Q1 2022 MarketWise Inc Earnings Call
Ladies and gentlemen, thank you for standing by the market Wise conference call will begin shortly once again. Please continue to hold our conference call will begin shortly.
Yeah.
[music].
Thank you for standing by and welcome to the market Wise first quarter 2022 earnings call I'd now like to hand, the conference over to Jonathan Chatfield head of Investor Relations at market why Thank you. Please go ahead.
Thank you and good morning.
Thanks for joining us on today's conference call to discuss Mark lifes first quarter 2020 to financial results on the call today, we have Mark Arnold, our Chief Executive Officer, and Dale Lynch, Our 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 for 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 might be relied upon as of any subsequent date.
And we disclaim any obligation to update any forward looking statements actual results may materially may vary materially from today's statements information concerning our risks uncertainties and other factors that could cause results to 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 on our earnings press release, and SEC filings now I'll turn the call over to Mark.
Thanks, Sean and good morning, everybody welcome to our first quarter earnings call.
Before we get into the financial results for the quarter I'd like to talk a bit about some of the dynamics that we're seeing in the markets and in our business right now.
At market Wise, our vision is to be the platform of choice for the self directed investor and to that end.
Except for their subscribers is of the utmost importance and we believe it is our greatest asset.
That is why at times like these we are seeing disruptive forces in the financial markets, we seek to provide our subscribers with the research and tools that they need to navigate the current situation.
In the first quarter of this year as the world and the U S and increasingly returned to the pre pandemic activity, Russia invaded Ukraine, and we saw the first full scale war in Europe Since World War two.
This accelerated inflationary pressure caused by global supply constraints and it showed in the data is inflation spiked a 40 year highs.
That in turn signaled that it is prepared to combat inflation through a series of interest rate increases.
We also experienced havoc in the bond market throughout the first quarter.
Against this backdrop. It is no wonder that investors in general, including our subscribers have step back to evaluate the situation and determine whether to continue with their previous investment strategies or change course.
This has resulted in what seems to be some consumer hesitant and then decisions regarding their investments.
We believe this combination of factors also impacted our current financial performance.
In the first quarter of 2022, our revenues grew 14% year over year to $136 $8 million or.
Our billings declined 47% year over year to $136 million and our adjusted cash flow from operations was $1 1 million.
Ill provide more color on this shortly but our adjusted cash flow from operations was lower this quarter for several distinct reasons.
First we continue to invest in marketing spend longer than we might have otherwise as we felt it was important to continue to test what investment ideas would resonate in these volatile markets.
We also had some timing differences in working capital accruals are temporarily reduced cash flow by approximately $18 $1 billion.
Additionally, as we have discussed for several quarters now and as other direct to consumer businesses have recently discussed in their quarterly results, we experienced higher subscriber acquisition costs and somewhat lower consumer engagement.
They will also discuss this in more detail shortly but engagement metrics for us were relatively flat in the first quarter 2022, as compared to fourth quarter 2021.
However, they remain approximately 18% below the average engagement metrics, we observed over the past two years during the pandemic.
With the great reemergence trend continuing at pace cost to market through display AD channels remain elevated, causing us to add new subscribers in recent quarters.
I should note that we are not strangers to these types of challenges we have faced similar situations over a 22 year history and successfully navigated periods of volatility like the one that we are experiencing now.
While this market has been volatile so far this year it has not been near as difficult as the financial crisis in 2008 2009.
During that period, we manage our business through the cycle by developing new content that address the financial environment and that post crisis world and ultimately resume significant organic growth.
So what are we doing to address these market conditions.
First of all we believe consumer reaction to this market is entirely understandable.
In light of the downdraft in many asset classes. We believe investors are weighing more offensive growth oriented investment ideas that have been successful in recent years versus more defensive strategies.
Investors are taking time to weigh the alternatives and evaluate the risk appetite.
We see this lower overall paid conversion rate among our lower RPT subscribers. However.
However, our high value in ultra high value conversion rates remain in line with historic levels, indicating better best subscribers are continuing to purchase from us at similar rates.
Our professionals are accustomed to changing market forces and we are adjusting to these forces like we hadn't previously.
Our teams are hard at work calibrating, our contacts to help self directed investors navigate this uncertainty there.
They are also hard at work to ensure that we can address today's markets and return our business to attractive organic growth levels.
We believe these efforts will show up in our performance as the year progresses.
Remember our research covers a broad variety of investment strategies appropriate for both bull markets and bear markets and for traders as well as long term investors.
This helps ensure that we have content that resonates and changing market conditions, there appear to be some major thematic changes occurring in the United States and globally as investors Shun riskier assets and we treat the safer ones.
So as the market shifts our editorial teams are contemplating where things are headed.
Eloping additional content that they believe will fit these emerging trends.
Some of these themes that our research teams have been emphasizing include the following day.
The globalization and shortening supply chains.
And oil prices in the U S energy independence broader based commodity price inflation inflation protection things, such as gold and other metals real estate inflation protected bonds.
Best thing and income like high quality dividend paying stocks.
Value teams across asset classes, and the critical need to keep asset allocation and position size in mind as our readers go for.
In addition to increasing the emphasis on these investment themes, we are looking at ways to mitigate subscriber acquisition costs, while driving incremental sales.
The unit cost to acquire new subscribers are high we continue to focus on enhancing incentives to cross sell contact between our operating brands and we have been working on a number of these campaigns recently.
No incremental acquisition costs paid to third parties. When we do this we have seen significant ARPA and retention benefits from similar initiatives in the past.
As we think about the future and as we have communicated over the past year. There are a number of very important strategic initiatives that we continue to execute on that should drive attractive growth.
One area of focus for us.
There's more explicitly marrying our investment research with technology.
We have been moving in this direction for some time now and a good example of this is our recent acquisition of chicken analytics, which has been tremendously successful for us.
Chicken analytics in China by Mark Chicken, a 40 year Wall Street veteran and Mark developed a series of proven quantitative stock selection tools and indicators, including the chicken power gauge and chicken money flow.
Investors make better investments.
And we introduced <unk> products to our audience they loved it.
Last year, a chicken analytics generated $27 million in billings, which is far beyond the revenue that had before we partnered with him and far beyond what we paid for the business.
It is truly a trifecta of wind from Marc Jacobs and his team a win for us it market wise and most importantly, a win for the subscribers.
When we combined technology products with our content brands, we have found significant ARPA improvements as well as better subscriber retention.
Going forward, we plan on further offering additional quantitative tools and products with our investment research.
And our existing brands as well as in our M&A efforts.
We have previously spoken about the development and rollout of a pan market wise content and tech platform for our subscribers.
Our technology team continues to develop this platform to accommodate our multiple brands and allow consumers to explore the investment content that we publish.
