Q2 2023 Marketwise Inc Earnings Call
Begin.
Thank you for standing by and welcome to the market why is our second quarter 2023 earnings call.
During todays presentation all parties on the webcast will be in a listen only mode. Following the presentation. The conference will be opened for questions with instructions to follow at that time.
In addition for those on the live webcast you may submit a question using the chat feature on the site.
As a reminder, this call is being recorded I would now like to hand, the conference over to Jonathan Mairs, Jan fields, Vice President of Investor Relations at market why is it. Please go ahead Sir.
Thank you and good morning, we appreciate you joining us on today's conference call to discuss <unk> second quarter 2023 financial results with me today on the call. We have Amber Mason Chief Executive Officer, Stephen Parker Interim financial Officer, and Lee Harris, Our senior Vice President financial planning and analysis before we get started I want to point out that we also have pub.
A supplemental earnings presentation on the investors section of our website at Www Dot market wise Dot com under the quarterly results tab just documents designed to provide additional information in context to our current earnings release and 10-Q filings for those of you participating in our conference call via live webcast. We are sharing a few slides to highlight certain information we are discussing.
During this call all the information presented in the slides is also available on the contents of this call. Our earnings press release 10-Q filing or in the supplemental earnings presentation I described above.
During the course of today's call, we may make forward looking statements, including but not limited to statements regarding our guidance on future financial performance market demand growth prospects business strategies, and plans and our ability to attract and retain subscribers. These forward looking statements are based on management's current views and assumptions and should not be relied upon as of any subsequent date and we may.
Disclaim obligation to update any forward looking statements actual results may vary from todays statements, including 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 or.
Our discussion today will include certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to but not as a substitute for or in isolation from GAAP measures reconciliations to non-GAAP measures can be found in our earnings press release, and our SEC filings now I'll turn the call over to Amber.
Thanks, John and good morning, everybody welcome to our second quarter 2023 earnings call before we get started I want to welcome everyone watching us via webcast I'm really excited about that it's new for us on the Investor relations side, but we've been talking to our subscribers and potential subscribers like this for years today, we're coming to you live from our Baltimore studio, where we create <unk>.
Content for our subscribers host Webinars and reach out to our audience of self directed investors I wanted to give you insight into our operations and let you see US work I hope that you liked the format as well as the content and I'm looking forward to hear feedback you can send it to IR at market wise Dot com.
Turning to this mornings call I will provide a brief overview of our second quarter results I'll give you an update on the progress, we're making with the goals I outlined on prior calls and I'll give you a peek into what's going on at our affiliates a look into our process, what we see working and some new initiatives. Steve will then take over and provide a more detailed review of our financial results.
Get started.
First let's discuss our Q2 results frankly, what we experienced in the second quarter is a lot like what we've seen in the past few quarters investors and subscribers are still engaged in buying financial research, but at lower levels than we saw during the boom years of 2020 and 'twenty 'twenty. One the good news is that many of our internal metrics show that we've reached a plateau of sorts or billings and expenses are fairly.
Flat to the prior quarter engagement as measured by landing page visits are slightly up over the past three quarters and our overall conversion rates are starting to show signs of improvement.
Stock market sentiment seems to be shifting back to equities as inflation looks to moderate over the next year and it's very encouraging to see signs of stabilization in our results.
While market volatility and economic uncertainty persisted through the second quarter, which continue to weigh on our results.
Focused on creating new content, and reaching new subscribers and we remain committed to managing our overhead costs and to directing our marketing spend where it is most efficient.
Importantly, we successfully maintained our expense discipline during the quarter as we have over the past year in the second quarter of 2023 direct marketing spend was roughly $23 million lower on a cash basis than the second quarter 2022. Additionally, our overhead costs were down $1 $5 million on the same basis as I mentioned last quarter.
As I mentioned last quarter, we know our cost structure and we work hard to rein in costs. When times are tough so that we can maintain our cash flow and profitability.
Turning to our results in more detail revenues on a GAAP basis were $103 $6 million, a decline of 19% as compared to the prior year billings declined 18, 2% year over year to $96 $2 million.
