MarketWise, Inc. Q4 FY2022 earnings call

• Amber Mason introduced herself, sharing her background and vision for MarketWise, including her experience in transforming businesses and plans to improve efficiency, grow the business, and find capital deployment for shareholders.
• In 2022, MarketWise implemented cost-cutting measures, achieving approximately $74 million in total savings, with $40 million from direct marketing and $36 million from overhead reductions.
• The company introduced 49 new publications and retired 33 ineffective ones in 2022. It integrated technology products with research brands, such as aligning TradeSmith with Investor Place.
• In the third quarter of 2022, MarketWise completed a tender offer to exchange all outstanding warrants for shares of Class A common stock, retiring 31 million warrants and issuing approximately 6 million Class A common shares.

GAAP revenue for the full year was $512.4 million, a decline of 6.7% compared to the prior year. Billings for the full year were $459.5 million, a decline of 37% year-over-year. Adjusted cash flow from operations for the full year was $59.3 million, down from $197.1 million in 2021. In the fourth quarter of 2022, GAAP revenue was $127.7 million, a decrease of 13% from the fourth quarter of 2021. Billings in the fourth quarter were $100.9 million, a decline of 33.4% from the year-ago quarter. Cost of revenue in the fourth quarter was $14.4 million, down $3.2 million from the year-ago quarter. Sales and marketing costs were $50.4 million in the fourth quarter, down $15.3 million from the year-ago quarter. General and Administrative costs were $34.9 million in the fourth quarter, up $3.1 million from the year-ago quarter. Adjusted cash flow from operations in the fourth quarter was $18.4 million, up from $5 million in the year-ago quarter. Paid subscribers declined from 972,000 at the end of the fourth quarter of 2021 to 841,000 in the fourth quarter of 2022, while free subscribers increased by 2 million in 2022.

• Focus on improving operating performance, including increasing marketing efficiency, recruiting talented individuals, and delivering high-quality research.
• Continue to look for further cost savings and efficiency improvements while maintaining margins and cash flow.
• Aim to hire a permanent Chief Financial Officer and a Chief Operating Officer to support the company's growth and operational excellence.

• Market volatility and economic uncertainty can impact investor engagement, billings, and subscriber purchases.
• The company's share price is affected by overall stock market conditions and being lumped into the post-SPAC universe of troubled companies.
• Risks associated with acquisitions, including evaluating strategic alignment, proper valuation, and integration challenges.

Q: Can you help bridge your comments around the first quarter outlook it's not consistent with the Schwab trading data, which is showing kind of a rebound in trading activity? And if that's not a good indicative indicator of your business how should investors think about that?

A: Lee Harris said landing page visits are tracking in line with Schwab trading data, but conversion rates are subdued and have deteriorated since the fourth quarter, with issues in the banking industry recently also affecting rates. Conversion rates are critical for billings.

Q: Marketing efficiency was flat in the quarter sequentially as a percent of bookings? Do you expect this ratio to improve over the next few quarters?

A: Lee Harris said marketing spend on a cash basis was flat between 3Q and 4Q and continues into the first quarter. The ratio will improve when billings pick up; until conversion and economic trends are favorable, marketing spend will continue at current rates.

Q: Can you give us the numbers for the full year 2022 on severance and professional fees?

A: Stephen Park said $7.7 million of severance was a one-time charge related to the former CEO's contract, and professional fees of $1.3 million were something to manage and control moving forward; Lee Harris mentioned prior severance related to the cost reduction program was one-time but didn't provide exact full-year numbers beyond that