The vision that we are pursuing this umbrella platform will host a community of millions of readers, enabling us to enhance engagement improve our marketing efficiency and ultimately provide us with a source of traffic to us expose our investment research too at scale.
This platform also encourage more cross selling between brands, which should drive better retention and are too.
We've completed our full rollout of this new platform for our Stansberry research brand this quarter and we had a strong initial response to the platform from users here are a few of the highlights.
We've seen a threefold increase in average time on page on our new investor platform since its launch.
Helping to drive this increased engagement time or a series of new interactive features that were recently developed including our new member dashboard enhanced interactive charting tools and video and media engagements and so far we're doing well against other investing sites with our members now spending more time on our side as compared to alternative investment content providers.
We also continue to develop a broader way integrate affiliates and their marketing onto the platform as a precursor to our larger club market wise efforts in 2022.
We now feel confident we'll have most if not all of our affiliates content on this new platform over the course of this year.
We also have previously described our plan to make greater use of data science throughout our business. In fact this is one of the primary reasons, we partnered with us in the digital it last year.
Last week, we announced an engagement with subscale and its founder Michael Bunzl to provide data science enhanced analytics artificial intelligence and machine learning to market wise.
We believe this effort will lead to improved performance in several ways, including increased intelligence about consumer behavior higher subscriber engagement better free to paid conversion rates improve subscriber retention greater marketing efficiencies and ultimately higher arps.
Our goals are no different today than they have been since our founding and that has to be the platform of choice for self directed investors.
Our subscriber community relies on our analysts for rich investment research educational content and valuable technology and tools in order to better navigate the financial markets.
We continue to strive to meet these goals and deliver the high quality research products that our subscribers are accustomed to receiving and for which we are now.
With that I'll turn the call over to bill to discuss some of our financial results in more detail.
Thanks, Mark and good morning.
As we've mentioned in the past our mission to provide the kind of research that we would want if our roles were reversed.
The challenging environment, we've experienced over the past three quarters, its especially important that we stay true to this mission and this vision.
This is a point in time, where we have the opportunity to have the greatest impact of self directed investors. This.
This is a very synergistic relationship when.
When we provide high value investment research that resonates our subscribers have stayed with us over a long period of time, creating value for both our subscribers and our shareholders.
We've been discussing this since last spring some challenges that many direct to consumer companies such as ours have been facing as.
That's the great reemerge this trend from Covid took hold and continue.
This has manifested itself the volatility lower levels of consumer engagement combined with higher customer acquisition costs.
Driven by higher display AD cost as a travel and leisure industry crowds back into that average of advertising space.
These dynamics have been in place for approximately a year now, but we believe these impacts will begin to wane later this year as Covid is more in the rearview mirror.
As previously mentioned first quarter 2022 brought some additional factors into play doctors that are particularly impactful for us as a publisher of investment research content and software.
The NASDAQ in technology stocks in particular and bear market territory crypto currencies have been hit.
We've seen the fastest rise in interest rates in a generation.
With all this uncertainty it's not surprising that we're seeing some consumer hesitancy and indecision about their investments.
We believe this may be causing some of our lower arps customers and prospective customers to delay purchases, resulting in a lower paid conversion rate this quarter.
Importantly, though as I'll highlight later, our high valued customers conversion rates remain strong.
Well I've just listed a number of pretty significant challenges to the investment markets. This is the time when market wise should shine you've done just that over our 22 year history as we provided our subscribers valuable insights after the telecom and in in my crash in the early two thousands the financial crisis in the late two thousands.
Rapid emergence of new opportunities such as crypto currencies and continued bullish recommendations throughout the melt up there are many sophisticated investment professionals thought was going to and many years before it actually did.
As Mark mentioned, our professionals are hard at work developing new content that will help our customers protect their investments and ultimately make money.
And Thomas conception to the time, we actually sell new content. It generally takes two to three months and we expect the majority of this content will be impactful in the second half of this year.
Before turning to financials Kpis I first wanted to touch on consumer engagement and conversion rates.
And first quarter of 2022, our landing page visits were largely stable on a sequential basis, however, theres still about 18% lower than the average quarterly amount for the past two years.
The good news here is despite the challenges we've mentioned our landing page visits have largely stabilized since second quarter 2021.
And we're not seeing ongoing significant declines.
Regarding conversion rates are direct to pay conversion rates have been stable over the past couple of years. If you exclude first quarter 2021, which was an exceptional quarter.
That is until first quarter 2022.
The overall conversion rate decline for us about 16 basis points from fourth quarter 2021.
And this had an impact on both billings and new subscriber additions this quarter.
It's notable that this decline in conversion rate is being driven by our low RP customers are.
Our high value and ultra high value conversion rates this quarter. It remained right in line with our averages over the past year.
Indicating that our most valuable subscribers continue to purchase additional content.
And in fact, our cumulative high value and ultra high value conversion rates rose to all time highs as we disclosed in our 10-Q filing today.
We believe this is a good indication of customer satisfaction, and we take great confidence and pride in the fact that these subscribers find value in our products and remain with us for the long term.
As we turn to the financials remember first quarter 2021 was a record in all regards even without a volatile economy stock market. This quarter, we would not have expected to meet or exceed those levels from the prior year.
Yes.
So turning now to the financials revenue was $136 8 million this quarter compared to $119 7 million in the year ago quarter, an increase of $17 1 million or 14, 3%.
The increase in revenue was driven by an $11 $3 million increase in lifetime subscription revenue and a $7 2 million dollar increase in term subscription revenue. This.
This was partially offset by $1 4 million decrease in non subscription revenue.
We recognized $109 8 million in deferred revenue this quarter.
Billings were $136 million compared to $255 3 million for the year ago quarter, a decline of $119 3 million.
We believe the decrease is due in large part to post COVID-19 reduced engagement of consumers, which began in earnest in second quarter 2021.
First quarter 2022 brought additional challenges with uncertainty stemming from external factors you've mentioned earlier.
Sequentially $136 million in first quarter billings declined $15 4 million or 10% from fourth quarter 2021.
Earlier, we mentioned that a direct to paid conversion rate fell approximately 16 basis points from fourth quarter 2021.
This was attributable to our lower RPT subscribers.
This 16 basis point decline is what primarily drove the sequential decline in billings this quarter.
Approximately 37% and our build out of our billings this quarter came from lifetime subscriptions, 62% from term and 1% from other.
This compares to 45% from lifetimes, 54% from term and 1% from other than the year ago quarter.
Cost of revenue was $17 6 million this quarter compared to $132 8 million for the year ago quarter, a decline of $115 2 million.
