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AUGUST 16, 2002 NEWSMAKER Q&A "We Continue to Be the Leader" Ed Labry, Concord's president, defends the outfit's earnings and argues that the company will thrive in any economic climate
Yet Concord's (CEFT ) second-quarter earnings, announced July 30, met analysts' expectations only thanks to profits from a one-time equipment sale. The company reported earnings of $63.2 million (or 12 cents a share) on revenues of $528 million. It also faces increased competition from rivals like First Data (FDC ). None of this overly concerns Ed Labry III, Concord's president. Labry talked about the earnings announcement and his faith in the company as a "safe haven" for investors with BusinessWeek Online Reporter Olga Kharif on Aug. 13. Edited excerpts of the interview follow: Q: Your latest earnings announcement disappointed Wall Street. What happened? A: The questions were surrounding the quality of our earnings. Specifically, there was a $5.9 million equipment sale that we reported as a separate line item and not as payment-services revenue. Our contention is, processing of transactions and selling and leasing equipment are all part of the transaction-processing business. We didn't miss our numbers. We continue to be the leader in the industry. Q: Higher costs were also to blame for the recent earnings disappointment. Many analysts believe expenses are higher because you're not digesting your recent acquisitions, such as electronic-transactions processor Core Data Resources, fast enough. A: Our company has held selling and administrative expenses absolutely flat for two years while we doubled the company. That shows the discipline that we have for holding the costs and integrating the companies [we acquire]. We have not integrated the companies we acquired in the first two quarters of this year, that's why there was a slight increase in the expense. But we just closed [those deals] in the past couple of months. Q: Rival First Data seems to be moving more aggressively into your market. Are you concerned? A: We actually think that First Data's liking our market is great for us. One, [thanks to their huge credit-card processing business], they [service] 40% of the merchants. As they go out and activate debit [machines] at new stores, it will provide more and more debit transactions for the Star network [which Concord runs and which is used to route these PIN-secured transactions]. It's great for everybody -- and it's great for Concord. (See Bw Online, 8/16/02, "How High Can Concord Fly?") Q: Some analysts are lowering their expectations for Concord's growth. Is there a problem at the company? A: I don't think it's a slowdown in our growth at all. I think what you're seeing is working with the law of large numbers. The company has forecasted that we would grow our top line by 21% to 23% this year, and, so far, we've been able to surpass that. We did 23% in the first quarter, 28% in the second quarter. We think revenue will continue to escalate in the third quarter. But we are seeing some analysts' guidance come down, and I think it's associated with the fact that our revenue base has grown: We do $2 billion in revenue per year. Q: Concord plans to fuel its growth by offering new services, such as one that will allow people to transfer money using ATMs as an alternative to wiring money through, say, Western Union. Why are you focusing on this? A: The only comparative product on the market has been offered by First Data. And with that product, each individual ATM has to be modified to receive and pick up a transaction. But we are going to set it up so that, literally, you can [send or] pick up a transaction at any ATM in the world [and the machine doesn't have to be modified]. We've done surveys of thousands of people with bank accounts in certain geographic areas, and they're very excited about using the product. Q: How do you expect to be affected by the swings in the economy? A: Concord has been, from the investor standpoint, a safe haven. We've done very well despite the [September 11] tragedy and the bad economy. If you take a look at our transaction volumes and our revenues, most of them were associated with ATM transactions, gasoline transactions, and grocery store transactions. About 70% of our revenues are associated with people getting paid at their jobs, eating, and driving. We'll do well in a good economy, and we're pretty well protected in a bad economy.  Edited by Patricia O'Connell Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | AUGUST |
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