MARKETWISE INC

Previous wording

Today, we benefit from the confluence of a leading editorial team, diverse portfolio of content and brands, and comprehensive suite of investor-centric tools that appeal to a broad subscriber base.

Current wording

Today, we benefit from the confluence of a leading editorial team, diverse portfolio of content and brands, and a comprehensive suite of investor-centric tools that appeal to a broad subscriber base.

Previous wording

As of June 30, 2024, our Paid Subscriber base was 645 thousand, down 105 thousand, or 14.0% as compared to 750 thousand at June 30, 2023. Our Paid Subscriber base is comprised of subscribers obtained through both direct-to-paid acquisition and free-to-paid conversions. Since 2019, direct-to-paid acquisition has accounted for approximately two-thirds of our annual Paid Subscriber acquisition and is largely driven by display ads and targeted email campaigns.

Current wording

As of September 30, 2024, our Paid Subscriber base was 592 thousand, down 182 thousand, or 23.5% as compared to 774 thousand at September 30, 2023. Our Paid Subscriber base is comprised of subscribers obtained through both direct-to-paid acquisition and free-to-paid conversions. Since 2019, direct-to-paid acquisition has accounted for approximately 60% of our annual Paid Subscriber acquisition and is largely driven by display ads and targeted email campaigns.

Previous wording

Our free subscription products also serve as a significant source of new Paid Subscribers, accounting for approximately one-third of our annual Paid Subscriber acquisition.

Current wording

Our free subscription products also serve as a significant source of new Paid Subscribers, accounting for approximately 40% of our annual Paid Subscriber acquisition.

Previous wording

Retaining and expanding relationships with existing subscribers. We believe that we have a significant opportunity to expand our relationships with our large base of Free and Paid Subscribers. Thanks to the quality of our products, we believe our customers will continue their relationship with us and extend and increase their subscriptions over time. As we deepen our engagement with our subscribers, our customers tend to purchase more and higher-value products. Our ARPU (as defined below) as of June 30, 2024 was $456, which decreased

Current wording

Retaining and expanding relationships with existing subscribers. We believe that we have a significant opportunity to expand our relationships with our large base of Free and Paid Subscribers. Thanks to the quality of our products, we believe our customers will continue their relationship with us and extend and increase their subscriptions over time. As we deepen our engagement with our subscribers, our customers tend to purchase more and higher-value products. Our ARPU (as defined below) as of September 30, 2024 was $417, which decreased 15.9% from $496 as of September 30, 2023. For more information on ARPU, see “Key Business Metrics—Average Revenue Per User.”

Previous wording

Our high-value composition rate reflects the rate at which Paid Subscribers that have purchased less than $600 of our products over their lifetime convert into subscribers that have purchased more than $600. We believe our high-value composition rate reflects our ability to retain existing subscribers through renewals and our ability to expand our relationship with them when those subscribers purchase higher-value subscriptions. Our cumulative ultra high-value composition rate reflects the rate at which high value Paid Subscribers that have purchased more than $600 of our products over their lifetime convert into subscribers that have purchased more than $5,000. We believe our ultra high-value composition rate reflects our ability to successfully build lifetime relationships with our subscribers, often across multiple products and brands. As of June 30, 2024, our high-value composition rate and ultra high-value composition rate were 50% and 43%, respectively.

Current wording

Our high-value composition rate reflects the rate at which Paid Subscribers that have purchased less than $600 of our products over their lifetime convert into subscribers that have purchased more than $600. We believe our high-value composition rate reflects our ability to retain existing subscribers through renewals and our ability to expand our relationship with them when those subscribers purchase higher-value subscriptions. Our cumulative ultra high-value composition rate reflects the rate at which high value Paid Subscribers that have purchased more than $600 of our products over their lifetime convert into subscribers that have purchased more than $5,000. We believe our ultra high-value composition rate reflects our ability to successfully build lifetime relationships with our subscribers, often across multiple products and brands. As of September 30, 2024, 52% of our Paid Subscribers were high-value subscribers and 22% of our Paid Subscribers were ultra high-value subscribers.

Previous wording

Free Subscribers decreased by 0.7 million, or 4.4%, to 15.2 million as of June 30, 2024 as compared to 15.9 million at June 30, 2023. As of June 30, 2024, Active Free Subscribers increased by 0.9 million, or 22.1%, to 4.8 million, compared to 3.9 million as of June 30, 2023. The year over year decline in Free Subscribers is a result of more aggressive culling of the most passive Free Subscribers in the quarter as we move towards implementation of the change described above. The year over year increase in Active Free Subscribers is a result of reaching out to previously passive Legacy Research Free Subscribers to notify them that their subscriptions would transfer over to like subscriptions in other brands within MarketWise.

