MarketWise, Inc. (MKTW) CEO Mark Arnold on Q1 2022 Results - Earnings Call Transcript

May 09, 2022 6:55 PM ETMarketWise, Inc. (MKTW), MKTWW
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MarketWise, Inc. (NASDAQ:MKTW) Q1 2022 Earnings Conference Call May 9, 2022 11:00 AM ET

Company Participants

Jonathan Shanfield - Head, IR.

Mark Arnold - Chairman & CEO

Dale Lynch - CFO

Conference Call Participants

Devin Ryan - JMP Securities

Kyle Peterson - Needham & Company

Alexander Kramm - UBS

Jeffrey Meuler - Robert W. Baird & Co.

Ygal Arounian - Wedbush Securities

Jason Helfstein - Oppenheimer


Thank you for standing by, and welcome to the MarketWise First Quarter 2022 Earnings Call.

I'd now like to hand the conference over to Jonathan Shanfield, Head of Investor Relations at MarketWise. Thank you. Please go ahead.

Jonathan Shanfield

Thank you, and good morning. Thanks for joining us on today's conference call to discuss MarketWise's First Quarter 2022 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 and future financial performance, market demand, growth prospects, business strategies and plans and our ability to attract and retain customers. These forward-looking statements are based on management's current views and assumptions and should not be relied upon as of any subsequent date, and we disclaim any obligation to update any forward-looking statements. Actual results may vary materially from today's 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 in our earnings press release and SEC filings.

Now I'll turn the call over to Mark.

Mark Arnold

Thanks, Jon, 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 MarketWise, our vision is to be the platform of choice for the self-directed investor. And to that end, our relationship with our subscribers is of the utmost importance, and we believe it's our greatest asset. That is why at times like these when we are seeing disruptive forces in the financial markets, we seek to provide the 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. increasingly returned to the pre-pandemic activity, Russia invaded Ukraine, and we saw the first full-scale war in Europe since World War II. This accelerated inflationary pressure caused by global supply constraints, and it showed in the data as inflation spiked to 40-year highs. The Fed 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 stepped 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 hesitance and in decision regarding their investments. We believe this combination of factors also impacted our current financial performance.

For the first quarter of 2022 our revenues grew 14% year-over-year to $136.8 million. Our billings declined 47% year-over-year to $136 million, and our adjusted cash flow from operations was $1.1 million. Dale will 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 has had some timing differences in working capital accruals that temporarily reduced cash flow by approximately $18.1 million.

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 2 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 fewer new subscribers in recent quarters. I should note that we are not strangers to these types of challenges. We have faced similar situations over our 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 and 2009. During that period, we managed our business through the cycle by developing new content that address the financial environment in 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 the recent years versus more defensive strategies. Investors are taking time to weigh the alternatives and evaluate the risk appetite. We see this lower in overall paid conversion rate among our lower ARPU subscribers. However, our high-value and ultrahigh-value conversion rates remain in line with historic levels, indicating that our 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 had previously. Our teams are hard at work calibrating our content to help self-directed investors navigate this uncertainty. 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 in changing market conditions. There appear to be some major thematic changes occurring in the United States and globally as investors showing riskier assets and retreat the safer ones.

So as the market shifts, our editorial teams are contemplating where things are headed, and developing additional content that they believe will fit these emerging trends. Some of these themes that our research teams have been emphasizing include the following: Deglobalization and shortening supply chains, trends in oil prices and U.S. energy independence, broader-based commodity price inflation, inflation protection themes, such as gold and other metals, real estate, inflation-protected bonds, investing in income like high-quality dividend paying stocks, deep value themes across asset classes and the critical need to keep asset allocation and position size in mind as our readers go forward.

In addition to increasing the emphasis on these investment themes, we are looking at ways to mitigate subscriber acquisition costs, while driving incremental sales. Given that unit costs to acquire new subscribers are high, we continue to focus on enhancing incentives to cross-sell content between our operating brands, and we have been working on a number of these campaigns recently. There are no incremental acquisition costs paid to third parties when we do this. We have seen significant ARPU 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'll continue to execute on that should drive attractive growth.

One area of focus for us is 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 Chaikin Analytics, which has been tremendously successful for us. Chaikin Analytics was founded by Marc Chaikin, a 40-year Wall Street veteran, and Marc developed a series of proven quantitative stock selection tools and indicators including the Chaikin Power Gauge and Chaikin Money flow that help investors make better investments. When we introduced Marc's products to our audience, they loved it.