This decline was primarily driven by a decrease of $114 3 million in stock based compensation expense related to the holders of class B units, which was partially offset by a $1.8 million increase in salaries and benefits due to higher head count.
The quarter stock based compensation included 0.5 million expense related to our current incentive stock Award plan and our employee stock purchase plan.
This compares to $114 $3 million in class B compensation expense in the year ago quarter.
If you exclude stock based compensation from cost of sales in both periods sales margins as a percent of revenue would have been 88% this quarter.
Appeared to 85% in the year ago quarter.
And generally in line with our historical averages.
As a reminder, from the time a combination with a sudden July and through the end of first quarter 2022, there was no longer any stock based compensation.
<unk> two our original class B units.
Prior to the transaction. These units are treated as derivative liabilities, rather than equity and therefore had to be re measured each quarter and the change in fair value included in stock based compensation also any distributions of profits paid to the class B unit holders were treated this stock based comp.
Since the transaction and going forward as those original units converted to straight communists straight common equity, we have and continue to expect to recognize a significantly lower stock based compensation.
It would be recognized at a level that we believe is consistent with the traditional stock based compensation plan.
For first quarter 2022, our total stock based compensation expense was $2 $6 million.
Yeah.
Sales and marketing costs were $68 2 million this quarter compared to $91 8 million in the year ago quarter decrease of $23 5 million.
This decline was primarily driven by $27 million decrease in marketing expense as we reduced our marketing spend due to higher per unit costs.
And a $14 $1 million decreases class B stock based compensation expense.
This was partially offset by an $8 $2 million increase in deferred tax and a $2 $2 million increase in payroll and benefit costs due to higher head count.
Included in these amounts were stock based compensation of <unk> 6 million this quarter compared to $14 1 million in the year ago quarter.
Excluding stock based compensation expense sales and marketing expense decreased by $10 1 million, primarily driven by decreases in cash our marketing expenditures this quarter.
Turning now to G&A G&A costs. This quarter were 35 million as compared to 507 4 million in the year ago quarter.
A decline of $476 9 million. This decline was primarily driven by a $472 $7 million decrease in class B stock based compensation expense.
This was partially offset by $2 $1 million increase in stock based comp and a $1 $40 million increase in payroll and benefits costs due to higher head count.
Included in these amounts were $1 5 million this quarter stock based compensation expense compared to $472 7 million in the year ago quarter.
Excluding stock based compensation expense, our G&A costs declined by $7 million year over year.
Net income in first quarter, 2022 was $23 million compared to $615 $1 million loss in the year ago quarter.
We recognized stock based comp of $2 6 million this quarter and stock based comp related to class B units of $601 1 million in the year ago quarter.
Now, let's turn to cash flow and adjusted cash flow from operations was $1 1 million in first quarter 2022, compared to $98 million in the year ago quarter with the decline primarily due to the decrease in billings.
Adjusted <unk> margin was 0.8 million this quarter as compared to 38.4% last year.
Well per unit costs remain high in first quarter of this year, we didnt decrease marketing expenditures as much as we might have otherwise as marketers continue to test investment themes that <expletive> amidst the changing market keep in mind that we control that on a day to day basis, and we can reduce that spend anytime we need to.
Adjusted for this quarter was further impacted by net changes in working capital excluding changes in deferred revenue and changes in deferred cat.
Which reduced cash by $18 $1 million.
Keep in mind, its only represents a timing difference in terms of receiving the cash.
Our paid subscriber base decline from $1 million at the end of the first quarter 2021 to 909000 this quarter a 9% decline.
The decline was driven by a decrease in overall consumer engagement lower direct to paid conversion rates and the impact of additional churn realized from the outsized cohort from first quarter 2021.
We saw our free subscriber base continued to increase from $10 9 million a year ago to $14 5 million this year, 33% increase.
New subscriber additions in the first quarter of 2021 were significantly higher than any of our prior or subsequent quarters.
Contributed to increase subscriber churn count in first quarter 2022.
The absolute number of additions in the year ago quarter, well in excess of our historical average quarterly additions contributed to the total amount of churn this quarter.
In fact, we estimate the at the absolute size of this cohort last year generated an additional 60000 churn subscribers in first quarter 2022.
Despite the fact that the percentage churn rate was right in line with historical averages.
Additionally, RPM subscribers, who churn this quarter continued to be in line with the approximate purchase price of our entry level publication, which is well below $100 generate.
As we get past this outsized cohort this dynamic.
Medically decline as they believe this is just another adjustment to a post COVID-19 environment.
And in fact, april's churn rates have returned to our historical averages that we disclosed in our 10-Q.
Yeah.
Turning to ARPA ARPA declined to 636% this quarter from $825 last year. This is being driven by a 15% increase in the average trailing four quarter paid subscribers.
Mine with an 11% decrease in the average trailing four quarter billings.
The increase in fourth quarter paid subscribers is still significantly impacted by the rapid increase in our subscriber base in the first half of 2021.
The decrease in four quarter billings is due in large part to first quarter 2020, billings, our largest quarter ever falling out of the trailing 12 month calculation.
You've shown that over time or subscribers continue to invest in our platform by purchasing higher end subscriptions, which have tended to drive increases in our booth.
As of March 31, 2022, we have 9% and 21% more high value and ultra high value subscribers than we did a year ago.
Now before I finish I want to provide a quick update on our share repurchase program.
Been pretty active in the market this quarter during the quarter, we repurchased approximately $2 1 million shares for approximately $11 5 million in total value.
And program to date from its initiation in December of last year we.
We repurchased 3 million shares for a total of $16 $4 million.
The past several quarters have been a challenge. Indeed, however, Marc previously at least say that we've been here before Nab navigating markets due to changing environments.
Absolutely the core of our value proposition, it's our time to shine and we fully intend on doing that.
With the new content that rural Rolling out combined with the various strategic initiatives that Mark discussed. We believe we are poised to add goodbye to both our subscribers and to our stockholders with that I'll turn the call back to you Mark.
Yeah. Thanks Bill.
Just a final thought for me before I move to taking your questions.
As you're all very well know financial markets are cyclical and our business reaction adapt to changes in the market environment.
And whether markets are going up and investors are looking for growth markets are going down and readers look for more wealth preservation our goals this supply them with high quality research.
Our long term approach and.
And we know that providing high value actionable tools and research to our customers will over time play out in their favor and in ours.
Despite this market disruption, we continue to invest in technology and people to improve and grow our business and we look forward to the opportunities ahead of us and continue to pursue several M&A opportunities I believe they can provide terrific value to complement our business.
With that I'll turn the call back to the operator for your questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset.
Before pressing the star Keys. Our first question comes from the line of Devin Ryan with JMP Securities. Please proceed with your question.
Thanks, Greg Good morning market deal how are you guys.
