Greetings. Good morning and welcome to the MarketWise Second Quarter 2021 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference line will be open for questions, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like t turn the call over to Mr. Jamie Lillis, Managing Director at Solebury Trout. Please go ahead, sir.

Thank you, operator, and good morning. Thank you for joining us on today’s conference call to discuss MarketWise’s second quarter 2021 financial results. On the call today we have Mark Arnold, Chief Executive Officer; and Dale Lynch, 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 statement. Information concerning 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 our SEC filings. Now, I’ll turn the call over to Mark.

Thank you, Jamie, and good morning, everybody. Before I get started, I’d like to take a moment to thank all of those people who helped us through our SPAC process, public offering, which culminated in our first day of trading on the NASDAQ on July 22nd, under the ticker symbol MKTW. The many months of hard work by our fantastic team here at MarketWise, our trusted advisors and the loyal support of our subscribers contributed to the success of our offering. So, thanks to all of those folks, for all of your hard work and support. Importantly, our public listing provides MarketWise with additional flexibility to take full advantage of the growth opportunities that lie ahead of us, including investments in technology and our community, additional partnerships and of course M&A activity. I’d like to start today by providing a brief overview of MarketWise and our mission for those investors who were not able to hear our story during the roadshow. Then, I’ll briefly review the highlights of our second quarter performance, before I turn the call over to Dale for a more detailed discussion of our results. We’ll then open up the call for your questions. So, to understand what we do, I think it’s important to understand our origin story. And you’ll see how a simple idea over the last few decades has really turned into what has proven to be a scalable platform to deliver what I believe is best-in-class investment research for the self-directed investor. We have a very unique set of products and a full spectrum of price points, and investment content that offers our audience an incredible value proposition that cannot be found elsewhere. Institutional research is the closest in content to what we provide because it is actionable, but it is usually hard…

Yes. Hey. Thanks, Mark. So, turning to our financial result. Second quarter 2021 revenue was $142.1 million, compared to $82.8 million in the second quarter 2020. That’s a 71.7% year-over-year growth. We continue to see the results of our significant investment in the business across our platform, our content, our people, new technologies, and our significant free-to-paid distribution channel. Billings were $185.1 million this quarter compared to $123.1 million a year ago. That’s more than a 50% year-over-year increase. Approximately 45% of our billings this quarter came from lifetime sales, 54% from term sales, and 1% from other billings. Keep in mind that our billings can vary quarter to quarter due to the nature of us collecting all of our invoices upfront as well as campaign mix and efficacy. First quarter 2021 was a record well beyond our forecast at $255 million in billings, that’s nearly $100 million sequential increase. But our second quarter was also very strong with high conversion rate -- conversion rate in line with to a bit higher than those we saw in 2020, just not quite as high as they were in the first quarter of this year. Our cost of revenue was $26.8 million this quarter compared to $27.5 million a year ago. Included in this cost of revenue is $10.6 million of stock-based compensation compared to $15.1 million in the year-ago quarter. If you were to exclude stock-based comp from our cost of sales, sales margins as a percent of revenue would have been 89% this quarter, as compared to 85% in the year-ago quarter and generally in line with historical averages to slightly above. One thing I’d like to emphasize is from the time of the combination with Ascendant and going forward, the stock-based compensation attributable to our original Class B units…

Yes. Thanks, Dale. So, before we take your questions, I’d like to emphasize a couple of points. First, now that we’ve completed our go public process, we’re very excited to turn our attention back to running the business and executing on our growth plans. The organic opportunities are significant in our eyes, and we now have a central holding company brand in MarketWise that we plan on using to pursue some brand awareness and the central platform using this new brand. We will, of course, build out our customer-facing brands, adding more editors and content and more brands over time, the way we’ve always done. And this is all with the backdrop of an addressable market that we think has strong tailwinds in our favor. More and more people are inclined to manage their own investments, and especially younger generations. In order for younger investors to grow their investment portfolios to say $250,000 to $500,000, they need education, research and tools to succeed. And we provide those solutions to that group, as they will fall squarely in our customer demographic as they age, mature and grow their assets. So, we’re very excited about all of this. We also have opportunities to leverage our data science more, and Mark Gerhard and his team at Ascendant will be very helpful and are being very helpful in this regard already. And finally, we’ve mentioned previously that we’ve always been active on the M&A front. Now, with the transparency, public awareness and currency of being public company, we are better positioned than ever to execute on this strategy. We’re very excited about our future and continuing to serve our readers going forward. And with that, I’d like to turn it over to the operator for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Devin Ryan with JMP Securities. Please proceed with your question.

