Apr 23, 2008
Executives
Mike Parks - Chairman and Chief Executive Officer Edward Heffernan - CFO Julie Prozeller - Financial Dynamics
Analysts
James Kissane - Bear Stearns Reggie Smith - J. P.
Morgan Bob Napoli - Piper Jaffary Mark Bacurin - Robert W. Baird Wayne Johnson - Raymond James Larry Berlin - First Analysis David Scharf - JMP Securities Andrew Jeffrey - Suntrust Dodd - Morgan Keegan
Operator
Good afternoon, welcome to the Alliance Data First Quarter 2008 Earnings Conference Call. At this time, all parties have been placed on a listen-only mode.
Following today's presentation we will open the call up for your questions. (Operator Instructions).
Also please note that in order to hear the company's presentation on the website. Please remember to turn off the pop locker on your computer.
Thank you. It is now with great pleasure to introduce your host Ms.
Julie Prozeller, of Financial Dynamics. Ma'am, you may begin your conference.
Julie Prozeller - Financial Dynamics
Thank you, operator. By now you should have received a copy of the company's first quarter 2008 earnings release.
If you haven't, please call Financial Dynamics at 212-850-5721. On the call today we have Mike Parks, Chairman and Chief Executive Officer and Ed Heffernan, Chief Financial Officer of Alliance Data.
Before we begin I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC.
Alliance Data has no obligation to update the information presented on the call. Also on today's call are speakers who will reference certain non-GAAP financial measures, which we believe will provide useful information for investors.
Reconciliation of those measures to GAAP will be posted on the Investor Relations website at www.alliancedata.com. With that, I'd like to turn the call over to Mike Parks.
Mike?
Mike Parks - Chairman and Chief Executive Officer
Thanks, Julie. Welcome everybody.
Thanks for joining us this good afternoon. If you will turn to the agenda page, as usual I spend the few minutes talking about the highlights, the business and then make few brief comments about the outlook and I will ask Ed to take a deeper dive in the financials, and then we will take your questions.
Before begin reviewing the result though and I have a few comments related to Blackstone and the merger. As you have no doubt heard, Blackstone informed us after the market closed Friday that it was not going forward with the purchase of Alliance Data.
As you have also heard I'm sure we've terminated the merger agreement based on their breach of contract and filed a law suit to collect a $170 billion business interruption fee that Blackstone now owes us. In our view, Blackstone could easily have closed the transaction, but chose not to do so, and frankly it is not any more complicated than that.
We are committed to enforce and all of Alliance data is right in light of Blackstone breaches including the pursuit of this law suit, as well as any other potential remedies that are in the best interests of our stock holders. Given that we are now in litigation with Blackstone we will not be discussing the terminated agreement any further or taking any questions relating to it.
While we are obviously disappointed that Blackstone chose not to live up to its commitment and satisfy the terms of its agreement. We remain focused on delivering exceptional value to all of our stake holders, and as you will hear today our strong performance speaks for itself.
Enough said about that distraction, so lets move on, let's talk about the business. Turing to the next slide, I'm pleased with the first quarter results.
As we expected this to be our toughest quarter, as you can see on the slide our revenue reached almost 500 million, it's about an increase of 7%. Our operating EBITDA increased nicely by 16% to 175 million, and adjusted EBITDA came in at a little over 164 million up about 3%.
Cash earnings per share per share was a buck and while flat to last years first quarter results this was on the high end of our guidance range. We expect to gain momentum throughout the year as we start to see traction from the new client win, some key renewal and the impact of having already completed our goal of 2.7 billion in financing at very favorable rates.
As we said last March for companies with a strong proven performances the current environment isn't an issue and in fact the company's liquidity is at all time high despite the volatility in the capital markets. Now let's take a look at the units.
Let's turn to their AIR MILES reward program. Our lowest e-services group in Canada post us a great quarter, and in fact its best in history at 30% increase as you will see in the top line over last year.
This quarter we also announced two key renewals of long term sponsors. CENTURY 21 Canada, one of the most recognized brands I'm sure you all recognize them.
They focus in real estate, they've been our national sponsors since 1992. We also renewed InterContinental, which includes the InterContinental hotels Holiday Inn, Crowne Plaza and Kendalwood Suites and they been our sponsors since 1994.
They've also been a reward supplier for our collectors offering hotels in any location worldwide, a great partner. And just this week, we announced a multi-year renewal one of top five sponsors of AIR MILES program RONA.
They’re Canada's largest retailer of hardware home renovation and gardening products and have a network of 680 stores all across Canada. As the most successful and recognizable correlation program in North America, our AIR MILES program has a unique and competitive advantage.
First when we talk about a lot is our advantages of result of the network effect meaning the program continues to expand as we have new sponsors, new collectors and new rewards. This mean to the strong resiliency to competitive pressures not just for our program but also for our sponsors.
And lastly, if the program continues to deliver double digit organic growth we also realize significant and increasing operating leverage as we spread more and more volumes over our relatively fixed cost platform. Needless to say it’s a machine.
Nice work team. Let's turn on to Epsilon.
Our Epsilon marketing Services Group delivered solid mid teens growth this quarter. We continue to see the benefit of the shift of traditional marketing spend on nearly $700 billion market toward the transaction based and loyalty and marketing programs that generate measurable ROI for our clients.
This is right in our sweet spot. This ongoing ship can best be demonstrated by our recent announcement of the multi-year expansion with Citicorp.
In 2006 we were rewarded a contract to build and won a loyalty platform to support to support their Thank You Network, as well host and maintain a website and customer interface for reward redemption. We then built a proprietary e-mail marketing platform to support their consumer credit card business, and now in our latest expansion the design and operation of a customized database marketing and analytic private banking network to provide campaign management analysis and reporting.
So, as you can see companies are quite willing to invest in transaction-based solutions when they realize the real value from these programs. To wrap up, we fully expect solid digit, double digit growth this year.
While we often precluded from announcing expansion in new client wins because of the competitive nature of our clients' businesses, we've successfully secured larger commitments from existing clients, our new client wins are ramping up, and we have a very solid pipeline of fortune 1000 companies. Let's now move on to private label.
In the next slide, in the first quarter, our private label groups signed an agreement with the leading specialty retailer Hot Topic to provide private label credit services for their newest multichannel brand Torrid which is a specialty retailer women's clothing and accessory. The program designed to complement and enhance Torrid's existing enrollment program which has over one million customers enrolled.