Importantly, our adjusted cash flow from operations was $29 million in <unk> 2023, an increase from $26 $8 million in the second quarter 2022, and a clear sign of our ability to generate positive cash flow in a challenging market.
Furthermore, our adjusted cash flow from operations margin for the first half of 2023 improved to 17% as compared to 11% for the first half of 2022, reflecting the success of our cost reduction efforts over the past year.
I would add that while GAAP revenues declined $22 $6 million from the prior quarter billings declined only $1 million as a reminder, for GAAP purposes, we defer revenue over the life of a subscription will non-GAAP billings represent current period cash received in 'twenty, and 2020 and 'twenty, one we generated record quarterly billings, which increase.
Our GAAP revenues for the subsequent quarters, but that's beginning to tail off in our GAAP comparisons reflect that.
Despite the difficult market environment, we are pleased with our ability to cut spending and increase our cash flow on both a quarterly and year over year basis. We will continue to look for ways to improve efficiencies cash flow and profitability. Additionally, we have started to see improving trends in our business through June and July well its early and we remain conservative it's an and.
<unk> trend these green shoots appear as they always do in our subscriber acquisition efforts on previous calls and in some of my conversations with you I've noted that the most important thing we needed to do to start improving results was to figure out how to talk to prospective readers again. These are the folks we saw sitting on the sidelines they required a new message.
That would get us a click a sign up and order a new subscriber.
Of course, the backbone of our business is the folks who've been with us for a long time I'll get into that more later, but to kick start the business, we need to bring on new high quality readers folks who will become long term membership subscribers and to bring on new high quality readers, we need to find the right message in 2022 the message changed themes that had been working for years.
Generating the same level of engagement. So we dialed back our marketing spend to focus on only the most efficient campaigns and we dialed up our efforts to find the next big idea.
Each of our publishers is equipped to do this on their own very effectively each operates multiple brands that can feature different angles on the market and when you put all of our publishers and all of our 13 brands together, we have a formidable engine of discovery. This I believe is a key driver of our durability as a business. We have multiple affiliates that are essentially competitors.
Targeting the same potential customers, where other businesses try to reduce redundancy, we embrace it because it means that every month, we can run dozens of different campaigns and everyday we can run dozens of different marketing experiments in fact during 'twenty 'twenty. Two we ran almost 470 individual marketing campaigns. This is what allows us to find what works.
Faster than any single affiliate could on its own and that's always been in place. It's allowed us to manage the business through decades of boom and bust markets in stocks commodities Cryptos you name it but.
But I'm working to accelerate learning throughout the business I've put in place programs to identify and spread best practices and have increased the amount of reporting we share across the business today, our key personnel to quickly seize on innovations and put them to work now I'm focusing on marketing here, but this principle applies to every area of operations from customer service to website design.
Two new technologies like artificial intelligence.
It's early days, but I'm excited about the efficiencies we can achieve by integrating some of the newly available tech into our operations right now, though I'm, even more excited by the new line of business that AI is creating for US predictive Alpha Prime for example is a new AI powered tool from our trade Smith affiliate it had a very successful launch in the quarter, which led to additional.
Products leveraged from this launch, including an options trading product, a new entry level product and a bundled offering of all predictive alpha publications.
Things are driving new subscriptions at Investor place, where the focus is on how to invest in AI and related products and we expect to see multiple new products and campaigns focusing on this sector throughout the rest of the year.
We are always looking for ways to add value to our subscribers, the folks who know us well, including our high and ultra high value subscribers, who remain loyal to us over the long term in fact, we have over 290000 membership subscribers, whose cumulative spend continues to increase despite the challenging environment. These membership subscribers tips.
<unk> sign on for an additional five subscriptions, including one additional membership subscription after their initial membership purchase. These long term subscribers are the core of our renewal revenue, which is one of the best measures of the success of our business over the past five quarters, we have averaged a total of $37 million in upgrade and renewal billings.
Each quarter. These metrics support what we've known for over 20 years, but long term subscribers are the heart of our business and their trust and confidence in our publications reflect the value they find in our products.