Current wording

Free Subscribers decreased by 1.0 million, or 6.4%, to 15.3 million as of September 30, 2024 as compared to 16.3 million at September 30, 2023. As of September 30, 2024, Active Free Subscribers decreased by 0.7 million, or 17.5%, to 3.3 million, compared to 4.0 million as of September 30, 2023. The year over year decline in Free Subscribers is a result of more aggressive culling of the most passive Free Subscribers as we move towards implementation of the change described above. The year over year decrease in Active Free Subscribers is a result of both fewer free subscribers in total as well as a reduced number of free products available as we rationalize our offerings.

Previous wording

Free Subscribers decreased by 1.4 million, or 8.5% to 15.2 million as of June 30, 2024 as compared to 16.7 million as of March 31, 2024. As of June 30, 2024, Active Free Subscribers increased by 998 thousand, or 26.4% to 4.8 million, compared to 3.8 million as of March 31, 2024, again as a result of reaching out to previously passive Legacy Research Free Subscribers in the quarter to notify them that their subscriptions were transferred over to like subscriptions in other brands within MarketWise.

Current wording

Free Subscribers decreased by 0.1 million, or 0.4% to 15.3 million as of September 30, 2024 as compared to 15.2 million as of June 30, 2024. As of September 30, 2024, Active Free Subscribers decreased by 1.5 million, or 31.7% to 3.3 million, compared to 4.8 million as of June 30, 2024, as the prior quarter saw us reach out to previously passive Legacy Research Free Subscribers to notify them that their subscriptions were transferred over to like subscriptions in other brands within MarketWise.

Previous wording

Total Paid Subscribers decreased by 38 thousand, or 5.6%, to 645 thousand as of June 30, 2024 as compared to 683 thousand as of March 31, 2024. Gross new subscribers were down 20 thousand or 44% compared to first quarter 2024 as a result of decreased marketing spend as marketing to former Legacy Research Group subscribers was curtailed in the quarter. Churn levels within the quarter were in line with the historical average.

Current wording

Total Paid Subscribers decreased by 53 thousand, or 8.2%, to 592 thousand as of September 30, 2024 as compared to 645 thousand as of June 30, 2024. Gross new subscribers were down 15 thousand or 58% compared to second quarter 2024 as a result of decreased marketing spend. Churn levels within the quarter were in line with the historical average.

Previous wording

Subscriber count churn has ranged from approximately 2.3% to 2.7% per month between 2021 and 2023. As of June 30, 2024, the average monthly churn over the trailing twelve months was in the middle of this range. Almost all of the subscribers who churned in second quarter 2024 did so having owned only one entry level publication. This is evidenced by the fact that their ARPU approximately matched the subscription price of our entry level publications. We believe our net revenue retention rate, which has averaged over 70% from 2021 to 2023, is a more meaningful gauge of subscriber satisfaction.

Current wording

Subscriber count churn has ranged from approximately 2.3% to 2.7% per month between 2021 and 2023. As of September 30, 2024, the average monthly churn over the trailing twelve months was slightly above this range due to the ongoing churn of previous Legacy Research subscribers. Almost all of the subscribers who churned in second quarter 2024 did so having owned only one entry level publication. This is evidenced by the fact that their ARPU approximately matched the subscription price of our entry level publications. We believe our net revenue retention rate, which has averaged over 70% from 2021 to 2023, is a more meaningful gauge of subscriber satisfaction.

Previous wording

ARPU decreased by $33, or 6.8%, to $456 as of June 30, 2024 as compared to $490 as of June 30, 2023. The year-over-year decrease was driven by a 19% decrease in trailing four quarter Billings, while trailing four quarter Paid Subscribers only decreased by 13%. The decrease in trailing four quarter Billings was largely driven by cessation of selling to our Legacy Research subscribers as further discussed in Billings below.

Current wording

ARPU decreased by $79, or 15.9%, to $417 as of September 30, 2024 as compared to $496 as of September 30, 2023. The year-over-year decrease was driven by a 29% decrease in trailing four quarter Billings, while trailing four quarter Paid Subscribers only decreased by 15%. The decrease in trailing four quarter Billings was largely driven by cessation of selling to our Legacy Research subscribers as further discussed in Billings below.

