Room to raise the ceiling: management says its own prices, rates, or terms sit below what the market would currently bea
The model's full reasoning — Q4 2021 call → NOWe need to determine if management conveys that the company is currently charging less than what the market would bear, and that they are actively closing that gap. The transcript discusses various aspects: pricing, rates, terms, etc. We need to find if management explicitly states that they are undercharging relative to value and are now raising prices or capturing more value. Key points from the transcript: - Scott Sanborn discusses rising rates: "I'd note, we've been through a rising rate environment before and have a grounded view of expectations based on our experience. I'll break it down into three buckets: impact to our borrowers, impact to loan investors and impact to LendingClub. The borrowers coming to us to refinance credit card debt, rising rates should not negatively impact demand. In fact, since cards are pegged to a floating rate, an increase in APR could actually stimulate them to look for value and alternative options like LendingClub. And with strong balance sheets and low unemployment levels, we don't expect rising rates to create significant payment stress for our core customers. For loan investors, the short duration of our asset allows us to reprice quickly and maintain attractive risk-adjusted returns. I'd remind everyone most of our marketplace loans are sold to banks, where we anticipate funding costs to rise more slowly given the significant deposits they already have on hand. And finally, for LendingClub, we expect the impact of rising rates in 2022 to be muted. We anticipate that any increase in cost of funds on new deposits used to fund our balance sheet growth will be more than offset by the increased mix of high-yielding consumer loans." This is about rising rates, but it's about cost of funds and mix, not about undercharging relative to value. It's about passing through costs or benefiting from mix. - Tom Casey discusses net interest margin: "Our net interest margin at the bank continued to increase during the quarter, to 8.25%, up 119 basis points sequentially due to the higher mix of consumer loans. As a reminder, this growth in net interest margin also factors in 8 basis points of increase in funding costs during the quarter." This is about mix shift, not about raising prices on existing products.
| Ticker | Company | Call | Date | Call grade |
|---|---|---|---|---|
| MEC | Mayville Engineering Company, Inc. | Q3 2022 | 2022-11-05 | B+ |
| CAG | Conagra Brands, Inc. | Q2 2017 | 2016-12-22 | C+ |
| SOHO | Sotherly Hotels Inc. | Q3 2016 | 2016-11-08 | D |
| RCL | Royal Caribbean Cruises Ltd. | Q1 2016 | 2016-04-29 | C+ |
| HPP | Hudson Pacific Properties, Inc. | Q4 2015 | 2016-02-25 | C |
HPP · Q4 2015 → YESThe question is: Does management convey that the company is currently charging LESS for what it sells than the market would presently bear — that its own prices, rates, fees, or terms sit meaningfully...YES The transcript shows management explicitly describing a gap between its current charges and what the market now supports, then confirming that the company is already closing it through mark-to-market resets and higher new/renewal rents. Victor Coleman states that the company has “rolled out 80% plus mark to market” on recent leases 2.5 years old, and that cash rent spreads on 1.6 million square feet executed since the acquisition were “north of 30%” with “20%, 25% mark-to-market for 2016 and 2017.
MEC · Q3 2022 → YESThe question is: Does management convey that the company is currently charging LESS for what it sells than the market would presently bear — that its own prices sit meaningfully below the value custom...YES Management explicitly states that they have taken pricing actions in 2022 and have "more room for margin expansion through continued value pricing even beyond the pricing actions taken during 2022." This conveys that their current prices sit below what the market would support, and they are actively beginning to close that gap with further value pricing.
SOHO · Q3 2016 → YESThe question is: Does management convey that the company is currently charging LESS for what it sells than the market would presently bear — that its own prices, rates, fees, or terms sit meaningfully...YES The transcript shows management explicitly identifying a rate gap at the Laurel hotel (and similar situations at other properties) where current charges sit below the competitive set/market, while describing active steps already underway to close that gap through continued ramp-up and occupancy/rate improvements.