As I touched on earlier, we have started to see improving trends through the end of the second quarter and into July both investor engagement and conversions have improved slightly as we've seen some success in recent campaigns and as a result, we have begun to strategically increase some of our direct marketing spend consequently, we're starting to see an increase in subscriber acquisition.
It is encouraging that said I still want to caution that these results reflect only a few weeks of results and it remains to be seen if this is a trend in overall subscriber activity or specific to certain campaigns that we've recently launched direct marketing spend is our largest variable spend and while we have reduced that spend over the past year, we fully anticipate increasing our marketing.
As market conditions indicate.
We also continue to work on ways to reward our shareholders last week, we announced our second quarterly dividend of one cent per share to our class a shareholders and an equivalent distribution for our class B shareholders as of this morning. This represents a 2.2% annual yield we're pleased to continue this dividend as it highlights our ability to generate positive annual cash flow.
Even near the bottom of the cycle.
Over our 20 plus year history. Our company has consistently returned capital to its owners. We are pleased to reward our shareholders with another dividend while working to increase total shareholder returns.
We continue to also look for ways to add existing businesses that will complement our operations, including bringing on new editorial teams software and technology as well. We are actively looking for M&A opportunities. We're also committed to sound financial transactions with acceptable levels of risk and return for our shareholders.
In terms of talent retention and acquisition I'm happy to share that we've completed our search to bring a permanent CFO to market wise as we announced a few weeks ago, Eric Nicols will be joining US later this month and the role of CFO .
Eric is an experienced public company CFO and brings with him a wealth of knowledge in financial management accounting and navigating the public markets.
He also has hands on experience, bringing a private company to the public market V. S back and all that comes with that transaction, we welcome Eric and look forward to his contributions going for it I also want to take this opportunity to thank Steve Park for his service to us as our interim CFO over the past few months, Dave is the consummate professional and joined us during a hectic time.
He helped us get to the finish line for a year end and first quarter reporting cycles and as Steve finishes his engagement with us we wish them well and nothing but success for what comes ahead. The whole team myself in particular is very grateful for your expertise time and guidance. Thank you Steve.
But that said I'll turn the call over to Steve to review the financial results of the quarter.
Thanks, Andrew and good morning, everyone.
As we've seen for some time now market and economic uncertainty continue to impact results through the second quarter early in the quarter retail investors remained uneasy about the economy inflation and the potential for a recession later in the year. However, as Albert noted many of our internal metrics are beginning to show signs of improvement towards the end of the call.
Order retail investors begin to pick up in the stock market officially entered a bull market territory in mid June our business began to reflect some of that improvement in late June as we sort of engagement and conversion to begin to improve our course a.
A few weeks doesn't make a trend, but we are seeing some green shoots in the landscape of financial publishing.
In the second quarter of 2023, our landing page visits were approximately 23 million up 10% from first quarter 2023 levels. However, our overall conversion rate was approximately two basis points lower this quarter as compared to prior quarter.
Looking at this more closely we saw lower conversion rates earlier in the quarter as market uncertainty and volatility remained high as the quarter progressed into June we saw higher levels of engagement with improvement to the point, where overall conversion for the quarter was only slightly off from prior quarter that said the two basis point.
Decline is relatively small and appears to be moderating based on recent performance.
As in prior quarters, our subscribers have also slowed the pace of buying additional subscriptions given the macroeconomic conditions. So our customers continue to take a bit longer to move through their subscriber journeys with us than historically, however, even in this environment our high value in ultra high value subscribers continued.
[noise] approaches additional subscriptions as a result, our active cumulative spend by all subscribers reached another all time high. This quarter. This is just another indication of customer satisfaction and the value that subscribe is finding our products, which is why they remain with us for the long term.
Turning to the financials GAAP revenue was $103.6 million this quarter compared to 128 million for the second quarter of 2022, a decrease of $24 4 million or 19%.
The decrease in revenue was driven by a 15.6 million dollar decrease in term subscription revenue and an $8.4 million decrease in membership subscription revenue.