Last year, Chaikin Analytics generated $27 million in billings, which is far beyond the revenue it had before we partnered them and far beyond what we paid for the business. This is truly a trifecta, a win for Marc Chaikin and his team, a win for us at MarketWise and most importantly, a win for the subscribers. When we combine technology products with our content brands, we have found significant ARPU improvements as well as better subscriber retention. Going forward, we plan on further offering additional quantitative tools and products with our investment research, both in our existing brands as well as in our M&A efforts. We have previously spoken about the development rollout of a pan MarketWise 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 is that 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 expose our investment research too at scale.

This platform will also encourage more cross-selling between brands, which should drive better retention and ARPU. We have completed our full rollout of this new platform for our Stansberry Research brand this quarter, and we've 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 and helping to drive this increased engagement time with 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 are now spending more time on our site as compared to alternative investment content providers.

We also continue to develop a broader way to integrate affiliates and their marketing onto the platform as a precursor to our larger pay and MarketWise efforts in 2022. We now feel confident that 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 Ascendant Digital last year. Last week, we announced an engagement with SubScale and its founder, Michael Birdsall to provide data science, enhanced analytics, artificial intelligence and machine learning to MarketWise. We believe this effort will lead to improved performance in several ways, including increased intelligence about consumer behavior, higher subscriber engagement, better free-to-pay conversion rates, improved subscriber retention, greater marketing efficiencies and ultimately higher ARPUs.

Our goals are no different today than they have been since our founding, and that is 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 known.

And with that, I'll turn the call over to Dale to discuss some of our financial results in more detail.

Dale Lynch

Thanks, Mark, and good morning. As we've mentioned in the past, our mission is to provide the kind of research that we would want if our roles were reversed. In the challenging environment we've experienced over the past 3 quarters, it's especially important that we stay true to this mission and this vision. This is a point in time where we have the opportunities to have the greatest impact to self-directed investors. This is a very synergistic relationship. 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 the great reemergence trends from COVID to hold and continued. This has manifested itself with volatility, lower levels of consumer engagement, combined with higher customer acquisition costs driven by higher display ad costs. Asset travel and leisure industry crowds back into that 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, factors that are particularly impactful for us as a publisher of investment research content and software. Much of the NASDAQ and technology stocks, in particular, are in bare market territory, cryptocurrencies have been hit. And we've seen the fastest rise in interest rates in the generation. With all this uncertainty, it's not surprising that we're seeing some consumer hesitance and indecision about their investments. We believe this may be causing some of our lower ARPU customers and prospective customers to delay purchases resulting in a lower paid conversion rate this quarter.

Importantly, those, I'll highlight later, our high-value customers conversion rates remain strong. And I've just listed a number of pretty significant challenges to the investment markets. This is the time when MarketWise should shined. We've done just that over our 22-year history as we provided our subscribers valuable insights after the telecom and internet crash in the early 2000s, the financial crisis in the late 2000s, the rapid emergence of new opportunities such as cryptocurrencies and continued bullish recommendations throughout a melt-up that many sophisticated investment professionals thought was going to end 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. From the time of conception to the time we actually sell new content, it generally takes 2 to 3 months, and we expect the majority of this content will be impactful in the second half of this year.

Before turning to financials and KPIs, I first wanted to touch on consumer engagement and conversion rates. In first quarter 2022, our landing page visits were largely stable on a sequential basis. However, there's still about 18% lower than the average quarterly amounts for the past 2 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, our 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 declined 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 ARPU customers. Our high value and ultra-high-value conversion rates this quarter 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 and stock market this quarter, we would not have expected to meet or exceed those levels from the prior year. 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 increase in term subscription revenue. This was partially offset by a $1.4 million decrease in nonsubscription 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-reduced engagement of consumers, which began in earnest in the second quarter of 2021. First quarter 2022 brought additional challenges with uncertainty stemming from external factors we've mentioned earlier.

Sequentially, $136 million in first quarter billings declined $15.4 million or 10% from fourth quarter 2021. Earlier, we mentioned that our direct-to-paid conversion rate fell approximately 16 basis points from fourth quarter 2021, and this is attributable to our lower ARPU subscribers. This 16 basis point decline is what primarily drove the sequential decline in billings this quarter. Approximately 37% 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 in 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 headcount. 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, compared to 85% in the year ago quarter and generally in line with our historical averages.