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Ed, would you take us through a little bit more detail on the finances?
Edward Heffernan - CFO
All right, thanks Mike. I am on the slide that says first quarter consolidated results; maybe you could pull out one up.
I would start off by saying, I guess, it is official at this point we are back and we'll pick up right where we left off; and we’re in a2 0th quarter in a row, delivering all over, our delivering on a promises. We are now emerging from that long painful root canal called deal predatory and fortunately we've managed to maintain focus on the business during all the turmoil.
As much as I would love to share some of the most classic moments over the past few months perhaps we would have to say that for another day. So let's dive right in to things are going.
There are six key takeaways from the quarter but first let's set the stage. Q1 had four major headwinds to overcome.
As Mike mentioned, a lots of Lane Bryant, which had its biggest quarter last year during Q1. Two, a moderate uptick in credit losses which had yet to be mitigated by lower funding costs; three, a mixed shift in the business whereby our fastest growth engines loyalty and Epsilon seasonally don't hit their monster quarters until the latter half of the year.
And four, very difficult comps in private label as Q1 of last year, as everyone knows was the last truly strong quarter of the entire retail sector. Now that been said, as the saying goes, don't give me excuses, just deliver the results.
No problem here, but start going to weigh now at the paper weights. We have six items that we think we wanted to have precise for the quarter.
The first was that despite severe headwinds, we managed to grow revenue, maintain earnings, and generate mid-teens organic growth in operating cash flow that is operating EBITDA. Two, both of our fastest growth engines, loyalty and Epsilon generated a minimum of mid-teens growth.
Three and this is fairly critical, the entire negative compare in private label occurred on January. Both February and March generated flat to positive compares to last year suggesting that we’re on our way.
4) Excluding Lane Bryant private label sales groups was positive and the portfolio grew at a healthy 6%. 5) On the debt side the capital markets treated of extremely well as we completed our entire $2.7 billion liquidity goal for the year.
As importantly, we will now enjoy savings on funding cost which at a minimum should nicely offset the modest uptick and credit losses. And six, finally as we begin to move deeper in to the year these headwins will begin to dissipate.
Lane Bryant which we anniversary in November has a less severe impact each subsequent quarter this year as newer clients ramp up. Also, private label compares get easier.
Funding sales start ramping up and we will mitigate to step up in credit losses which have now hit a plateau, and the loyalty in Epsilon engine fully kick into gear. So overall, pretty good quarters for us, that’s the stage for nice returns to earnings growth throughout the remainder of the year.
Perhaps more importantly, the earnings growth rate will accelerate and hit high street at the end of the year, suggesting a very nice jump off for 2009. Alright, as kind of the big picture we will turn our attention and walk through the segments which as you all know have been redone to better reflect how we actually operate the business.
Segment results. First step, multi services what more can you say posted strongest quarter in its history with operating EBITDA which is a proxy for cash-flow of over $50 million.
Six drivers are counted for this performance might make it a bunch of them, but we will do it again. One, Solid issues and some redemption growth are just under 10%.
Two, Pricing power, which we describe is at a minimum, stable combined with increase operating leverage. Three, continued success in security larger and larger commitments from existing sponsors.
Four, New sponsors coming online, and five, the code uncode network effects as our members frequent more and more of our participating as the program continues to assume higher and higher profile, and six, of course, the stronger Canadian dollar certainly didn’t hurt, overall huge quarter. But we don’t expect similar results every quarter; we are more uncomfortable with our initial guidance with mid teens growth and EBITDA for the year.
And now it’s entirely organic. Now let’s chat about Epsilon.
Epsilon marketing comes next; it posted mid teens growth in both top line and EBITDA. The bulk of Epsilons growth comes from larger and larger commitments from its installed base of customers.
The deal with Cities Thank you cities Program is a perfect example of this. Additionally, the Epsilon model was increasingly benefiting from the shift in fortune 1000 marketing spend away from traditional channels and into the transaction base highly target is ROI based programs which is Epsilon’s specialty.
As a quick review for of the some of the newer focus on the phone, Epsilon offers a most comprehensive, end-to-end ROI based solution for the fortune 1000 covering all five key critical offering from one, creative I mean, designing the loyalty program. Two, providing the data, whether it’s proprietary or purchased.
Three designing building and maintaining the big higher data bases. Four, high end analytics to developing the analysis and algorithms needed for micro targeting.
And five, an easy delivery mechanism and then we rely on permission based e-mail using previously acquired businesses double click and big to deliver micro targeted high ROI based programs. This year over 35 billion permission based emails will be sent.
Similar to loyalty we expect Epsilon to post Mid-Term organic EBITDA growth this year results tend to chop a bit in the first part of the year with the bulk f the contributing coming in the back half. On a final note, Epsilon also builds by fault the most robust pipeline at Alliance..
Okay. Private label services covers all the processing that we do, all the high-end customer care and call center work that we do, as well as all the cards associated with providing the marketing items for approximately 90 private label programs.
The secret sauce in private label has always been our ability to step in and serve as our clients' key touch point to its customers via our customer care solutions. Additional stickiness comes from the tailored marketing and loyalty programs which are created on behalf of our clients and the closed loop network inherent in private label provide the unique framework for us to capture both the customers' information and we get back to the skew level data regarding their purchases that's driving effective targeted marketing programs.
Q1s performance was a bit off due to the loss of Lane Bryant which knocked 7 points off the statement growth. Excluding it, statements our key proxy for performance would have been about flat.
As the year unfolds, look to see the grow-over diminish as the '05, '06, and '07 signings ramp up. And just to give you a sense, that's about 20 of our 90 clients; so it is a huge chunk of our business.
Additionally there will be a positive pop in November when Lane Bryant anniversary is. Overall then, look for a year of mid single-digit growth in organic EBITDA in this segment.
Okay finally, same drill with private label credit. As you can clearly see from the results, about one-quarter of private label's earnings after the above-mentioned services, the processing, high-end customer care, and marketing royalty or about three-quarters of it falls directly into the credit bucket.
Again, results reflected the loss of Lane Bryant. If you were to exclude Lane Bryant, we saw a very nice 6% growth in the portfolio along with very stable yields.
Sales which grew slightly, when excluding Lane Bryant, are slowly creeping up based on the results of the end of the quarter and an early April read. Combined with the continued ramp-up of the '05, '06, and '07 new clients we would expect mid single digit growth in organic EBITDA in this segment for the year.
