MarketWise, Inc.

Welcome to the MarketWise first quarter 2023 earnings call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference call is being recorded. I would now like to hand the conference over to Jonathan Chanfield, Vice President of Investor Relations at MarketWise. Please go ahead, sir.

Thank you, and good morning. We appreciate you joining us on today's conference call to discuss MarketWise's first quarter 2023 financial results. With me on the call today, we have Amber Mason, Chief Executive Officer, Stephen Park, our Interim Chief Financial Officer, and Lee Harris, our Senior Vice President of Financial Planning and Analysis. Before I get started, I want to point out that we've also published a supplemental earnings presentation on the investor section of our website, www.marketwise.com, under the quarterly results tab. This document is designed to provide additional information and context to our current earnings release and 10Q filing. We hope you find it's helpful in understanding not just the current quarter's results, but also the way we look at the business. We welcome your feedback as we work to improve our communications and give you the information most relevant to our performance. For those of you participating in our conference call via webcast, we are sharing a few slides to highlight certain information we are discussing during the call. All of the information presented in those slides is also available in the content of this call or in the supplemental earnings presentation I described above. 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 subscribers. 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 would disclaim any obligation to update any forward-looking statements. Actual results may vary materially from today's statements. Information concerning our risks, uncertainties, and other factors that could cause results to differ from those forward-looking statements are contained in the company's SEC filings, earnings press release, and supplemental information posted on the investor 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 SEC filings. And now I'll turn the call over to Amber.