As a reminder, from the time of combination with Ascendant in July and through the end of the first quarter 2022, there was no longer any stock-based compensation attributable to our original Class B units. Prior to the transaction, these units were treated as derivative liabilities rather than equity and therefore, had to be remeasured each quarter and the change in fair value included in stock-based compensation. Also any distribution to profits paid to the Class B unitholders were treated as stock-based comp. Since the transaction and going forward, as those original units converted to straight common units, straight common equity, we have and continue to expect to recognize significantly lower stock-based compensation. It will 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. Sales and marketing costs were $68.2 million this quarter compared to $91.8 million in the year ago quarter, a decrease of $23.5 million. This decline was primarily driven by a $20.7 million decrease in marketing expense as we reduced our marketing spend due to higher per unit costs and a $14.1 million decrease to Class B stock-based compensation expense. This was partially offset by an $8.2 million increase in deferred CAC and a $2.2 million increase in payroll and benefit costs due to higher headcount.

Included in these amounts were stock-based compensation of $0.6 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 marketing expenditures this quarter. Turning now to G&A. G&A costs this quarter were $30.5 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 is partially offset by a $2.1 million increase in stock-based comp and a $1.4 million increase in payroll and benefits costs due to higher headcount. Included in these amounts were $1.5 million this quarter of stock-based compensation expense compared to $472.7 million in the year ago quarter. Excluding stock-based compensation expense, our G&A cost declined $5.7 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. Adjusted cash flow from operations was $1.1 million in the first quarter of 2022 compared to $98 million in the year ago quarter with the decline primarily due to the decrease in billings. Adjusted CFFO margin was $0.8 million this quarter as compared to 38.4% last year. Additionally, while per unit cost remained high in first quarter of this year, we didn't decrease marketing expenditures as much as we might have otherwise as our marketers continue to test investment themes amidst the changing market. Keep in mind that we control that on a day-to-day basis, and we can reduce that spend any time we need to. Adjusted CFFO this quarter was further impacted by net changes in working capital, excluding changes in deferred revenue and changes in deferred CAC, which reduced cash by $18.1 million. Keep in mind, this only represents a timing difference in terms of receiving the cash.

Our paid subscriber base declined from $1 million at the end of the first quarter of 2021 to $909,000 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 continue to increase from $10.9 million a year ago to $14.5 million this year, a 33% increase.

New subscriber additions in first quarter 2021 were significantly higher than any of our prior or subsequent quarters and contributed to increased 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 that the absolute size of this cohort last year, generated an additional 60,000 churn subscribers in first quarter 2022, despite the fact that the percentage churn rate was right in line with historical averages.

Additionally, ARPU subscribers who churned 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 should significantly decline as we believe this is just another adjustment to a post-COVID environment. And in fact, April's churn rates have returned to our historical averages that we've disclosed in our 10-Q.

Turning to ARPU. ARPU declined to $636 this quarter from $825 last year. This is being driven by a 15% increase in the average trailing 4 quarter paid subscribers, combined with an 11% decrease in the average trailing 4 quarter billings. The increase in 4 quarter paid subscribers is still significantly impacted by the rapid increase in our subscriber base in the first half of 2021. The decrease in fourth quarter billings is due in large part to first quarter 2020 billings, our largest quarter ever, falling out of the trailing 12-month calculation. We've shown that over time, our subscribers continue to invest in our platform by purchasing higher-end subscriptions, which have tended to drive increases in ARPUs. 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 as we've been pretty active in the market this quarter. During this 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 have repurchased 3 million shares for a total of $16.4 million. The past several quarters have been a challenge in need. However, Mark previously stated, we've been here before, navigating markets due to changing environments is 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 is rolling out, combined with the various strategic initiatives that Mark discussed, we believe we're poised to add good value to both our subscribers and to our stockholders.

With that, I'll turn the call back to you, Mark.

Mark Arnold

Yes. Thanks, Dale. Just a final thought from me before we move to taking your questions. As you all very well know, financial markets are cyclical, and our business reacts and adapts to changes in the market environment. And whether markets are going up and investors are looking for growth, our markets are going down and readers look for more wealth preservation, our goal is to supply them with high-quality research. We have a long-term approach 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. We look forward to the opportunities ahead of us and continue to pursue several M&A opportunities and believe they could provide terrific value to and complement our business.

With that, I'll turn the call back to the operator for your questions.

