MarketWise, Inc.

Greetings. Good morning and welcome to the MarketWise Second Quarter 2021 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference line will be open for questions and instructions to follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Jamie Lillis, Managing Director at Solberry Trout. Please go ahead, sir.

Thank you, Operator, and good morning. Thank you for joining us on today's conference call to discuss MarketWise's second quarter 2021 financial results. On the call today, we have Mark Arnold, Chief Executive Officer, and Dale Lynch, Chief Financial Officer. During the course of today's call, we may make forward-looking statements, including but not limited to statements regarding our guidance and future financial performance, market demand, growth prospects, business strategies and plans, and our ability to attract and retain customers. These forward-looking statements are based on management's current views and assumptions and should not be relied upon as of any subsequent date, and we disclaim any obligation to update any forward-looking statements. Actual results may vary materially from today's statement. Information concerning our risks, uncertainties, and other factors that could cause results that differ from these forward-looking statements are contained in the company's SEC filings, earnings press release, and supplemental information posted on the Investors section of the company's website. Our discussion today will include certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to but not as a substitute for or in isolation from GAAP measures. Reconciliations to non-GAAP measures can be found in our earnings press release and our SEC filings. Now I'll turn the call over to Mark.

Thank you, Jamie, and good morning, everybody. Before I get started, I'd like to take a moment to thank all those people who helped us through our SPAC process and public offering, which culminated in our first day of trading on the NASDAQ on July 22nd, under the ticker symbol MKTW. The many months of hard work by our fantastic team here at MarkWise, our trusted advisors, and the loyal support of our subscribers contributed to the success of our offering. So thanks to all of those folks for all of your hard work and support. Importantly, our public listing provides MarketWise with additional flexibility to take full advantage of the growth opportunities that lie ahead of us, including investments in technology and our community, additional partnerships, and of course, M&A activity. I'd like to start today by providing a brief overview of MarketWise and our mission for those investors who were not able to hear our story during the roadshow. Then I'll briefly review the highlights of our second quarter performance before I turn the call over to Dale for a more detailed discussion of our results. We'll then open up the call for your questions. So to understand what we do, I think it's important to understand our origin story, and you'll see how a simple idea over the last two decades has really turned into what has proven to be a scalable platform to deliver what I believe is best-in-class investment research for the self-directed investor. We have a very unique set of products at a full spectrum of price points, and investment content that offers our audience an incredible value proposition that cannot be found elsewhere. Institutional research is the closest in content to what we provide because it is actionable, but it is usually hard to digest and very expensive. What we do is provide actionable content designed for self-directed retail investors and deliver it in a way that allows them to form long-term relationships with world-class experts to help them meet their financial goals. In the 80s and 90s, the independent investment research space was inconsistent, and there were very few credible offerings available to the public that we would characterize as high-quality, trusted research. Our founders surveyed this landscape and knew there was a better way to provide independent research to the self-directed investor. That started with delivering great content and treating the readers how we would want to be treated if our roles were reversed. When we do that right, a relationship is formed between the reader and the writer and goodwill is built up between the reader and the operating brand. Fast forward two decades, and today we are a leading independent research subscription service serving millions of self-directed investors with a diverse portfolio of operating brands. Our research is a trusted source of financial information for our subscribers, and we have a community today of 13 million people, and approximately 1 million of these are paid subscribers. At present, we have 12 primary consumer-facing brands that offer more than 160 products, and we continually look for new ways to strengthen our portfolio of products and services. Given our success and the size of our subscriber base, I'm often asked, what is your secret sauce? Well, there are really four main drivers of our success. It begins with our powerful content platform. Our compelling content creates strong relationships between our editors and our customers. The second driver of our success is our strong customer focus. We are very focused on our customer satisfaction, and you can see this in our more than 90% annual revenue retention rate. The third factor is our business model, which is extremely scalable with very little in the way of CapEx requirements. Our digital platform, high average revenue per user, and high margins contribute to our capital efficiency, and we can scale our business very cost-effectively. Finally, we are extremely data-driven. leveraging real-time data feedback for campaign efficiency and the use of artificial intelligence and machine learning to improve the efficacy of our operations. We believe our global addressable market is very large and growing, and it includes asset managers, financial information services companies, and investment research. We believe the trend is increasingly for investors to manage their own money, and we think all three of these industry segments are in play for us. In the U.S. alone, there are over 60 million self-directed investors. And on top of this significant opportunity, we believe our addressable market is set to grow even faster as the millennial generation ages and their investable assets increase over time. In our eyes, the market for self-directed investing is ripe for innovation and disruption and changing dramatically and doing so in ways that strongly favor our business. First, we have a rapidly increasing retiree population with 10,000 Americans retired in every day. This is an age