Again results should pop up a few more points in November, the anniversary of Lane Bryant. Alright, so let's say we have a decent field for the revenue drivers that is portfolio growth, new client ramp-ups, stable yields, all impacted, or if you want to take out the Lane Bryant impact.
So let's assume we have a pretty good idea of what top line is doing, what turn to the fun stuff, which would be credit quality and of course phones. Our normal run rate in decent economic times would be around a 6% loss rate.
Assuming we are in a recession, we would be looking for something in the mid sixes, a 50 to 60 basis point increase. Risk factors and prior recession results plus the benefits from a portfolio mix which has skewed upward in quality over the years and the benefits of the tens of millions we have invested in our back office operations to bring it up to world class status.
Alright, what's your comfort level with this? Well, we actually tend to front run a recession.
So, our delinquencies moved up as early as late August. If you went back to the data you would have seen something going from the high four's to the mid five's.
But importantly they plateaued at that level and have remained remarkably stable over the last nine months. And we'll give you a sneak preview and say for last nine months if you include what April looks like.
Since delinquencies give us a 180-day window into future write offs, we have very strong visibility well into Q4 this year. What this all mean?
Losses in the mid six's, they seem about right. This will denies for about 20 million of lost EBITDA versus budget and of course now the good news, the successful completion of our 2.7 billion in re-financing will yield a minimum of 30 million or more embedded on the funding side.
So we would like to keep it simple here. Let's just watch for now and it really is that simple.
I summarize loyalty in Epsilon (R), private label services and credits are well position to grow despite the loss of Lane Bryant and the macro environment. Thus the difference between the company having a very, very good year that is double-digit organic growth generating 400 million of pure free cash flow, and tan absolutely great year is not the macro environment for us, but rather just the waiting game until Lane Bryant hits it anniversary.
So we will have to live with just a very, very good year for now.
From a year-end to the end of the first quarter the Canadian dollar declined. Thus we have a translation loss for balance sheet purposes.
Specifically, the affects hit deferred revenues for about a negative 34 million and our trust account for a negative 12 million leading to a net non cash affects hit of around minus 22 million. If you look at the actual changes in those accounts from December until the end of the March they will only show decline of 12 million.
So if the net balance sheet hit was around minus 12 and the affects component was minus 22, then the true cash flow contributed during the quarter must be a positive 10 million make up the difference.
Debt. Net quarter debt which is similar to our debt covenants exclude CDs, ended the other quarter a bit north of 700 million.
While LTM operating EBITDA or operating cash flow was also approximately by about 700 million. Thus our LTM leverage assured approximately one time.
We used to bid under a 100 million of free cash to pay down some CDs during the quarter and to free up even more capacity.
This however is not what we believe is the optimal capital structure for us. Specifically, we would like to maintain an investment grade profile which we suggest no more than three times leverage.
The difference between where our leverage is heading now, and the three times level hit around $1.5billion to $2 billion of dry powder. Lets call a billion 8 of dry powder for now and be assured we will be looking at our capital structure intensively now that we have been freed from purgatory.
That’s it on the balance sheet. It seems like a good time to chat about liquidity.
Next slide please. Alright liquidity, going into Q4 last year and as noted in the 10-K we were looking for new or to renew approximately 2.7 billion facilities, related specifically to our private label program were done names such as Barclays, Royal Bank of Scotland, Royal Bank of Canada Bank of Montreal, J.
P. Morgan, and Wachovia all contributed to the effort and we thank them.
Next question, how much capacity do we have? Well, let's first look at the off-balance sheet facilities where we have about $1 billion of available and unused capacity at the moment.
Let's go ahead and toss in about 400 million in extra CD capacity and over 0.5 billion in our normal corporate credit facilities. Add it all up and as we said yesterday, we have about $2 billion in immediately available and unused capacity.
Finally as noted before, if we were to run it up a bit, we could be looking at another couple of billions. In summary call it 2 billion immediately available and up to 2 billion if we run it up a bit.
We feel comfortable saying that despite the gloom and doom in the capital markets, liquidity has never been more wonderful for us. Yeah, one more thing, our newly renewed facilities offer us the opportunity to save at least 30 million in funding cost this year versus budget.
Hopefully, this puts the final nail on the coffin regarding investor concerns about liquidity. Next stop?
Guidance. Alright, we are going to reiterate what we already laid up here to the public which is operating EBITDA of at least 730 adjusted EBITDA of at least 700 and cash EPS certainly very comfortable at 430 per share.
You will see the check Mike, Q1 was there tough one with the Lane Bryant drag and very difficult comps. Q2, we expect about 10% growth in earnings and what essentially happens in Q2 is we'll still experience the Lane Bryant drag also from a seasonal perspective.
Private label's earnings from that always tends to trail off in the second quarter, essentially folks tend to revolve their balances on their cards in the first quarter post holiday and in the second quarter they tend to pay the amount. But now we start seeing the positive bennies.
The private label ramp-ups again those would be '05, '06, and '07 vintages which is 20 out of 90 clients and we would begin the see the funding benefits as well. Q3, Lane Bryant drag, but again now we're really beginning to kick in the gear with positive funding benefits, positive private label ramp-ups, and positive royalty in Epsilon who really kick in to gear at this point, especially Epsilon.
In Q4, that's when the fun begins, the anniversary of Lane Bryant, funding benefits, private label ramp-ups, and royalty in Epsilon all positives, no negatives and that is our jump off for '09. As in the past, we'll take a look at the end of Q2, see how things are running.
We think we're pretty close and perhaps just a bit conservative at the moment. If things open up in the second back half, we'll adjust guidance quarterly, but let's not get ahead of ourselves just yet.
Okay, free cash flow; going back to adjusted EBITDA, north of 700. We talked about the adjustment in Canada where we are receiving cash, putting some into our trust account, keeping the profits, that profit does not get recognized immediately even though we have the cash.
That's 30 to 40 million bucks a year. So our operating cash flow is going to be north of 730 million this year.
Personally we look at all the cash items, CapEx, interest, taxes, and we come down to a pure free cash flow number of about $400 million this year, per share that is $5, which is about 10% yield. In the past, we typically had 5% yield and plus that does not include any type of asset sales or other initiatives.
In terms of the asset sales, we talked about the network business and the utility business; we are in process on both of those. In the utility business, the process has started a little bit later than work business and we just about to begin to winning down interested parties.