Question-and-Answer Session


[Operator Instructions]. Our first question comes from the line of Devin Ryan with JMP Securities.

Devin Ryan

First question. So obviously, it's a challenging investment backdrop. We've seen this before. Who knows whether we have a recession or not. But if you take a step back, just looking historically, periods of stress and dislocation have always been the biggest opportunities for investing, right? So obviously, you can't call a bottom. But in terms of thinking about the longer term, these have been opportunities.

So when I look at your free 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 to -- kind of that 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 to maybe nudge 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 subscriptions relative to, call it, the S&P price or pick your index. But that the market starts to move higher and then subscribers kind of increase.

Is that the right correlation as well? Or is there something else we should look at in terms of historical timing that you've seen in your business?

Mark Arnold

Yes. So Devin, those are two really good points, and I'm heartened because we didn't know you very well, not so long ago, but your questions hit on 2 dynamics about our business that are dead right. The first is, to your point about free subscribers and tough markets being up an opportunity for them, you're exactly right. As I've described over the course of the past year, it does take us some time between when a free subscriber comes onto our platform, 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 to 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. The comment was just essentially that while these markets have been volatile, it might be time to take advantage of the drawdown in the 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. But the point is that the editor was talking to the readership about 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 and the reader. And so in times like this, that's where that relationship is really taking hold, but it's not instant to your point. And so as the readership develops relationships across our platform with the editors, I do expect them to move on to paid status and then they are high value, and then the ultrahigh value like our prior cohorts have; it's just not instant, it takes time for people to develop that relationship.

And to your second point about the lag in subscriptions to indices, 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 paradox in our business that sometimes when you have an investment sector that's going gangbusters and has gone, made 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. But as you know, that sometimes it 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.

And so there's a paradox in our 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'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.

Devin Ryan

Got it. Okay. Really appreciate the color there, Mark. Helpful. I want to put on another topic you hit on 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, M&A can be more challenging and the bid-ask spread can be wide. Bid-ask spread can also be wide when there's 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 sellers may still have really high expectations. How there are 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?

Mark Arnold

Yes. That's a good question, too, Devin, and you're also right on there. Just like there's a lag in the market sometimes, there's a lag in valuation sometimes. And so in some of the conversations we've had, people are rooted and straining to hold on to market valuations that were more appropriate last year in 2021. And you could see why they would do that, it makes sense. But at least in our experience, the valuation multiples have come down since then, all the information we're getting points to that. And you can see where that natural tension would develop, and we're working through that. And to your point, there are ways you can structure around that. I 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 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 and have been saying since we went public, our theory that our M&A pipeline would fill up with really high-quality people and high-quality businesses has borne out. And I can't make any comments on specifics, but it's moving along very nicely. I'm very happy with it.

Devin Ryan

Yes. Got it. Great. If I can just squeeze one more quick one in here for Dale, just on the subscribers and the churn that you saw in the quarter. I heard the comment that your April seen -- or saw some stabilization or a reversion to kind of historical levels. Any other kind of data that would suggest maybe we're stabilizing there? Or it's just one data point. So anything else you can help with there would be great.

Dale Lynch

Yes. So look, I mean, that is a good data point in and of itself, and we were looking for that confirmation. And when we saw it, it was good, right? So we've been -- we published a churn rate in our Q and I think we've been telling you folks, we've been kind of at that higher end of that range. I believe we give it as a range on a monthly basis. We've been at the higher end of that range for quite a bit of time now, maybe 5 quarters until this quarter came. And we sort of quantified what we think the excess churn was just given the outsized nature of that. So we adjusted for that and when we adjust for that, our churn rate was actually a little bit lower than the higher end of the range of that -- our historic range. And then in April, as we mentioned, it came down. But there's a number of data points here that point to a bit of some stabilization, right? We touched upon consumer engagement. We told you that 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 4 quarters, this quarter and 3 trailing, you're right about the average. So it looks like we sort of bottoms out on that engagement dynamic that post-COVID travel boom we were 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, they're plus or minus 10 basis points. So that stability is a good thing to see too.

Really what we're seeing is the new customer, right, which is about 60% of our customer base. They're 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, the paid conversion rate to dip here in the quarter. So the message I would take away from this is, look, 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 a forgone purchase. But we are seeing stabilization in everything around landing page visits high-value conversions.