Great. Good morning, Mark and Dale. First of all, congratulations on the SPAC closing and welcome to the public markets.

Thank you.

I guess, I want to start on customer acquisition costs and the outlook. Obviously, you guys gave some good detail around what you’re seeing in the market. It seems like maybe some unusual drivers just with the economy reopening, so we’ll see how long this lasts. But maybe if you can, just give us a little more perspective around how you’re thinking about where your CAC may settle down. Is it still reasonable to be thinking about kind of somewhere in between 2019 and 2020? I appreciate a little bit of a crystal ball question in there. But then also, talk about this transition towards focusing on the free subs, which I agree is kind of a nice part of the model that you can go back and forth. And just functionally, what does that look like? And how you -- with that nice growing base there, how you expect to kind of push harder into that area?

Yes. Hey, Devin. So, look, I mean, as you know, we don’t disclose CAC in specific. But, you guys can do your own math, you have enough data points to calculate it. You can calculate it kind of what you think it is year-to-date, you probably won’t be too far off, right? And if you look at it year-to-date, it’s actually right in line with sort of what we told you guys in our investor -- previous investor slide deck where we said we expected to be the average of 19 and 20. It’s almost right on the screens there. So, what we’re seeing here is not anomalous from the absolute number. What we saw in the second quarter, particularly later in the second quarter was just the acuteness of the immediacy of the impact. It was like all of a sudden travel and leisure was gone for 15 months -- 14 months. All of a sudden, the entire world of travel and leisure was then Google and Yahoo and everything else in May and June. And so, it’s just the acuteness of the time that had an impact. That was sort of dramatic in the quarter. But in aggregate year-to-date, we’re kind of right in line with where we think we would be at year-end. It might ebb and flow a bit quarter-to-quarter, right? But no, we don’t see so far and we’re right on the street to -- ahead of our forecast, and we feel good about where we sit. On the free subs, yes, look, that’s a huge community for us. It’s 12 million large now. And I’ll let Mark chime in here, but I just wanted to give my nickel first since I was talking. But, look, 12 million people, that’s massive community. We need to figure out how to better take advantage of that, right? We are converting them to paid, and that’s an obvious benefit of the community. But there are other ways to engage that community to help create some synergies. And I know Mark and his team, Gerhard have some thoughts on that. I know Mark Arnold has -- certainly has thoughts on that. So, stay tuned. There’s a lot more to do to that set of relationships and simply convert 2% of them manually to paid. And why don’t I let Mark chime in here more on that.

That’s right. We’re happy to have the community we have. And of course, we work hard to provide content to that group that we think they’ll find engaging. And then, ultimately, what we hope will happen is we’ll intrigue them enough and get them excited to start paying for our -- either our lower cost or our higher cost products. And we’ve had a lot of success doing that over time. Can we do better? Sure. I want to do better, of course. And that’s one of the things I’m excited about doing going forward. That’s part of why I’m excited to turn back towards operating the business, and also part of why I’m excited to start working with Mark Gerhard and his team to see what lessons they learned, tell you some of the tools that they’ve developed expertise in, to try to make that happen.

Okay, terrific. I appreciate all that color. And then, just as a follow-up, I’m not sure how much you can share here, but even if you can give some qualitative color would be very helpful. Just to kind of think about the pipeline of new brands or editors or analytic capabilities, any flavor for kind of the level of dialogue or having, areas that are interesting at the moment? And really just how the visibility of the SPAC and Ascendant relationship and also the public currency is maybe helping to drive more conversation and potentially accelerate some things that are in the pipeline?

Yes. I can’t comment on specific targets, as I’m sure you know. But, I’ve said a couple times before publicly and I mentioned that here today that the number of inbound inquiries we’ve received has increased dramatically since we announced the merger back on March 2nd. A lot of our outbound, both content and M&A activity prior to the announcement was outbound. We would occasionally have folks knock on our door, so to speak and see if they wanted to strike a content or M&A deal. But by far and away, our activity was outbound. Since March 2nd, we’ve had a lot more inbound inquiries. And a number of those opportunities are interesting. I can’t comment on the specifics. But I’m very excited because what I thought would happen in the level of increased activity on the M&A front has in fact kicked in. And so, we’ve got a couple of things that we’re looking at actively now to try to see if we can plug back in our M&A activity and our M&A efforts and see if we can add brands and people to our system.

Thank you. Our next question comes from line of Jason Helfstein with Oppenheimer. Please proceed with your question.

