Q4 2022 Marketwise Inc Earnings Call
Speaker 2: Thank you for standing by and welcome to the MarketWise fourth quarter 2022 earnings call.
Speaker 2: During today's presentation, all parties will be in a listen-only mode.
Speaker 2: Following the presentation, the conference will be open for questions, with instructions to follow at that time.
Speaker 2: As a reminder, this conference call is being recorded.
Speaker 2: I would now like to hand the conference over to Jonathan Shanfield, Vice President of Investor Relations at MarketWise. Please go ahead, sir. Jonathan Shanfield, Vice President of Investor Relations at MarketWise.
Speaker 2: Thank you, operator, and good morning. Thank you all for joining us on today's conference call to discuss MarketWise's full year and fourth quarter financial results. With me on the call today, we have Amber Mason, our chief executive officer, Stephen Park, our interim chief financial officer, and Lee Harris, our senior vice president of financial planning and analysis. Thank you for joining us today.
Speaker 2: During the course of today's call, we may make forward-looking statements including but not limited to statements regarding our guidance in future financial performance, market demand, growth prospects, business strategies and plans, and our ability to attract and retain subscribers.
Speaker 2: 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.
Speaker 2: Actual results 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 investor section of the company's website.
Speaker 2: 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. I'll turn the call over for Amber.
Speaker 3: Thanks, John , and good morning, everybody. Welcome to our fourth quarter of 2022 earnings call. I'll get to the numbers in a moment, but since this is my first official public appearance as CEO , I'd like to take a few minutes to introduce myself, tell you a little bit about my views of MarketWise, and show you some of the opportunities that I see ahead for our company and all of our stakeholders.
Speaker 3: I've been in this business for 17 years. I've worked in all levels of the organization. I've been a proofreader, an editor, an analyst, a copywriter, perhaps not a very good one, a publisher and vice president of business development. I was then promoted to Chief Operating Officer during Steve Sugarud's stint as interim CEO .
Speaker 3: My experience in a market-wise ecosystem gives me a unique and broad perspective that I bring to the role of CEO . Importantly, I bring an operator's perspective to my role. During my career, I transformed two of MarketWise's businesses. The largest was Legacy Research Group, where I served as co-CEO for more than five years. My partners and I built Legacy by merging three separate newsletter businesses.
Speaker 3: Each business had a different culture, different leadership, and different strengths and weaknesses. The first year was a huge challenge. We had to integrate the team, right-side compensation, determine the appropriate people and products, and exit those businesses that were not a long-term fit. And I'm very proud of our results.
Speaker 3: We delivered a seven-fold increase in profits in just our first year. And over the next few years, we built Legacy into MarketWise's largest business.
Speaker 3: Now, as CEO of MarketWise, I'm not on the front line, but I know what it means to be in that role, and I understand how all of the pieces of the publishing business fit together, including marketing, copy, editorial, and operations. I have years of experience acquiring, retaining, and motivating key talent within our publishing businesses.
Speaker 3: and I've worked side by side with all of the remarkable individuals currently running our affiliates. I've also been on the inside of our acquisition machine, a key driver of MarketWise's extraordinary growth.
Speaker 3: Looking forward, my goal is to position the business for its next phase of growth and unlock the enormous value that exists right now in our shares.
Speaker 3: I'm currently working with all of our executives to do a deep dive into our centralized operations to understand how we can improve our efficiency. I'm working with the affiliates and our business development team to find opportunities to grow in this more challenging environment. I'm exploring ways to deploy our capital for the benefit of shareholders.
Speaker 3: Next time we talk, I'll cover all of that in more detail. For now, let me share what I've found so far and my priorities for immediate improvement at MarketWise.
Speaker 3: First, my overall focus is on serving our subscribers by producing great products with quality themes and investing ideas. This is what has made us successful over time and will continue to do so. So I'm revamping our system for tracking the performance of our analyst recommendations on specific investments, which we use to evaluate talent.
Speaker 3: These results provide the information necessary to promote publications, investing themes, and our star analysts.
Speaker 3: as well as provide a kind of report card that will allow us to quickly pivot or even retire products when they are underperforming.
