Alliance Data Systems Corporation reports 32.9% EBITDA decline in 2020 and 19.0% Revenue decline
01/28/2021 • About Alliance Data Systems Corporation (
$ADS) • By InTwits
Alliance Data Systems Corporation reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Alliance Data Systems Corporation is a company in decline: FY2020 revenue growth was -19.0%, 5 years revenue CAGR was -6.8%
- Alliance Data Systems Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.4%. At the same time it's a lot of higher than industry average of 3.0%.
- CAPEX is quite volatile: $54m in FY2020, $142m in FY2019, $200m in FY2018, $225m in FY2017, $207m in FY2016
- In the last 5 years the company invested considerably less than D&A: $829m vs. $1,497m
- The company has potentially unprofitable business model: ROIC is 4.6%
- It operates with high leverage: Net Debt/EBITDA is 9.2x while industry average is 1.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 19.0%. Revenue decline showed acceleration in FY20Q4 - it was 24.0% YoY. Revenue decline was accelerating on average at -9.6 pp per annum in FY2016-FY2020. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 4.9 pp from 28.6% to 23.7% in FY2020. During the last 5 years EBITDA Margin topped in FY2018 at 30.6% and was declining since that time.
Gross Margin showed almost no change in FY2020. Gross Margin followed a growing trend at 3.0 pp per annum in FY2016-FY2020.
Net Income margin showed almost no change in FY2020. During FY2016-FY2020 Net Income margin topped in FY2018 at 12.4% and was declining since that time.
Investments (CAPEX, working capital and M&A)
In FY2020 the company had CAPEX/Revenue of 1.2%. The company showed small CAPEX/Revenue decline of 1.7 pp from 2.9% in FY2017 to 1.2% in FY2020. It's average level of CAPEX/Revenue for the last three years was 2.1%. During the last 5 years CAPEX as a % of Revenue topped in FY2017 at 2.9% and was declining since that time.
Return on investment
The company operates at good ROE (13.7%) while ROIC is low (4.6%). ROIC showed almost no change in FY2020. ROE showed almost no change in FY2020. During the last 5 years ROIC topped in FY2018 at 6.8% and was declining since that time.
Management team
Alliance Data Systems Corporation's CEO is Ralph J Andretta. Ralph J Andretta has 1 year tenure with the company. Alliance Data Systems Corporation's CFO Timothy P King "Tim" has spent 1 year with the company.
Financial and operational results
Alliance Data Systems Corporation ($ADS) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 7,138 | 7,719 | 7,791 | 5,581 | 4,521 | -19.0% |
| Gross Profit | 2,861 | 3,449 | 3,570 | 2,894 | 2,338 | -19.2% |
| SG&A | 143 | 166 | 173 | 151 | | |
| EBITDA | 1,778 | 2,143 | 2,382 | 1,598 | 1,072 | -32.9% |
| EBIT | 1,266 | 1,646 | 1,894 | | | |
| Tax | 319 | 292 | 261 | | | |