The network is much further along and we’ve now there are another options to less than a hand forth this point so stay tune. Next page very simply just to review sort of our four key financial metrics and goals and that is very simply double digit organic growth, very strong for cash flow conversion, you will see along with organic growth huge margin expansion already used CapEx we’ve done, virtually all of the build, I think all of the build, so we are going from 5% of top line to 3%.
This is a 28 consecutive quarters since the IPO meeting repeating, a very high recession resiliency and as we talked about excellent liquidity. If you turn to the last slide which is the '03 to '08 track record, I want to make a couple of comments before I kick it back to Mike I know lot of folks are doing a turn off work on the company, we will work with you as best we can, and we do ask your patience given the amount of folks who are calling in.
Specifically, we look forward to welcoming back many of our long turn growth investors, as well as the number of our new folks from the value side. Any how, let me briefly hit on the top three questions that people are asking as they go through due diligence and combine these with what was seems to be the disconnect in the market versus the reality of Alliance.
#1 of course is liquidity , capital market receiving up t cetera, et cetera, et cetera. We are developed everything, we’re going to have a bunch of savings from doing these renewal the new facilities, we have tons of exec capacity.
So I really like to take this one of the west going forward. It certainly a was it excellent question which needed to be answered, and I think we beat this one to defeat this point.
#2 surprise , surprise credit losses. Again, critical that we put this one in perspective, because we are not a credit card company.
First, this 50 basis point increase that we directive out through this year is already fully offset by rural funding, so that’s done. Second, lets say o people work to model things out.
Let’s say you want to stress test the mid sixes on a losses and banging it up for 7%. So we are up another 50 basis points, while that’s another $20 million hit to us.
Before I ready to going to be doing operating eve with the greater than 730 million, you are talking about less than 3% of our cash flow. It’s just not enough to get excited about.
I think when put net perspective something like an hit head less than 3% of cash flow doesn't seem quite so concerning. Also note that we probably mean that there was a deeper turndown in the economy and we would most likely get most of all that mitigated by additional lower funding.
And then #3 sort of the general turmoil, what's going on, obviously, we have a share to base that is turning over now. Now that we’re remaining public, it’s going to take a bit of time, our people complete the work on us.
And finally, from the management perspective, it has been a very long 12 to 15 months, but as you can see we over perform last year, we intend to have great performance this year. Management is fully committed once again and we are back.
And with that I will turn it over to Mike.
This however is not what we believe is the optimal capital structure for us. Specifically, we would like to maintain an investment grade profile which we suggest no more than three times leverage.
The difference between where our leverage is heading now, and the three times level hit around $1.5billion to $2 billion of dry powder. Lets call a billion 8 of dry powder for now and be assured we will be looking at our capital structure intensively now that we have been freed from purgatory.
That’s it on the balance sheet. It seems like a good time to chat about liquidity.
Next slide please. Alright liquidity, going into Q4 last year and as noted in the 10-K we were looking for new or to renew approximately 2.7 billion facilities, related specifically to our private label program were done names such as Barclays, Royal Bank of Scotland, Royal Bank of Canada Bank of Montreal, J.
P. Morgan, and Wachovia all contributed to the effort and we thank them.
Next question, how much capacity do we have? Well, let's first look at the off-balance sheet facilities where we have about $1 billion of available and unused capacity at the moment.
Let's go ahead and toss in about 400 million in extra CD capacity and over 0.5 billion in our normal corporate credit facilities. Add it all up and as we said yesterday, we have about $2 billion in immediately available and unused capacity.
Finally as noted before, if we were to run it up a bit, we could be looking at another couple of billions. In summary call it 2 billion immediately available and up to 2 billion if we run it up a bit.
We feel comfortable saying that despite the gloom and doom in the capital markets, liquidity has never been more wonderful for us. Yeah, one more thing, our newly renewed facilities offer us the opportunity to save at least 30 million in funding cost this year versus budget.
Hopefully, this puts the final nail on the coffin regarding investor concerns about liquidity. Next stop?
Guidance. Alright, we are going to reiterate what we already laid up here to the public which is operating EBITDA of at least 730 adjusted EBITDA of at least 700 and cash EPS certainly very comfortable at 430 per share.
You will see the check Mike, Q1 was there tough one with the Lane Bryant drag and very difficult comps. Q2, we expect about 10% growth in earnings and what essentially happens in Q2 is we'll still experience the Lane Bryant drag also from a seasonal perspective.
Private label's earnings from that always tends to trail off in the second quarter, essentially folks tend to revolve their balances on their cards in the first quarter post holiday and in the second quarter they tend to pay the amount. But now we start seeing the positive bennies.
The private label ramp-ups again those would be '05, '06, and '07 vintages which is 20 out of 90 clients and we would begin the see the funding benefits as well. Q3, Lane Bryant drag, but again now we're really beginning to kick in the gear with positive funding benefits, positive private label ramp-ups, and positive royalty in Epsilon who really kick in to gear at this point, especially Epsilon.
In Q4, that's when the fun begins, the anniversary of Lane Bryant, funding benefits, private label ramp-ups, and royalty in Epsilon all positives, no negatives and that is our jump off for '09. As in the past, we'll take a look at the end of Q2, see how things are running.
We think we're pretty close and perhaps just a bit conservative at the moment. If things open up in the second back half, we'll adjust guidance quarterly, but let's not get ahead of ourselves just yet.
Okay, free cash flow; going back to adjusted EBITDA, north of 700. We talked about the adjustment in Canada where we are receiving cash, putting some into our trust account, keeping the profits, that profit does not get recognized immediately even though we have the cash.
That's 30 to 40 million bucks a year. So our operating cash flow is going to be north of 730 million this year.
Personally we look at all the cash items, CapEx, interest, taxes, and we come down to a pure free cash flow number of about $400 million this year, per share that is $5, which is about 10% yield. In the past, we typically had 5% yield and plus that does not include any type of asset sales or other initiatives.
In terms of the asset sales, we talked about the network business and the utility business; we are in process on both of those. In the utility business, the process has started a little bit later than work business and we just about to begin to winning down interested parties.
The network is much further along and we’ve now there are another options to less than a hand forth this point so stay tune. Next page very simply just to review sort of our four key financial metrics and goals and that is very simply double digit organic growth, very strong for cash flow conversion, you will see along with organic growth huge margin expansion already used CapEx we’ve done, virtually all of the build, I think all of the build, so we are going from 5% of top line to 3%.