Speaker 3: Second, we must improve the financial performance of the company. We've already reduced our overhead and direct marketing spend. We'll get into more specifics about what we did last year in a bit. This year, there's more to do. We are aggressively looking for further expense reductions and opportunities to improve our overall efficiency. For example, as we transition from a private partnership to a public company, we are looking
Speaker 3: we incurred a huge amount of professional fees. As we move toward the second anniversary of our transaction, we are working to bring much of that expertise in-house, which will create significant data.
Speaker 3: Third, talent acquisition and retention are incredibly important parts of our business. Our stellar analysts, copywriters, marketers, and operations staff are what make this company successful.
Speaker 3: We are always on the lookout for new talent with new ideas and energy to add to our team. Fortunately, we have lots of ways to do this. We can hire through acquisitions, through the efforts of our publishers who are always looking for new voices, and even from our subscriber list.
Speaker 3: Some of our most successful employees were readers before they joined us.
Speaker 3: Fourth, our public shares have not performed the way we'd like. We've got headwinds, the overall stock market condition since we've gone public has hurt our share price and our billing, and we continue to get lumped into the post-bac universe of troubled companies, despite the fact that we're one of the few who have maintained profitability and positive cash flow.
Speaker 3: Obviously, we need to improve our operating performance, which I already discussed. We can also look to the company's long history of generating cash and rewarding our shareholders.
Speaker 3: Fifth, I'm directing an effort to find a new Permanent Chief Financial Officer, ideally one with public company and capital markets experience, who can partner with me and my staff and guide us as we mature as a public company. This effort is underway and I'm hoping to introduce someone to you very soon. In the meantime, I want to thank Lee Harris here and Steve Park for their incredible work.
Speaker 3: Steve just joined us in the past month and he's been a clutch addition to the team.
Speaker 3: And finally, I also plan on bringing in a Chief Operating Officer to backfill the role I had briefly prior to this one. Creating a talented and experienced COO is critical to delivering improved operating
Speaker 3: I look forward to expanding upon our initiatives and our first quarter earnings call, and I'm very excited about what the future holds for MarketWise. Turning to our results, the market dynamics that began in early 2022 continued in the fourth quarter.
Speaker 3: Investor engagement fell as volatility and economic uncertainty increased. For the full year, we generated $512.4 million in revenues measured on a gap basis, a decline of 6.7% as compared to the prior year. Billings declined 37% year-over-year to $459.5 million, and our adjusted cash flow from operations was $59.3 million, down from $197.1 million for all 24 years.
Speaker 3: our target of approximately $74 million in total savings, $40 million from direct marketing, which was realized over the second half of 2022, and overhead reductions representing $36 million of annualized run rate savings. It's important to note that these savings are on a cash basis, and a portion of them are not immediately reflected in our GAAP results.
Speaker 3: that will be recognized over time.
Speaker 3: Because we took action, we have realized significant improvement in our margins since last summer.
Speaker 3: Specifically, in the first half of 2022, we collected $254 million in billing and recognized $28 million in adjusted CFFO, resulting in an adjusted CFFO margin of 11%.
Speaker 3: In the second half of the year, even though billings declined to $206 million, we recognized $31.5 million in adjusted CFFO for an adjusted CFFO margin of 15.3%.
Speaker 3: Additionally, our adjusted CFFO margin for fourth quarter 2022 improved to 18.2%. This margin improvement is a direct result of our cost-cutting initiative, and we continue to focus on our margins this year.
Speaker 3: Beyond our financial results, the team had many notable accomplishments in 2022, including the introduction of 49 new publications to the market, covering a range of relevant investing topics such as healthcare, options trading strategies, and energy. In addition, as we strive to be more efficient, we retired 33 publications that were not as effective.
Speaker 3: or were focused on themes that did not reflect the current market.
Speaker 3: We also focused on integrating some of our technology products with our research brands to further enhance our product offerings. In 2021, we brought the Chaikin brand to our platform and experienced tremendous success and growth in billing. Similarly, last year, we successfully marketed our altimetry brand to a much larger audience. As a result, our most recent marketing campaign for altimetry...
Speaker 3: proved to be their most successful in terms of billing over the last two years.
Speaker 3: Additionally, we aligned another of our technology brands, Tradesmith, with our investor-place business.