I think ARPU came in better than we were looking in the quarter. You guys are not -- you guys are keeping the full year guidance unchanged. Maybe help us how are you thinking about kind of ARPU relative to paid subs for the rest of the year. And then just any more color you want to give us on some of the emerging initiatives like terminal and whatnot. Is that something that could be kind of additive to the model next year? Thanks.

Yes. So, hey, Jason, thanks for the question. On ARPUs, yes, look, you’re right. I mean, 823, I think it was 825 in the first quarter. So, we're keeping it pretty high. Two things go into that just the numerator and the denominator, right? Look, our billings were incredibly strong, not first quarter numbers, but still a record for us other than first quarter. So, a combination of those growing numbers being high, which showed the conversion rates. But it also has to do with the fact that we didn’t grow subs and our subs were essentially flat in the second quarter. So, that's the denominator. So, that kept the ARPU a bit higher, right, those two things together kept it higher. We've talked about our forecast at length with you guys, we do like to under promise, over deliver. So there is, frankly, some measure of conservatism in our numbers, right? And we expect that. We feel very confident in reading our numbers. Do we think our ARPU may come in higher than the -- I think it's 717 for the full year that's been our forecast, if I remember correctly. So, I think we'll probably come in, yes, we’d probably will, right? But if you do the exact math, and you do the exact billings of 750 in our forecast, and you do the exact subscribers of I think it's 1084, that math work. The timing of the sub adds matters on the denominator. But basically, you'll come out with that 717. So, it really comes down to, do you think we're going to beat our billings number, yes or no, and if so, ARPU will be higher, and so forth, and then how quickly we can get these new subs to buy something additional? Keep in mind,…

Yes, Jason, thanks for the question. As I mentioned to Devin, I'm excited about our M&A pipeline. We got some things that are -- that we're looking at very closely. And I can't get into specifics. And of course, we haven't closed anything or you all know that. So, I can't promise you that we'll have an announcement or anything like that. But I'm very happy with the level of activity that's going on in our M&A process, and with our M&A team. And you also mentioned the terminals specifically, the terminals launched, it's still primarily focused on delivering Stansberry Research products to its readers right now, although some of our other affiliates are also marketing their products there. We have not yet migrated all the other pan MarketWise brands into that terminal infrastructure. And we're still looking at doing that as soon as we can. That’s again, one of the reasons why I'm excited about turning my attention back to running the business and being a little bit less distracted with our co-public efforts. But we do want that, as I've always mentioned. So having a umbrella product across the MarketWise brands will help us with both a new distribution channel in an effort to drive traffic to that site and introduce prospective readers to our products, and we just haven't had that so far. So that's still very much in our plans. We're still actively moving in that direction. We just don't have anything concrete to announce, right now.

Thank you. Our next question comes from the line of Jeff Meuler with Baird. Please proceed with your question.

Yes. Thank you. So just on the comments about member -- paid member attrition trending higher following a period of good member growth. That makes sense to me, given the mix shift. I guess my question is, does it get more than offset by that upselling that occurs over I think typically 18 months. So, is net billings or net revenue retention also usually elevated relative to historical periods for 12 or 18 months when you're coming off of book period of good paid number growth?

Right on. You got it right. And the dashboard that you would look at to confirm what you just hypothesized would be ARPUs, right? You are seeing ARPU growth of 10%. So, we're still in that -- like, we’re not disclosing churns specifically, but we did pay that. We're in that range of 1.5% to 2% that we've published in previous investor decks. We're just at the higher end of the range right now, as opposed to the lower end of that range. So -- but yes, second highest billings quarter ever, ARPU growth year-over-year and ARPU pretty much flat Q1 to Q2. So, yes, and the reason why is, those that do churn from us -- and this fact is consistent year in and year out, are the entry-level guys. Their ARPUs when they leave us are right in line with what is the cart value for an entry-level publication and that will range between $60 to $100, and that's the ARPU of the guys that leave us. So, yes, that's far off set by the guy that spends $65 initially, and then buys a second publication for a $1,000. So yes, as long as our conversion rates stay at or higher than we have seen, yet easy to offset that modest uptick in subscriber count churn, if that makes sense.

Got it. And then on the upselling of the paid subs, it sounds like for you the marketing costs ticking up. There is -- you're responsive to that and disciplined on that, and there maybe incrementally more focused on that upselling, I guess, what exactly does that mean? Or can you give more examples of what you do differently, just given that it's so low cost to do that, I would think you're always doing a lot of that, and that's always the focus area. So like, what do you do differently in one of these periods from a upselling, I guess, focus or execution perspective?

Mark, you want to take that one or let me do it?