Good thanks.
Good. Good first question. So you know obviously its a challenging investment backdrop, you've seen this before who knows whether we have a recession or not but if you take a step back you know you're just looking historically periods of stress and dislocation have always been the <unk>.
Biggest opportunities for investing right. So so obviously you can't call a bottom, but you know in terms of thinking about the longer term.
Been opportunity so when I look at your three subscriber group it would seem that investor education, just around some of those themes are around how markets work could be very valuable both to them. But then also kind of two kind of bet.
Next product purchase if you will or the ability to bring them into the paid subscriber base and so.
I just want to maybe think about that and what you guys are doing now that maybe not just given that we are in a tough investing backdrop, but opportunities are likely to be created here.
And then also just kind of thinking about the business historically I'm, assuming there's a lag in subscription relative to call. It you know the.
The S&P price or will you pick your pick your index, but that the market starts to move higher and then subscribers kind of increases is that is that the right correlation as well as a worse or something else. We should look at in terms of.
Historical timing that you've seen in your business.
Yes, so devin those are two really good.
Points and I'm I'm heartened, because we didn't know you very well not so long ago, but but your question was hit on two dynamics about our business that are dead right.
First is to your point about pretty subscribers and tough markets being up an opportunity for them.
You're exactly right.
As I have described over the course of the past year.
It does take us some time between when a a free subscriber comes onto our platform. It starts consuming the content for us to build up that relationship with them and in particular for them to develop a relationship with the editors, but that relationship does once it starts to develop.
Become strong and it becomes strong for the very point that you're making which is.
The editors are talking to the readers about what's going on in the market. How they should think about it whether they should be panicking or whether they should be calm and the opportunities that exist based on what the editor happens we see going on in the market and you're exactly right. In fact this morning I was reading one of our free pieces when they were saying exactly that.
A comment was just essentially that while these markets have been volatile it might be time to take advantage of the draw down in the <unk>.
Aftermath of the decline in the tech stocks and it may be time to evaluate and jump back in on them now I'm not making a recommendation and neither were they at the point is that the editor was talking to the readership.
How they should be thinking and feeling about the markets and the disruption that they're seeing.
And to that point it takes some time to develop that trust and the credibility between the editor of the reader and so in times like this that's where that relationship is really taking hold but it's not to your point and so as as the readership develops relationships across our platform with the editors I do expect them to.
Move on to page status and then the high value and then the ultra high na you'd like our prior cohorts have it's just not it takes time for people to develop that relationship.
To your second point about.
The lag in subscriptions the embassies that too is exactly right.
Which means that.
As the indexes are rising and falling investors emotions about what's happening in the markets are not always instant either.
So it's a it's a paradox in our business that sometimes when you have a investment sector, that's going gangbusters and has gone maybe meaningful moves up in recent periods. That's when the readers the retail investors and the self directed subscribers.
Tend to want to pile into those positions when they become most popular.
As you know that sometimes can be dangerous because if it's in a bubble territory that can be the exact opposite of what they should do if they're trying to preserve their wealth or grow their wealth.
So there's a paradox center of business about that but on the downside when things have been rough like they have been so far this year that may be tremendous buying opportunities, but it but it's not an instant relationship because like I. Just described it takes a little while for the editors and the readers to form that bond and for them to feel comfortable moving back into investment.
Products paying more for our research and moving in their own portfolios.
Yeah.
Got it okay.
Really appreciate the color there mark helpful.
Okay.
Topic, you had one at the end of the call, but it sounds like you're still having some healthy M&A conversations for the firm.
In an environment, where everything is working for everyone.
I could be more challenging.
The bid ask spread can be wide.
The bid ask spread can also be wide when theres a lot of volatility.
Like we're in now so I'm kind of curious how the conversations are going because it sounds like there may be some things that are progressing there and then.
How can you get a deal done in an environment where.
Prices are in flux and your sellers may still have really high expectations are there other ways to structure, where there's kind of a win win for everybody and how are you feeling about kind of progressing on some of those.
Yeah. That's a good question to Devin and you're also right on there.
They're just like there's a lag in the market, sometimes there's a lagging evaluation, sometimes and so in some of the conversations we've had people are rooted and straining to hold onto market valuations that were more appropriate.
Last year in 2021, and you can see why they would do that it makes sense.
But at least in our experience the valuation multiples have come down since then all of the information we're getting points for that but you can see where that natural tension with developing and we're working through that and to your point. There are ways. You can structure around that I've thought you were going to ask about our share value and of course.
We would not want to.
Use equity at this stage, given where our share price is because we just think it's a deeply undervalued.
And so we are exploring other ways to structure deals in order to navigate around that.
But I'm very happy I mean, like I said I had been saying that since we went public our theory that our M&A pipeline would fill up with really high quality people quality businesses.
This is borne out and and I can't make any comment on specifics, but it's moving along very nicely I'm very happy with it.
Yep got it great.
Squeeze one more quick one in here for Dale just on the.
The subscribers and the churn that you saw in the quarter I heard the comment that you know April seeing or saw some stabilization.
Reversion to kind of historical levels and any other kind of data that would suggest maybe maybe were stabilizing there or.
One data point, so anything else you can help with there would be would be great.
Yeah. So look I mean that that that that is a good data point in and of itself and we were looking for that confirmation on when we thought that was good right. So we've been.
We published a term rate in our Q and.
I think we've been telling you folks had been kind of at that higher end of that that range, but we'll have to give us a range on a monthly basis, we've been at that higher end of that range for quite a bit of time now maybe five quarters.
Until this quarter came and and we sort of quantified what we think the excess churn, which is given the outsized nature of that so we adjusted for that when you adjust for that our churn rate was actually a little bit lower than the higher end of the range of that.
Historic range and then in April as I mentioned, it came down but there's a number of data points here that point too.
Some stabilization right.
We touched on consumer engagement, we told you that our our landing page visits were essentially flat sequentially. That's good news and if you look at the average.
Landing page visits now over the past several quarters like trailing four quarters this quarter and through trailing.
We're right about at the average.
So it looks like we sort of bottomed out on that engagement dynamic that post COVID-19 travel, but I'm mentioning for almost a year now.
That feels like it's bottomed out.
Our conversion rates for our high value customers continue to chug, along every quarter I mean, there are plus or minus 10 basis points. So that stability is a good thing to see too.
Really what we're seeing is as the new customer right, which is about 60% of our customer base. They are the ones that seem to be the most.
Indecisive and have slowed or paused their purchases right now and that's what's causing that conversion rate to paid conversion rate to dip here in the quarter.
So so the message I would take away from this is look these these guys will ultimately.
Make decisions in the market and don't need help with that so we think this is a timing delay in purchase not forgone purchase.
