

Is that known info or are you speculating?

bizaro86

  • Hero Member
  • *****
  • Posts: 1090
Re: ADS - Alliance Data Systems
« Reply #233 on: February 08, 2019, 09:02:34 AM »
I really hope they spin out Loyalty One and the market assigns it a "meh-business" valuation. Blue chip stamps for the 21st century.

kab60

  • Hero Member
  • *****
  • Posts: 1029
Re: ADS - Alliance Data Systems
« Reply #234 on: February 08, 2019, 11:09:28 AM »
I'm Bullish but I really appreciate the pushback and agree with alot of it.

Core EPS is pretty meh, and it reminds me of Cash EPS at Valeant, where ValueAct also had a major influence (though at Valeant it wasn't just meh but horseshit, since they diverted attention from the fact that the cash streams they bought were in run off - hardly as bad here).

I also agree that them trimming the slow/declining customers doesn't affect the intrinsic value of the business, even though it optically makes it look healthier for lazy people (at least for some time). Incrementally it might actually be a negative, because what kind of signal does it send to prospectice customers to treat older customers like that (now I haven't heard of any pushback, but it does seem like a negative).

The third thing, which I can't really quantify, is about Epsilon. It's part of their secret sauce, and while they continue getting access through contracts, contracts come up for renegotion, and it might make their work more cumbersome (and contracts are often disputed anyway). Perhaps it's a win-win, and perhaps ADS has the upper hand since Epsilon are more dependant on ADS than the other way around, but it's hard to quantify. I think it'll be okay - at least in the medium term.

Sooo, those three twings nags me a bit, but it also shows management wants to highlight the value of the business (or they're under pressure to do so) and while I'm patient I can live with that if it doesn't compromise the long term potential.

Anyway, I think the most important questions to ask are whether or not the valuation is reasonable, their business model is intact, they have options to deploy capital at high incremental returns and whether they're thoughtful at allocating capital and have skin in the game. I think it checks all boxes.

Going by net income it's hardly expensive (grew 22 pct y/y - almost doubled in six), they seem to have decent traction with new customers, ROE is sky high and they're now taking advantage of discrepancies between public and private markets (and did a stroke of genius through the GFC - well not really genius, but not many companies bought back 1/3 of the Company while people screamed the world was going under).

So I understand why management rubs people the wrong way, but apart from being worse forecasters than one could hope - do you guys see anything operationally that makes your worried? I really appreciate the pushback, much appreciated.

valueinvestor

  • Full Member
  • ***
  • Posts: 102
Re: ADS - Alliance Data Systems
« Reply #235 on: February 08, 2019, 05:01:31 PM »
I'm Bullish but I really appreciate the pushback and agree with alot of it.

Core EPS is pretty meh, and it reminds me of Cash EPS at Valeant, where ValueAct also had a major influence (though at Valeant it wasn't just meh but horseshit, since they diverted attention from the fact that the cash streams they bought were in run off - hardly as bad here).

I also agree that them trimming the slow/declining customers doesn't affect the intrinsic value of the business, even though it optically makes it look healthier for lazy people (at least for some time). Incrementally it might actually be a negative, because what kind of signal does it send to prospectice customers to treat older customers like that (now I haven't heard of any pushback, but it does seem like a negative).

The third thing, which I can't really quantify, is about Epsilon. It's part of their secret sauce, and while they continue getting access through contracts, contracts come up for renegotion, and it might make their work more cumbersome (and contracts are often disputed anyway). Perhaps it's a win-win, and perhaps ADS has the upper hand since Epsilon are more dependant on ADS than the other way around, but it's hard to quantify. I think it'll be okay - at least in the medium term.

Sooo, those three twings nags me a bit, but it also shows management wants to highlight the value of the business (or they're under pressure to do so) and while I'm patient I can live with that if it doesn't compromise the long term potential.