This is a 28 consecutive quarters since the IPO meeting repeating, a very high recession resiliency and as we talked about excellent liquidity. If you turn to the last slide which is the '03 to '08 track record, I want to make a couple of comments before I kick it back to Mike I know lot of folks are doing a turn off work on the company, we will work with you as best we can, and we do ask your patience given the amount of folks who are calling in.
Specifically, we look forward to welcoming back many of our long turn growth investors, as well as the number of our new folks from the value side. Any how, let me briefly hit on the top three questions that people are asking as they go through due diligence and combine these with what was seems to be the disconnect in the market versus the reality of Alliance.
#1 of course is liquidity , capital market receiving up t cetera, et cetera, et cetera. We are developed everything, we’re going to have a bunch of savings from doing these renewal the new facilities, we have tons of exec capacity.
So I really like to take this one of the west going forward. It certainly a was it excellent question which needed to be answered, and I think we beat this one to defeat this point.
#2 surprise , surprise credit losses. Again, critical that we put this one in perspective, because we are not a credit card company.
First, this 50 basis point increase that we directive out through this year is already fully offset by rural funding, so that’s done. Second, lets say o people work to model things out.
Let’s say you want to stress test the mid sixes on a losses and banging it up for 7%. So we are up another 50 basis points, while that’s another $20 million hit to us.
Before I ready to going to be doing operating eve with the greater than 730 million, you are talking about less than 3% of our cash flow. It’s just not enough to get excited about.
I think when put net perspective something like an hit head less than 3% of cash flow doesn't seem quite so concerning. Also note that we probably mean that there was a deeper turndown in the economy and we would most likely get most of all that mitigated by additional lower funding.
And then #3 sort of the general turmoil, what's going on, obviously, we have a share to base that is turning over now. Now that we’re remaining public, it’s going to take a bit of time, our people complete the work on us.
And finally, from the management perspective, it has been a very long 12 to 15 months, but as you can see we over perform last year, we intend to have great performance this year. Management is fully committed once again and we are back.
And with that I will turn it over to Mike.
Michael Parks - Chairman and Chief Executive Officer
Thanks Ed. I think we are ready to take Q&A now operator if you open up the line.
Operator
Thank you. (Operator Instructions) Thank you.
Your first question coming from James Kissane of Bear Stearns. Please go ahead.
James Kissane
Hi Mike and Ed great job.
Mike Parks
Thanks Jim.
Edward Heffernan
Thanks.
James Kissane
Loyalty grew by our estimate, but you all are indicating that you’re expecting to low through the year, walk thorough some of the factors that would cause to slowdown?
Edward Heffernan
James Kissane
Okay, yeah I just want to make sure it was mid-teens or pretty conservative given the 60% in the first quarter.
Edward Heffernan
Yeah.
James Kissane
Thanks Ed. And then the next question, could you give us a sense of the ramp-ups of the new private label programs, the ones you added over the past three years relative to your past experience?
Edward Heffernan
You bet. I think if you were to look at the 20 or so from the '05 through '07 vintages, they are typical type client, right, there are typical client and our typical portfolio is that will be a 130 million in credit sales and 60 or 70 million in portfolio side, it takes three years for a typical client to go from 0% wallet share to about a third of all sales being put on the card.
So, I guess the bottom line is very different from like the bank card community is. Even if those 20 clients are suffering through some really lousy comps, and the base is showing negative comps, just the math of getting up to that wallet share itself will pull the overall file and the overall business into positive territory.
So, we are not betting on even positive comps to make this happen at the stores. All we are betting on is just the math as 20 of these folks ramping up.
So, if you would add negative 5% comps at all 90 clients and you tossed in Lane Bryant, I think for another few points, these 20 would be enough to offset both of those.
James Kissane
All right great. And just one last question, you indicated the pipeline at Epsilon was the best throughout the company.
Is it motivated to new customers or is it just the existing customers expanding their relationships?
Edward Heffernan
Yeah, I would say about 60% of the growth at Epsilon is from existing clients. So again the City Thank You would be appropriate example where we moved from spending two years, building and maintaining the transactional based platform in the point program too.
Now we are popping on the actual marketing platform, so we can develop our old school algorithms and analyses to do the micro-targeting. So, 60% of Epsilon's growth is from existing clients.
The remaining 40% would be from new clients and again, very similar to private label we accept on a shorter leash, a lot of these are the signings that were done last year. I would say and it kills us not to be able to announce it, but the signings that we released to the public are probably one out of every four that Epsilon signs.
So, there is a lot of stuff going on that is ramping up and that's what's happening in Epsilon.
James Kissane
So when you talk of the pipeline is that backlog or is that future potential?
Edward Heffernan
This year will be driven by what was signed last year. The signings this year will be driving '09, and I can tell you right now the signings that have already happened in the first quarter and the pipeline for the remainder of the year is the largest we've ever seen.
So, '09 and 2010 look to be shaping up nicely. You know we're always looking about a year ahead.
James Kissane
Yeah, thank you very much; great job.
Operator
Thank you. Your next question is coming from Reggie Smith of J.
P. Morgan.
Please go ahead.
Reggie Smith
Did you guys give the charge-offs earlier for the quarter?
Edward Heffernan
I think we said we were plateauing right around the mid sixes, I have an average, I would say probably somewhere around, if you were to take the math probably around 6.5%.
Reggie Smith
Okay.
Edward Heffernan
I think that’s a good number and last year we were about 5.7 or so.
Reggie Smith
All right.
Edward Heffernan
We had to choose through about 70 or 80 basis points, Reggie is about the number I’d use.
Reggie Smith
Okay. And then I guess on the macro front does the environment change at all.
Retailers willingness to I guess talk to you guys about private label program. Does it change your pipeline or the sale cycle there at all?
Mike Parks
It actually, we talked about in the last quarter. Retailers are more interested in talking to us now then ever.
They are looking to drive sales so we have a very positive looking pipeline in the retail area as well Reggie.
Edward Heffernan
Yeah I think we try target 4 to 6 signings per year. Right now you will see I think we are in contract with about 4 or so as we speak.
Larry announced Torrid so that’s five. I mean clearly we are heading towards the high end of that number for the year.
Reggie Smith
Okay.
Mike Parks
One of the thing as I point out, we were talking about credit sales. Even though you do see a lot of quote negative same store sales comp there is a whole a lot of them when you look at the total sales that aren’t as bleak as some people are making them out to be.
So I think we are going to have a good year on the retail signing side.