But we are seeing stabilization in everything around landing page visits.
High value conversions.
And you can look at our subscriber adds we know they are down you know.
Versus historic like a year ago, or so, but if you look at the this quarter in the trailing three quarters and you average them out the gross adds we put in this quarter are within a thousand of that average so you've hit on a theme I think that's important it does feel like it's been a it's been a tough year theres no way to sugarcoat that.
But it feels like we have begin to form a base of support here. It feels like what we are seeing across a number of metrics is the formation of okay. Here. We go now we're going to set ourselves and reset ourselves for organic growth going forward.
And I wanted to expand on a point that you and Mark we're talking about on a free subscriber base, because it's really important.
We give you a conversion rates of 1%, 2% historically from that customer base.
That should be higher I'm, one of the reasons one of the areas that are.
Our our data science initiatives going to focus on is just that conversion is a free to paid.
First you have to have really good content mark touched on that a bit in his comments, which I thought were very good content matters, most but the data science will support that and that's one of the key focal areas that we're that the team is going to.
Look at first so that will help and that's really impactful to because if you look at the customer sets you have direct to paid that we.
Channel and free to paid.
If you look at the free to paid over their lifetimes, though.
Are they actually tend to spend more than our direct to pay channel. So what we're finding is the free to paid channels are very very valuable network for us and so we really want to maximize that and that's why we're turning the data science lens on that early on.
Sorry, long winded answer, but if you really hit on a good theme around bumping along what feels like.
The formation of a base here across a number of our metrics.
Yeah no.
The details as always helpful. Bill so thanks for for taken all of that I'll leave it there whatsoever and I appreciate it guys.
Thank you. Our next question comes from the line of Kyle Peterson with Needham <unk> Company. Please proceed with your question.
Hey, good morning, guys. Thanks for taking the questions just.
Just wanted to touch on on the marketing spend and I know you guys kind of mentioned that you were at least testing I'm just when they can't content and campaigns in the first quarter.
We need some.
Some of the spend a little elevated are.
Are you guys still testing that and letting some campaigns run longer like has that continued into <unk> or do you think some of these strategies have been pretty refined and tested and you'll go more back towards like normal spending, especially in elevated CAC environment.
Yeah.
You want me to take that first Mark and then you can add yeah that would be fine yeah perfect. Okay.
So look here, we are and this goes back to Devins question earlier. This is a critical moment for us right.
The Max volatility, we're seeing across pretty much every asset class.
Generation changes in interest rates.
So I would say that we are going to probably continue to test the market now the absolute dollars of marketing spend have come down and don't don't get me wrong. There. In fact, if you look year over year, it's down pretty significantly you mentioned $20 million.
That's a pretty significant decline.
But because of the gross adds are lower right now that's that's what's keeping the CAC elevated on a per unit basis.
So I would characterize it this way we're going to continue to test the market, we're not blind to margins, Okay, we can slow or stop or whatever whenever he wants it and we're not going to stop marketing spend that's the future lifeblood of the business and it's the right thing to do for our subscribers they need help and guidance right. Now so we're going to continue to test. It so think of it is.
CAC is probably not going to decline materially we don't necessarily need it too, but we do need is that you need to come up with content that resonates content that resonate is the secret sauce to our business those conversion rates drive everything. So we'll continue to test, but we're still gonna be keeping an eye toward margins.
It's the right balance so it's not all or none right. Our unit costs are high that's not great.
<unk>, probably going to be lower than it would be otherwise.
But we're gonna keep testing, new and new things, we have a lot of new content coming out so that needs to be tested until there'll be continuing marketing spend.
But just have to strike the right balance between that and margins.
Got it.
That's helpful. And then I guess, just one quick follow up on capital allocation. Obviously, the balance sheet is really strong and I'm. Just how are you guys thinking about it it's been good that you guys have been shipping.
Chipping away at the buyback.
Anticipate kind of keep going at the current pace or do you think but the the shares at these levels would you guys be willing to kind of accelerate that pace or step up in a bigger way just given that the balance sheet is very strong right now.
Yeah.
So there's a balance there right now you have to.
The biggest.
Strategic technical thing impacting.
Our stock price is probably the float the small float size right.
So we have to balance the combination of.
It's accretive to repurchase of shares that's a screw.
Screamingly obvious but the other thing is we have to be cognizant of the free float.
So we can execute a large secondary offering at some point and really solve that liquidity problem for the long term, so larger busters can't get involved and by a much larger positions.
We're gonna have to keep an eye towards both of those things. So the program is still out there. It's active we have a 75, one plan set up where our broker dealer just execute set can be five one according to the instructions.
And so it just kind of operates but but we do have to be cognizant to the float so we.
We don't want to take too many shares out so we have to balance that.
Makes sense it's helpful. Thanks, guys.
Thank you. Our next question comes from the line of Alex Kramm with UBS. Please proceed with your question.
Yeah, Hey, guys.
Wanted to come back to the discussion on cash flow just now.
I think over the last few quarters, you've told us that.
Now no matter what you know you you run this business for healthy.
Our profitability and you know, we just had two quarters in a row of pretty low margin and you know basically if I'm hearing you correctly, you're saying you're still testing a lot on the marketing spend side et cetera. So I guess the question is well when are you going to react and are there. Other things you may have to pull outside of marketing.
Is there any kind of margin you feel like you can't commit to for the year. So we have a little bit more confidence and then and then maybe just lastly, you know that that $18 million of working cash flow or working capital cash flow impact can you just flush out what exactly happened there because again two quarters in a row fairly low cash flow if I think about it from a cash person.
What are the items that can actually swing cash that we should we are we should be thinking about as we think about the business. Thanks.
Okay.
Yeah, so starting with Otis order Dale Yeah. Good yeah, I'll start with the last first and then go from there so on that cash flow impact there was a few things that drove that.
Receivables one again, that's just a timing difference.
And that was that was a big part of it. So you would expect to see that reverse probably most probably in the coming quarter.
So we'll get a majority of that back here shortly.
And then there were some other changes in variable cost accruals and so forth, but it was really primarily in accounts receivable.
I changed this quarter that was sort of random that drove that that cash flow decline. So if you kind of think about it.
And keep in mind that the accounts receivable represents sales right. So you get up you could think of that as sort of cash income right. So you might adjust that but even to your point adjusting for that.
We acknowledge the margins are low there is no doubt.
You know look we have built a product and an infrastructure that is designed to capture more market share we've grown pretty significantly in the last three years.
That has come a ground has come at an increase in our cost base right.
We have a lot of people a lot of products and a lot of affiliates that we want to have more so theres always the tension between short term impacts versus long term goals right long term goal is to really scale. This and be the platform of choice. So we have built up an infrastructure. That's relatively large we're seeing a revenue impact this year, that's outsized we'd never.
