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.

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.

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 our subscribers with the research and tools that they need to navigate the current situation. In the first quarter of this year, as the world and the U.S. increasingly returned to 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 indecision 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 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 of 2022 compared to the fourth quarter of 2021. However, they remain approximately 18% below the average engagement metrics we observed over the past two years during the pandemic. With the great reemergence trend continuing at pace, the cost to market through display ad channels remains 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 addressed the financial environment in that post-crisis world and ultimately resumed significant organic growth. So what are we doing to address these market conditions? First of all, we believe consumer reaction to this market is entirely understandable. In light of the downdraft in many asset classes, we believe investors are weighing more offensive growth-oriented investment ideas that have been successful in recent years versus more defensive strategies. Investors are taking time to weigh the alternatives and evaluate their risk appetite. We see this lower overall paid conversion rate among our lower ARPU subscribers. However, our high-value and ultra-high-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 show riskier assets and retreat to 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. 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 with 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 to 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, 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. So far, we're doing well against other investing sites, with our members are now spending more time on our site 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.

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 three 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 on 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 hold and continue. 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, the first quarter of 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 bear market territory, cryptocurrencies have been hit. And we've seen the fastest rise in interest rates in a generation. With all this uncertainty, it's not surprising that we're seeing some consumer 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 shine. 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 the first quarter of 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 two years. The good news here is despite the challenges we've mentioned, our landing page visits have largely stabilized since the second quarter of 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 the first quarter of 2021, which was an exceptional quarter. That is until the first quarter of 2022. The overall conversion rate declined for us about 16 basis points from the fourth quarter of 2021. 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, the first quarter of 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. The first quarter of 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 the fourth quarter of 2021. Earlier, we mentioned that our direct-to-paid conversion rate fell approximately 16 basis points from the fourth quarter of 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 the 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 of 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 the first quarter of 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 costs declined by $5.7 million year-over-year. Net income in the first quarter of 2022 was $23 million compared to a $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 costs remained high in the 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 the first quarter of 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 the first quarter of 2021 were significantly higher than any of our prior or subsequent quarters and contributed to increased subscriber churn count in the first quarter of 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 the first quarter of 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 generated. 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. 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 indeed. 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.

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, or our markets 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.

Our first question comes from Devin Ryan with JMP Securities.

First question. Clearly, the investment environment is challenging, and we've encountered this before. It's uncertain whether a recession is on the horizon. However, if we examine historical trends, times of stress often present significant investment opportunities. While we can't precisely predict a market bottom, these periods have historically been advantageous for long-term thinking. When I consider your free subscriber group, it seems that educating investors about market dynamics could be highly beneficial for them and could facilitate their transition to a paid subscription. I would like to discuss what initiatives you are currently implementing to guide subscribers during this tough investment landscape, as new opportunities may arise. Additionally, regarding your business's historical performance, I assume there is typically a delay in subscriptions in relation to market indices like the S&P. Do you observe a pattern where market improvements lead to an uptick in subscribers, or should we be considering different historical timing factors in your business?

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 two 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 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.

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 are there other ways to structure where there's kind of a win-win for everybody and how are you feeling about kind of progressing on some of those?

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. You can see why they would do that; it makes sense. But at least in our experience, the valuation multiples have come down since then, and all the information we're getting points to that. You can see where that natural tension would develop, and we're working through that. 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. So we are exploring other ways to structure deals 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. I can't make any comments on specifics, but it's moving along very nicely. I'm very happy with it.

If I could ask one more quick question for Dale regarding the subscribers and churn you experienced this quarter. I heard that April showed some stabilization or a return to historical levels. Is there any additional data that might indicate we are seeing stabilization, or is this just a single data point? Any further insights you could provide would be appreciated.