Reggie Smith
Okay. And then I guess in Epsilon remind me, I believe there is still a half and a quarter of Abacus in there you hadn’t annualized yet.
Is that about right or?
Unidentified Company Representative
One month.
Reggie Smith
One month?
Unidentified Company Representative
Yeah it’s net.
Edward Heffernan
Yeah (Inaudible). Yeah Abacus, if you look at Abacus there are our second half team Reggie as they solved in Q3, Q4.
Reggie Smith
Okay. And then I had a question we get through folks is you know kind of what’s your appetite for a share repurchase and how quickly could that happen.
I mean, the stock is trading I guess 12 times your guidance right now. What’s your view on that?
Mike Parks
We are not going to give any guidance on that Reggie. We’ve just gotten out from earnings agreement that we’ve been spending a lot of time on that, but we are now turned to looking at it.
So that’s about all we can say right now.
Edward Heffernan
To Mike’s point I mean, there’s an awful lot of dry powder there and obviously we know we are having an investor base is in the process of doing a lot of work a lot of diligence. We are I mean absolutely flooded here with both value and carping growth folks, and we are going as fast as we can.
Clearly we are not very excited about where the stock is right now. That doesn’t take a rocket scientist to figure out, and hopefully as folks finish up their diligence get comfort with you know the things that have been bugging folks the credit and the liquidity and in comfort with our year, that will help.
And we’ve always been a company that has given, you know we’ve stepped aside to let the folks who are likely to be big long term share holders do their work make a decision. And at the same time as Mike clearly indicated we are doing our own work here and that’s all we can say.
Reggie Smith
All right that’s helpful and then one last question, IL gain any IL gain for the quarter?
Mike Parks
Yeah, I think 09ish.
Reggie Smith
9 million?
Mike Parks
Yeah and it was spread around, that’s sounds about right.
Reggie Smith
Okay thanks a lot.
Edward Heffernan
And again any IL gain n is recaptured in cash flow within the current year because the receivable as they show such a short life. Well it’s just a proxy for cash flow.
Mike Parks
Operator next question please.
Operator
Thank you your next question is coming from Bob Napoli of Piper Jaffary. Please go ahead.
Bob Napoli
Thank you. Good afternoon.
Mike Parks
Hi.
Bob Napoli
It’s a question I guess on the loyalty. Just trying to understand a little better the revenue growth of 30% versus the AIR MILES rewards growth of 10% and how much of that is currency is and what am I missing on the driver and the disparity between the two?
Edward Heffernan
Couple of things going on it’s not just the miles issue. There are miles redeemed that drive the financials of the program.
Those are drivers that -- quite frankly those are the only two we could really find that would give at least an indication directionally of where the business is going. You really want to see those right around the double digit point.
But at the same time we talked about the pricing power that we do have up in Canada. And while we don’t want to get into the price per mile and which way it’s trending, clearly when we say it’s very strong pricing hopefully you can draw the line from A to B.
And then on the EBITDA side, since we are now so big in Canada, our purchasing power is enormous, and our cost per’s certainly we are getting some very nice leverage there. So it’s a combination of pricing power plus the drivers, and then also as I mentioned when Jim asked the question, the Foreign Exchange benefit this quarter was substantial.
If you were to look at the Canadian dollar this year versus last year it’s up almost $0.15. So it’s huge.
And so we picked up about $24 million in revenue strictly due to FX. And that will probably explain a lot of it.
Yeah if you were to knock it down by 24 million it might be a much lower number. Now what’s going to happen is that Canadian dollar is going to start it anniversary as we go through the year.
So you’re not going to see that big FX gain later on this year.
Bob Napoli
Okay that makes sense, thank you. On margins, we talked about margins and obviously you had massive margin expansion over the last several years 14% to 32%.
From this level, how much more can you grow margins over the next say five years? What kind of a goal do you have?
Edward Heffernan
Again we keep resetting the bar. So we went from 14 and then we said lets try to hit 20 and lets 25 and 30.
I’d say that from a big picture perceptive we finished all the build up that we needed in the businesses. We are disposing those businesses that were rather draining on the company from cash flow perspective and a margin perspective.
So what we are left with are three businesses that are very leverageable and have all been built out. Our CapEx is dropping to only 3% from 5%.
So obviously that’s going to start, you will start seeing that show up on the bottom line. I would say you even though we were doing 200 basis points plus of expansion over the last seven years.
We comfortably saved 50 basis points, and hopefully we can achieve something a bit north of that. I think it’s unrealistic to expect 200 a year, but I think 50 is certainly something that conservatively said is certainly doable.
Bob Napoli
Thanks. And last question just on the retailers side, do you have exposure to many troubled retailers.
Obviously it’s a much tougher environment for retailers. And how long ahead of time do you know when you are going to loose somebody like a Lane Bryant?
Edward Heffernan
Yeah. You know I’ve been here 10 years, might be even 11; some thing that, seems like yesterday.
But over 10 years we are trying to think of loyalty, Epsilon, and private label all together I can only think of one other large client that ever left us and that was due to a bankruptcy at Service Merchandise back in 2001. Other than that across all three of our businesses I can’t advise me to think of any one major who has left.
So this is one of those things that happens very-very early and we just happened to get hit with it this year. As we look at renewals and everything else for 2008 and for 2009, we aren’t seeing anything that would suggest, there are any issues whatsoever with any of the renewals.
Lane Bryant quite frankly was purchased by Charming. They decided to go against the trend and bring it in-house.
Not much we could do about that. And so I would say I wouldn’t worry about losing another client we think we are pretty sticky here and in terms of exposure to troubled retailer, there are couple in the portfolio that are pretty small on the jewelry side that are in bankruptcy, but again we do protect ourselves, and we don’t lose money when the retailer goes out of the business, all we do is, we just wine down the file, and now we startup with the new owner, it depends on what the situation is.
So we don’t see that impacting us.
Bob Napoli
Great, thank you very much that’s helpful.
Edward Heffernan
Thanks Bob.
Operator
Thank you your next question is coming from Mark Bacurin of Robert W. Baird.
Please go ahead.
Mark Bacurin
Good afternoon
Mike Parks
Hi
Company representative
Hey.
Mark Bacurin
Couple of questions. First, I just want to make sure I am clear on, Ed in the comment, in the press release you talk about the charge-off coming in 20 million higher than budget, when was that budget set, I mean, when you set the guidance for '08 you talked about the expectations was 50 basis point increasing charge-off, it sounds like what’s happening.