Yes. Sure. I'm happy to. You're right, Jeff. It’s -- if we articulated our ideas as an either/or, we didn't mean to. It's not like what we do as a business, especially across our multiple brands. Is we wake up every morning and say, should we go find more readers or should we advertise for higher price products? It's not like that, of course, as you know and as you pick up on. What we do and our marketers are very disciplined about is, as we look for new subscribers, and as per unit costs come up, we have very disciplined metrics around our marketing teams, where they're looking at that. And if it becomes cost efficient and cheap to acquire new readers, and stay within our operating metrics, we push the accelerator down and try to do more of that on a cost efficient basis. And as that price action reverses, and it gets expensive to do that, we have discipline in our marketing teams to pull off and back off. Throughout both of those dynamics, we, of course, are also putting offers in front of our readers to see if they're interested in other investing strategies, usually at higher price points on both the lower price end, meaning less than $200, but also higher priced products in the several thousand dollar range. So, if we articulated our ideas as if it was an either/or, that's not at all what it is. We do and constantly try to put different investing strategies in front of our readers that we think they'll find interesting and engage with. We just do less of the new customer acquisition when it gets expensive to do so. And that's what we started to see late in the second quarter.

Got it. And then feel like I missed something from the way that some of the questions have been asked and answered in terms of like, what you're actually staying on outlook commentary. And I totally hear you on kind of the current trends and incorporating that into our thinking. But as you went through the de-SPAC process, you have various 2021 and 2022 key metric and financial outlooks. And I guess, are you standing by those? Are you reiterating those or not? Or is there any just methodology change, because now that you're -- you've closed on the de-SPAC merger, you're kind of rolling forward into a new methodology around, if you give formal guidance or not? Thanks.

Yes. So good question. So look, what we're trying to do is what would be a normal course, de-SPAC process, which is obviously -- and the go public process and the rest. So there's a lot of metrics that are disclosed and forecast. We put two years of forecast in there. Once you are public, it's typical to pull back a bit on some of those metrics. And so obviously, the key metrics that we define by KPIs and our non-GAAP measure, we're obviously committed to disclosing those and we'll absolutely do that. And we'll probably also disclose some of the other metrics around the mosaic, right, as well. As far as our forecast for '21, yes, we're sticking by this forecast. I think we kind of said that pretty strongly on this call. We don't plan to change them or update them. But we -- I think, I said 20 minutes ago, we feel very comfortable in meeting or beating those forecasts. So absolutely, we did remove the 2022 forecast from our slide deck that you'll see on our website, but that sort of normal course procedure, as I understand it. But once you are a public company, what we're going to do over the next couple of months is listen to learn from you guys, from the buy side and begin to formulate what our guidance policy will be -- and to the extent to of it. Look I'll tell you this. I mean, I know Mark feels this way very much. We are much in the camp of Warren Buffett around guidance and things like that on one hand. On the other hand, we certainly understand your needs. We want you guys to have enough information to be able to produce intelligent models and intelligent reports. So…

[Operator Instructions]. Our next question comes from line of Yugal Aronian with Wedbush Securities.

Thanks for taking the questions and congrats on closing the deal and going public. I guess with all that’s going on around, the reopening and the trends there, I wanted to dig into the sub thing a little bit more. So, if you help understand maybe some of the ins and outs of what's happening? Is it kind of gross [add] issue that's really driven by the marketing side? Is it -- it has -- or it’s churn changing or are you seeing any of those metrics of your current subs changing at all? Or is it really just mostly a gross thing? And if it is just the gross [add] thing, is it marketing related or are you seeing a difference in how people are interested in self-directed investing now that the world's reopening a little bit more? I think, during the process you had -- I think the way you would highlight it was that there wasn't really necessarily a boost or pull forward from COVID. But, we were -- people were at home for a while, and not really going out as much. And I think there was a boost generally speaking. So, maybe just walk through some of the puts and takes. Can subscribers decline again next quarter? If marketing -- if digital advertising rates stay high? Let's start there and I have a follow-up.

