#4 - Loyalty Ventures Inc

airmiles

Today, we’ll take a look at Loyalty Ventures Inc, $LYLT.

$LYLT was spun off by Alliance Data Systems ($ADS) in November 2021.

Loyalty Ventures Inc owns and operates the AIR MILES® Reward Program, Canada’s most recognized loyalty program, and Netherlands-based BrandLoyalty, a global provider of purpose-driven, tailor-made, campaign-based loyalty solutions for grocers and other high-frequency retailers.

EPS as of 2021Q3 was $0.97 for the quarter and $2.34 for the 9mo YTD, or about $3.1 annualized, giving us around ~10x P/E at the current share price of $32.50.

Current EV seems to be in the $1.6B area; see here for details (note: I have yet to check the calculations myself). I’m including a screenshot for archiving purposes:

lylt-ev

Estimated Normalized Adjusted EBITDA for 2021 is ~$160M. Obviously, this business has been impacted by Covid.

Giving us an EV/EBITDA(2021E) of ~10, while EV/EBITDA(2019, pre-covid) is ~7.

lylt

I also notice that the CEO has been buying decent amounts recently:

lylt-ib

Valuation-wise, it’s not bad. There’s probably a discussion to be had about whether the company will return to pre-covid numbers.

I found some recent bad news about customers dropping the Air Miles program for other options, here.

Here’s an interesting excerpt:

lylt-partners

More generally, it seems that airlines have recognized the value of the frequent flyer points not only as currency but also as a retention tool. Therefore these points have more value within the airline company than outside of it, diluted across different retailers.

Verdict: I’m passing for now.

However, researching this company led me to another one in this space, which might be more…spicy. Stay tuned!