So I just want to make sure I am understanding, It was your referring to on the 20 million relative to budget?
Edward Heffernan
Yeah when we – and its kind of moving target, but you can think of funds, sorry , credit losses and cost of funds as doing a flip flop if you want to do it that way, when we could set the initial budget way back in the fall, we were thinking sort of a moderate economic type environment and we where thinking losses around the 6ish and we where going to get dinged on the funding side. And then as we were moving into the new year, it completes the reveres itself and it look like the losses, we’re going to be up 50 basis points, and our funding was going to be improving by about 30 million and so, what we do it is we just reset those expectations in the budget.
So at the end of the day its kind of a wash and our guidance really didn’t change.
Mark Bacurin
Yes when you’re saying budget that was something from math format the guidance you gave back in February?
Edward Heffernan
Right and what we basically did is lot, when we talk the guys of private label and we know process are going up 20 and funding coming down 30, we are going to what there budgets accordingly, because it only make sense.
Mark Bacurin
Okay. Perfect.
Edward Heffernan
I am sorry Mark if you go back and look at our history we normally at the end of October give guidance, historically the public company is something we have always done, but we have -- because of that visibility a year out.
Mark Bacurin
Okay
Edward Heffernan
This is business that you do.
Mark Bacurin
Okay. Switching over the Epsilon side, can you give us -- you talked about a very robust pipeline, can you talk about any success story you’ve had with regard to taking that sweet of services and trying to sale it more aggressively into those 90 or so private label relationships you have?
Mike Parks
I think you if you look at the focus it’s much within the Epsilon client, the City Bank example was a good one. You look at charter communication is a good one.
In terms of our retail private label, the specialty retailers versus the big financial services insurance, travel, hospitality which has historically been Epsilon bread and butter, that’s where we’re really growing the business. We’ve had several e-mail clients in our private label world, but those are driving the big, big performances which you’re seeing out of Epsilon, it/s within the existing historical markets, expanding within those relationships and then adding some new ones like charter.
Edward Heffernan
Yeah I would say the nice point as you said sort of the ability to expand and offer all the five of those services Mark from the creative data, the database, the analytics and the delivery mechanisms, that’s where we’re getting to chose, and obviously we cant give your names, I must say less, but we will try our best to get names out there,. So I would say to Mike’s point, obviously the commission based email that would be a nice add to private label, we’ve had success, there are also fair amount of folks between private label and Abacus the correlation database within Epsilon that also are share clients.
Mike Parks We aren’t remember that also people forget to think about our private label billing system like other cool processors, it was build around the database marketing platform that also could do billing. So we got the analytics and the marketing capabilities and lot of the things that Epsilon does for the other industry.
Significantly build our private label business.
Unknown Analysts
And then you make references fact of looking at Optimal Capital Structure I know, you said you don’t wan to talk about share buyback, but I guess the other thing you might look at using leverage forward be M&A. Can you give us any sense of what’s your upside might be for plugging in more tuck in type acquisition maybe on the Epsilon side or elsewhere?
Mike Parks
We are first and foremost growth company, our cash is going to go to bringing on new organic customers, we were looked at tuck ins right now that are just really, on that minute we pretty much build out the suite of services at Epsilon, and because of just a pure amount of cash we are producing well this happen enough access to do a lot more win. So, but we will always focus on growth first month.
Unknown Analysts
Alright. But again its this year, I don’t -- because everything has been build out and we are going to be generating additional cash flow from potential dispositions at discontinued ops, and we really don’t have anything major in the pipe right now on the acquisition side, obviously that would tend to stay one towards other uses f the cash .
Edward Heffernan
Great thanks. And Mike, I would look forward to see in few weeks at our conference.
Analyst
(Inaudible) see you in few weeks.
Operator
Your next question coming from, Wayne Johnson of Raymond James. Please go ahead.
Wayne Johnson
Hi Good afternoon,
Mike Parks
He Wayne
Edward Heffernan
He Wayne
Wayne Johnson
Hi I was wondering if you guys could give us sense of how the groups of Epsilon companies performed in the last recession, and if there is kind of comparing contract or total signs of what e should expect?
Edward Heffernan
Yeah, its – I don’t want to go so far to say its kind of cyclical, but certainly its extremely resilient in a recession. There obviously what you have is the business as you know Wayne you cant really turn the lights off, its transactional based.
And, if you were to stop feeding the beast and stop sending that purchase related information to us on a daily bases then that compromises ability to do the most effective micro targeting and hence the highest ROI type campaigning that we can do. So that’s very long way of saying, you know, other type of marketing other type of marketing budgets will certainly go by the wayside in difficult time for what we found and the last recession was that there was no impact to us whatsoever because again the whole basis of the Epsilon beast is build around capturing individual transaction behavior using that to predict future behavior.
And then secondly, we will say that’s for some of our clients that obviously not big farmer and a couple of those that, but some of the other areas that those sectors that actually do get hit hard by recession, if you think that the hotel industry for example, where occupancy rates would actually go through the roof, we actually could generate quite a bit more revenue because we’re doing a lot more work, if you think it had logical that the marginal costs that were rooming for example, is not being occupied.
Wayne Johnson
Okay that’s really helpful so I appreciate that. And clearly City Bank is pleased with result of the Epsilon program and a Thank you network.
Is there any kind of metrics of efficacy that you could share with us you know, highly successful it is, kind of we thought that would be in this way and then the fact that, we thought its going to be accident factored why? the only kind of before and after snap and the City Bank is too sensitive, is there another customer you complaint to and kind of walk us through what it was and kind or what it is today?
Edward Heffernan
Well again particularly in this marketing segment we have hard enough time giving people to even allows to do a press release on major release because of their view of the competitive nature. So getting actually specific results of customers won’t happened Wayne, but I can tell you that I think can we can get some very strong testimonials direct from customers that would be willing to talk, but we can’t share specific result.
Wayne Johnson
Understood I thought I give it a try anyway.
Unidentified Company representative
Nice try it really was.
Mike Parks
Thanks Wayne
Wayne Johnson
Oh thanks.
Operator
Here your next question coming from Larry Berlin from First Analysis. Please go ahead.
Larry Berlin
I see you guys answer my question. So lets go on to the next guy.
Mike Parks
Thank Berlin.
Edward Heffernan
Thanks Berlin.
Larry Berlin
Thank you have a great evening.