We're seeing a revenue impact like this.
Quite frankly.
So, but we do think we're hitting sort of a bottom bumping around on the bottom and.
Our cost basis now relatively stable our overhead if you look at that our G&A was actually down year over year by $5 million.
That's a good thing the year ago quarter had some costs related to our public initiative that was in that quarter, but the good news is our G&A Israel is stable.
To probably down a bit year over year.
And we will keep an eye to that look if there's efficiencies that we can effect that we will do that but we want to keep an eye towards long term growth as well so it's always going to be a balance as.
As far as margin percentages, you know Alex I wish I could give you a number but we're not really no.
Committing to guidance, but we are sensitive to the margins and we are going to keep our eye on that and we certainly acknowledge the last two quarters have been outlier quarters in terms of margins.
We certainly would like them to be higher we could get the much higher tomorrow, we just slashed our marketing spend.
Watching marketing spend probably isn't the right answer it probably needs to be at a more measured approach to that that spend because now is the time going back to Devin first point around.
Peak volatility like this is ultimately going to create massive amounts of investment opportunities. We have good analysts with great ideas and we're about to unleash and we are unleashing a lot of these ideas right now so.
This is a unique situation point in time, where I do think you know the margins are going to be a bit lower right here.
Ultimate solution is to maximize that and turn it into revenue and get back to the growth trajectories that we have done historically.
But in the short term, we're certainly keeping an eye on those margins, we want them to be higher and we're going to look for efficiencies both on the marketing side and potentially efficiencies at other places in the business as well.
As far as like a percentage I can't give you that.
Okay fair enough I figured I'd try them just a couple of well actually one quick one here you mentioned that you still have success in up selling and you know when I look at quarter over quarter relative to the fourth quarter your ultra high net value clients.
Count actually increased nicely, but the high value actually went down so just maybe just flush it out a little bit again. It seems like your you are having success at the high end, but that's kind of like initial upsell them to high value there you're still lagging anything particular going on there or anything else you you you.
You're trying to do there to maybe do a little bit better.
Yeah, so on but that's going to be some oscillations around the absolute numbers period to period. What we saw this quarter was when you see that outsized churn from that cohort keep in mind that a lot of those subscribers that came in in Q1.
They bought a number of publications pretty quickly.
So that churn dynamic that we saw from Q1 'twenty one manifesting in Q2 'twenty two.
That could certainly impact sort of around the margins those numbers that youre seeing on the high value conversion like the count right just there's fewer there's fear people.
Our subscriber base now than there was a year ago.
So there's going to be a normal oscillation around the mean, but if you look at it on a percentage basis, which is really how we think about it again the conversion rates are plus or minus literally 10 basis points for high value and also high value.
For four quarters now the current quarter in the previous three quarters. So for a year I mean, it's been rock solid within 10 basis points on both of those metrics.
The key for us is to stabilize and begin to grow that sub base now and as I mentioned earlier do you feel like we're building a base right now across a number of our metrics.
If you look at the four quarter average across a whole stable of metrics. It does feel at the moment like we've built a base of support here and now we can start to anchor and move forward from there.
Alright, just one quick one and I'll, let you go.
The landing page comment I believe the flattish comment was a <unk> comment did you say anything about April and I missed it but any update on landing page visits so far in the second quarter would be would be helpful. Thanks.
Yeah, I know youre going to ask that question. So again, along the theme of building a base.
So I would say quarter to date second quarter to date, if you will through through I think this is through last Friday, So just before the weekend.
You know our our visits are up a little bit.
45%, depending on which metric you're looking at we cut them a bunch of different ways, but overall rupture in that 4% sequential side, if you compare quarter to date versus the first quarter of 'twenty two were up modestly.
Conversion rates are pretty stable on the direct to paid conversion rates, but the landing page visits are up modestly here.
Alright, good to hear that thank you very much.
Thanks, Alex.
Thank you. Our next question comes from the line of Jeff Mueller with Baird. Please proceed with your question.
Yeah. Thank you so I understand the positive takeaway on the.
The high end conversion, but as I think about that.
The typical migration up the value stack I just wonder what are you trying to convey to us on the low end conversion I guess should we be looking to that metric and the eventual inflection in that metric as kind of the leading indicator because theres a natural.
I guess migration up the value stack that includes that price point.
Or doesn't.
Trying to understand what you're trying to convey to us when you disaggregate.
The conversion rates are for different parts of the.
The value stuff.
Yes, that's a really good point, so think about it this way right the folks that have not spent $600 with us.
That by definition pretty much means pretty good certainty they hadn't yet purchase that higher that that high value, what we called back and subscription the richer investment compound at that 750 to $1000 price point I mean by definition haven't done that.
Why we're not seeing them convert at the rates they used to historically and that in our mind is really that.
That happened that turned on a dime in the first quarter here and that happened two to the point.
February when inflation spiked it depending on how you measure 8% to 12%.
And the war started and and rates spike and the markets kind of crashed so that conversion rate fell very quickly. Those those are customers that have not yet really formed that long term bond with us they haven't bought that high value content, yet they're waiting to and we certainly are going to work to get them. There the key for us is.
Right now, they're indecisive right individual investors institutional investors when things move quickly.
Additional investors often move quickly as well.
When things move quickly individual investors can be very different they get a bit indecisive and they don't do they don't take action right away right Theres a lag to that so the way to think about it is ultimately here, we come up with new ideas and new content and we present that content to be subscribers, new subscribers that have not yet fully embraced our.
Our value stack right getting.
Getting those conversion rates back to kind of where they were a couple of quarters ago or even just two quarters ago, you'd see a meaningful impact on billings.
And so I think with the markets plunging like they have there are going to be a raft of opportunities. These ideas will be.
We'll be going out in the form of our content.
We just need to get that conversion rate backed up which means these guys are going to begin their higher value journey through our our ecosystem. If you will right right now they haven't sort of on pause and I think we need some measure of stability on number one and number two time for this content that Mark mentioned earlier to get into the system.
And for these folks to take action right just the retail investors that I think moves a bit more slowly than than what you guys are used to seeing.
Okay, Yeah, I'll, just add there that oh, sorry to cut it and obviously that too quickly.
This is what I was saying when I said earlier that I thought the reaction.
From the subscriber community was understandable if someone has built up a trust relationship with us and their editors and they they know the quality of the content and they have confidence conviction around what's going to happen.
Well then they they have continued to spend with us and continue to subscribe to.
The higher value products for someone who's newer I thought I was touching on earlier with the devins question.
That relationship takes some time to build.
And when the market is doing what it's been doing.
And you don't have necessarily clear conviction around which way the market is going to go or what strategies you want to pursue.
