MarketWise reports 2023 EPS 5c vs. 73c last year

Reports 2023 revenue $448.2M, consensus $446.14M. CEO Amber Lee Mason said, “Since I last wrote, an unfortunate series of events has unfolded at a business unit within our company. A former employee of one of our subsidiaries was criminally charged by federal prosecutors last month. According to the charges, from December 2019 through August 2021, Jon Mikula was surreptitiously receiving large payments for recommending low-quality stocks to subscribers of Palm Beach Venture, while claiming falsely that his work was independent. This fraudulent scheme was first exposed in the fall of 2022, when the Securities and Exchange Commission brought civil charges against Mikula. By that time, Mikula had already been fired. In fact, Legacy Research promptly fired Mikula in the fall of 2021 when it learned that he had multiple SEC judgements against him. I became aware of these facts only last month. I was out of the company when these events first came to light. When I was informed about this matter, I expressed willingness to assist the U.S. Attorney’s Office prosecuting Mikula. I also terminated two additional employees because I did not believe that they did enough to prevent this situation from occurring. As a result of these painful circumstances, I additionally decided to wind down the entire operating group. You may disagree with these actions, which may impact our company’s results this year. Just as important to me, these actions could cost employees their jobs, even though they may not be implicated in any wrongdoing. I’m tempted to quote Buffett’s comments to Congress during the Salomon Brothers bid-rigging scandal of the early 1990s: “Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.” But I have no desire to ever be ruthless toward innocent employees. I took these actions because the wrongdoing that’s alleged to have occurred at the company violated our single most important ethic. When we write to our subscribers about investments, they are depending on us to be independent, accurate, and thorough. It is very clear to me that Mikula and others did not meet those standards. These actions, while costly and painful, were necessary to ensure our company can continue to move forward with its mission to serve investors faithfully. We will not tolerate anyone who betrays our customers. I have definitive plans to move our company forward. We are going to implement more stringent oversight of all financial products to make sure that not only do they meet our most basic test of being independent, but that they meet our high standards for being thorough and reliable. Great editorial products lead to higher conversion rates, higher upsell rates, and higher membership sales. To grow our subscriber base, we will focus on acquiring other leading financial research products through sensible acquisitions while also launching new products internally. To improve our marketing efficiency, we will develop new methods of fulfilling our content, methods that enable automated cross-selling driven by user preferences. And to increase our ARPU, we will innovate new means of reaching out to higher net worth customers, including through the development of a new marketing funnel and by increasing our entry-level prices substantially. I believe we are very well positioned for growth. Prior to the unfortunate developments at Legacy Research, I was confident we would grow the business substantially this year. While I still believe that’s possible, it will certainly be more challenging than I anticipated in the short term. However, these painful steps were necessary to assure our reputation for only publishing independent, reliable, and high-quality financial research. That reputation is the foundation of our success.”