Slide 1: Alliance Data Systems Q2 2005
Alliance Data Systems NYSE: ADS Q2 2005
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements contained in this presentation may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may use words such as "anticipate,"
Slide 3: Integration of Transaction Processing and Marketing Services
Alliance Data: Integration of Transaction Processing and Marketing Services Build and Strengthen Customer Loyalty for Our Clients Focus on 300 Specialized Relationships, not "Commodity" Items Offer Full Suite of Services Transaction, Credit, Loyalty and Database Marketing Three Engines All Offering
Slide 4: 2005: Five Themes
2005: Five Themes Growth Engines Continue to "Cycle" Momentum Builds Throughout the Year Private Label Returns to Its Solid Historical Growth Rate Utility Topline Continues Its Growth Drive EBITDA Impacted by Consolidation Efforts Marketing Canada: Air Miles Stronger than Ever U.S.: Epsilon Off to E
Slide 5: Private Label Services (50% of Company)
Private Label Services (50% of Company) Attractive Market - 1998-03: Double-digit Annual Growth for Outsourcers Services: Private Label Processing Customer Care / Call Center Credit: 700 Score, No Sub-Prime Targeting Database Marketing Services Income Streams: Split Between Processing and Credit Cli
Slide 6: Private Label Services 2005 Momentum to Increase as Year Unfolds
Private Label Services 2005 Momentum to Increase as Year Unfolds Financial Drivers: Impact Portfolio Growth - Solid; Higher Avg. Balances (+) Funding Costs - Rising Rates Mitigated (+) Credit Losses - Continuing to Improve (+) Operating Leverage - Continuing to Improve (+) Credit Sales - Tepid, but
Slide 7: Utility Services (15% of Company)
Utility Services (15% of Company) Serving Both Regulated & De-regulated Services: Core Processing Customer Care / Call Center Database and Marketing Services Income Stream: Earnings Based on Monthly # Statements Clients: Duke, Entergy, Puget Sound, AEP, Centrica, Georgia Natural Gas, Orlando, City o
Slide 8: Utility Services 2005 Momentum to Increase as Year Unfolds
Utility Services 2005 Momentum to Increase as Year Unfolds Revenues: ^ Entergy and Direct Energy Conversions ^ 2005 Pipeline EBITDA: Streamlining Project to be Completed by Summer Financial Results: Expect Solid Growth to Continue
Slide 9: Marketing Services (30% of Company): Canada Loyalty AIR MILES
Marketing Services (30% of Company) (1) Canada: Loyalty AIR MILES(r) Program Solid Mid-teens Growth Coalition Loyalty Program Based Upon Everyday Spend - - Not an Airline Program 2/3 of Canada Active Clients: Shell Oil, Safeway, American Express, Bank of Montreal Three Sources of Future Growth: New
Slide 10: Marketing Services (cont.): US Epsilon
Marketing Services (cont.) (2) US: Epsilon Solid Mid-teens Growth Top 25 Clients: 10 Year Average Tenure Customer Management and Loyalty Solutions: Customized Marketing Campaigns Design and Management of Loyalty Databases Analytical Services Back-end Processing Clients: Hilton Hotels, Principal Fina
Slide 11: Marketing Services 2005 Top Performer Throughout the Year
Marketing Services 2005 Top Performer Throughout the Year Three Drivers of Performance Loyalty: 10% Miles Issued Growth/18-22% Redeemed ^ Mid-teens Growth Loyalty: Per Mile Margin Increasing ^ Additional Growth Epsilon: Strong Start; Solid Pipeline ^ Mid-teens Growth Financial Results: Strongest of
Slide 12: Management Team
Management Team Name Responsibility Background Mike Parks Chairman, CEO and President 28 First Data Ed Heffernan EVP and CFO 18 First Data, Citigroup, CS First Boston Ivan Szeftel EVP, President, retail credit Services 23 Charming Shoppes John Scullion EVP, President, Loyalty and 16 The Rider Group
Slide 13: Financial Themes
Financial Themes - - Growth - - Operating Leverage - - Free Cash Flow
Slide 14: 2000 - 2005 Revenue, EBITDA, Cash EPS
2000 - 2005 (in $MM, except per share) '00 '01 '02 '03 '04 '05E '00 '01 '02 '03 '04 '05E '00 '01 '02 '03 '04 '05E $670 $770 $865 $1,047 $1,257 $1,460- $1,470 $97 $123 $144 $211 $279 $335+ $1.87- $1.90 $1.54 $1.03 $0.59 $0.49 $0.40 Revenue EBITDA Cash EPS 17% CAGR 28% CAGR 36% CAGR
Slide 15: Operating Leverage
Operating Leverage EBITDA Margin Goal: 50bps Expansion per Year 16.0% 13.8% 14.5% 16.7% 20.1% '99 '00 '01 '02 '03 '04 '05E Averaging over 100 bps per Year 22.2% 23.0%
Slide 16: 2005 Guidance
2005 Guidance Guidance Increased Following Q1's Performance Revenues $1.46 - $1.47 Billion ^17% EBITDA ^ $335 Million ^20% Cash EPS $1.87 - $1.90 ^22% Free Cash/Share $2.10
Slide 17: 2005 Est. Free Cash Flow
2005 Est. Free Cash Flow ($MM, Except per Share) EBITDA $335+ Loyalty Cash Flow Adj. 25 Operating EBITDA $360 Less Capex (70) Net Cash Ops $290 Less Int./Taxes (110) Free Cash Flow $180+ Per Share ^ $2.10
Slide 18: Our Keys for Success
Our Keys for Success Services with Pricing Power Long-term Relationships 10 - 12 New Clients per Year