And if you look at our subscriber adds, they are down versus a store like a year ago or so. But if you look at this quarter and the trailing 3 quarters and you average them out, the gross adds we put in this quarter are within 1,000 of that average. So you've hit on a theme, I think that's important. It does feel like it's been a tough year. There's no way to sugar coat that. But it feels like we have begun 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 the point that you and Mark were talking about on our free subscriber base because it's really important. We give you a conversion rate of 1% to 2% historically from that customer base. That should be higher. One of the reasons, one of the areas that our data science initiatives is going to focus on is just that conversions are free to paid. First, you have to have really good content. Mark touched on that a bit in his comments, which I thought was very good, right? The content matters most but the data science will support that. And that's one of the key focal areas that the team is going to look at first. So that will help. And that's really impactful too, because if you look at the customer sets, you have direct-to-paid that we -- as a channel on free-to-paid.

If you look at the free-to-paid over their lifetime, so they actually tend to spend more than our direct-to-paid channel. So what we're finding is the free-to-paid channel is a 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 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.


Our next question comes from the line of Kyle Peterson with Needham & Company.

Kyle Peterson

I just wanted to touch on the marketing spend. And I know you guys kind of mentioned that you were at least testing some of the content and campaigns in the first quarter that kind of made some of the spend a little elevated. Are you guys still testing that and letting some campaigns run longer? Like has that continued into 2Q 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 an elevated CAC environment?

Dale Lynch

You want me to take that first, Mark, and then you can add to it.

Mark Arnold

Yes. That'll be fine. Yes. Perfect.

Dale Lynch

Okay. So look, here we are -- and this goes back to Devin's question earlier, this is a critical moment for us, right? The max volatility we're seeing across pretty much every asset class, generational 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. Don't get me wrong there. In fact, if you look year-over-year, it's down pretty significantly. We mentioned $20 million. That's a pretty significant decline. But because the gross adds are lower right now, 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 a stop or what, whenever we want to. 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 in guidance right now, so we're going to continue to test it.

So think of it as, CAC's probably not going to decline materially, and we don't necessarily need it to. What we do need is that we need to come up with content that resonates. Content that resonates is the secret sauce to our business. Those conversion rates drive everything. So we'll continue to test, but we're still going to 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. The total spend is probably going to be lower than it would be otherwise. But we're going to keep testing new and new things. We have a lot of new content coming out. So that needs to be tested. And so there will be continuing marketing spend, but just have to strike the right balance between adding and margins.

Kyle Peterson

Got it. That's helpful. And then I guess just 1 quick follow-up on capital allocation. Obviously, the balance sheet is really strong. And just how are you guys thinking about -- it's been good that you guys have been chipping away at the buyback. Do you anticipate kind of keep going at the current pace or do you think that the shares at these levels, would you guys be willing to kind of either accelerate that pace or step up in a bigger way just given that the balance sheet is very strong right now.

Dale Lynch

So there's a balance there, right, Kyle. 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 the shares. That's screamingly obvious. But the other thing is we have to be cognizant of the free float. Until we can execute a large secondary offering at some point and really solve that liquidity problem for the long term, so larger investors can get involved and buy much larger positions. We're going to have to keep an eye toward both of those things. So the program is still out there. It's active. We have a 10b5-1 plan set up where our -- what the dealer just executes that 10b5-1 according to the instructions and so it just kind of operates, but we do have to be cognizant to the float. So we don't want to take too many shares out of the float. We have to balance that.


Our next question comes from the line of Alex Kramm with UBS.

Alexander Kramm

I wanted to come back to the discussion on cash flow. Just now I think over the last few quarters, you've told us that no matter what you run this business for healthy profitability, and we just had 2 quarters in a row of pretty low margin. And 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? Are there other things you may have to pull outside of marketing? Is there any kind of margin you feel like you can commit to for the year? So we have a little bit more confidence? And then maybe just lastly, that $18 million of working cash flow or working capital cash flow impact, can you just flush out what exactly happened there? Because again, 2 quarters in a row, fairly low cash flow. If I think about it from a cash perspective, what are the items that can actually swing cash that we should be thinking about as we think about the business?

Mark Arnold

Can you take that with last first order, Dale? Yes, go ahead.

Dale Lynch

Yes, I'll start with the last first and go from there. So on that cash flow impact, there were a few things that drove that accounts receivables, one, again, that's just a timing difference. And 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 an accounts receivable change this quarter that was sort of random that drove that cash flow decline.