Anyway, I think the most important questions to ask are whether or not the valuation is reasonable, their business model is intact, they have options to deploy capital at high incremental returns and whether they're thoughtful at allocating capital and have skin in the game. I think it checks all boxes.

Going by net income it's hardly expensive (grew 22 pct y/y - almost doubled in six), they seem to have decent traction with new customers, ROE is sky high and they're now taking advantage of discrepancies between public and private markets (and did a stroke of genius through the GFC - well not really genius, but not many companies bought back 1/3 of the Company while people screamed the world was going under).

So I understand why management rubs people the wrong way, but apart from being worse forecasters than one could hope - do you guys see anything operationally that makes your worried? I really appreciate the pushback, much appreciated.

A family member of mine work at LoyaltyOne and I continually ask about the business. Aside from the culture that he/she complains about, which I ignore for the most part, they are worried that their corporate clients will realize that there are better ways to collect data and provide marketing services, as opposed to collecting data from card services. Which affects card services, where customers use these cards to get great deals. This was a great business ten years ago with the infancy of the internet, but if one knows for certain that data collecting from card spend is not dead, then one can do well with the investment, even if it does not re-rate. Iím just not comfortable with this yet long term, but short term, there is a lot that can happen, but will it happen?

glorysk87

  • Sr. Member
  • ****
  • Posts: 322
Re: ADS - Alliance Data Systems
« Reply #236 on: February 08, 2019, 06:00:32 PM »
A family member of mine work at LoyaltyOne and I continually ask about the business. Aside from the culture that he/she complains about, which I ignore for the most part, they are worried that their corporate clients will realize that there are better ways to collect data and provide marketing services, as opposed to collecting data from card services. Which affects card services, where customers use these cards to get great deals. This was a great business ten years ago with the infancy of the internet, but if one knows for certain that data collecting from card spend is not dead, then one can do well with the investment, even if it does not re-rate. Iím just not comfortable with this yet long term, but short term, there is a lot that can happen, but will it happen?

Are you mixing up Epsilon and LoyaltyOne? LoyaltyOne doesn't really collect data and provide marketing services. They run the Air Miles program and tailored coalition loyalty programs.
« Last Edit: February 08, 2019, 06:02:35 PM by glorysk87 »

valueinvestor

  • Full Member
  • ***
  • Posts: 102
Re: ADS - Alliance Data Systems
« Reply #237 on: February 08, 2019, 06:21:14 PM »
A family member of mine work at LoyaltyOne and I continually ask about the business. Aside from the culture that he/she complains about, which I ignore for the most part, they are worried that their corporate clients will realize that there are better ways to collect data and provide marketing services, as opposed to collecting data from card services. Which affects card services, where customers use these cards to get great deals. This was a great business ten years ago with the infancy of the internet, but if one knows for certain that data collecting from card spend is not dead, then one can do well with the investment, even if it does not re-rate. Iím just not comfortable with this yet long term, but short term, there is a lot that can happen, but will it happen?

Are you mixing up Epsilon and LoyaltyOne? LoyaltyOne doesn't really collect data and provide marketing services. They run the Air Miles program and tailored coalition loyalty programs.

No the person is working at LoyaltyOne now, but should of clarified that they worked at different factions of ADS.

Edit: I should also point out that employees of ADS can get ADS stock at a 15% discount, but again the person decided against having a meaningful portion of the portfolio in ADS.
« Last Edit: February 08, 2019, 06:22:46 PM by valueinvestor »


vince

  • Sr. Member
  • ****
  • Posts: 472
Re: ADS - Alliance Data Systems
« Reply #239 on: March 14, 2019, 12:23:08 PM »
Ads adds Sephora to its lineup.  Further proof that their business is attractive to newer retail models that cater to millenials preference for experiences.  I think the news is significant on many levels in addition to the fact that they are large and growing rapidly in a large market.  Another yawn by the market.... hopefully the stock weakness continues as the business continues to increase in value so they can buy meaningful amounts of stock with probable proceeds.