Billings were $96 $2 million compared to $117.5 million for the year ago quarter. A decline of 21 point 20 million that said, our billings are starting to level out as they only declined $1 million or 1% from the 2023 first quarter.
Approximately 36% of our billings came from membership subscriptions, 63% from term to subscriptions and 1% from other billings in second quarter 2023.
This compares to 38% of our billings coming from membership subscriptions, 61% from term subscriptions and 1% from other billings for second quarter 2022.
As we discussed in the prior quarters call our cost reduction initiative that we completed in 2022 was successful in reducing both run rate overhead expense and direct marketing expense through the end of 2022.
We continue to maintain these levels of efficiency throughout the first half of 2023.
While we may begin to see the level of direct marketing expense increase in coming months. This will be in relation to increase landing page visits conversions and subscriptions as we remind everyone direct marketing is our largest variable expense and as we see subscriber engagement and the per unit cost of acquisition of proof we.
May look to increase our direct marketing spend from current levels and focus on subscriber acquisition.
As a result of our effort to reduce cost and maintain efficiencies we were able to improve our overall operating expense profile on a GAAP basis total operating expenses were reduced approximately $99 million or 9.5% as compared to second quarter 2022.
Cost of revenue was $14 6 million this quarter compared to $16 2 million for the year ago quarter, a decline of 1.6 million or nine 8%.
This decline was driven primarily by a decrease of <unk> 8 million in salaries and related benefits expense.
Point 6 million dollar decrease in credit card fees and another point 6 million all the decrease in outsourced customer service fees.
Sales and marketing costs were $49 million this quarter compared to $65 1 million in the year ago quarter, a decrease of $16 million or 24.6%.
This decrease was primarily driven by a $19.6 million decrease in direct marketing expense related to our cost reduction initiative.
Partially offset by a $3.7 million increase in the amortization of our deferred contract cost acquisitions.
General administrative costs this quarter were $27.6 million as compared to $20 4 million in a year ago quarter, an increase of $7.3 million. This increase was primarily driven by a $3.6 million increase in state franchise and sales tax expenses of $3 $8 million increase in incentive.
Compensation.
And a 1 million dollar at $1.1 million increase in stock compensation, Andy's point $7 million increasing outside labor.
This was partially offset by a 1.1 million dollar decrease in compensation expense at a point 4 million dollar decrease in travel and entertainment.
Adjusted cash flow from operations was $29 million in second quarter of 2023 compared to $26 8 million in the year ago quarter with the increase primarily due to net income of $9 7 million adjusted for net noncash items, which increased $5 3 million in net changes.
Our operating assets and liabilities, which increased cash by $13 9 million.
Adjusted C. S. F O margin was 31% in second quarter of 2023 as compared to 22, 8% last year.
As we discussed on our last quarter earnings call timing of annual bonus payments made in the first quarter of 2023 impacted our adjusted cash flow from operations margin.
Our second quarter adjusted cash flow from operations margin was 31%, which was significantly higher than the 4% we reported in the first quarter of 2023.
On a year to date basis, our adjusted C. S. F O margin for the first half of 'twenty twenty-three was 17% as compared to 11% for the first half of 2020 two.
As we have discussed in the past the payment of certain expenses, especially as it comes to royalties and commissions is not linear and we impact quarter to quarter margins. However, we believe the second half of the year on average should be consistent with our year to date margin for the first half of the year.
Our paid subscriber base declined from 890000 at the end of the second quarter 2022 to 750000 this quarter.
16.4% decline driven by a decrease in overall consumer engagement as compared to the first quarter 2023, our paid subscriber base was down 27000 or three 5%.
During the quarter active fish free subscribers decreased by <unk> 4 million or nine 5% to $3 9 million compared to $4 3 million as of June 32022.
The year over year decline in active subscribers as a result of decreased engagement with our subscriber community as consumer engagement continues to be soft.
As compared to first quarter 2023 active free subscribers declined point.
$1 million or 2.9%.
<unk> declined to $490 this quarter from $580 in the second quarter of 2022.