Speaker 3: Tradesmith, our leading financial technology and quantitative systems brand, began as a simple way to track portfolios using trailing stocks and has evolved into a powerful suite of risk management and portfolio analysis tools. This suite of tools features volatility based buy and sell alerts, stock screener tools,
Speaker 3: robust rating system and a very successful options trading tool, all of which further empower the self-directed investor.
Speaker 3: Our experience with these recent combinations has proven that offering technology products to our subscribers along with our content brands leads to higher average revenue per user for ARPU and better subscriber retention. As we go forward, we look to offer more quantitative tools and products with our investment research, both through our existing brands as well as in our M&A efforts.
Speaker 3: We also took a meaningful step to improve our capital structure during 2022. In the third quarter, we completed a tender offer to exchange all outstanding warrants for shares of Clap Day common stock.
Speaker 3: Through this exchange, we retired a total of 31 million outstanding public and private warrants. As a result, we issued approximately 6 million Class A common shares, which increased our public shares by approximately 26%.
Speaker 3: This increase in shares added to our public float and our trading liquidity will be less than 2% diluted to our total shareholder base.
Speaker 3: From a corporate finance perspective, we believe eliminating the warrant simplifies our capital structure, making it easier to execute future corporate financing activities.
Speaker 3: We know that individuals are the key to the success of our organization and we can continue to recruit talented analysts and teams to join our organization, including those coming to us from Rewind and Media Transactions and we look forward to their contributions.
Speaker 3: The overall market for M&A remains attractive and we continue to look for ways to enhance and further combine editorial teams, software and technologies, as well as looking to add existing businesses to complement market-wise.
Speaker 3: However, we also realize it is important that even in a period of active M&A, we continue to be diligent in terms of evaluating risk, strategic alignment, and determining proper valuation and pricing. And while we continue to be active and interested in certain opportunities, we are also committed to sound financial transactions with acceptable levels of risk in return for our shareholders.
Speaker 3: Looking to the year ahead, we believe we are in an advantageous position to capitalize on opportunities as they unfold.
Speaker 3: Now, let me turn the call over to Steve to discuss the financial results. Steve came on recently as our Interim Chief Financial Officer. Steve is an accomplished financial executive with significant experience in the CFO role across many companies, both private and public. He has a history of driving change in accounting and finance organizations, building teams, improving processes, and implic-
Speaker 4: Thanks Amber, and good morning everyone.
Speaker 4: As Amber described, market factors that impacted our business in the first half of the year continue to persist throughout the third and fourth quarters.
Speaker 4: The U.S. economy continues to experience higher inflation, the uncertainty of a coming recession, and the impact of increasing interest rates on equity markets as they remained in bear territory during the quarter.
Speaker 4: Not surprisingly, we continue to see retail and self-directed investors hesitate to engage in purchasing new investment research as market volatility remained elevated.
Speaker 4: As a result, we experienced lower engagement levels during the quarter and reduced certain direct marketing expenses, consistent with our cost savings initiative that we began in the second quarter of 2022.
Speaker 4: In fourth quarter 2022, our landing page visits were approximately 26 million, down 5% from third quarter 2022 levels.
Speaker 4: Similar to prior quarters, this resulting declining landing page visits had an impact on both billings and new subscriber acquisitions this quarter. However,
Speaker 4: our overall conversion rate is exactly the same as in the prior quarter.
Speaker 4: In contrast to full year 2021, our 2022 landing page visits were down approximately 30% and our overall conversion rate declined by approximately 5 basis points.
Speaker 4: Our current subscribers have also slowed the pace of buying additional subscriptions.
Speaker 4: as a result of these macroeconomic conditions, as it is taking somewhat longer for our customer to move through their subscriber journey with us than in the past.
Speaker 4: However, even in this slower paced environment, our high value and ultra high value subscribers continue to purchase additional subscriptions leading to an all-time high in active cumulative spend by all subscribers.
Speaker 4: We believe this is another indication of customer satisfaction and that these subscribers find value in our products which is why they remain with us for the long term.
Speaker 4: Turning to the financials, gap revenue was $127.7 million this quarter, compared to $146.7 million for the fourth quarter of 2021, a decrease of $19.0 million or 13%.
Speaker 4: The decrease in revenue was driven by a $14.7 million decrease in term subscription revenue. The gains were $100.9 million compared to $151.4 million for the year ended.
Speaker 4: for the year-ago quarter, a decline of 50.5 million. We believe the decrease is due in large part to reduced engagement of our new and existing subscribers.