So if you kind of think about it adjusted -- and keep in mind that the accounts receivable represents sales, right? So you could think of that as sort of cash and income, right? So you might adjust that. But even to your point, adjusting for that, we acknowledge the margins are low, there's no doubt. 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 3 years. With that, has come on ground -- has come an increase in our cost base, right? We have a lot of people, a lot of products and a lot of affiliates. We want to have more. So there's 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've never seen 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 base is 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 Go Public initiative that was in that quarter. But the good news is our G&A is stable to probably down a bit year-over-year. And we'll keep an eye to that. Look, if there's efficiencies that we can affect, we'll do that but we want to keep an eye toward long-term growth as well. So it's always going to be a balance.

As far as margin percentages, I would like to give you a number, but we're not really 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 2 quarters have been outlier quarters in terms of margins. We certainly would like them to be higher. We could get them much higher to more if we just slashed our marketing spend. Slashing marketing spend probably isn't the right answer, it probably needs to be a more measured approach to that, that spend, because now is the time going back to Devin's 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 the margins are going to be a bit lower right here. The 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. But as far as like a percentage, I can't give you that.

Alexander Kramm

Okay. Fair enough. I figured I'd try. Just a couple of -- well, actually, one quick one here. You mentioned that you still have success in upselling. And 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 you're having success at the high end, but in this kind of like initial upsell to high-value you're still lagging anything particularly going on there or anything else you're trying to do there to maybe do a little bit better?

Dale Lynch

Yes. So on -- there'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, right? So that churn dynamic that we saw from Q1 '21 manifested in Q2 '22 that could certainly impact sort of around the margins, those numbers that you're seeing on the high-value conversion like the count, right? Just there's fewer people in 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 4 quarters now. The current quarter and the previous 3 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 to begin to grow that sub base now. As I mentioned earlier, we do feel like we're building a base right now across a number of our metrics. If you look at the 4 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.

Alexander Kramm

All right. Just one quick one and I let you go. The landing page comment, I believe flattish comment was a 1Q 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 helpful?

Dale Lynch

Yes. I knew you're going to ask that question. So -- and again, all along the theme of building a base. So I would say quarter-to-date, second quarter to date, if you walk through -- I think this is through last Friday, so just before the weekend. Our business are up a little bit, 4%, 5% depending on which metric you're looking at, we cut them a bunch of different ways. But overall, we're up certain in that 4% sequential. So if you compare quarter-to-date versus the first quarter of '22, we're up modestly. Conversion rates are pretty stable on the direct-to-paid conversion rates, but the landing page visits are up modestly here.


Our next question comes from the line of Jeff Meuler with Baird.

Jeffrey Meuler

Yes. So I understand the positive takeaway on the high-end conversion. But as I think about the typical migration of the value stack. I just -- 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 is kind of the leading indicator because there's a natural, I guess, migration of the value stacks that includes that price point? Or just trying to understand what you're trying to convey to us when you disaggregate the conversion rate at the different parts of the value stack?

Dale Lynch

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 haven't yet purchased that high -- that high value, what we call back-end subscription. The richer investment content at that $750 to $1,000 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 -- I mean that happened -- that turned on a dime in the first quarter here, and that happened to the point in February when inflation spiked depending on how you measure it, 8% to 12% and the war started and rate spikes and the markets kind of crashed. So that conversion rate fell very quickly. Those are our customers, right, 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 -- institutional investors when things move quickly, institutional investors will 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? There's 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 the subscribers. These subscribers that have not yet fully embraced our value stack, right?

Getting those conversion rates back to kind of where they were a couple of quarters ago or even just 2 quarters ago, you'd see a meaningful impact on billings. And so I think with the market plunging like they have, there are going to be a raft of opportunities. These ideas will be going out in the form of our content. We just need to get that conversion rate back up, which means these guys are going to begin their higher-value journey through our ecosystem, if you will. Right now, they haven't. It's sort of on pause, and I think we need some measure of stability on number 1 and number 2, time for this content that Mark mentioned earlier to get into the system and for these folks to take action, right? Just the retail investor set, I think moves a bit more slowly than what you guys are used to seeing.

Mark Arnold

Yes, I'll just add to that. Sorry to cut in. I'll just add 2 cents 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 know the quality of the content, and they have confidence and conviction around what's going to happen. Well, then they've continued to spend with us and continue to subscribe to the higher-value products. But for someone who's newer as I was touching on earlier with Devin's 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 emerges if one does.

