Second engine igniting off the first: an unplanned-for adjacent revenue stream has started paying, and management is now
The model's full reasoning — Q1 2016 call → NOWe need to determine if management describes a second, distinct way of making money that emerged from existing operations, is already generating real paying business, and is being deliberately grown. Looking at the transcript, there is discussion about the aftermarket business. Larry Lawson says: "we sold parts and provided services to the market. And we also sold parts and services to Boeing and in addition to that we also had, we have I should say in the [indiscernible] business. And so, now, we're going to sell -- and by the way our customers were very happy with us. We received a lot of recognition for our service through our customers so this outcome wasn’t related to any customer dissatisfaction with us. This is more along the lines of a strategy that Boeing has. And so we're going to sell parts to Boeing instead of - so will sell all the parts to Boeing now and will provide our services to Boeing and our [indiscernible] business will continue. And I think Boeing is very optimistic about the aftermarket. The general idea is that first of all in their view and I think it's factual, there's a very large aftermarket there and they believe they can garner a bigger percentage of it. I think from our perspective there is a growing aftermarket just associated with the fact that the fleet is growing. It's kind of interesting thing. The fleet is growing and retirements are down. This progression of time, this is good news for us. It just means at some point there's more airplanes out there that we'll sell parts for. But in any consequence this is not a big, big part of our business. I don't think I've ever at any quarter in any call ever said, it's my objective to grow aftermarket. Frankly it was a service that we provided when I got here and I think we will move forward and hopefully be the beneficiaries of this growing market space." This indicates that the aftermarket business is a distinct stream (selling parts and services to the aftermarket) that grew out of their existing operations (they already had the parts and services). However, management explicitly says it is not a big part of their business, and they have not made it an objective to grow it. They say "hopefully be the beneficiaries" but not that they are deliberately putting effort or resources behind growing it.
| Ticker | Company | Call | Date | Call grade |
|---|---|---|---|---|
| M | Macy's, Inc. | Q4 2022 | 2023-03-02 | D |
| CMLS | Cumulus Media Inc. | Q3 2022 | 2022-10-28 | D |
| GDRX | GoodRx Holdings, Inc. | Q2 2022 | 2022-08-08 | F |
| SOPH | SOPHiA GENETICS SA | Q4 2021 | 2022-03-15 | C |
| SLQT | SelectQuote, Inc. | Q2 2022 | 2022-02-07 | F |
| LC | LendingClub Corporation | Q4 2021 | 2022-01-26 | A |
| IRBT | iRobot Corporation | Q3 2021 | 2021-10-28 | D |
| T | AT&T Inc. | Q3 2018 | 2018-10-24 | C+ |
| LRN | Stride, Inc. | Q1 2019 | 2018-10-23 | B |
| MITK | Mitek Systems, Inc. | Q4 2017 | 2017-11-07 | C+ |
| IONS | Ionis Pharmaceuticals, Inc. | Q1 2017 | 2017-05-09 | C |
LRN · Q1 2019 → YESThe question is: Does management describe a SECOND, DISTINCT WAY OF MAKING MONEY that has recently emerged FROM the company's existing operations, assets, customers, or capabilities - an additional re...YES The transcript shows career readiness as a distinct second revenue avenue that emerged directly from the existing MPS business: students already enrolled in Managed Public Schools are being moved into career readiness programs (over 5,000 students), and the initiative is built on the same platform, curriculum, and student base. Management explicitly describes it as a “career readiness line of business” and “robust career readiness business” that is already generating paying enrollments today while they are deliberately investing resources—dedicated executives, reallocation of funds, and plans to drive a major portion of next year’s enrollment growth.
M · Q4 2022 → YESThe question is: Does management describe a SECOND, DISTINCT WAY OF MAKING MONEY that has recently emerged FROM the company's existing operations, assets, customers, or capabilities - an additional re...YES The transcript shows that Macy’s Marketplace is explicitly described as a distinct new revenue avenue that emerged directly from their existing e-commerce operations and customer base (macys.com, cross-shoppers, and omnichannel platform). Jeff Gennette states it “captures incremental sales opportunity,” “drives a larger average order value,” “allows us to quickly move into new and adjacent categories without inventory risk,” and “attracts a new younger customer,” while management is actively scaling it by adding 2,000 brands in 2023 and launching Bloomingdale’s marketplace in the back half.
GDRX · Q2 2022 → YESThe question is: Does management describe a SECOND, DISTINCT WAY OF MAKING MONEY that has recently emerged FROM the company's existing operations, assets, customers, or capabilities - an additional re...YES The transcript shows that Pharma Manufacturer Solutions is the second distinct revenue avenue that emerged from GoodRx’s existing operations. Trevor explicitly states: “Our distinct ability to reach both consumers and providers continues to be recognized by manufacturers as evidenced by the strong growth.” This capability originated from the core prescription-transactions platform and user base 3 years earlier (when other offerings were only ~5% of revenue). In Q2 2022 it generated $26.6 million (102% YoY growth) and is already producing real paying business.