This was driven by a 26% decrease in average trailing four quarter billings combined with a 13% decrease in average trailing four quarter paid subscribers. We believe the billings decline is primarily due to the volatile economy desert persisted since the first quarter of 2022 as compared to first quarter two.
Twenty-three ARPA decreased $4 or less than 1%.
Last week, we declared a one cent per share quarterly dividend to shareholders of our class a common stock and a dividend equivalent to our holders of our class B units. We continue to view this dividend as a conservative capital returned to our shareholders.
Finally, before I turn it back to <unk> I want to emphasize that the hard work we've done on the cost inefficiency side of our operations continues to contribute to the bottom line improvement inefficiencies total operating cost and our cash flow.
And adjusted cash flow margins are a direct result of the hard choices. We have made over the past year. In addition, we are starting to see some improvement in market engagement conversions and subscriber interest you know publications as we can as we begin to see overall market conditions improve and the self directed investor return to the market we.
Believe we are well positioned to take advantage of opportunities to improve the strength of our business with that I will turn it back to you. Thank you Steve to conclude I continue to be excited about the opportunity I see every day at market wise or metrics around consumer engagement and subscriber conversions are beginning to show signs of improvement big ideas.
And products focused on artificial intelligence and global macro themes have gained traction in recent weeks and market sentiment is starting to shift in our favor as I look at our current situation I'm pleased to see our business model has proven itself once again when faced with volatility and uncertainty in the markets. He pulled back on our spending and work to find the next big ideas to help self directed investor.
Her succeed we successfully navigated that challenging environment and emerge on the other side profitable and cash flow positive I look forward to working with our teams to execute on the opportunities ahead of us continually improve our business model and deliver increasing shareholder returns to our long term investors.
No. We've said this before but this truly is a great business focused on serving the retail investor in a way, which we know is both unique and valuable our principles define our mission deliver great investing ideas to the retail investor deliver these ideas written in a way that is easy to understand and execute and treating our subscribers. The way we would want to be treated.
It if our roles were reversed I will now turn it over to the operator for your questions.
Yeah.
Thank you, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is released to allow your signal to reach our equipment.
Again to ask a phone question it is star one.
Ask a question over the web please submit your question in the box and hit send.
And we'll pause just for a moment until everyone an opportunity to signal for questions.
Okay.
And we will go ahead and take our first question from Kyle Peterson with Needham. Please go ahead.
Great.
Thanks, guys. Good morning, and I. Appreciate you taking the question wanted to start on paid subscribers.
He was like yes.
You got some more kind of cautiously optimistic there it.
It seems like there is some.
A little bit better numbers and engagement in June and in July , but just wanted to get your sense like barring weather like if there's a black swan event or something and absence of like a negative market event like that or you guys have some comfort, but you know we might be at least approaching a bottom on paid subs.
Or is it still a little early to tell.
None of US has a crystal ball, but that's that's I would call as cautiously optimistic I think you're right. We're looking to see subscriber growth at a quarter over quarter, we can't guarantee anything, but but that's where our heads are at.
Yeah, I'd, just say that we're definitely starting to see some improvement in some of the metrics and some actions being taken on subscriber side. So.
As Andrew said, it's early yet, but it feels like we're getting some traction that we didn't have let's say six months ago.
Yeah Collyn, we've also seen churn starting to work in our favor our churn rate.
Was down from where we were it was in the first quarter of the year and it looks like at least in the short term, we're going to continue to have that churn rates stay low so that that's one part of the equation and the other part obviously is new subscriber acquisition, we did see a slight increase in subscriber acquisition in the second quarter end.
You know we have a couple of weeks of good results here in July we just have to see if that continues.
Yes.
Okay. That's great color and then just a follow up on a cash flow are going to see the step up in cash flow margins this quarter.
It sounds like in the second half I guess, they should be relatively consistent with the first half, but I guess just thinking about that I mean, obviously, the one Q versus the QQ cash flow margins were quite a bit different as is thinking of somewhere in between is that like a good good way to think about it or maybe are we closer to the <unk> level given that <unk> had.
The bonus payment impact.
Well I think that we were forecasting something similar for the second half of of a 2023 it's it's hard to know quarter to quarter. There are impacts that are a little bit uneven and also as we increase our subscriber acquisition that might impact our results as well, but if.
