MarketWise, Inc. Q1 FY2023 earnings call

• Expense discipline: Direct marketing spend was roughly $24 million lower in cash basis than Q1 2022, and overhead costs were down $6.3 million. - Product updates: Introduced 12 new products and retired 8 publications in the quarter. - Subscriber metrics: Over 290,000 membership subscribers, with long-term subscribers being core; renewal revenue averaged $40 million per quarter over the past five quarters; active free subscribers decreased by 0.6 million or 11.5% to 4 million. - Cost reduction: Reduced professional fees by approximately 24% year-over-year and continue to seek in-house work for savings; focused on talent retention/acquisition. - Dividend: Approved a quarterly dividend of $0.01 per share for Class A and B shareholders. - M&A: Actively evaluating opportunities to acquire businesses that complement operations, with an attractive M&A market. - Subscriber focus: Publishers working on great investing ideas, with interest in AI and macroeconomic stories, and high/ultra-high value subscribers remaining loyal.

In the first quarter of 2023, GAAP revenue was $126.2 million, a decline of 7.7% compared to the prior year. Billings were $97.2 million, a 28.5% year-over-year decline. The decrease in revenue was driven by a $7.6 million decrease in term subscription revenue and a $3.1 million decrease in membership subscription revenue. In terms of billings composition, approximately 37% came from membership subscriptions, 62% from term subscriptions, and 1% from other billings.

• Continues to focus on cost efficiencies and improving margins. - Plans to evaluate M&A opportunities to add complementary businesses. - The quarterly dividend is seen as a conservative capital return while maintaining cash for growth opportunities.

• Volatile market and economic uncertainty impacting retail investor engagement. - Bank failures and related concerns affecting investor confidence and purchasing of investment research. - Potential challenges in subscriber acquisition due to macroeconomic conditions and reduced marketing spend.

Q: Could you give an approximation of churn in the paid subscriber base and separate gross subscriber additions and churn impact?

A: Churn was in the normal range, slightly higher this quarter but nothing out of the ordinary; paid subscriber list under pressure due to macro environment, not a churn issue but an acquisition issue.

Q: Thoughts on G&A run rate in the next few quarters?

A: G&A has seen cuts, still some room to lower professional fees and centralized services, but no large immediate decrease expected, with puts and takes along the way.

Q: Confidence in content portfolio and ARPU bottoming?

A: Content is constantly pruned and added to based on performance; ARPU not expected to drop significantly, loyal customer base still buying though funnel is slower.

Q: M&A activity?

A: Actively looking at M&A, getting more inbound inquiries, pursuing ideas but being picky about terms and deals