Speaker 4: The challenges that emerged in the first half of 2022 continued throughout the remainder of the year, which we believe further contributed to prospective and existing subscribers delaying their purchases.
Speaker 4: Sequentially, our $100.9 million in fourth quarter billings decreased 4.2 million, or 4% from third quarter 2022.
Speaker 4: This decrease was primarily driven by a 5% decrease in landing page visits as we maintained the same conversion rate to the prior quarter.
Speaker 4: Approximately 35% of our billings came from membership subscriptions.
Speaker 4: 63% from term subscriptions and 2% from other billings in fourth quarter 2022.
Speaker 4: This compares to 45% of our billings from membership subscriptions, 54% from term group subscriptions, and 1% from other billings in fourth quarter 2021. As we disclosed in the middle of 2022, and as Amber touched on earlier, we have been actively working to reduce expenses.
Speaker 4: and executed on a cost reduction initiative throughout the second half of the year, targeting $74 million in total expense savings.
Speaker 4: This came in two parts. First, we anticipated reducing overhead by an annualized amount equal to approximately $37 million or 15% of budget overhead.
Speaker 4: As a result, and through the fourth quarter, we achieved approximately $30 million of annualized overhead reduction as compared to the run rate in first quarter 2022. Additionally, we identified and realized $6 million in savings related to 2022 eliminated budgeted overhead spend for the year.
Speaker 4: bringing our total annualized overhead savings to $36 million. Second, we targeted an approximately $37 million reduction to direct marketing expenditures in the second half of the year, compared to the first half of 2022.
Speaker 4: During the second half of 2022, we reduced our total direct marketing spend by $40 million, or approximately $6.6 million per month, which exceeded our target by approximately $3 million.
Speaker 4: I should remind everyone that marketing is our most significant variable cost and our use of direct marketing and the related cost is dependent on market factors.
Speaker 4: If per unit acquisition costs improve and the market dictates, we may decide not to cut marketing spend to the same degree going forward and instead focus on subscriber acquisition.
Speaker 4: In total, through the end of the year, we successfully achieved our identified cost savings targets for both overhead and direct marketing.
Speaker 4: While we are pleased to have realized these savings, we continue to look for additional savings where appropriate and improve efficiencies as we work to protect both margins and cash flow. The cost of revenue was $14.4 million this quarter compared to $17.6 million for the year-ago quarter, a decline of $3.2 million.
Speaker 4: This decline was driven primarily by a decrease of $1.2 million in credit card fees, a $1.3 million decrease in outsourced contract and customer service fees, and a $0.4 million reduction in salaries and related benefits expense.
Speaker 4: Sales and marketing costs were $50.4 million this quarter.
Speaker 4: to get to 65.7 million in the year ago quarter, a decrease of 15.3 million.
Speaker 4: This decrease was primarily driven by a $20.2 million decrease in direct marketing expense related to our cost production initiative.
Speaker 4: partially offset by a $5.3 million increase in the amortization of deferred contract acquisition costs.
Speaker 4: General and administrative costs this quarter were $34.9 million as compared to $31.8 million in the year ago quarter, an increase of $3.1 million.
Speaker 4: The increase was primarily driven by a $7.7 million increase in 7s related to Executive Compensation contract expense and a $1.3 million increase in professional fees.
Speaker 4: This was partially offset by a $3.3 million decrease in employee compensation, a $1.3 million reduction in donations, and a $0.6 million reduction in travel expense.
Speaker 4: That income in the fourth quarter of 2022 was $4.3 million compared to $8.6 million in fourth quarter of 2021. We recognize stock-based compensation expenses of $1.9 million in fourth quarter of 2022 as compared to $2.3 million in fourth quarter.
Speaker 4: Adjust its CFFO was $18.4 million in fourth quarter 2022 compared to $5 million in the year ago quarter.
Speaker 4: with the increase primarily due to moving 2022 annual bonus payments into the first quarter of 2023.
Speaker 4: and the reduction of both overhead and direct marketing expense offset by a reduction in billings.
Speaker 4: Adjusted CFFO margin was 18.2% in 4th quarter 2022 as compared to 3.3% last year.
Speaker 4: However, adjusted CFF over margin improved from 11% for the first half of 2022 to 15.3% for the second half of the year as a direct result for our cost-cutting initiative.