Leave you got any more to add to that yeah call. So we are we do tend to be lumpy a bit and that in the first quarter had our annual incentive payouts, which is kind of a double whammy, but we do pay out some royalties and commissions in Q3, and what we're trying to get that leveled out so we're not as choppy, but generally speaking.
The first quarter in the third quarter are going to tend to be on the lower side, the second quarter and the fourth quarter are going to tend to be on the higher side, but I think the best way to really look at it is to look at the half year and again, we think that the second half of the year's going to look a lot like the first part of the year, maybe with a slight upside to it.
Yeah.
Okay. That's.
That's helpful. Thank you.
And our next question will come from Devin Ryan with JMP Securities. Please go ahead.
Hi, This is actually Michael Falcon, one for Devin good morning.
Wanted to start by touching on the content strategy.
Launched 15, new obligations in the quarter and Amber I think you mentioned in the prepared remarks talking about figuring out how to.
Talk to prospective subscribers again and.
And so I know you mentioned AI, but can you provide any additional insight around maybe what specific types of clients and are working driving conversions, attracting new members and resonating with existing subscribers in the current environment and then perhaps on the other hand, what content, maybe it's been less effective.
Great question, it's one of the most important questions in the business, so AI and in all of its magical different forums is absolutely intriguing our subscribers. So we've got products that are using AI to help predict to help generate stock recommendations.
We've got products that are talking about how to invest in AI. We've got products that can give you the best stocks in any sector, let's talk about the best stocks in AI. So if you are the the AI flavor, we're seeing it throughout market wise a couple of other themes that have been interesting for our subscribers is.
Global macro which sort of you know, it's hard exactly to define but the idea of dangers to the U S dollar and how to protect yourself from that it's it's a perennial theme and newsletters and that's something that is generating subscriber interest as well and then we're also seeing increased interest and all different kinds of software too.
To help assist you in managing your own portfolio and to help you trade.
That's great context, and then maybe just one quick follow up on M&A.
And the types of opportunities Youre seeing there and what your appetite is for acquisitions at the moment.
We have been and continue to be very active looking for potential M&A opportunities I can tell you that we've kissed a lot of frogs over the last year, we found a few princes, but nobody that we're ready to walk down the aisle with so we are open to interesting ideas, but we're extremely disciplined about our approach we want.
To make sure that is additive for shareholders and not that we're doing M&A for the sake of doing M&A.
Sure that makes sense. Thank you.
Our next question will come from Jason <unk> with Oppenheimer. Please go ahead.
Hey, Thanks. This is Chad on for Jason I, just wanted to hit on.
The first question. So you talked about churn declining in the quarter.
And it does look like your sequential subscriber losses did get better, but schwab's daily active trades got worse in <unk>. So is that something we should be kind of paying less attention to kind of going forward now and then I have a second question. Okay. I'm Gonna toss. The Schwab question to me, who keeps a closer eye on it.
Yeah. So.
Swap had a little bit of a strange nuance in the first quarter, we had that little mini bank run, where we had a couple of banks fail.
So there was a lot of cash outflows for the Schwab that kind of peaked in the first quarter.
And then they did they kind of declined in the second quarter back to kind of where they've been trending since the back half of.
2022, and we had you know an increase this quarter in schwab, although it didn't kind of see it did not.
It did not translate in the second quarter Schwab debts have come up in July so they appear to be lagging ours, just a little bit, but I think that first quarter increase on their part was an anomaly.
So many bankruptcy.
That increase in deaths wasn't going to translate into new subscribers for us we thought and so I think that the level. It all out and kind of look to fourth quarter to now it makes a lot more sense.
Yes.
Okay, great that makes sense.
And then I know you don't guide, but you know it sounds like were getting incrementally more positive on kind of the go forward outlook.
Does that mean that revenue can grow sequentially from here or you know I'm still not sure yet.
And like you said, we don't guide, but that's something.