group that has significant investable assets and very much wants investment education. As a result, baby boomers represent the majority of our customers today. However, the aging of millennials is a significant future opportunity for our business given that 72% of this generation identifies themselves as self-directed investors. Every month we provide actionable investment ideas, and this premium research is complemented by our software and easy-to-use tools. We are able to keep our subscribers engaged and provide our subscribers with insights they're looking for at prices they can afford. Other providers of such diverse content are typically for institutions and inaccessible from a price standpoint for most self-directed investors. Other solutions only serve a limited segment of the market, which many investors quickly outgrow. We believe that investing is a lifelong pursuit, so we are interested in developing a long-term relationship with our subscribers. Yes, we provide investment education and research, but by no means are our products dry or boring. Our editors are tried and true investment experts, and they like to write in ways that are personally engaging for their subscribers. And when I look across the competitive landscape, this is another area where we differentiate ourselves. I'll now turn to the strategic initiatives that have driven our business over the past few years and where we are headed next. When I stepped into the CEO role in 2017, we had real opportunities to increase the scale of the business and invest in our operating companies and content. As we built out the platform, we ultimately doubled our number of lead editors, more than doubled our number of primary customer-facing brands, and more than tripled our number of products. We also scaled a sizable free-to-pay subscriber origination channel. And by the middle of 2019, many of these new initiatives had taken hold, and the business began to accelerate. Our billings grew nearly 40% between the first and second quarter of 2019, and this revenue growth trajectory largely has continued over the past two years. The story is the same in terms of total subscriber relationships, as we grew from 3.8 million in the first quarter of 2019 to 13 million by the second quarter of this year. This acceleration in growth is a direct result of the investment that we've made in the business and the fact that we have built a diverse and critical mass of content, people, and technology that allows us to drive attractive growth going forward. And this leads me to our vision for the company. We want to be the leading financial wellness platform for self-directed investors. We want to expand our reach and discoverability through new channels, consumption mediums, and branding. We want to build deep network effects by increasing social connections and leveraging our rapidly growing community. And we want to expand the use of machine learning and data science and expand our SaaS product development and acquisition. We also have many organic and inorganic growth opportunities in front of us, opportunities that have increased in number during the process of going public as we had hoped. On this front, I want to highlight that we have a long and very successful track record of highly accretive acquisitions. Over the past 10 years, we have successfully identified, acquired, and integrated a number of M&A opportunities. Typically, we look for either one, editorial content that we think will be enriching to our customer base, or two, we look for a business that is not being run as effectively as ours that we think we can bring onto our ecosystem and help to improve. On the editorial or new content front, we often identify a key area of content that we want to add or a key personality that we think will fit well in our models. We bring them onto our platform, provide a turnkey solution for them, and then integrate them onto our operations infrastructure. This has been incredibly successful for us in the past. In one recent example, we helped a lead editor scale his business from approximately 6,000 subscribers when he came on board to more than 100,000 subscribers 18 months later. And the business is very profitable. On the M&A front, we acquired a business in 2017 that was not performing well and was losing money. But we saw the potential. Once it was integrated onto our platform, the business made more than $12 million in 2020. Another example is our acquisition of Chaiken Analytics, which we acquired in January of this year. Following the acquisition, we integrated that business onto our platform and formally introduced their products to our existing subscribers in May. The Chaiken products are quite good, and the broader distribution of those products to our subscribers allowed us to quickly recoup our initial investment and we expect to see considerable opportunities for growth with their product suite going forward. Now I'd like to spend some time walking through briefly the highlights of our second quarter results before handing the call over to Dale to dive deeper into our financials. During the second quarter, our revenues grew 71.7% year over year, and our billings increased 50.4% year over year. That helped increase our adjusted cash flow from operations by 59% year over year. With these numbers, we are very pleased with our results, and this quarter was our second highest quarter ever in both billings and adjusted cash flow from operations. Our business continued to perform well as the subscribers continued to engage with and explore our research products and software solutions. That resulted in significant growth in our year-over-year results. And when you consider that a number of our senior leaders are working on the GoPublic transaction, I think that makes our results even more impressive. While we are very pleased with our financial results, I would encourage our shareholders to keep the long view in mind. We have been in business for over 20 years, always been profitable, and treated our equity holders well. And during that long history, there have been periods like this one where our year-over-year growth was up significantly. Now, we can't promise our investors that things will always go up like they did in this period. What we can do is promise to do our best to run the business as if it were our own money at risk. because it is. Our leadership team has a tremendous amount of skin in the game, so our economic interests are aligned with our shareholders. This approach has served us very well over time, and we have no plans to change that approach now that we are a public company. And with that said, I'll turn the call over to Dale to provide a deeper dive into our numbers.