Speaker 4: we continue to focus on margin improvement in 2023. Our paid subscriber base declined from 972,000 at the end of fourth quarter 2021 to 841,000 this quarter, a decline of 13.4%, driven by a decrease in overall consumer engagement.
Speaker 4: However, we increased our free subscriber base by 2 million during the course of 2022.
14.6% increase. ARPU declined to $519 this quarter from $742 in fourth quarter 2021 driven by a 37% decrease in average trailing four-quarter billings combined with a 10% decrease in average trailing four-quarter pages.
and the impact of the Federal Reserve's recent and future interest rate decisions.
Before I turn it back to Amber, I want to emphasize that we are pleased with the results of our cost reduction initiatives and improved margins. We continue to look for further opportunities to create efficiencies both in operating and overhead reductions, where we feel we can find meaningful improvements while maintaining the strength of our core businesses.
Thank you Steve. To conclude, I see great opportunity ahead for MarketWise and most importantly improving our operations and performance is largely within our control. We will focus on increasing our marketing efficiency, recruiting extremely talented individuals, and delivering high quality research to our subscribers.
We are committed to operating the business in a clean and efficient manner to ensure we have the right people in the right role and to make sure that our marketing spend is maximally effective.
Finally, we're also looking to hire a CFO with deep public company experience to partner with me on a corporate level and a COO to ensure we attain operational excellence where I see much opportunity. Since our start in 1999, our success has been achieved by focusing on three core principles which are at the foundation of our business. We deliver great investing ideas to the retail investor. We deliver these ideas written in a way that is easy to understand and execute.
and we treat our subscribers the way we would want to be treated if the roles were reversed. Central to this operating philosophy is that we consider all subscribers to be potential lifelong partners. And it is this long-term relationship that provides immense value and a stable base of recurring revenue.
These principles have informed our growth and leadership over the past 20 years and will continue to do so in the future.
The actions we have taken throughout the year remain in line with that simple operating philosophy as we continue to manage the business for the long-term benefit of our shareholders, subscribers, and employees. I will now turn it over to the operator for your question.
Thank you. Ladies and gentlemen, at this time we will be conducting a question and answer session.
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Our first question comes from the line of Jason Helfstein with Oppenheimer. Please proceed with your question.
Thanks and congratulations on the new role, the CEO title. So three questions. The first. Um,
Just can you help read your comments around the first quarter outlook? It's not consistent with the Schwab trading data, which is showing kind of a rebound in trading activity. I think it was like minus five in the fourth quarter, and I think it's trending plus 10 in the first quarter. So...
If there's a disconnect there, why do you think that? And then...
If that's not a good indicator of your business, how should investors think about that? The second question, marketing efficiency was flat in the quarter sequentially, the percent of bookings. Do you expect this ratio to improve over the next few quarters or is this more of something we should think about for 2024? And then last question, got a CFO question. He said there was...
7.7 million of severance, which is obviously one-time expense, 1.3 million of professional fees, not a one-time expense but something you expect to improve. Can you give us those numbers for the full year of both severance and professional fees? Thank you.
Hey Jason, it's Lee Harris. I'll take the first two of those. As far as the DATs question, so we see DATs trending at plus 9. I think you said maybe plus 10. Our landing page visits are very much tracking in line with those.
with the issues that have surfaced in the banking industry of late. You know, those rates are just down, right? And they have modestly improved in the last couple of weeks. I wouldn't call it a trend just yet, but obviously we're keeping our eyes on that.
So as you know, conversion rates are critical in terms of us achieving the level of billings that we want to see. So that is why there is a little bit of a disconnect between the perhaps somewhat good news on the landing page visits versus what we're seeing in terms of conversion.
In terms of the marketing efficiency, you are correct. Our rates are fairly flat from the third quarter to the fourth quarter. As we talked about at length, we have cut our marketing spend back significantly. And those numbers on a cash basis were fairly flat between 3Q and 4Q.
we'll continue to obviously keep eyes on that. And we're not gonna spend money where we're not gonna get a good payback, right? So until we start seeing some trends that move in our favor in terms of the conversion and the overall economy, we will continue to spend kind of at the rate where we are today.