| Net Income | 516 | 789 | 963 | 278 | 214 | -23.1% |
| Stock Based Compensation | 77 | 75 | 81 | | | |
Balance Sheet
|
|---|
| Cash | 1,859 | 4,190 | 3,863 | 3,874 | 3,082 | -20.5% |
| Accounts Receivable | 797 | 822 | 924 | | | |
| Inventory | | 234 | 252 | | | |
| Accounts Payable | 568 | 651 | 558 | | | |
| Short Term Debt | 7,127 | 7,837 | 9,400 | 10,097 | | |
| Long Term Debt | 13,822 | 17,980 | 15,784 | 12,503 | 12,898 | 3.2% |
Cash flow
|
|---|
| Capex | 207 | 225 | 200 | 142 | 54 | -62.1% |
| Dividends | 30 | 116 | 125 | | | |
| Acquisitions | | 946 | | | | |
Ratios
|
|---|
| Revenue growth | 10.8% | 8.1% | 0.9% | -28.4% | -19.0% | |
| EBITDA growth | 1.3% | 20.6% | 11.1% | -32.9% | -32.9% | |
|
|---|
| Gross Margin | 40.1% | 44.7% | 45.8% | 51.8% | 51.7% | -0.1% |
| EBITDA Margin | 24.9% | 27.8% | 30.6% | 28.6% | 23.7% | -4.9% |
| EBIT Margin | 17.7% | 21.3% | 24.3% | | |
| SG&A, % of revenue | 2.0% | 2.2% | 2.2% | 2.7% | | |
| SBC, % of revenue | 1.1% | 1.0% | 1.0% | | |
| Net Income Margin | 7.2% | 10.2% | 12.4% | 5.0% | 4.7% | -0.3% |
| CAPEX, % of revenue | 2.9% | 2.9% | 2.6% | 2.5% | 1.2% | -1.4% |
|
|---|
| ROIC | 5.9% | 6.5% | 6.8% | 5.1% | 4.6% | -0.5% |
| ROE | 23.6% | 44.9% | 46.0% | 13.7% | 13.7% | 0.1% |
| Net Debt/EBITDA | 10.7x | 10.1x | 9.0x | 11.7x | 9.2x | -2.6x |
People
|
|---|
| Insider ownership | 3.3% | 3.3% | 3.3% | | | |
| Employees | 17,000 | 20,000 | 20,000 | | | |
| Revenue/Employee, th. $ | 420 | 386 | 390 | | | |
Alliance Data Systems Corporation ($ADS) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,382 | 979 | 1,051 | 1,110 | | 3.6% | -27.4% | -26.9% | -24.0% |
| EBITDA | 213 | 226 | 341 | 322 | | -56.2% | -42.1% | -5.0% | -11.0% |
| Net Income | 30 | 38 | 133 | 12 | | -79.9% | -72.4% | - | -90.8% |
Balance Sheet
|
|---|
| Cash | 4,457 | 4,960 | 3,078 | 3,082 | | 20.9% | 23.2% | -31.8% | -20.5% |
| Long Term Debt | 11,962 | 9,889 | 5,227 | 12,898 | | -25.1% | -42.3% | -60.8% | 3.2% |
Ratios
|
|---|
| Gross Margin | 63.9% | 49.7% | 54.1% | 42.8% | | 11.9% | -1.8% | 1.9% | -7.4% |
| EBITDA Margin | 15.4% | 23.1% | 32.5% | 29.0% | | -21.0% | -5.9% | 7.5% | 4.2% |
| Net Income Margin | 2.2% | 3.9% | 12.7% | 1.1% | | -9.0% | -6.4% | 20.2% | -7.8% |
Peers in Data Processing & Outsourced Services
Below we provide Alliance Data Systems Corporation benchmarking against other companies in Data Processing & Outsourced Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Square, Inc. ($SQ) | - | 29.6% | 49.0% | 42.9% | 101.5% |
| Global Payments Inc. ($GPN) | - | 37.2% | -15.3% | 45.9% | 51.1% |
| Fiserv, Inc. ($FISV) | - | 3.5% | 2.2% | 74.9% | 45.8% |
| NIC Inc. ($EGOV) | - | 5.8% | 2.5% | 2.7% | 30.0% |
| StoneCo Ltd ($STNE) | - | 74.3% | 106.0% | 63.1% | 28.9% |
| |
|---|
| Median (39 companies) | 6.7% | 11.8% | 7.5% | 11.5% | -2.7% |
