MarketWise, Inc. Q2 FY2022 earnings call

• The market environment remained volatile with inflation, Fed tightening, and recession fears impacting the business. Revenues, billings, and cash flow declined.
• Editors and analysts are producing new content and investing ideas, with new publications launched and some retired/consolidated. Partnered with SubScale for data science and AI integration.
• Cost reduction efforts: Targeting ~$37 million annualized overhead reduction, with Phase 1 (11% reduction) largely completed and Phase 2 targeting additional $10 million. Tightening marketing spend, aiming for ~$37 million reduction in direct marketing spend in H2.
• TAM MarketWise technology platform beta tested in July, with broader launch expected in early 2023. Successful rollout of Stansberry Research platform earlier in the year.

In the second quarter of 2022, MarketWise's revenue declined 9.9% year-over-year to $128 million. Billings dropped 36.5% year-over-year to $117.5 million, and adjusted cash flow from operations was $26.8 million, down from $59.4 million in Q2 2021. The paid subscriber base decreased from 994,000 at the end of Q2 2021 to 898,000 this quarter (-9.7%), while the free subscriber base grew from 12 million to 15 million (+25%). ARPU fell to $580 from $823. In Q2 2022, approximately 38% of billings came from membership subscriptions, 61% from term subscriptions, and 1% from other billings. In Q2 2021, the breakdown was 45% membership, 54% term, and 1% other.

• Adjusting to the market cycle by focusing on efficiencies and strategic objectives, expecting incremental run rate benefits from cost reductions in Q3 and Q4.
• Marketing spend reduction in H2 is dependent on market factors; if marketing efficiency improves, may not cut spend to the same degree and instead focus on efficient subscriber acquisition.

• Continued market volatility and investor hesitancy could further impact subscriber acquisition and billings.
• Competitors with stronger financial positions could capitalize on opportunities, affecting MarketWise's growth.
• Persistent high inflation, Fed policies, and economic recession fears could prolong the challenging market environment.

Q: Discuss the interplay between free and paid subs and new product development A: Mark Arnold mentioned testing price points, adjusting content to market changes (focus on value creation and trading strategies), and editors producing content for the current financial environment.

Q: Talk about capital allocation, M&A pipeline A: Dale Lynch stated the company has a strong cash position ($150M cash, $150M line of credit), an active M&A pipeline with inbound inquiries from smaller publishers, and share buybacks were paused due to float and regulatory considerations.

Q: Explain Q2 G&A expense and cost saves A: Mark Arnold explained G&A decline due to reduced bonus accruals, state sales tax liability, and non-recurring legal expenses. Dale Lynch discussed a tailored approach to marketing spend reduction based on ROI.

Q: Discuss content changes, market bottom, and cash flow A: Mark Arnold noted a shift from risk-on to risk-off content (wealth preservation vs. accumulation). Dale Lynch talked about historical margins and striving for high teens to 20% margins in tough market, with margin expansion expected when market turns.