Q4 2013 Earnings Call Transcript

Transcript Call Date 02/06/2014

Let's talk specifically about how the quarters are going to rollout out, because there is going to difference this year than the past couple of years, and essentially you have a couple of big drivers. So, Q1 will still come across and have very strong mid-teens top-line growth. So right out of the gate, you should see strong top line growth. But our earnings will be held back and dampened down to the mid-single digit growth to reflect one big thing and that is the unique opportunity that we're seeing in Private Label. What we're looking at right now, is we're going to grow operating expenses in our Private Label group as much as 25% versus prior year which is a huge amount. We're doing that for one simple reason and that is we are building for '15, '16, and '17. To put it in perspective, we normally bring on four to five new clients per year; in 2012, we brought on seven; in 2013, we brought on 15; and in 2014, we're going to bring up over 20 new clients on our platform. That requires ramping up expenses well ahead of the revenues.

We talked about revenues come down flow-through in the later years, not right up-front, and so we're going to go ahead and sit there and say, all right, this is the right thing to do. And what does that mean? It means we added 800 people to the card group during '13. We're going to add over 1,000 to the card group in '14, most of them are already onboard and getting ready for the 20 plus new clients that we're bringing on.

So essentially the infrastructure, the people are all in place to ramp up these 20 plus new clients. That bodes extremely well for '15, '16, and '17 when the revenue pours in the door. At the same time however, it will dampen Q1, but it won't dampen the year. Business is absolutely booming. We believe we can continue to grow earnings 20% this year, while at the same time really getting some nice visibility into '15, '16, and '17 for our card business and also with our extension and expansion in Brazil and in Europe, we think we can set the table for having a very strong international footprint in future years as well.

So it's a little bit of, I think we can deliver some real nice numbs for 2014 with high single digit organic top-line and 20% plus EPS, while at the same time absorbing some huge investments for the big growth spurt that's coming down the road.

Turning to 2014 outlook, again, more of what you've heard us talk about forever, which is the marketing dollars continue to flow into the data driven marketing and loyalty programs. I don't think that's news to anyone, we've been saying pretty much the same thing for about a dozen years, and all we're seeing now is it looks like it's picking up, which is obviously good news for us. The fact that our assets consist of data, consist of platforms, loyalty programs, analytics, digital distribution.

We're kind of sitting right in the middle where a lot of these trends are converging, and I think we're sitting in a good spot. One thing I do want to say because people ask sometimes about how we are different or how we compete with some of the other models that are out in the marketplace, my belief is that this is a huge and growing market, and as a result, there are going to be more than one model that will be successful.

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