We feel like most people are sitting tight and waiting to see which direction emergence if one does.
So while they're doing that they're consuming the content at a lower price point, but they just havent.
Worked up the conviction or the trust to be able to step up to higher price points and that just takes time.
So I agree with what Bill said, it's just a little extra color that there is a lag between when someone comes on our platform and when they feel strongly about when to spend more with us.
Got it and if you look at the free subs group.
How is their engagement their readership are you seeing them highly engaged because they need the help and they're just not making that purchase or are you still in this legged period.
There you're editors are adapting the content for the current environment to you.
And there is some lower level of readership or engagement among the pre sub space.
Yeah.
Well, it's both I mean the.
Free group is so large that we're continuing to see a lot of engagement from a bunch of them, but where we've seen the churn is at that lower price point. So you've got both growing on a bunch of engaging with the content developing the relationship with the reader and just haven't stepped up to higher price points at rates that were accustomed to seeing and some others are.
<unk> are essentially dishing engaged them from the platform and that's resulted in the churn from a year ago cohorts available was mentioning.
Okay. Thank you.
Thank you. Our next question comes from the line of Hugo I Runion with Wedbush Securities. Please proceed with your question.
Hey, guys. Thanks for taking the question.
Maybe first is there any way to think about you know.
To be able to kind of parse out the impact schrum can reopening.
First is the market volatility that you're seeing in terms of.
Engagement and conversion to paid subscribers and then the second question talked about marketing and kind of what you're doing but within that the testing.
Chris They go a little bit more about what you're learning, maybe a little bit more color on specifically, what youre doing and do you expect that to impact as we move forward and hopefully things start to stabilize a little bit more.
I can't give me I can take that one and then you can take the second one.
Yeah, that's exactly what I was gonna deal I'll go first if that's okay.
Uh huh.
As far as the testing goes well.
We had a long period of bull market activity, where people were chasing Cryptos Alpha Microcap Securities just Gogo Bull market type activity and so we saw that.
In both what our editors were recommending to try and take advantage of the environment and also what our readers, where we're looking for and responding to.
Both which helped propel us up over the past couple of years.
Now things feel different in the investing environment I think everyone would agree to that you've seen a big drawdown in the NASDAQ and the tech trade.
And and a move towards safer investments, where it's where you're either escaping the volatility or youre waiting to see whether a recessionary type of environment and more bull market strategies, you're gonna take hold and so what we're doing internally is we've got editors who are assessing that choice.
We're dealing with it in turn and each editorial team has different they've got different strategies around what they do in that environment.
And then of course, our marketers also we're trying to see what resonates with readers at all out of our price points around those themes.
So what we are testing both of editorial and marketing levels are messages up.
Commodities gold real estate inflation protection.
Income investing some of the list that I was describing earlier in my comments.
So when I when I describe what we're testing its back.
We're trying to see based on the editorial conviction around the ideas what messages resonate with readers and that's why I described.
The behavior that we're seeing amongst the readership like I am which is there's a little bit of hesitancy amongst the lower priced subscribers that we've got as they assess.
What they want to do around the investing strategies and as the editorial teams do too.
So we'll continue to do that that's why we've left the spend go a little longer than we ordinarily would because we think the market environment.
It requires it and we want to test around it to make sure we're.
Optimizing our marketing metrics.
Okay that helps.
Yeah.
And healthier.
Your first question.
If I'm trying to parse the effect between.
Sort of what I would call. It post COVID-19 engagement dynamic right that's been going on for about a year as contrasted to <unk>.
Now this new first quarter 'twenty, two development, which is just all the market volatility interest rates inflation war and all that.
Certainly we have some internal calc that have.
Sought to do that the metrics that we use that arent really disclose but I'll try to give you some directional insight to think about it this way.
We talked with Devon around some of the the fact that some of our key metrics seem to have been bottomed bottoming right. The last three four quarters a lot of these key metrics have kind of formed a base. It feels like if you average them and you compare them to the first quarter metrics a lot of them are pretty similar gross adds churn rate all those things are stabilized and landing page visits seems to have.
Stabilized.
So that's all good but what happened in the first quarter, our billings in the fourth quarter were roughly $151 million our billings this quarter were $136 million.
So.
If engagement was relatively similar.
Similar between Q4, and Q1, which it was it was down 2%, but nothing that materially.
You might then draw the conclusion from that that that Delta right that step down from Q4 to Q1 is largely the impact of what we're seeing this new dynamic the sort of individual investor in decision right there.
Decline in the conversion rate that I mentioned in my commentary the 16 basis point decline.
And landing page to convert in paid customer conversion rate that really is due to what we believe is this first quarter dynamic because it turned on a dime in February .
When inflation went through the roof in the war started.
And rates went from.
100 plus basis points.
So I would look at that Delta between Q4, and Q1 and our billings as a good relative indicator of the immediate impact of that volatility.
Our customer base in particular, it's the less seasoned customer base, it's like the ones that have not yet spent that $600 with US right. Those are the ones that are being most hit and being sort of hub just pausing right and I think that's how I would think about the delta between the Covid effect that we've been seeing for several quarters and now this new effect here.
In terms of delaying purchases.
Yeah.
Alright, Thats really helpful color. Thanks, It's Matt.
Yeah.
Thank you. Our next question I'm, sorry, if you'd like to ask a question as a reminder, please press star one on your telephone keypad. Our next question comes from the line of Jason <unk> with Oppenheimer. Please proceed with your question.
And I've got three questions and I'm, a little surprised no one's asked so I mean, it's clear that you guys really can't forecast the business and so not criticizing you for not giving guidance right now, but you know what you can do is manage to a minimum level of adjusted free cash for the year and it seems as if the market wants to hear based on.
You know the way other companies have reported market reaction all of that so is there any reason why you can't to commit you can't commit to a minimum level of free cash flow for the year given the leverage you have around sales and marketing. So that's question one question two.
It seems like we're hearing on the call a little bit less of a focus of this marketing ROI.
And.
Is there more of a shift of marketing dollars to tech and product I mean is that something we shouldn't be seeing over the next two years given your prepared remarks.
And it kind of begs the question should you be centralizing marketing more and removing it more away from the brands and then I guess the direct question is your ability to reduce G&A from current levels and your economy tie that back to the point about adjusted free cash flow. Thanks.
Yeah.
Thanks, Jason.
Yeah.
Where to begin.
So I'll just take it from the top.
Your first comment about committing to a minimum free cash flow margin, which we're not doing that.
<unk>.
We decided not to give guidance and I explained that in our last quarterly call. We think that's the right thing to do for the management of the business and that dovetails into both aspects of the rest of your question.
In other words, what we tried to do and you're right, we do have leverage and control.