Bringing on new subscribers is a great thing. It is the beginning of all things revenue might lag a bit because it takes a while for folks to work through our funnel and start buying the higher priced products, but as new high quality subscribers come on we absolutely expect to see revenue increase.
Go ahead.
Just going to say so revenue definitely has a lag versus billings.
So we amortize the revenue or the revenue comes off of our balance sheet over the life of a subscription. So we could have several straight quarters of increased billings, but the GAAP revenue is going to take much longer than that to catch up to it.
So you know again, we don't give guidance, but I don't think we're going to see a rapid escalation of our DAP revenue.
It certainly wouldn't escalate as quickly as our billings Meg.
And just to finish on that it's really important to realize that if we start to bring more people to the top of funnel as Amber just mentioned that you know the lifecycle of our customers is quite long and that first that first sale may be additive to some point, but it's really that second and third sale, so the longer and deeper their relationship with US plus is the more we will see that.
Revenue build over time.
Yeah, something really important to keep in mind is that very little of the current period GAAP revenue is actually earned in the period. So if you're looking for a revenue that was earned in the period billings as the as the metric to look at.
Okay makes sense. Thank you.
Okay.
And as another reminder, it is star one to ask a question over the phone you can also ask a question over the web by just typing your question into the ask a question box and hits and.
And we'll go ahead and take our next question from Alex Kramm with UBS. Please go ahead.
Yes, Hey, good morning, everyone. Just another one on the cost side not sure. If I heard you correctly, there, but I think you said you continue to evaluate or take cost action. So maybe you can flesh this out a little bit more are you are you.
You basically.
Are you still doing things if you're if you're doing anything. Please let us know what are you doing it maybe dimensionalize a little bit or given the improvement here are you a little bit slowing down those maybe maybe other cuts that you had planned.
So I think we still have efficiencies to find and our centralized operation and those will be iterative rather than slash and slash and burn out as we get better at being a public company, we will become more efficient at providing those services that we need to provide at a lower cost and we can bring them.
Some functions in house that right now, we're paying consultants to do for us, which could save us some money.
And then but we're always looking to improve efficiencies.
One of the things to note on the cost side is as we increase our direct marketing, we will be increasing our direct marketing spend but the reason why we dial that back and the reason why we would dial it up is based on efficiency and we dialed it back because it was inefficient spend as we start to see great metrics will be dialing that up.
No makes sense and then.
Maybe just to come back to it.
Maybe the second quarter and also what we've seen so far I mean, you gave a lot of detail around some of the metrics that are improving I think growth in subscribers up 11% relative to the first quarter was one that stood out to us, but when you just look at maybe markets being really strong in the second quarter and sometimes that brings retail investors back.
To engage like what are the things that you would point to four existing for both existing and new investors that really.
Really stood out and maybe anything you've you know from history in terms of like you know maybe it actually takes a little bit after like a big quarter that we just had so I know, it's a broad question, but but really any more detail you had provided so far on both the new and existing side that that kind of stood out in <unk>.
Service is a quick preamble of what's to come Okay. I'll take a shot at that and then if anybody has anything started out they can one thing to keep in mind about our business is often that retail investors are a little bit slower than institutional investors to catch on to it trend. So if you start to see institutional investors move into a sector of move into the market overall.
Retail investors can take a little bit longer to warm up to that idea. So just in general you might see a little bit of lag and retail investor activity and retail subscriber activity for us.
And then I I touched on it before but if there is a hot trend in the market like AI and our retail investors are hearing about it in the news and they're talking to their friends about it and their friends are doing things to chat G. P. T that sort of Echo chamber effect works in our favor if were speaking to that same trend.
Yeah. The other thing I would say Alex is.
One of the things we watch I watch very carefully is our daily orders, especially around the lower price.
Price point products, and we are starting to see a little bit of an acceleration. There. If you think about our sales funnel.
Though that is the very top of our sales funnel. That's that's kind of the oil that runs through the engine. So.
Again, I don't want to get kind of over my skis, but where we are seeing a positive trend in that and typically in our sales funnel what would happen is those subscribers would see the value in the content that we provide and they will continue to buy additional subscriptions and as they move along their journey their subscriptions become more expensive and that's.