Yes. That confirmation was a positive indication for us. We published our churn rate in our quarterly report and had been operating at the higher end of our stated range for quite some time, possibly for five quarters until this recent quarter. We analyzed the excess churn and adjusted our figures accordingly, which showed our churn rate to be slightly lower than the historical upper end of that range. In April, we noted a decrease as well. Several data points suggest some stabilization. For instance, our landing page visits have remained steady, which is encouraging. Analyzing the trend over the past four quarters, we see that this quarter aligns closely with the average, indicating a stabilization in engagement since the post-COVID travel boom. Our conversion rates for high-value customers are also consistent, fluctuating around 10 basis points each quarter. The real challenge appears to be with new customers, who represent about 60% of our base. They are currently reluctant to make purchasing decisions, causing a decline in the paid conversion rate this quarter. It's important to note that we believe this is merely a delay in their purchasing decisions rather than a complete loss of potential sales. Overall, we see stabilization across various metrics, although subscriber additions are lower compared to last year. However, if we average this quarter's growth adds with the previous three, they align closely with the average. It has been a challenging year, but we seem to be forming a solid foundation for future growth. Regarding our free subscriber base, we typically see a 1% to 2% conversion rate, which we believe can improve. Our data science initiatives will focus on enhancing the conversions from free to paid subscriptions. High-quality content is essential, as Mark emphasized, and the data science efforts will support this goal. The free-to-paid channel is particularly valuable, as these customers tend to spend more over their lifetime compared to those who come in directly. Hence, we are prioritizing this area in our data science efforts. In summary, we are starting to see signs of stability that could set the stage for future organic growth across multiple metrics.

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

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 Q2 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?

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

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

Okay. We are at a critical moment right now, facing maximum volatility across almost every asset class and generational changes in interest rates. We will likely continue to test the market. While our overall marketing spending has decreased significantly year-over-year, with a decline of about $20 million, the lower gross additions currently are keeping our customer acquisition costs high on a per-unit basis. I want to emphasize that we will keep testing the market. We are mindful of our margins and can adjust our spending whenever necessary. Marketing spend is essential for our future and the right approach for our subscribers, who need guidance at this time. Therefore, we will continue our testing efforts. It’s important to note that while customer acquisition costs are not expected to drop significantly, we do not necessarily need them to. Our focus needs to be on generating content that resonates with our audience, as this is crucial for our business and drives conversion rates. We will maintain our testing while keeping an eye on margins to find the right balance. Our unit costs are high, which is not ideal, and our total spend will likely remain lower than it could be. However, we will persist in exploring new opportunities and have a lot of new content set to release, which requires testing. Thus, marketing spend will continue, but we need to find the right balance between additions and margins.

Got it. That's helpful. I have a quick follow-up on capital allocation. The balance sheet is really strong, and it's good to see that you've been making progress on the buyback. Do you plan to maintain the current pace, or do you think the share prices at this level would justify either accelerating that pace or increasing the buyback significantly, given the strength of the balance sheet right now?

There's a balance to consider, Kyle. The main factor affecting our stock price is likely the small float size. We need to find the right mix since repurchasing shares is clearly beneficial. At the same time, we must be aware of the free float situation. Until we can carry out a large secondary offering to address the liquidity issue in the long term, allowing larger investors to buy significant positions, we need to monitor both aspects closely. The buyback program is active with a 10b5-1 plan in place where the dealer executes according to the instructions. However, we have to remain mindful of the float to avoid withdrawing too many shares. It's all about balancing these factors.

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

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 two quarters in a row of pretty low margin. 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?

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

I'll begin with the last point and work my way back. Regarding the cash flow impact, several factors contributed to changes in accounts receivables, primarily driven by timing differences. We anticipate that these will likely reverse in the upcoming quarter, so we expect to recover a significant portion of that soon. Furthermore, there were other variations in variable cost accruals, but the main driver for the cash flow decline this quarter was the accounts receivable changes, which were somewhat random. It's important to remember that accounts receivable reflects sales, akin to cash and income. Even when adjusting for that, we recognize that our margins are low. We have developed a product and infrastructure aimed at increasing market share, which has led to significant growth over the past three years, but this growth has also resulted in higher costs. We have many employees, products, and affiliates, and we plan to expand further. There's always a balance between short-term impacts and long-term objectives, with our ultimate goal being to scale and establish ourselves as the preferred platform. We have built a relatively large infrastructure, and this year we're experiencing an unprecedented revenue impact. However, we believe we've reached a bottom regarding this impact, and our cost base is now fairly stable. Our general and administrative expenses declined by $5 million year-over-year, which is positive, especially since the prior year included costs related to our Go Public initiative. We're focused on maintaining or even reducing our G&A expenses annually. If we can find efficiencies, we will, but we will also maintain a focus on long-term growth. Regarding margins, while I would like to provide a specific figure, we are not committed to guidance. We are aware of the margins and recognize that the last two quarters have been outliers. We would prefer them to be higher, and while we could boost margins significantly by cutting our marketing expenses, that may not be the best strategy. We need to take a more measured approach, particularly as this peak volatility presents significant investment opportunities. Our analysts have great ideas that we are beginning to implement now. This is a unique moment where margins may be lower, but the focus is on turning this situation into revenue and returning to our historical growth trajectories. We're mindful of the margins and will seek efficiencies in marketing and other areas of the business as well. However, I can't provide a specific margin percentage at this time.

