Alliance Data Systems (NYSE:ADS) may not be a household name, but there’s a good chance you use one of their credit cards. The company provides private-label credit card services for retailers and other well-known brands.
In this episode of “Beat and Raise,” recorded on Jan. 27, Fool contributors Jason Hall and Brian Withers discuss Alliance Data Systems’ latest report and why the stock has a bright future in front of it.
Jason Hall: Let’s talk about Alliance Data Systems. What do you say, Brian?
Brian Withers: Yeah. What the heck do these guys do?
Jason Hall: It’s a really interesting company. You go back like a long time ago, you go back to the mid-’90s. JCPenney’s credit card processing business, and The Limited’s credit card bank. The Limited owned a bank like back in the ’90s, tons of retailers actually owned banks that did personal finance. Those two banks merged or those two businesses that were part of retailers merged and they became Alliance Data Systems and then a few years after that, they bought LoyaltyOne, which was like the loyalty program manager for airlines is the big thing that LoyaltyOne does. They bought something called Epsilon, which I don’t really know much about, to be honest with you.
But fast-forward until a couple of years ago and things just weren’t really going well, it wasn’t managed well. The board made a strategic decision. Let’s spin-off some of these other things and let’s focus on our core business. That core business is private-label credit cards or rewards programs too. Those two things that they do so maybe you have a credit card that has Toyota (NYSE:TM) is one they just signed. They manage the Toyota program. The NFL, they just announced this in December, they’re going to be the company that manages the NFL’s credit card, so you have your favorite team and the logo when you get rewards that you can spend on NFL merchandise and all that stuff, so they are the company behind a lot of that so it’s a really interesting business.
Brian Withers: It’s like a fintech.
Jason Hall: It is very much a fintech. They bought a company called Bread. Not to be confused with Toast (NYSE:TOST). [laughs] They are very much getting more into fintech financial services. Fintech is an interesting term but I think just more broadly fintech is part of financial services, that’s what they do. Anyway, they just spun out Alliance One during the fiscal year. That’s good so some good things that came out of that I’ll go ahead and pull up the screen share here.
It’s streamlined the business No. 1, but it’s also tightened up the balance sheet. Since I mentioned, I’ll bring it up. That happened in the prior quarter in the third quarter, in the fourth quarter $750 million of debt has been paid off and goodwill because of all the various and sundry acquisitions over the years, because of that spin-off, $700 million in goodwill went with…
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