MarketWise(US:MKTW)2023-03-31 11:30Financial Performance - Total net revenue decreased by $36.8 million, or 6.7%, from $549.2 million in 2021 to $512.4 million in 2022, primarily due to a $38.1 million decrease in term subscription revenue[268]. - Net revenue for the year ended December 31, 2022 was $512.4 million, a decrease of $36.8 million or 6.7% from $549.2 million in 2021, primarily due to a $38.1 million decrease in term subscription revenue[346]. - Net income for the year ended December 31, 2022 was $101.2 million, a significant improvement compared to a net loss of $953.9 million in 2021[343]. - The company reported a net income attributable to MarketWise, Inc. of $18.0 million for the year ended December 31, 2022, compared to a net loss of $1.0 billion in 2021[342]. Subscriber Metrics - As of December 31, 2022, the paid subscriber base was 841 thousand, down 130 thousand, or 13.4%, compared to 972 thousand in 2021[281]. - Total Paid Subscribers decreased by 130 thousand, or 13.4%, to 841 thousand as of December 31, 2022 compared to 972 thousand in 2021[298]. - Free Subscribers increased by 2.0 million, or 14.6%, to 15.7 million as of December 31, 2022 compared to 13.7 million in 2021[295]. - Average revenue per user (ARPU) decreased by 30.1% from $742 in 2021 to $519 in 2022[283]. - The average annual free-to-paid conversion rate was approximately 1% to 2% between 2020 and 2022, with a cumulative free-to-paid conversion rate of 4%[282]. - Subscriber count churn ranged from approximately 1.8% to 2.7% per month between 2020 and 2022, with a net revenue retention rate averaging over 80%[301]. Cash Flow and Operating Activities - Net cash provided by operating activities decreased by $15.3 million, or 24.0%, from $63.6 million in 2021 to $48.4 million in 2022[265]. - The company reported a net cash provided by operating activities of $48.4 million in 2022, down 24.0% from $63.6 million in 2021[377]. - Cash flow from operations increased by $7.8 million, or 13.9%, from $55.9 million in 2020 to $63.6 million in 2021[270]. - Adjusted CFFO decreased by $137.8 million, or 69.9%, from $197.1 million in 2021 to $59.3 million in 2022, driven by the decrease in Billings[266]. - Adjusted CFFO Margin was 12.9% in 2022, down from 27.0% in 2021, reflecting the decrease in Adjusted CFFO[371]. Revenue Composition - Approximately 36% of Billings in 2022 came from membership subscriptions, down from 42% in 2021[309]. - Membership subscription revenue increased due to the recognition of deferred revenue from prior years, contributing positively to overall revenue for 2022[347]. - Revenue from Buttonwood Publishing, acquired in August 2022, was $2.0 million for the year ended December 31, 2022, indicating successful integration of the new business[346]. Operating Expenses - Total operating expenses decreased significantly by $1.1 billion or 72.0% from $1.5 billion in 2021 to $425.1 million in 2022, driven by reductions in cost of revenue and general and administrative expenses[349]. - Cost of revenue decreased by $176.6 million or 73.8% from $239.3 million in 2021 to $62.7 million in 2022, primarily due to a $170.5 million decrease in stock-based compensation expense related to Class B Units[350]. - Sales and marketing expenses decreased by $61.6 million or 20.7% from $296.9 million in 2021 to $235.3 million in 2022, largely due to a $46.4 million decrease in stock-based compensation expense related to Class B Units[352]. - General and administrative expenses decreased by $845.4 million or 88.0% from $960.2 million in 2021 to $114.8 million in 2022, reflecting significant cost reduction initiatives[349]. - Research and development expenses increased by $1.3 million or 17.8% from $7.5 million in 2021 to $8.8 million in 2022, as the company continues to invest in its platform[349]. Future Outlook and Financing - The company expects fluctuations in Adjusted CFFO and Adjusted CFFO Margin in future periods as it invests in its growth strategy[376]. - Future capital requirements will depend on subscription growth rates and the introduction of new products[386]. - The company may need to seek additional equity or debt financing in the future, which could affect its ability to compete successfully[387]. Acquisitions and Goodwill - Revenue from Chaikin Analytics, acquired in January 2021, was $7.5 million for the year ended December 31, 2021[358]. - Goodwill is recorded as the excess of purchase consideration over the fair values of identifiable assets and liabilities acquired, requiring significant estimates and assumptions[420]. Stock-Based Compensation - Total stock-based compensation expenses decreased to $9.0 million in 2022 from $1,063.4 million in 2021[322]. - Class B Units were historically classified as liabilities and remeasured to fair value, impacting stock-based compensation expense[421]. - The fair value of Class B Units was estimated using a two-step valuation approach, considering market and discounted cash flow methods[424].