Okay, I understand. I just wanted to ask a quick question. You mentioned that you've had success in upselling. When I compare quarter-over-quarter to the fourth quarter, I see that your ultra-high net value clients count has increased significantly, while the high-value clients count has actually decreased. Could you elaborate on this? It appears that you're doing well at the high end, but you're still struggling with the initial upsell to high-value clients. Is there anything specific going on that might explain this, or any strategies you're considering to improve that aspect?

Yes. There will be some fluctuations in the absolute numbers from period to period. This quarter, we noticed that the high churn from that cohort was influenced by subscribers who joined in Q1 and quickly purchased several publications. The churn trend we observed from Q1 '21 carried over into Q2 '22, which could affect the high-value conversion metrics you're seeing now. Our subscriber base has decreased compared to last year, leading to normal variations around the average. However, if we assess this on a percentage basis, which is how we view it, the conversion rates have remained fairly consistent, fluctuating by only 10 basis points for high value over the past four quarters. For an entire year, those metrics have remained solidly within that range. Our goal now is to stabilize and start growing our subscriber base. As I mentioned earlier, we believe we are currently establishing a foundation across various metrics. When looking at the four-quarter average of these metrics, it appears that we have built a support base from which we can now make progress.

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?

Yes, I anticipated you would ask that question. As part of our ongoing efforts to build a strong foundation, I can report that so far in the second quarter, up to last Friday, our business has increased by about 4% to 5% depending on the metric analyzed. Overall, we are seeing a modest increase of around 4% sequentially when comparing the current quarter to the first quarter of 2022. Conversion rates on direct-to-paid channels remain stable, and we have observed a modest increase in landing page visits.

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

Yes, I understand the positive point regarding high-end conversion. However, I'm curious about what you are indicating regarding low-end conversion. Should we consider that metric and its eventual change as a leading indicator? There's a natural progression in the value stacks that includes that price point, and I'm trying to grasp what you're communicating when you break down the conversion rates for different segments of the value stack.

Yes, that's a great point. To put it simply, those who haven't spent $600 with us likely haven't purchased our higher-value, back-end subscription. This content, priced between $750 and $1,000, remains unpurchased by them. We're noticing a decline in their conversion rates compared to historical levels. This change occurred suddenly in the first quarter, particularly in February when inflation rose significantly, along with market instability due to the war and interest rate hikes. Consequently, the conversion rate dropped swiftly. These customers haven't yet established a long-term relationship with us and are waiting to invest in our premium content. Currently, they are hesitant. Institutional investors tend to act quickly during volatile times, while individual investors often hesitate and delay their actions. To put it in perspective, we need to introduce new ideas and content to those subscribers who haven't yet fully engaged with our offerings. If we can restore those conversion rates to what they were just a couple of quarters ago, it would positively impact our billings. Given the current market decline, we see numerous opportunities to deliver new content. We need to increase the conversion rate so these customers can embark on their journey with us. At present, their engagement is somewhat stalled, and we require both stability and time for the content discussed earlier to be integrated, allowing these customers to take action. The retail investor demographic tends to move more cautiously than what you might be accustomed to.

Yes, I'll just add to that. Sorry to cut in. I'll just add two 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. 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.

Got it. If you look at the group of free subscribers, how is their engagement and readership? Are they highly engaged because they need assistance but haven't made a purchase yet? Or is there still a lag where your editors are adjusting the content for the current situation, resulting in lower readership or engagement among the free subscribers?

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.

Is there a way to differentiate the impacts from reopening compared to the market volatility you're experiencing in terms of engagement and conversion to paid subscribers? Additionally, regarding your marketing efforts, could you provide more insights into what you're learning from your testing? What specific strategies are you implementing, and do you anticipate that these will have an effect as we move forward, especially as things hopefully begin to stabilize?