Where we would start to see a lift in the billings, but it's way too early for us to see that because we're only a few weeks into those orders kind of stepping up just a little bit so we'll be keeping a close eye on it this quarter.
Makes sense. Thanks.
And it appears there are no further phone questions. At this time I will now turn it over for the web question. Yeah. Thanks. So much early we've got a couple of questions.
And the first one is on M&A and M&A targeting.
The question as how do we factor subscriber demographics into acquisition.
Analysis, and you know we have a we tend to have a bit of an older subscription base.
How do you factor that into potential deals.
We absolutely do factor that into potential deals. We are looking for demographics that match. Our current demographics. We know that those are the kinds of people, who buy subscriptions from us and who upgrade and become our long term loyal subscribers. So when we're looking at an M&A target. If they have demographics that are substantially different if they're all gen Z ears.
That would give us give us a real pause it's not that we don't want to talk to Gen Z, but we want to talk to the Gen Z a cohort who is interested and investment advice chubb's happens to be a sort of a small slice of that so what we're looking for in M&A acquisitions are something that looks and feels familiar that we could have really high confidence that they're going to be time great.
<unk> for us.
That's great and then question that you can start but I'm sure. It's going to end up with Lee is about <unk> and how do you balance new acquisition with with ARPA since new acquisitions will typically come in at a lower price point do you have a floor in mind do you have a thought process about where you see them. So I would say we.
You don't manage to our appeal and new subscribers new high quality subscribers are a great thing we bring them on we when we can do that efficiently when we have confidence that they will pay us back for our costs and then some so if we have the great. Good fortune to be able to bring on a whole lot of those subscribers at once that could weigh on our <unk>, but we were.
Expect ARPA than to rebound as those subscribers worked through our funnel as Lee was describing right I always say our view is simply math it is.
Billings in its subscribers and <unk>.
Right now we are kind of at an inflection point, where we hope both are going to start.
Picking up but it is a trailing four quarter metric. So I just have to remind you of that so even if we have like a really great quarter, we still have to slog through the prior three quarters, which quite honestly.
Haven't been that great for us so there's going to be you know again, we were talking a lot about the late effects today I think we're probably bottomed on our RP, but I don't expect a rapid escalation I think it will stay steady ish around where it is maybe tick up a buck or two or something like that here as we head into the next quarter and then we'll just have to see how.
The rest of the this quarter's billings kind of play out.
Great all right one last one since we've been talking about AI and.
Really the question is how do you assess the impact of AI on our business model and other threats to our business that come out of that.
The things we've heard about them.
So I might end.
And spinning a little gold out a straw here because we haven't seen it see any impact yet, but I'm super excited about what AI can do on our operation side, I think it could improve efficiencies and customer service and they're already using it and our HR team. We're looking at Copywriting, we're looking at editorial production and it doesn't have to.
Revolutionize how everybody does their job if we can just get 10% better in a few areas of our business that will have a major impact again forward looking statements disclaimer disclaimer disclaimer, but in terms of threats. What I think about is the spectrum of financial information or even publishing in general you've got.
Information you've got data you've got information you've got news <unk>.
Got a pinion you've got analysis, you've got insight you've got recommendations and you've got a human connection. So there are a lot of publishing businesses live down here and if I were down here I would be worried because I think that it is a commodity and in fact, the robots are coming and we'll be able to produce that very efficiently, but as you move up the.
Spectrum, you get closer and closer to human connection and that's really where we live that's the value that we bring to our subscribers that insight analysis ideas that a robot won't be able to generate now robots might be coming for us all eventually, but we will not be the first ones down on the battlefield.
That's great.
Good day, good tenant demand.
Does it feel secure that's all we have from our great.
Great.
Ah well, it's just I'm.
I really appreciate you guys. Joining me on this webcast I know it was a there was some trepidation among the team. So I think you guys did great and thanks for indulging this experiment and thanks to the audience for the same.
So I hope you guys all have a great day, and we'll see you next quarter.
With that that does conclude today's call. Thank you for your participation you may now disconnect.
Yes.
Yeah.