MarketWise(MKTW) - 2025 Q1 - Quarterly Report

markdown PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for MarketWise, Inc. as of March 31, 2025, and for the three months ended March 31, 2025 and 2024, reflect a decrease in total assets and liabilities compared to December 31, 2024, with net revenue of **$83.5 million** and net income of **$16.8 million** for Q1 2025, and improved positive cash flow from operations of **$1.7 million** [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets to **$239.6 million** as of March 31, 2025, from **$259.5 million** at year-end 2024, primarily due to a reduction in cash and cash equivalents, while total liabilities also decreased to **$457.3 million** from **$477.4 million**, mainly from a reduction in deferred revenue Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $79,178 | $97,876 | | Total current assets | $152,910 | $168,833 | | Total assets | $239,560 | $259,515 | | **Liabilities & Stockholders' Deficit** | | | | Deferred revenue (current) | $213,004 | $217,973 | | Total current liabilities | $248,192 | $260,208 | | Total liabilities | $457,291 | $477,439 | | Total stockholders' deficit | $(217,731) | $(217,924) | [Condensed Consolidated Statement of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Operations) For the three months ended March 31, 2025, total net revenue was **$83.5 million**, a **23.4%** decrease from **$109.0 million** in the same period of 2024, resulting in net income of **$16.8 million** and diluted net income per Class A common share of **$0.41** Q1 2025 vs Q1 2024 Statement of Operations (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total net revenue | $83,507 | $108,991 | | Total operating expenses | $66,727 | $87,436 | | Income from operations | $16,780 | $21,555 | | Net income | $16,841 | $22,712 | | Net income attributable to MarketWise, Inc. | $890 | $1,657 | | Net income per Class A common share – diluted | $0.41 | $0.85 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated **$1.7 million** in cash from operating activities in Q1 2025, a significant improvement from the **$18.5 million** used in Q1 2024, resulting in a net decrease in cash of **$18.7 million** for the quarter, ending with a cash balance of **$79.2 million** Q1 2025 vs Q1 2024 Cash Flows (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,733 | $(18,511) | | Net cash used in investing activities | $(222) | $(252) | | Net cash used in financing activities | $(20,209) | $(5,198) | | **Net decrease in cash** | **$(18,698)** | **$(23,999)** | | **Cash at end of period** | **$79,178** | **$131,175** | [Notes to the Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20the%20financial%20statements%20%28unaudited%29) The notes provide detailed explanations of accounting policies and financial statement components, including a **1-for-20** reverse stock split, **$415.1 million** in remaining performance obligations, a **$50 million** share repurchase program, and a Tax Receivable Agreement (TRA) liability of **$3.7 million** - Effective April 2, 2025, the company executed a **1-for-20** reverse stock split for its Class A and Class B common stock. All share and per-share data in the financial statements have been retroactively adjusted[40](index=40&type=chunk)[45](index=45&type=chunk) - As of March 31, 2025, the company had **$415.1 million** in remaining performance obligations (deferred revenue), with approximately **51%** expected to be recognized as revenue over the next twelve months[54](index=54&type=chunk) - In February 2025, the Board authorized a stock repurchase program of up to **$50 million** of Class A common stock. Subsequent to the quarter end, the company repurchased **20,306** shares for **$219 thousand** through May 8, 2025[97](index=97&type=chunk)[107](index=107&type=chunk) - The liability under the Tax Receivable Agreement (TRA) increased to **$3.7 million** as of March 31, 2025, following the exchange of **261,634** LLC Units for Class A common stock during the quarter[84](index=84&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the year-over-year decline in revenue and paid subscribers primarily to the shutdown of the Legacy Research business, despite which Q1 2025 Billings increased **27.3%** sequentially to **$70.5 million**, and cash from operations improved by **$20.2 million** year-over-year, with new non-GAAP measures and a **$50 million** share repurchase program introduced [Key Business Metrics](index=31&type=section&id=Key%20Business%20Metrics) Key metrics show a decline in subscribers year-over-year, largely due to the shutdown of the Legacy Research business, with Paid Subscribers falling **30.7%** to **473 thousand**, while Total Billings decreased **8.8%** YoY to **$70.5 million** but showed strong sequential growth of **27.3%** from Q4 2024, and Average Revenue Per User (ARPU) decreased **14.8%** YoY to **$419** Key Business Metrics Comparison | Metric | Q1 2025 | Q1 2024 | % Change (YoY) | Q4 2024 | % Change (QoQ) | | :--- | :--- | :--- | :--- | :--- | :--- | | Paid Subscribers | 473,407 | 683,436 | (30.7)% | 505,889 | (6.4)% | | ARPU | $419 | $492 | (14.8)% | $394 | 6.3% | | Total Billings (in thousands) | $70,456 | $77,222 | (8.8)% | $55,355 | 27.3% | - The decline in Paid Subscribers is primarily attributed to lower customer acquisition and elevated churn associated with the shutdown of the Legacy Research business[136](index=136&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Net revenue decreased by **23.4%** to **$83.5 million** in Q1 2025 from **$109.0 million** in Q1 2024, primarily driven by a **$17.7 million** decrease in term subscription revenue and a **$7.7 million** decrease in membership subscription revenue due to the wind-down of Legacy Research, while total operating expenses fell **23.7%** to **$66.7 million** - The decrease in net revenue was primarily driven by the wind-down of the Legacy Research business, which contributed **$11.6 million** to the decrease in term subscription revenue and **$7.3 million** to the decrease in membership subscription revenue[171](index=171&type=chunk) - Sales and marketing expenses decreased by **$13.2 million** (**27.9%**), mainly due to a **$10.2 million** decrease in amortization of deferred contract acquisition costs and a **$2.0 million** decrease in salaries, taxes, and benefits[173](index=173&type=chunk)[175](index=175&type=chunk) - General and administrative expenses decreased by **$6.5 million** (**27.2%**), driven by a **$1.6 million** gain on lease termination, a **$1.2 million** gain on contingent consideration, and a **$1.4 million** decrease in stock-based compensation[173](index=173&type=chunk)[176](index=176&type=chunk) [Non-GAAP Financial Measures](index=38&type=section&id=Non-GAAP%20Financial%20Measures) The company introduced two new non-GAAP measures, Free Cash Flow and EBITDA, with Adjusted CFFO at **$1.7 million**, Free Cash Flow at **$1.5 million**, and EBITDA at **$17.5 million** for Q1 2025, providing additional insight into liquidity and operating performance - Two new non-GAAP financial measures were introduced this quarter: **Free Cash Flow** and **EBITDA**, to supplement existing measures and provide additional insight into liquidity and operating performance[178](index=178&type=chunk) Non-GAAP Financial Measures Reconciliation (in thousands) | Measure | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,733 | $(18,511) | | **Adjusted CFFO** | **$1,733** | **$(18,511)** | | **Free Cash Flow** | **$1,511** | **$(18,763)** | | Net income | $16,841 | $22,712 | | **EBITDA** | **$17,469** | **$22,482** | [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) The company's principal source of liquidity is its cash balance of **$79.2 million** as of March 31, 2025, supplemented by a cash 'float' from upfront subscription payments estimated at **$107.7 million**, and supported by a **$50 million** share repurchase program authorized in February 2025 - The company manages a cash 'float' from upfront subscription payments, estimated at approximately **$107.7 million** as of March 31, 2025, which it may invest or use to expand operations[192](index=192&type=chunk) - A stock repurchase program of up to **$50 million** of Class A common stock was authorized on February 28, 2025, with repurchases authorized for the next **12** months[203](index=203&type=chunk) - In March 2025, as part of the Legacy Research reorganization, the company terminated an office lease, resulting in a **$380 thousand** impairment loss on assets and a **$1.6 million** gain on the termination[206](index=206&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has stated that this item is not applicable for the reporting period - No quantitative and qualitative disclosures about market risk were provided, as the item was deemed not applicable[215](index=215&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective[216](index=216&type=chunk) - No changes occurred in the company's internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[217](index=217&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company reported that this item is not applicable, indicating no material legal proceedings during the period - Not applicable[221](index=221&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes in the risk factors disclosed in the company's Annual Report[222](index=222&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported that this item is not applicable - Not applicable[223](index=223&type=chunk) [Other Information](index=45&type=section&id=Item%205.%20Other%20Information) The company reported that this item is not applicable, indicating no other material information to disclose for the period - Not applicable[226](index=226&type=chunk) [Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications by the CEO and CFO, and XBRL data files