more on FMD's customer concentration risks

This is copied from bankstocks.com, tom brown has said much better than me on this risk:

http://www.bankstocks.com/article.asp?type=&id=9881368

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Astrive going gangbusters

As I mentioned earlier, Marblehead’s in-house test Astrive brand has gained considerable momentum. So far in fiscal 2007, Astrive has accounted for roughly 10% of facilitations; that implies it’s done roughly $300 million year-to-date, and will finish the year at around $375 million. By my reckoning, that would make Astrive bigger than Bank of America for Marblehead in the direct-to-consumer channel. Recall, too, that this is extremely profitable business, since Marblehead doesn’t have to pay out a whole loan premium to a lending partner.

The emergence of Marblehead’s Astrive business in the past few years is highly significant, in my view. Ever since we started talking about this company, the skeptics have worried that Marblehead would be toast if BofA and Chase ever severed their relationships with it. In fact, that hasn’t happened; both BofA and Chase have continued to grow their business with Marblehead very rapidly. And yet at the same time, Marblehead has been able to build up its in-house Astrive brand, from basically zero three years ago, into a business that now generates earnings that rival the earnings Marblehead gets from those same worrisome Big Two. Tell me again how reliant the company is on them?

Client concentration down

Along that line, BofA and Chase accounted for just 44% of revenues this past quarter. That’s down from 52% last year. The number should almost surely continue to decline given the rate the company is adding new partners. In particular, Marblehead signed 12 new partners during the quarter. Management indicated one was a large consumer finance company, while the balance were banks, credit unions, and affinity groups. Additionally, the company extended or expanded relationships with eleven existing partners.

Revenues from its other partners excluding BofA and Chase and TERI are growing very, very fast. Take a look:

"others" rev growth: 2004->161%, 2005->141%, 2006-> 117%


And that's why I really don't get all this hub-bub surrounding First Marblehead's business with Chase and BofA when revenues from its other partners are growing more than 100%!
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