Slide 1: Company Overview Investor Presentation Third Quarter 2016
Company OverviewNYSE: ADS Investor PresentationThird Quarter 2016
Slide 2: Who Are We and What Do We Do?
Who Are We and What Do We Do?Historical ResultsRecent Investor QuestionsBusiness & Financial Outlook Alliance Data 2
Slide 3: Who are we and what do we do? Build Customer Loyalty Platforms
Build Customer Loyalty PlatformsUse Unique Data: SKU (requires client permission)Link SKU with ConsumerAdd Demographic/Psychographic Data 3 Who are we and what do we do?
Slide 4: Example: Mary Smith at Ann Taylor Loft
On September 14th, Mary Smith spent $60 at Ann Taylor Loft, Store #128 She bought a blue dress, size 10 (SKU)Dress was 20 percent offMary is upper middle incomeTends to buy complete wardrobesLooks for value (i.e. sales)Mom who works > busy Example: 4 Who are we and what do we do?
Slide 5: We use data to gain insights which drive sales & loyalty for our clients
We use data to gain insights which drive sales & loyalty for our clients Use Data/Insights to Create Specialized Offers On September 15thMobile offer to MaryShoes & belt would work nicely with dressClick & buy now > 20 percent off sale 5 Who are we and what do we do? “Rinse and repeat” millions of t
Slide 6: Different Platforms/Same Model
AIRMILES®Coalition loyalty (Canada) 6. Different Platforms/Same Model 6 Card Services Loyalty program with credit component Epsilon®Single client programs BrandLoyalty® Grocer loyalty specialist (Int’l) Who are we and what do we do?
Slide 7: Historical Results
IPO 2001: $12 per share($MM) 2001 2016 CAGR Revenue $770 $7,150 16% Core EPS $0.52 $16.85 26% Stock Price $12 $200 20% (1,500% total v. 70% Market) Despite recent ADS pullbackModel:Growth (3x GDP revenue growth)Double-digit core eps growth20 percent growth early-mid credit cycle10 to 12 percent toda
Slide 8: Are you a MktingTech, FinTech or Specialty Finance Company?
Are you a MktingTech, FinTech or Specialty Finance Company?Yes50 percent of revenue from purely technology/marketing and loyalty platforms50 percent card related (data, analytics, marketing, credit)Use data/tech heavily to drive 1/1 marketing programs (~ 500 people within Cards – mini Epsilon)Vast o
Slide 9: How did you grow through Great Recession?
2. How did you grow through Great Recession?Same business mix as todayNon-card businesses grew revenue at steady 5 percent rateAt peak of unemployment (10 percent rate), cards made 600 bps pre-tax return on assetsFree cash flow and modest increase in leverage drove share repurchase programCore EPS g
Slide 10: Are Private Label Cards Riskier than General Purpose Cards?
Are Private Label Cards “Riskier” than General Purpose Cards?NoGreat Recession Loss Rate: ADS ↑ 300 bps Bank Cards ↑ 600 bps Traditional scores were not good predictors of performanceDue to balance size, 4 private label holders needed to write-off to equal 1 bankcard holder…which did not occurWhy? C
Slide 11: What does today's Business Cycle mean to ADS?
What does today’s Business Cycle mean to ADS?Non-card segments have mid-single digit revenue and adjusted EBITDA growthCard Services segment has double-digit revenue and adjusted EBITDA growth (includes drag from losses normalizing)U.S. Recession?See no evidence of one: consumer healthyTypical reces
Slide 12: Is your Card Business really different?
Is your Card Business really different?YesHigher card receivables growth (double-digit compared to single-digit for industry)Higher returns (both ROA & ROE)Less riskySee ‘Great Recession’Industry leading profitability margins to absorb shocksHalf of our growth driven by tender share gains: 80 to 85
Slide 13: How do Loss Rates behave?
How do Loss Rates behave?Pre-Great Recession: approximately 6.5 percent (minimal co-brand)2017: Private Label ~ 6.5% Co-brand ~ 3.0% WTD avg. mid 5’sDespite rising rates from account seasoning, Card Services still generates double-digit earnings growthPortfolio growth, mix, gross yields, operating e
Slide 14: What is your Free Cash Flow?
What is your Free Cash Flow?FCF = adjusted EBITDA – cash taxes – cash interest – capital expenditures + non-cash items = $1.3 billionUses: $500 million to support 20 percent plus card receivables growthRemainder for M&A or share repurchasesCorporate leverage ratio is modest <3.0xCalculated consisten
Slide 15: Outlook
Raised guidance following second quarter results:Full Year: Revenue $7.15 billion +11% Core EPS $16.85 +12%Double-digit growth including drag from higher loss ratesRobust cash flow to drive growth and share repurchase programs2017: Expect another year of solid growthLoss rate normalization continues
Slide 16: Forward Looking Statements
Forward Looking Statements 16 This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generally
Slide 17: Non-GAAP financial measures
17 In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, the Company may present financial measures that are non-GAAP measures, such as constant currency financial measures, adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA, net of funding