Marketwise Inc (NASDAQ:MKTW) reports a decrease in net income and GAAP net revenue in Q3 2023 compared to the previous year.
The company's paid subscriber file size has declined year-over-year, reflecting ongoing challenges.
Despite a decrease in Billings, Marketwise Inc (NASDAQ:MKTW) sees an improved return on Billings, signaling potential for future turnaround.
On November 9, 2023, Marketwise Inc (NASDAQ:MKTW) released its earnings report for the third quarter of 2023, revealing a challenging period for the company. Marketwise Inc (NASDAQ:MKTW) generated a net income of $12.0 million on GAAP net revenue of $106.2 million for Q3 2023, a decrease from the previous year's third-quarter net income of $16.5 million on GAAP net revenue of $119.9 million. The nine-month period ending September 30, 2023, also saw a decline, with net income of $52.4 million on GAAP net revenue of $336.0 million, compared to $73.6 million in net income and $384.7 million in GAAP net revenue for the same period in 2022.
Financial Performance and Paid Subscriber Trends
The company's paid subscriber file size as of September 30, 2023, was 774,000, down from 894,000 on the same date in 2022. This decline in subscribers is a concern for Marketwise Inc (NASDAQ:MKTW) and reflects the broader challenges the company faces. However, the CEO & Chairman of Marketwise Inc (NASDAQ:MKTW), Porter Stansberry, notes an improvement in the return on Billings, which he considers a positive sign based on past turnaround experiences.
Strategic Insights and Company Culture
Stansberry emphasizes the company's commitment to trust, quality investment research, and subscriber service as core values. He outlines the company's history, culture, and operational approach, highlighting the importance of mutual respect and partnership in driving success. Despite the disappointing performance since going public, Stansberry is focused on re-establishing the company's culture and aligning with the company's leading operators to address the challenges.
Understanding Marketwise Inc (NASDAQ:MKTW)'s Billings
Marketwise Inc (NASDAQ:MKTW) distinguishes between "Billings" and "Revenue," with Billings representing the cash received from new subscriptions. The company's Billings are categorized into three streams: Marketing, Renewal, and Other, each with different characteristics and implications for the company's financial health. While Marketing Billings have decreased significantly since the COVID bubble, Renewal Billings have shown resilience, indicating a stable core business. The company also plans to leverage its "float" of $108.6 million, akin to an insurance company's float, to potentially fund higher-return investments.
Capital Allocation and Dividend Strategy
Marketwise Inc (NASDAQ:MKTW) has reinstated its recurring dividend and paid a special dividend, reflecting its belief in the company's ability to grow without excess capital. The company also remains open to strategic acquisitions that align with its customer-first philosophy and has a preference for partnerships that can enhance its publishing groups.
Intrinsic Value and Shareholder Alignment
Stansberry provides insights into the intrinsic value of Marketwise Inc (NASDAQ:MKTW), suggesting different multiples for each Billings channel based on their characteristics. He reaffirms his commitment to shareholder interests, noting that his significant ownership in the company aligns his interests with those of the shareholders.
In conclusion, while Marketwise Inc (NASDAQ:MKTW) faces headwinds with declining net revenue and subscriber numbers, the company's leadership is focused on cultural realignment and strategic initiatives to stabilize and grow the business. Investors are encouraged to consider the company's long-term potential and the measures being taken to address current challenges.
Explore the complete 8-K earnings release (here) from Marketwise Inc for further details.
This article first appeared on GuruFocus.