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Alliance Data (ADS) Q2 Earnings Beat, Revenues Rise Y/Y

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Alliance Data Systems Corporation’s operating earnings of $5.99 per share for the second quarter of 2021 beat the Zacks Consensus Estimate of $3.83. The bottom line increased more than threefold year over year.

The quarterly earnings benefited from higher revenues coupled with lower expenses.  

Alliance Data delivered strong credit performance, reflecting disciplined risk management and the ongoing impact of economic stimulus, resulting in increased customer liquidity and greater ability to pay.

Shares of the company gained 1.9% in the pre-market trading session, reflecting the outperformance.

Behind the Headlines

Alliance Data reported total revenues of $1 billion, up 3.4% year over year, attributable to the ongoing consumer recovery from pandemic lows. Card Services revenues improved though LoyaltyOne revenues remained flat year over year. The top line however missed the Zacks Consensus Estimate by 3.9%.

Operating expenses decreased 33% year over year to $539.1 million. Operating income increased nearly than threefold year over year to $473.3 million largely due to lower expenses.

EBIT increased nearly eightfold year over year to $372 million.

Segment Update

LoyaltyOne: Revenues totaled $151 million, flat year over year.

EBIT increased 2% to $24 million, attributable to lower amortization expense.

AIR MILES reward miles issued increased 8%, reflecting an increase in discretionary spending, including credit card spend. AIR MILES reward miles redeemed increased 32%, an improvement in travel-related categories and continued strength from merchandise redemptions.

BrandLoyalty revenues decreased 9% due to decline in programs  as a result of retailer delays related to the continuing impact of COVID-19.

Card Services: Revenues were $861 million, up 4% year over year, primarily attributable to the impact from pandemic-related consumer relief programs offered in the year-ago quarter. EBIT was $404 million, up nearly sixfold year over year attributable to a lower provision for loan loss.

Financial Update

As of Jun 30, 2021 cash and cash equivalents was $3 billion, down 2.6% from Dec 31, 2020-level.

At quarter end, the debt level was down 1.6% from 2020-end to $2.8 billion.

Cash from operations decreased 3.1% year over year to $733.2 million in the first six months of 2021. Capital expenditure at Alliance Data increased 33.7% year over year to $34.9 million in the same period.

Dividend Update

The board of directors approved a quarterly dividend of 21 cents to be paid out on Sep 17 to stockholders of record as of Aug 13.


Total revenues in 2021 are anticipated to be down in low single digits year over year as the impact from lower receivables is likely to be partially offset by improving revenues from LoyaltyOne and the Bread acquisition.

Credit sales are estimated to deliver double-digit growth while net loss rate is expected in the low 5% range in 2021.

Receivables at 2021 end are estimated to be in line with 2020 end levels although average receivables are expected to be down mid-single digits in 2021, reflecting the year-over-year pressure in the first half of 2021 and elevated payment rates. Nonetheless, the company expects to resume high single-digit to low double-digit average receivables growth in 2022.

Expenses are expected to remain flat with 2020 level. The company targets over $100 million of digital innovation and technology enhancement and $50 million in marketing investments in 2021 to support growth.

Zacks Rank

Alliance Data currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Another Player From the Industry

Mastercard’s (MA - Free Report) second-quarter 2021 earnings beat the Zacks Consensus Estimate.

Upcoming Releases

Global Payments (GPN - Free Report) is set to release second-quarter 2021 earnings on Aug 2. The Zacks Consensus Estimate for the same stands at $1.89 per share.

The Western Union Company (WU - Free Report) is set to release second-quarter 2021 earnings on Aug 4. The Zacks Consensus Estimate for the same stands at 47 cents per share.