MarketWise, Inc. Q3 FY2022 earnings call

Market Environment Impact

• Investor engagement was subdued due to market volatility and macroeconomic uncertainty, with the Federal Reserve's aggressive rate hikes and concerns of a recession causing investors to remain cautious.

Cost Reduction Initiatives

• Targeted $74 million in total expense savings, with $8 million annualized reduction in overhead expenses (approx. $31 million annualized) and $18 million reduction in direct marketing spend in Q3.

Strategic Initiatives

• Launched 5 new publications addressing current investing environments like healthcare and energy.
• Progressed with data science integration to improve conversion rates, reduce chargebacks, and enhance free-to-paid conversion, ARPU, and churn.
• Integrated technology products with research brands, e.g., successful marketing campaigns for Altimetry and progress with Trade Smith.
• Launched marketwise.com, moving the platform from beta to live, aiming to lower digital marketing costs.
• Completed a warrant exchange, issuing ~6 million Class A common shares, increasing public float and simplifying capital structure.
• Acquired a publishing group focused on tech, early-stage private investing, and data-driven investing, integrating it into Winans media.

For the third quarter, MarketWise generated $119.9 million in revenues on a GAAP basis, a decline of 14.7% compared to the year-ago quarter. Billings decreased 23.9% year-over-year to $105.1 million. Adjusted cash flow from operations was $13.1 million, down from $34.7 million in the third quarter of the previous year. Revenue contribution breakdown by product segment was not explicitly detailed in the transcript.

Forward-Looking Statements

• Cost reduction initiatives are on track, and margin improvement trend is expected to continue in Q4.
• Prepared to increase marketing spend if market conditions improve, balancing profitability with subscriber acquisition.

Risks

• Continued market volatility and macroeconomic uncertainty impacting investor engagement and subscription purchases.
• High customer acquisition costs and potential for prolonged downturn affecting business performance.
• Divergence in editorial views on market direction leading to uncertain subscriber behavior.

Q: Alex Kramm asked about cash cost and fourth quarter guidance.

A: Mark Arnold and James McGinness responded that cash cost was affected by one-time items, cost reductions are on track, and they may increase marketing spend if market conditions improve.

Q: Devin Ryan inquired about G&A expenses.

A: Mark Arnold and James McGinness discussed ongoing cost reductions in G&A and the plan to reach the total cost target.

Q: Jeffrey Meuler asked about lag between macro factors and subscriber base, and marketing strategy with existing subscribers.

A: Mark Arnold responded on the lag depending on market conditions and continued focus on marketing to existing subscribers.

Q: Kyle Peterson asked about acquisition ARPU and shareholder value.

A: Mark Arnold talked about the acquisition integration and capital allocation strategies.

Q: Jason Helfstein asked about SG&A details and share counts.

A: Mark Arnold mentioned severance costs and Jonathan Shanfield provided share count details.