With regards to your question on the 7.7 million worth of severance, you're correct, that is a one-time charge, and we don't expect that to occur, obviously. That was the contractual portion of our responsibility to our former CEO . With regards to the professional fees of 1.3 million, we'll consider the Olympic preventive
I'm asking for the full year 2022. So was there any other severance, just so people kind of think about their models, was there any other severance in the first three quarters?
if we wanted to come up with a better number. Yeah, Jason, if you look through our prior, I think it's in our third quarter, when we initiated the cost reduction plan, we did delineate some severance, which was one time that was related to the cost reduction program itself.
So I can't remember, I want to say it, I don't want to say the wrong number, but I know it's in our prior release.
Okay, so it would be those two numbers. Okay. Yeah. And we'll follow up. Do you want to give what the professional fees were for all of 2022?
It's something we haven't provided that way in the past. You know, it's something that I know Amber can talk to, but she's looking at diligently, because there's a lot of things that came about and kind of were layered on along with our public transactions, and as she mentioned in her comments, and I don't mean to speak for you, Amber, but that's something we're focusing on now, whether it's to bring in-house or to kind of do away with.
in order to kind of right size those costs.
Yeah, it's a ripe opportunity. And you know, as we get to putting that kind of more into a form and Amber gets through a strategic review, I think we may have some more to provide that later.
question comes from the line of Devin Ryan with JMP Securities. Please proceed with your question.
Hi, this is actually Michael Falco standing in for Devin. Good morning, and I'll just reiterate Amber, congratulations on the new role. I wanted to start on customer engagement and the relationship between free and paid subscribers. As you noted in the prepared remarks, paid subscribers have declined over the last year, and free subscribers are continuing to grow.
Obviously, macro volatility is a weight on engagement, but how are you thinking maybe broadly about the strategy and any potential new content or products to both reach new audiences and also convert a greater number of free subscribers into paying customers? I think our free subscribers are responding the same way as folks who aren't on our list at all. There's reduced engagement from them. We're looking at our...
inspire them to take out their wallet. And we're testing all kinds of different ideas every day among our affiliates. And when we find that, we'll see higher conversion rates from our free list, as well as increased engagement across the board.
Hey Mike, I'd also say, listen, there's two things we can do. We can control our content, and we control our themes and our writing. What we can't control is what we're seeing going on around us. And we hate to fall back on the macroeconomic factors, but the market hasn't been conducive for retail investing. We're seeing trading stats that are starting to look better in our landing page visits, as Lee I think outlined.
follow that, but it's that second step of getting people to be comfortable to make the second part, the final purchase, which has lagged a little bit. And so we're, you know, given what's happened over the last three weeks in the financial markets, it hasn't been a help. We're starting to see some, I think again, Lee mentioned this, we're starting to see some traction.
But that's really kind of market dependent a little bit. So those two things together are balanced. We're trying to control what we can control and perform to the best of our ability to provide that opportunity. And then we've got to get a little bit of favorability in market sentiment and in the ease of investors if you will to help us out on the other side.
Sure, that makes sense. And then just wanted to double click on inorganic growth opportunities as well. Obviously, you did a small acquisition in the fall and you noted the overall market for M&A remains attractive. I guess what does that pipeline look like? What kinds of opportunities are you seeing and how should we be thinking about the appetite for possible strategic growth opportunities?
and we're...
We're looking for ways to deploy our capital to reward shareholders and that will mean bringing in accretive transactions and also possibly looking at other strategies like buybacks and dividends.
Great, I'll hop back in the queue. Thanks. Our next question comes from the line of Alex Cram with UBS. Please proceed with your question. Hey, good morning everyone. Just coming back to some of the comments you made for the first quarter, obviously helpful, thank you. But…
In the interest of transparency with one day left in the quarter, just wondering if there is a little bit more numbers or ranges you can give how we are tracking in billings or maybe on the cash flow generation of the business. Again, one day left. I feel like the quarter.
people coming but they're not converting at the same rates. Okay, so to think that we're going to be at the same levels given what we've seen is probably not 100%. So we're seeing some decline in some in conversion, so that transfers into billings, etc. We've been at we've obviously been
active on the cost efficiency front. We continue to be active.
obviously looking to maintain cash flows and profitability. We feel confident that we're going to be able to do that. Without getting too specific, I think the general themes that we've seen and I just mentioned a moment ago continue to impact our business. It's not like there's been a rush of paid subscribers as you saw.
and it's not like it's been a rush of market sentiment in one way or the other, and we continue to get hit, just like everybody on this call, with volatile news, divergent themes, whether it's from the Fed or from the markets or from the banking world, and we're reacting.