|---|
| Alliance Data Systems Corporation ($ADS) | - | 8.1% | 0.9% | -28.4% | -19.0% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Verra Mobility Corp ($VRRM) | - | 97.4% | 97.5% | 95.7% | 91.5% |
| EVO Payments, Inc. ($EVOP) | - | - | - | 80.2% | 80.8% |
| StoneCo Ltd ($STNE) | 69.7% | 70.8% | 79.5% | 83.4% | 76.8% |
| WEX Inc. ($WEX) | 54.7% | 58.8% | 63.3% | 61.7% | 56.8% |
| Sabre Corporation ($SABR) | 32.2% | 30.1% | 27.8% | 56.6% | 56.6% |
| |
|---|
| Median (31 companies) | 39.2% | 38.9% | 40.9% | 40.3% | 36.5% |
|---|
| Alliance Data Systems Corporation ($ADS) | 40.1% | 44.7% | 45.8% | 51.8% | 51.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Visa Inc. ($V) | 55.6% | 69.2% | 65.8% | 68.1% | 68.5% |
| Mastercard Incorporated ($MA) | 56.9% | 56.5% | 51.8% | 60.9% | 56.6% |
| FleetCor Technologies, Inc. ($FLT) | 52.0% | 50.8% | 55.9% | 57.6% | 52.2% |
| StoneCo Ltd ($STNE) | 31.4% | 26.0% | 53.0% | 62.4% | 52.1% |
| Black Knight, Inc. ($BKI) | 43.0% | 44.6% | 43.3% | 46.0% | 44.9% |
| |
|---|
| Median (38 companies) | 21.2% | 20.6% | 19.2% | 21.7% | 18.2% |
|---|
| Alliance Data Systems Corporation ($ADS) | 24.9% | 27.8% | 30.6% | 28.6% | 23.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| PagSeguro Digital Ltd. ($PAGS) | 6.4% | 4.3% | 1.4% | 5.8% | 22.3% |
| StoneCo Ltd ($STNE) | 7.2% | 18.4% | 8.9% | 12.9% | 11.2% |
| Cardtronics plc ($CATM) | 9.9% | 9.6% | 8.0% | 9.3% | 8.3% |
| Verra Mobility Corp ($VRRM) | - | 11.5% | 7.2% | 6.6% | 6.2% |
| Fiserv, Inc. ($FISV) | 5.3% | 5.0% | 6.2% | 7.1% | 6.1% |
| |
|---|
| Median (38 companies) | 3.2% | 2.9% | 3.2% | 3.3% | 3.1% |
|---|
| Alliance Data Systems Corporation ($ADS) | 2.9% | 2.9% | 2.6% | 2.5% | 1.2% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Mastercard Incorporated ($MA) | 57.5% | 60.6% | 64.7% | 72.7% | 47.6% |
| International Money Express, Inc. ($IMXI) | -1.3% | -1.4% | 12.1% | 36.0% | 31.4% |
| NIC Inc. ($EGOV) | 63.1% | 52.1% | 39.3% | 26.5% | 30.8% |
| Visa Inc. ($V) | 18.1% | 21.9% | 23.0% | 27.2% | 23.2% |
| Western Union Company (The) ($WU) | 10.7% | 11.9% | 27.8% | 21.5% | 22.1% |
| |
|---|
| Median (39 companies) | 11.7% | 10.7% | 12.1% | 8.3% | 6.4% |
|---|
| Alliance Data Systems Corporation ($ADS) | 5.9% | 6.5% | 6.8% | 5.1% | 4.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| WEX Inc. ($WEX) | 6.7x | 4.4x | 3.1x | 3.4x | 12.1x |
| Exela Technologies Inc ($XELAU) | 8.1x | - | 9.7x | - | 10.7x |
| Verra Mobility Corp ($VRRM) | - | 10.7x | 6.9x | 3.5x | 4.7x |
| GreenSky, Inc. ($GSKY) | -1.5x | -1.5x | 0.5x | 1.5x | 4.6x |
| Fidelity National Information Services, Inc. ($FIS) | 4.1x | 2.9x | 2.9x | 5.5x | 4.2x |
| |
|---|
| Median (35 companies) | 1.3x | 2.3x | 2.0x | 2.1x | 1.9x |
|---|
| Alliance Data Systems Corporation ($ADS) | 10.7x | 10.1x | 9.0x | 11.7x | 9.2x |