Yes, so while there's lots to unpack there, good questions. Let me address the COVID part of that first. Look, as we've talked about extensively, you can see the graphs, our acceleration began well in advance of COVID. So the organic improvement in the business was a result of the investment. That's for sure. The impact we're seeing now I think really has to do with the acuteness of it. We went from having less than 150,000 people go through TSA checkpoints in the middle of COVID. The last Sunday, I heard 2.5 million in one day went through TSA checkpoints. Okay? So it's just dramatic acuteness of the snapback in travel that happened within like a four to six week period of time. It went from essentially zero to 2.5 -- people -- that million people flying a day, right? So it's just the display [indiscernible 47:31] was quick, right? And so I think that's what we saw in the second quarter was the acuteness of that. And obviously there is attention -- screen attention time. Everybody I know is traveling and having fun right now. So, I think people visor away from screens a little bit. So, that's impacting us in the near-term, right? We certainly do expect that to normalize. Now this for two decades, we've seen everything from the financial crisis to the telecom boom and bust to September 11th, everything along the way. So, the topic is new, but cycles aren't. And we're used to adjusting to them. Your question around what's driving, what's the primary factor in this is, it's really a numerator effect, meaning by that gross [adds] turns up nominally, but it's in that range that we've told you about before. It's not really that what it is, is just the gross…

Yes, it makes a ton. So let's say, digital -- I just want to be clear. Let’s say digital ad rates, again, stay elevated through the rest of the year, would that mean that you would keep your foot off of gas in terms of marketing throughout all that? Or would there be a point where you kind of feel like you need to step in a little bit and don't really have a choice around it?

Yes look. This is -- you're getting at a really good point here, too. And this is not some macro top down thing from us. Mark Arnold says, you guys need to stop spending. And that's not it. These guys know their business better than anybody and Mark isn’t telling them their business. So no, it's not going to be we are monolithically not spending. What we are doing is designing these new campaigns. And we're going to -- as we launch these campaigns, we're going to test a whole host of things around look and feel, the marketing copy, the landing page, and price points, right? And price points. So yes, we have a ton of campaigns we're going to go out with in the fourth quarter. So no, we're not just not going to market. We're going to launch these campaigns. We're going to learn, we're going to take feedback, and there's a lot of things that you can address. You can just pivot one content item to another. You can pivot in terms of marketing language, you can pivot in terms of price points. But no, not just being sit here or not do anything, we're going to be testing all those things. And in fact, may see elevated, it's still -- it's going to stay elevated here in the summer, right? But again, like I mentioned earlier, to be clear, it is absolutely in the range that we've talked about with you guys in our previously filed investors slide deck. It is right on the screws that we in terms of where we gave you that outlook in terms of our year-to-date numbers. So, it's just the acuteness in the second quarter, how quickly it kind of snapped to that number. So -- but it seems to have stabilized in terms of the display ad cost component of it, that is not continuing to ratchet higher. It kind of jumped up and it’s kind of bumped along now. But we certainly are not going to sit here and do nothing. We have a lot of stuff planned for 4Q.

Got it. That color is really helpful, given all the uncertainties in environment. And then just real quick follow for Mark. Mark you talked about seeing the advantages of the growth opportunity and investments in tech M&A, and partnerships and I think that M&A and partnership side is pretty clear. A little bit more color around what are the top priorities in tech that can help improve the business? Thanks guys.

Yes. Thank you. Appreciate the question. As I listen to your question, the thing that pops in my mind, first is, we have -- I've talked about this a lot over the past few months, which is starting to leverage the know-how Mark Gerhar and his team at Ascendant who are very, very experienced operators, they've launched a number of successful companies, but they're not just operators, they're operators in and around the direct to consumer business model albeit in games, which isn't exactly what we do as you know. But it is consumer-facing and their business in particular was built on significant data science expertise and delivering value in a way that created long-term bonds with their customers. And so, we have already begun the sort of exchange of ideas in comparing what they did to what we do and seeing if we can learn from those experiences and leverage that knowhow. And so we're fairly far along in our discussions around that. And so, we're going to try to implement some of their knowhow and what we do to make what is already a really efficient business model, even more efficient. I'm excited about doing that on the tech side. If your question is more directed towards tech M&A, or other software and tools, as I mentioned earlier in the call, I can't get into specifics about specific discussions we're having. It's just, if you look at our M&A track record, you'd see that we have a history of both bringing in content that sometimes is software and tools to help people manage portfolios or look at their investment portfolios in different ways. And without getting into specifics, that's generally what we are doing. I don't expect that to change. We are looking at all of those things. With -- through the lens of if it can help people and not just anybody, but our readers, improve their performance in their investing portfolios, that is something we were interested in. So, I don't know if that helps Yugal. But hopefully it does.

That's helpful. I was really just trying to get at what are the pieces in the tech SPAC that are the most of missing and important? I think you did answer that. So thank you.

Thank you. Ladies and gentlemen, at this time, there are no further questions. I'd like to turn the floor back to management for closing comments.

Yes. I don't really have any further closing comments. Just that, I appreciate on behalf of Dale and myself, your time this morning, your time and attention, and appreciate all your support. And we look forward to talking to you all soon in the coming quarters.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.