Round, our marketing spend it is a big part of our expense on the P&L.
But what we have done as I described earlier was we extended some of that testing that we do here because we're trying to.
Peel out different investing strategies based on what the editorial teams, you're seeing and what they're thinking.
And we do that as time goes by and you saw that from Q4 to Q1.
We will continue to do that throughout the year.
We don't know is what the customer acquisition costs will be and what the.
The AD platforms will be charging now or in the future and so we're continuing to manage the business. The way, we have which is when the market makes it inexpensive for us to acquire customers, we do more of it and when it gets very expensive, we do less of it and.
And you've seen that over the quarters that are followed since we turned public I think that's very consistent with how we manage the business and I think we've been consistent about the messaging around that.
In terms of marketing ROI of our marketing teams are doing what they typically do which is.
We're testing those themes around different investment strategies and different products and they're trying to see what's going to resonate with a subscriber base depending on what's going on in the markets and as we've described at length. What we're seeing is hesitancy amongst the lower priced.
Subscribers that we've got to step up to higher price points as they try to figure out what theyre going to do in their portfolios going forward given the volatility that they're seeing and so our marketers are constantly testing that but they are letting the marketing spend are longer than they would because they tried to as they try to feel out what are some strategies people are going to end up pursuing.
And want to subscribe to.
And around G&A I would just echo what Dan was describing earlier, which is.
We've been doing this for a long time.
I feel like we've touched on this a bunch, but we've got a 22 year operating history and what our operators are experienced at doing and constantly trying to optimize.
There's a short term results versus our long term goals.
If we wanted to we could we could eliminate the marketing budget altogether and we can do massive layoffs. If that's what we wanted to do to maximize profits, but we don't think that's in the best long term interests of our business or for our investors and.
And so we don't do that instead, what we do is we pursue.
<unk> I'm trying to bring on subscribers.
Folks that who we think will be the right types of subscribers that will be interested and committed to learning about investing.
We believe it's a lifelong pursuit.
And that will move along in our environment the way our customers have historically.
In other words that they'll come on as free move up to a different price points as they explore different investing strategies and as they try to navigate the financial markets.
And we try to balance that with some of the things we're trying to do strategically.
Yeah.
To provide for long term growth for the business things like I described earlier, the Pam market wise platform data science.
And some of the other things you're doing around M&A and people.
So that's what our operators are doing and that's what I want them to do I think that's what investors would want them to do which is manage the business for the long term.
Prosperity of the shareholder base as well as our subscribers.
I have no clue.
I know, we're going along where I was simply asking about G&A.
You know you just answered the question about sales and marketing I'm, just saying again, given that again Europe public companies do you have that you shouldn't care I guess about your public shareholders, but the market wants to see more discipline on the cost side that is what the message has been given to every single company. So the question is do you have.
The ability to get your G&A down if you wanted to do this year.
Okay.
Oh, yes, we do.
Yeah.
Okay. Thanks, Jason look I think I mentioned earlier that the marketing expense one thing and we're looking for efficiencies on the G&A side for sure.
Well when we should always be doing that right, but that that's going to there's going to be a bit of a lag to that right now we want to make sure that we keep the infrastructure that we built over the last few years. So we can maximize on the market opportunities. What we're seeing right now is creating massive amount of new investment possibilities here and probably not in the too distant future and what Youre seeing is such a.
Urge across so many different things, there's going to be a myriad of opportunities and ideas that are going to resonate with folks. We are in here is a lag right.
In a time lag between a shock of whats happened new ideas being propagated and then those resonating with folks and then buying that will happen right is it going to be 30 days or 60 days I don't know, but it will eventually happen but to your point, yes. We are looking at G&A and we're absolutely looking for efficiencies there and and you should also expect that our mark.
<unk> two are looking for efficiencies the unit costs are high.
One of the data science projects, we're working on is related to that the terminal that Mark mentioned also should over time lead to more efficient.
Unit acquisition costs Theres, a lot of technologies that are being rolled into that platform that we think will help do that provide some synergies so overtime marketing spend should get more efficient we should be able to reduce our own unit cost despite market forces and.
And we are not at all let's focus on ROI I'm not sure how that.
But that's absolutely not true we couldnt be more focused on marketing ROI, yes. The per unit costs are high that's one thing that's the cost side of it. The revenue side is what produces the return on what we're seeing is a delay in the revenue side, because I think the shock the individual investor is in right now which.
I think it's understandable given everything we've talked about.
Okay. Thank you sure if that helps or not.
Thank you. Our next question is a follow up from the line of Alex Kramm with UBS. Please proceed with your question.
Guys, sorry, I apologize for dragging out the call just very quick given maybe the the challenge to upsell people to paid subscribers right now and you're clearly gaining a lot of new subscribers and the numbers have obviously been dealing with over the last couple of years.
Are you, giving any thought about maybe monetizing that free cohort a little bit more are there. Other other you know business opportunities you can do that with that valuable customer base at all or is that too early to maybe shift strategy here.
On on that side.
Thanks, Alex.
I'm not sure what youre, suggesting in terms of monetizing the free base.
So far what we've done is stick with our strategy, which is provide them high value content.
That we think is value add compared to other stuff that can find out there around investing strategies.
And then and then put content and offers in front of them on the paid from a patent standpoint.
We will find attractive that's that has been what we're doing.
We've been doing and that's what we plan on keep doing but I'm not sure if that gets to your question around what else, we would do with that group Yeah, I guess that's it.
So as far as any here, but obviously theres other models in the industry right now.
Companies that are more focused on advertising et cetera, and I think maybe you could do that to some degree very little but.
You know clearly you have a committed free subscriber base that is engaged I think you said it earlier engagement on your website, there's still a pretty healthy right. So clearly people that are interested in the financial markets, maybe for whatever reason, they're not really interested in and in spending hard dollars for content and you know that's a prerogative. So just.
Wondering if you think that that customer base or potential customers could be monetize more but again. This is not your business models of fall I'm, just wondering if you're spending more time on thinking about things like that.
Yeah, we do I mean, we do have a modest amount of AD revenue.
In our business largely as a result of legacy activity that happened in an acquisition that we've done.
So that's fine we don't have really anything against it but to your point that it really hasn't been our business model up until now we think one of the reasons why the free user base keeps coming back to our content.
To a large extent, it's not it doesn't look like everything else that you find out there having said that that doesn't mean, we have a categorical.
Ban on AD revenue, it's just not something that we really pursued and we're getting great emphasis so far.
Yeah fair enough just figured I'd check thanks again.
No problem.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Arnold for any final comments.
Yeah. Thank you I just wanted to thank everyone for their participation today and your interest in market Wise I Hope you have a great day.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.