Thanks, John, and good morning, everybody. Welcome to our first quarter 2023 earnings call. On this morning's call, I will provide a brief overview of our first quarter results. I'll tell you why I think we're in one of the greatest businesses in the world, and I'll show you some progress on our strategic plan. We've also put together a supplemental deck to this earnings call. There's some cool stuff in there that should give you more of an operator's perspective on the business. Steve will wrap up with a more detailed review of our financial results, and then we'll take your questions. Let's get started. First, touching on our Q1 results. The market has been volatile and economic uncertainty persists, as it has over the last 18 months. Through all of this, we have stayed committed to the course we set in 2022, specifically to rein in overhead costs and direct marketing spend. I'm pleased to report that we have maintained our expense discipline. In the first quarter of 2023, direct marketing spend was roughly $24 million lower on a cash basis than the first quarter of 2022. Additionally, our overhead costs were down $6.3 million on the same basis. When times are tough, we tighten our belts to maintain profitability. Revenues on a gap basis were $126.2 million, a decline of 7.7% as compared to the prior year. Billings declined 28.5% year-over-year to $97.2 million. However, given our cost discipline over the past year, we delivered $30.6 million in net income from operations for the first quarter, an increase of $13.1 million, or 75.7% as compared to the first quarter of 2022. In addition, our adjusted cash flow from operations was $3.9 million, an increase from $1.1 million from first quarter 2022. As we discussed on last quarter's call, we paid our annual employee and management bonuses in the first quarter. While we reported higher adjusted cash flow from operations as compared to the prior year, these bonus payments hit our cash flow results for the period. This will be our normal practice going forward, and we would expect our cash flow and adjusted cash flow from operations margins to be lower in each first quarter as compared to the remainder of the year. Despite the difficult market environment, we're pleased with our ability to cut spending and achieve these results, but we know we can do better. As I mentioned on our last call, I've been in this business for over 17 years, many of them spent operating one of our largest revenue-producing publishers. Given my experience, I know that MarketWise can create enormous value for all our stakeholders, including employees and shareholders. It's hard to see right now, with the drop in the market and our results since we've gone public, what an extraordinary business financial publishing is. So I want to show you a little bit of what I've seen and learned during my career here. why I love working in this industry, why I think this business has such extraordinary potential. And before we begin, I just want to give a little hat tip to Richard Russell, who wrote the well-known Dow Theory Letters for decades, and to my colleague Brian Hunt, who helped show me the ropes years ago. So why do I love what we do at MarketWise? First and foremost, financial publishing has an unlimited market. Because we sell online and not in a brick and mortar store, we reach people all over the country and the world. We're also scalable. We sell our products, data, and research to thousands or tens of thousands of people without increasing our cost of production. We have low overhead and we're capital efficient. We don't need an extremely large staff, just the right talent, and we don't need equipment or physical inventory to generate revenue. Our largest investments are in people and marketing, and we can scale those up in boom times and scale them back when we need to. And we have an amazing file of customers. Once we develop a relationship with our subscribers and create a track record of success, we find they're willing to buy multiple products from us. The best potential subscriber is an existing subscriber. And on top of that, we get to help people. We're sharing ideas and giving them tools to control their financial future that wouldn't otherwise be accessible. In other words, financial publishing is an incredible industry. We can do good work, attract top quality talent, charge premium prices, keep our costs low, and produce high margins. Even when subscriber engagement is down, like now, this is still a great cash-generating business, and I have great optimism for our future. On last quarter's call, I outlined five priorities for the coming year. Let's take a look at how we're doing. First, I believe it's most important to serve our subscribers well. Our publishers are working hard to provide great investing ideas for the current market. And more importantly, we're exploring what our experts believe are the big ideas in the next 12 months and beyond. For example, most recently, our biggest hits in terms of sales and subscribers are coming from trading and software products. As for investing themes, we're seeing increased interest in artificial intelligence and macroeconomic stories, what we like to call doom and gloom. As always, we look to enhance our lineup and bring new ideas to market. In the quarter, we introduced 12 new products and retired another eight publications. Because we're always looking for ways to add value to our subscribers, Our long-term readers, the folks who know us well, including our high and ultra high value subscribers, remain loyal to us. And that's what I want to show you. In our new supplemental deck, we provide a few charts which reveal more about the long-term nature of our subscribers and the impact of renewals and revenue retention on our cash flow. Let's take a look. On page 12, you'll see we have over 290,000 membership subscribers, what we used to call lifetime readers. And that number continues to grow, even as we have navigated a difficult economy in the past 18 months. Also on that page, you'll see that on average, our membership subscribers purchase approximately five additional subscriptions, including an additional membership subscription. And membership subscribers typically spend over $5,000 after their initial membership subscription with us. Then on page 11, you'll see our renewal revenue. I think this is one of the best measures of the success of our business. Over the past five quarters, we've averaged a total of $40 million in upgrade and renewal billing each quarter. Long-term subscribers are the core of our business, and I'm proud of the trust they have in our publications and our company. I wanted to point out that along with some other information in the supplemental earnings presentation, we've started highlighting a subset of our free subscriber base, which we call active free subscribers. Active free subscribers are those free subscribers we've engaged during the most recent quarter. This group of free subscribers is most likely to continue to consume content and convert to a paid subscriber in the short term. Active free subscribers decreased by 0.6 million or 11.5% to 4 million this quarter as compared to 4.6 million as of March 31st, 2022. The year-over-year decline in active free subscribers is a result of the general decrease in engagement in the retail investing community. I added this metric because this is how I track our success in converting free readers to paid readers. And I want to give you more insight into the way I look at our business. Another key component of our strategic plan, as you know, is to continue to focus on cost and improve our margins. We did a lot of work on this last year, and while that effort was successful, we're still looking for opportunities to become even more efficient and profitable. Last quarter, I mentioned that our professional fees, mostly accounting and legal, had increased during our GO public transaction, and it was time to take a closer look. Year over year, we have reduced our professional fees approximately 24%, and we are still looking to bring additional work in-house for additional savings. Talent retention and acquisition are critical to this business, and we are focused on retaining the best of the best and bringing in new talent to our lineup. We are well down the road to bringing a permanent chief financial officer in-house, someone who can be a partner to me in guiding the organization. Additionally, hiring a chief operating officer to work between our revenue producers and our corporate services We'll improve our performance and align both sides of our business. I'm also focused on the culture of our company and the work our teams do together. We have a fantastic group of people here, and when we all row in the same direction, we get there faster. We also continue to work on ways to improve our share price and the liquidity in our stock. We just approved a quarterly dividend of one cent per share for our Class A public shareholders and a quarterly distribution of one cent per share for our Class B shareholders. As of this morning, this dividend represents a 2.4% annual yield. Compare that to the current S&P 500's yield of 1.7% and the Russell 2000's yield of 1.6%. We're able to establish this dividend because we generate positive annual cash flow, even at the bottom of the cycle. And even after the dividend, we have plenty of cash available to take advantage of future growth opportunities. Over our 20 plus year history, our company has consistently returned capital to its owners. This dividend is another step in our evolution as a public company. As we've discussed before, the overall market for M&A remains attractive. We continue to look for ways to add existing businesses that will complement our operations, including bringing on new editorial teams, software, and technologies. The current market for potential transactions remains active, and we are evaluating opportunities to determine the right fit, strategies, and valuations. Once again, while we are active in this market, we are also committed to sound financial transactions with acceptable levels of risk and return for our shareholders. Finally, before I turn it over to Steve to give you a rundown on the financials, I want to address the recent shareholder filing asking for engagement with the board and management. I'm happy to share that we recently came to an agreement that all parties feel good about. Our proxy statement will include a board slate that is a combination of our original board members and some new faces. These folks are known to us and are working for the best interests of the company and our shareholders. With this agreement in place, we can return our focus to our mission, delivering great investing ideas to the retail investor. With that, I will turn the call over to Steve to review the financial results of the quarter.