Yes. I am sure what you want to do, Dale, I'll take the first one. That's fine. 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 propel 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 among the readership like I am, which is there's a little bit of 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. 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.

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 calculations 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 three, four 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 seem 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 a 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? 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.

Our next question comes from Jason Helfstein with Oppenheimer.

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 two years given your prepared remarks, and it kind of begs the question, should you be centralizing marketing more and removing it more away from the brands? And then I guess the 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?

Thank you, Jason. To start, regarding your comment about committing to a minimum free cash flow margin, we have chosen not to provide that guidance, and I discussed this in our last quarterly call. We believe this is the best approach for managing the business. This connects to both parts of your question. We do have control over our marketing spending, which is a significant expense for us. As I mentioned earlier, we have extended some of our testing to explore different investment strategies based on insights from our auditing teams. This is an ongoing process, and you’ve seen an example of this from Q4 to Q1. We will keep this up throughout the year. However, we are uncertain about future customer acquisition costs and the rates we will encounter on advertising platforms. We will continue managing our business as we have been—when market conditions allow us to acquire customers at a low cost, we increase our efforts; when costs rise, we scale back. This has been evident in our results since we went public. We’ve maintained a consistent approach and messaging regarding this. Concerning marketing ROI, our marketing teams are conducting their usual tests to find out which investment strategies and products resonate with our subscribers, depending on the current market situation. We have observed hesitance among our lower-priced subscribers to transition to higher price points as they assess their portfolio strategies amid market volatility. Our marketers are testing for longer periods than usual to better understand the investment strategies that will attract these customers. Regarding G&A, I want to reiterate what Dale mentioned earlier: we have a lengthy operational history of 22 years, and our team is focused on optimizing short-term results while aligning with our long-term objectives. While we could cut the marketing budget or make significant layoffs to boost profits, we don't believe that would serve the long-term interests of our business or our investors. Therefore, we aim to attract subscribers who are genuinely interested in learning about investing, as we view investing as a lifelong journey. They will likely engage with our offerings, starting from free options and moving up to higher price points as they explore different strategies and navigate the financial landscape. We try to balance this with strategic initiatives aimed at ensuring long-term growth for the business, including the pan MarketWise platform, data science advancements, and M&A efforts. Our operators are focused on these priorities, and I believe this approach aligns with what our investors want, which is long-term success for both shareholders and subscribers.

Yes, Jason. I mentioned earlier that while we are focusing on our marketing spend, we are also seeking efficiencies in our general and administrative areas. This is something we should always strive for, though there will be a slight delay in seeing those efficiencies come to fruition. We want to maintain the infrastructure we have developed over the past few years to capitalize on market opportunities. Currently, we are witnessing significant new investment possibilities emerging, likely in the near future. There is an ongoing adjustment period across various sectors, leading to numerous new opportunities and ideas that will resonate with people. A response lag exists between the initial shock of recent events and the emergence of new ideas that connect with people before they start making purchases. This process will unfold; I can't predict whether it will take 30 or 60 days, but it will happen. We are indeed focused on improving efficiencies in our general and administrative expenses, as well as expecting our marketing teams to do the same. Unit costs are currently elevated, and one of our data science projects addresses this issue. The terminal that Mark referenced is expected to gradually lead to more efficient acquisition costs per unit. We are integrating various technologies into that platform that we believe will provide synergies. Over time, marketing spending should become more effective, allowing us to lower our own unit costs despite market pressures. Our focus on return on investment remains strong, and I'm not sure why it might seem otherwise, but rest assured we are dedicated to maximizing our marketing ROI. While unit costs are high, this is only one aspect; revenue generation ultimately drives returns. The current delay in revenue is likely due to the shock experienced by individual investors, which is understandable given the circumstances we’ve discussed.

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 with that valuable customer base at all, or is that too early to maybe shift strategy here on that side?

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 valuable 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 keeping doing. But I'm not sure if that gets to your question around what else we would do to make that clear.

I guess there are other models in the industry, like companies that focus more on advertising. To some extent, you do that, but you clearly have a committed free subscriber base. I think you mentioned earlier that engagement on your website is still quite healthy. It seems that people interested in financial markets, for various reasons, might not want to spend money on content, which is their choice. I'm curious if you think that this customer base or potential customers could be monetized further. However, this isn't your current business model, so I'm just wondering if you're considering such ideas more.

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 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.

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.