And so while they're doing that, they're consuming the content at a lower price point, but they just haven't 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 Dale 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.

Jeffrey Meuler

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 lagged period where your editors are adapting the content for the current environment and you -- and there's some lower level of readership or engagement among the free subs space?

Mark Arnold

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 going on. A bunch you're engaging with the content, developing the relationship with the reader. They just haven't stepped up to higher price points at rates that we're accustomed to seeing and some others are essentially visiting, engaging from the platform, and that's resulted in the churn from the year ago cohorts that Dale was mentioning.


Our next question comes from the line of Ygal Arounian with Wedbush Securities.

Ygal Arounian

Maybe first, is there any way to think about to be able to kind of parse out the impacts from reopening versus the market volatility that you're seeing in terms of engagement and conversion to paid subscribers? And then the second question, you talked about marketing and kind of what you're doing. But within that the testing -- could you speak a little bit more about what you're learning. Maybe a little bit more color on specifically what you're doing? And do you expect that to impact as we move forward and hopefully, things start to stabilize a little bit more?

Dale Lynch

Give me the first one and you take the second one?

Mark Arnold

Yes. That is exactly what I was going to do. I'll go first, if it's okay. As far as the testing goes, we had a long period of bull market activity where people were chasing cryptos, alpha, Microcap securities, just go-go bull market type activity. And so we saw that in both what our editors were recommending to try to take advantage of that environment and also what our readers were looking for and responding to both, which helped propelled us up over the past couple of years. But now things feel different in the investing environment. I think everyone would agree to that. We've seen a big drawdown in the NASDAQ and the tech trade and a move towards safer investments where you're either escaping the volatility or you're waiting to see whether a recessionary type environment and more bull market strategies are going to take hold.

And so what we're doing internally is we've got editors who are assessing that choice and dealing with it in turn and each editorial team is different. They've got different strategies around what they do in that environment. And then, of course, our marketers also are trying to see what resonates with readers at all of our price points around those themes. And so what we are testing both of the editorial and marketing levels are messages of commodities, gold, real estate, inflation protection, income investing, some of the list that I was describing earlier in my comments.

And so when I describe what we're testing, it's back right? We're trying to see based on the editorial conviction around the ideas, what messages will resonate with the 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 let the spend go a little longer than we ordinarily would because we think the market environment requires it, and we want to test around it to make sure we're optimizing our marketing metrics. That's the way that helps.

Dale Lynch

And to your first question. If I am trying to parse the effect between sort of what I would call a post-COVID engagement dynamic, right, that's been going on for a whole year as contrasted to now this new first quarter '22 development, which is just all the market volatility, interest rates inflation war and all that. Certainly, we have some internal calcs that have sought to do that. The metrics that we use that aren't really disclosed, but I'll try to give you some directional insight. Think about it this way. We talked with Devin around some of the fact that some of our key metrics seem to have been bottoming, right, the last 3, 4 quarters.

A lot of these key metrics have kind of formed the base. It feels like if you average them and then you compare them to the first quarter metrics, a lot of them are pretty similar. Gross adds, churn rate, all those things have stabilized and landing page visits seems to have stabilized. So that's all good. Now 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 the engagement was relatively similar between Q4 and Q1, which it was, it was down 2%, but not materially. You might then draw the conclusion from that, that delta, right, that stepped down to Q4 to Q1 is largely the impact of what we're seeing of this new dynamic to sort of individual investor indecision, right?

The decline in the conversion rate that I mentioned in my commentary, the 16 basis point decline in landing page to converted paid customer conversion rate, that really is due to what we believe is this first quarter dynamic because as this turned on the dime in February when inflation went through the roof and the war started and rates went from up 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 on 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 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.


[Operator Instructions]. Our next question comes from the line of Jason Helfstein with Oppenheimer.

Jason Helfstein

And I've got three questions, and I'm a little surprised no one has 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 what you can do is manage to a minimum level of adjusted free cash for the year. And it seems that as the market wants to hear based on the way other companies have reported, market reaction, all of that. So is there any reason why you can't commit for a minimum level of free cash flow for the year, given the leverage you have around sales and marketing. So that's question 1.

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 should be seeing over the next 2 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 third question is your ability to reduce G&A from current levels and you could kind of maybe tie that back to the point about adjusted free cash flow?