So I think I think that could give you a Tone right and just to reinforce what I said earlier You know we continue to keep our marketing spend limited which helps us stay profitable it helps us generate cash flow and And you know we're continuing to look for further Expense reductions in ways we can continue to just battle into that while we weather the storm so to speak
for the full year. Very much hear the message of controlling what you can control. So again, I know you don't provide guidance, but as you think about the full year, in particular on the cash flow and margin line, I guess
depending on how the environment shakes out, is there a certain minimum margin or a certain minimum cash flow that you think you can deliver no matter what? I know again it's a fluid environment but obviously you're taking all the necessary steps. So you hopefully have something in your mind where you think you can get to no matter what. So just wondering how you think about the full year from that perspective.
So I don't think we can commit to a number, but I can tell you that we weren't pleased with last year's results and that we are absolutely working to do everything we can to improve over last year. And even in the worst of times, this business is cash flow positive. So I expect that we'll be working to...
have that cash at the end of the year too. And you know Alex, you know part of our business and we talked about it before is that there's a significant amount of recurring revenue, right? So people have been with us for a long time, our members, subscriptions, they buy and buy and even though we've seen some decrease in the in the rapidity or the velocity of their buying this year, we're still seeing that recurring. So if you look at like our chart that's in our investor deck,
It kind of shows what you can think about as almost a minimum level. And then of course, there is more that we get every year on new subscriptions and memberships. We don't want to commit to a number obviously, but we feel comfortable with a certain level of recurring revenue which is a key portion of our business that is still going to be there. And you know, in margins as I would just say, as Amber said, you know.
better than where it is today. You know, there's always putz and takes, we know that.
Maybe just one last one on the same topic because you just highlighted, I think you were referring to the chart of all the different cohorts. I mean, when I looked at that one just optically, I mean the 2020-2021...
cohorts obviously were huge and you're kind of working against that churn I guess. Again when I want to compare though that cohort it's just still looks like there could be more churn to come maybe out of normal so when you look at those last two years of new customers paid customers that you gained.
Do you feel like that has stabilized now or is that still the biggest worry you have in terms of maybe incremental churn that you need to work through before you can actually start growing again?
Hey Alex, we think that we have already processed through the term from those largest cohorts.
study the churn and those cohorts are now behaving exactly like every other cohort before them and since them in terms of what percentage of them is still left on our list. So I don't expect there to be an outsized churn coming from those cohorts. We'll always have
some seasonality to our churn because we have certain campaigns that are, say, a one-year term or a two-year term, and when they renew, you could have some surges in churn. But generally speaking, our churn has been pretty stable. We saw heavy churn in the first quarter of this year, which was the one-year anniversary of our largest cohort. But since then, we've really been right in the average historical range.
Alex, I think that that's the most important chart in the investor deck. You can see that over time, every new cohort that we bring in sort of deposits a layer of sediment in that mountain. And that base of recurring revenues, which we talked a little bit about in the comments, is really the core strength of this business. You know, this is two parts to subscribers, right? The new ads and the turn.
and have exited.
appropriately, I guess. But I think right now we're kind of...
Thinking that we're in a steady state on the turn side Excellent. I jump back in the queue. Thank you Thanks else Our next question comes from the line of Kyle Peterson with Niedermann company, please proceed with your question Hey guys, this is actually Sam Salvasan for Kyle today
Thanks for taking the questions. Just had a couple quick ones. You know, you guys mentioned last year when you were working on and rolling out some of the newer content given this.
you know, more recent market environment we're kind of in today. Can you talk about how this content has been received by your consumers and maybe how it's performed relative to your expectations?
I think I would like to speak to our technology offerings. I talked a little bit about that in our comments. We have seen really good results particularly in shaken and altimetry and we are excited to see what comes of the combination of our tradesmith business with investor play.