Operator
Thank you. Your final question is coming from David Scharf of JMP Securities.
Please go ahead.
David Scharf
I have a two really that I want to cover, one on Epsilon I guess it follows up on the prior questioned, kind of history with the transparency. Sort of, I appreciating you got a record pipeline there, but its still a little opaque.
Can you have any metrics much like AIR MILES you searched for few metrics or you could kind of come up with mile redeeming issues, but nevertheless there is a helpful parameters, so anything in the Epsilon that could be released quarterly such as the number of companies contributing to the efficacy network, number of statements, number of permission based e-mail. Is there any type of recurring statistic that can in the future give us a little bit of more tangible indications how that business is trending?
Mike Parks
Revenues and EBITDA -- its hard David, the individual transaction stuff is really small piece of the overall revenue, a lot of the revenue is from running these big processing engines that are build out every month that all transaction driven. So as much as anything else, its revenue, EBITDA, and customer signings, and I know were that’s really the next track we’re trying to get out to give you some guidance on numbers of customers, but we’re still working on It and we continue to looked for ways to give you some better guidance.
Edward Heffernan
Yeah, we’re trying pretty hard to fine driver that will work and personally as Mike said, we cant at this point – we’ve looked back over the year, and its just, it’s a real tough one.
Mike Parks
It’s not consistent and I think that would.
Edward Heffernan
I think it is a long driver.
David Scharf
No, no I appreciate that, we obviously kind of face with a situation over the -- why your admissions stronger segment is one in which there are fewest metrics but there but we wait on that.
Edward Heffernan
Yeah if you could be a little bit patient, one other things we could try to do is essentially give a sense of what – if last year we had 100 million of revenue, we drag whatever the number is, make it up 98% of it into this year, and then we would expect signings from last year which on average you know $X million per client and we sign 50 clients. That should get you 10% growth and then new enhancement so whatever they may be on average of 2 million per client and there were 10 of those and help you build up to the 15% size EBITDA growth that help you out.
David Scharf
Yeah I think one of the things helpful to get a sense for how much of the revenue you would consider to be somewhat recurring ,I would imagine, when I hope now other statements goes out every month, its largely recurring versus project oriented work.
Edward Heffernan
Yeah, I mean its got be 90 plus
David Scharf
Okay
Edward Heffernan
So, we will put this on and trying to get you something right – and that’s me made some up, it can come up.
David Scharf
Okay. Well one last topic and its touched upon, I am going to try it again because you know I think he kind of pin the door by putting the slide up, they’re talking about how much dry powder you have, I mean , 2 billion of borrowing capacity and that would still keep you in investment grade level.
Other than buying back stock I am not sure what would you use $2 because if I, it seems like they levered up 2 billion more in brought back stock at $80 a share, you would be raising an EPS and it’s the only investment grade, it seems like the same conditions on your balance sheets to prompt to Blackstone a year ago to take a look at you still exist today. Am I missing something here?
Edward Heffernan
Again we’re just turning our attention to it, we’ve got a lot work to do, again we will focus on to go first, there is certainly a lot of concern about liquidity in the markets we keep hearing it all the time. So it just having strong balance sheet important, but we will let you know when we can let you know.
David Scharf
Okay. Well it seems there is off a lot of room there, so you’re in a good position.
Edward Heffernan
Thank you.
David Scharf
Bye.
Edward Heffernan
Bye, bye now.
Operator
Your next question is coming from Andrew Jeffrey, of Suntrust. Please go ahead.
Andrew Jeffrey
Hi guys, sorry I apologize I am out of city some (Inaudible) in the way sorry.
Edward Heffernan
Yeah there is a lot background like overhead speakers.
Andrew Jeffrey
Yes I think it should go by now. Could you talk a little bit about again on Epsilon.
How much of that those backend loaded natures of the business are function of the Abacus versus the core Epsilon business and maybe you could focus top end to bottom line. There is a team like -- essentially there is a little bit two, but first quarter is a little light, is that mostly Abacus, or is that traditional that sound (Inaudible).
Edward Heffernan
It’s a combo of both Abacus, Abacus by itself I mean, it is just like a cherish, its all of second half player, but there are large parts of Epsilon that also crank up very, very heavily in the latter part t of August for the back-to-school and just don’t slow down until the end of the year. So if you would to look at the amount of EBITDA that we would expect from Epsilon this year, we would probably say that where we guess 60% or more of the EBITDA from Epsilon is going to come on the second half.
And Q1 and Q2 within Epsilon are going to be very similar, and then its just pops up, not just similar to what it did last year. So I think you’re going to see that type of seasonality.
Andrew Jeffrey
Okay. And then pipeline sounds great, any change in sales cycle at all, or is it been pretty constant I mean, while customers obviously did indicate interest, given the nature of the economy that is there anything that’s pushing out the decision timeline within Epsilon?
Edward Heffernan
N, we’ve seen no measurable change faster or slower ending, we’re happy with the pipeline right now.
Andrew Jeffrey
Thanks a lot.
Edward Heffernan
You bet.
Company Representative
Alright do we have one more question operator is that end.
Operator
This coming from Mr .Dodd of Morgan Keegan, please go ahead.
Dodd
(Inaudible) Hello.
Mike Parks
Yeah Robert.
Dodd
What's the strategy on swaps going forward, I mean, historically you’ve swapped out your floating exposure for longer tones, and anything on the crowds and net balance here?.
Edward Heffernan
Absolutely. And again as Mike and I have said, we appreciate everyone's patience that we were really constraint under the merger agreement from pretty much do anything by brushing our teeth.
So its -- now that we have some freedom there, we’ll have a lot more opportunity to work capital structure and debt structure. And as part of that you correctly pointed out, we’re a little heavy right now on the variable part of our funding book, and we would in fact be working to turmoil in fixed number, a significant portion of that funding book into a fixed rates book at some point this year.
Dodd
Oh, yeah. Thanks.
Operator
I would now like to turn the floor back over to Mr. Mike Parks, CEO.
Please go ahead sir.
Michael Parks
Thank you, very much. Again everybody I appreciate you our joining the call today.
We'll come back. We'll have to be back.
We’re going to have a good year. So -- and to all of the associates listening as well, I want to thank all of them and let's go deliver what we've promised.
Thanks everybody bye now.
Operator
Thank you, this concludes today's Alliance Data first quarter 2008 earnings conference call. You may now disconnect your lines at this time and have a wonderful afternoon.