Mark Arnold

Thanks, Jason. Where to begin? So I'll just take it from the top. Your first comment about committing to minimum free-cash flow margin, we're not doing that. 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 try to do, and you're right, we do have leverage and control around 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 because we're trying to feel out different investing strategies based on what the auditorial teams are seeing and what they are thinking. And we do that as time goes by, and you saw that from Q4 to Q1. We'll continue to do that throughout the year.

What we don't know is what the customer acquisition costs will be and what 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 you've seen that over the quarters that have 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, 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 the 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 they're 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 go longer than they would because they try to -- as they try to feel out what investing strategies people are going to end up pursuing and want to subscribe to.

And around G&A, I would just back up what Dale was describing earlier, which is -- we've been doing this for a long time. We've -- 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 is the short-term results versus our long-term goals. If we wanted to, 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 interest of our business or for our investors. And so we don't do that. Instead, what we do is we pursue a balance of trying to bring on subscribers of folks that who we think will be the right types of subscribers that will be interested and committed to learning about investing as 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 is free, move up to 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 to provide for long-term growth for the business. Things like I described earlier, the pan MarketWise platform, data science. And some of the other things you're doing around M&A and people. And so that's what our operators are doing, and that's what I want them to do. I think that's what investors will want them to do, which is manage the business for the long term prosperity of the shareholder base as well as our subscribers.

Jason Helfstein

I know we're going along. I was typically asking about G&A. So not -- you just answered the question about sales and marketing. But I'm just saying, again, given that, again, you're a public company, so you have that -- you should 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 real company. So the question is, do you have flexibility to get your G&A down if you wanted to this year?

Mark Arnold

Yes, we do.

Dale Lynch

Yes. Jason, look, I think I mentioned earlier that the marketing spend is one thing, and we're looking for efficiencies on the G&A side for sure. Well, we should always be doing that, right? But that's going to -- there's going to be a bit of a lag to that, right? We want to make sure that we keep the infrastructure that we've built over the last few years so we can maximize on the market opportunities.

What we're seeing right now is creating a massive amount of new investment possibilities here and probably not in the too distant future. And what you're seeing is such a purge across so many different things, there's going to be a myriad of opportunities and ideas that are going to resonate with folks. What we are in here is a lag, right? We're in a time lag between shock of what's 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're looking at G&A, and we're absolutely looking for efficiencies there. And you should also expect that our marketers too, are looking for efficiencies. The unit costs are high. One of the data science projects you're working on is related to that. The terminal that Mark mentioned also should, over time, lead to more efficient per unit acquisition costs. There's a lot of technologies that are being rolled into that platform that we think will help do that, provide some synergies. So over time marketing spend should get more efficient. We should be able to reduce our own unit cost despite market forces. And we are not at all less focused on ROI. I'm not sure how that came across, but that's absolutely not true. We couldn't 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. And 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 is understandable given everything we've talked about.


Our next question is a follow-up from the line of Alex Kramm with UBS.

Alexander Kramm

Sorry, I apologize for dragging up the call. Just very quick, given maybe the challenge to upsell people to paid subscribers right now and you are clearly gaining a lot of new subscribers and the numbers have obviously ballooned over the last couple of years. Are you giving any thought about maybe monetizing that free cohort a little bit more? Are there other business opportunities, you can do that with that valuable customer base at all or is that too early to maybe shift strategy here on that side?

Mark Arnold

Thanks, Alex. I'm not sure what you're suggesting in terms of monetizing the free base. So far, what we've done is to stick with our strategy, which is provide them high-value content that we think is value add compared to other stuff they can find out there around investing strategies and then put content and offers in front of them from a paid standpoint, that we think will find attractive. 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 to make that clear.

Alexander Kramm

I guess [indiscernible], but obviously, there's other models in the industry, right, companies that are more focused on advertising, et cetera. And I think maybe you do that to some degree, very little, but clearly, you have a committed free subscriber base that is -- I think you said earlier, engagement on your website is still pretty healthy, right? So clearly, people that are interested in financial markets maybe, for whatever reason, they're not really interested in spending hard dollars for content, and that's the prerogative. So just wondering if you think that, that customer base or potential customers could be monetized more. But again, this is not your business model so far. I'm just wondering if you're spending more time on thinking about things like that.

Mark Arnold

Yes, 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. And 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 is because, 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've really perceived with any great emphasis so far.


Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Arnold for any final comments.

Mark Arnold

Yes. Thank you. I just want to thank everyone for their participation today and your interest in MarketWise. 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.

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