Those products tend to have lower churns, they're stickier, and folks are responding to those messages. So as far as us rolling out those products last year, I think they were successful. You can see from the engagement that we haven't quite found the message that we want using the products that we've rolled out, but our publishers...
spend every day thinking about the quality of the research that they're producing, whether it's something that our readers want to consume, and how they can better position what they're doing for the market. Great. That's helpful. Thanks. And then just a quick one.
On the prior M&A question, you know, it sounds like you guys are still actively looking and the appetite there is pretty healthy. But you know, given you guys are still currently searching for a permanent CFO .
You know, would you guys be open to pulling the trigger on an M&A deal prior to having that CFO role filled? Or is that something we should expect to kind of be put on the back burner until then?
No, we have no problem pulling the trigger without a CFO on hand. Marco Ferri, who is our Chief Corporate Development Officer, is an experienced M&A lawyer, and we're comfortable with his work and with the evaluation work that our FP&A team is doing.
Got itall. Great thanksction question is a follow up question for the ong of the Alex gram. Please rece with your questions. Yeah Hey, Hello again, just want to squeeze any. You mentioned that you move the bonus from the fourth quarter to the first quarter. You just.
give us a sense of how big that was and what led to that decision? I think the decision was kind of act like every other public company, most of whom align their bonuses after year-end results are formed. So that's kind of where we ended up moving.
provide the full bonus number. I think if you looked at the changes in cash flow quarter over quarter from the third to fourth and prior years you get an indication of some level and that was a very high year is what I would say. Is that correct?
Yes, that was a very high year due to the tremendous growth in the public company situation going from private to public. So I wouldn't expect it to be as high this year. So if you want to think about it that way, Alex, that's kind of where I'd start.
Right, but certainly something that weighs on cash flow in the first quarter relative to prior years. Yeah, absolutely. So the comparison, you know, if you looked at our fourth quarter in 2020, I want to say 5% adjusted cash flow from operations margin. There was some other noise in there as well.
And then this last quarter we just said it was 18% for fourth quarter. You'd expect the cash flow leaving for bonuses to impact that number, absolutely.
And then maybe just one last one and I think we touched on this already, but just looking at the paid subscribers again and looking at the different types of subscribers that you define between paid high value and ultra high value. And the ultra high value continued to go up.
and that's success on upselling. But yeah, the high value really has come down over last year, really every quarter, right? So maybe you've talked to this already, but what can you really do to get better on upselling here? Because those marketing costs I think should be lower, right? Because you're basically selling into the same.
customer base is already paying. So what's been missing there and is that a bigger focus maybe going forward? Yeah, I'll start and then we may want to add in. So the ultra high value of course, those are the folks that have been with us the longest and the folks that spend the most money. So their membership subscriptions with higher dollars.
to the second subscription or third subscription which is how the composition if you will paid to high value. And I think some of the dynamics that we talked about, this hesitation that we talked about is impacting that number. We see people, we see subscribers I should say, and interested parties come to a website. And again this idea of
landing page visits following trends that start to improve, but the conversion to a paid subscription is not just the first subscription. It's the secondary conversions as well. So that is, we are showing a slowing if you will, of the rate of change between those two parties, those two subsets if you will. And I think that's what we're seeing in the last couple of course.
Yeah, just to add a little more color to that, if you look at, if you break our subscribers into certain pieces, we have a segment of membership subscribers. And we have more membership subscribers right now than we've ever had. And the amount of money that those people spend is as high as it's ever been.
So those loyal subscribers keep spending. It is really, to echo what John said, it's how do you get the new subscribers from the first subscription which generally is going to be $100 for a year, to the next subscription which there could be a wide range there, but in many cases you are talking about $2000. So in this kind of...
time where people are not like super excited about pulling out the wallet and charging $2000, naturally it's going to take longer. So I think we believe that once we get a little bit of positive momentum with the economy, we are going to get right back to that pattern and our sales funnel will work just as it always has in the past. All right, I appreciate the call. That's it from me. Thanks.
that are not super excited about pulling out the wallet and charging $2000, naturally it's going to take longer. So I think we believe that once we get a little bit of positive momentum with the economy, we are going to get right back to that pattern, and our sales plan will work just as it always has in the past. All right, appreciate the call. That's it from me. Thanks.
There are no further questions in the queue. I'd like to hand the call back to management for closing remarks. Thank you everyone for being here. It was a pleasure to be here with all of you and I look forward to next time. Have a great day. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.