Previous wording

ARPU decreased by $36, or 7.3%, to $456 as of June 30, 2024 as compared to $492 as of March 31, 2024. The sequential decrease was driven by a 11% decrease in trailing four-quarter Billings, while trailing four-quarter average Paid Subscribers only decreased 4%.

Current wording

ARPU decreased by $39, or 8.5%, to $417 as of September 30, 2024 as compared to $456 as of June 30, 2024. The sequential decrease was driven by a 14% decrease in trailing four-quarter Billings, while trailing four-quarter average Paid Subscribers only decreased 6%.

Previous wording

New Marketing Billings are Billings from all new subscription sales. New Marketing Billings decreased by $31.4 million, or 44.8%, to $38.7 million for second quarter 2024 as compared to $70.1 million for second quarter 2023. The decrease was primarily driven by ceasing new sales campaigns within our Legacy Research Group brands, which began winding down operations in mid-February 2024.

Current wording

New Marketing Billings are Billings from all new subscription sales. New Marketing Billings decreased by $41.4 million, or 56.1%, to $32.3 million for third quarter 2024 as compared to $73.7 million for third quarter 2023. The decrease was primarily driven by ceasing new sales campaigns within our Legacy Research Group brands, which began winding down operations in mid-February 2024.

Previous wording

Net Renewal Billings are Billings from renewals and maintenance fee payments. Net Renewal Billings decreased by $8.2 million, or 32.4%, to $17.1 million for second quarter 2024 as compared to $25.3 million for second quarter 2023. This is primarily a function of a significant decrease (approximately 106 thousand) in average Paid Subscribers for the trailing twelve months ended June 30, 2024 versus the trailing twelve months ended June 30, 2023.

Current wording

Net Renewal Billings are Billings from renewals and maintenance fee payments. Net Renewal Billings decreased by $5.0 million, or 24.2%, to $15.7 million for third quarter 2024 as compared to $20.8 million for third quarter 2023. This is primarily a function of a significant decrease (approximately 121 thousand) in average Paid Subscribers for the trailing twelve months ended September 30, 2024 versus the trailing twelve months ended September 30, 2023.

Previous wording

Net Renewal Billings decreased by $4.3 million, or 20.1%, to $17.1 million for second quarter 2024 as compared to $21.4 million for first quarter 2024. This decrease was a function of declining subscribers overall, with the heaviest decrease coming from our Legacy Research business which began winding down operations in mid-February 2024.

Current wording

Net Renewal Billings decreased by $1.4 million, or 8.0%, to $15.7 million for third quarter 2024 as compared to $17.1 million for second quarter 2024. This decrease was a function of declining subscribers overall, with the heaviest decrease coming from our Legacy Research business which began winding down operations in mid-February 2024.

Previous wording

Other Billings are Billings from revenue share, advertising and conferences. Other Billings increased by $1.0 million, or 123.5% to $1.8 million for second quarter 2024 as compared to $0.8 million for second quarter 2023 as a result of increasing revenue share activity with a related party and increased advertising sales.

Current wording

Other Billings are Billings from revenue share, advertising and conferences. Other Billings decreased by $0.2 million, or 15.7% to $0.9 million for third quarter 2024 as compared to $1.0 million for third quarter 2023.

Previous wording

Other Billings increased by $0.8 million or 79.0% to $1.8 million for second quarter 2024 as compared to $1.0 million for first quarter 2024 as a result of increasing revenue share activity with external parties.

Current wording

Other Billings decreased by $0.9 million or 52.0% to $0.9 million for third quarter 2024 as compared to $1.8 million for second quarter 2024 as a result of decreased revenue share activity with third parties.

Previous wording

Total Billings decreased by $38.6 million, or 40.1%, to $57.6 million for the second quarter 2024 as compared to $96.2 million for second quarter 2023. While consumer engagement remains soft, we believe the decrease was primarily driven by our Legacy Research Group brands, which began winding down operations in mid-February 2024.

Current wording

Total Billings decreased by $46.6 million, or 48.8%, to $48.9 million for the third quarter 2024 as compared to $95.5 million for third quarter 2023. While consumer engagement remains soft, we believe the decrease was primarily driven by our Legacy Research Group brands, which began winding down operations in mid-February 2024.

Previous wording

Total Billings decreased by $19.6 million, or 25.4%, to $57.6 million for second quarter 2024 as compared to $77.2 million for first quarter 2024. The decrease was primarily driven by our Legacy Research Group brands, which began winding down operations in mid-February 2024 with some additional decline seen in other brands as the overall subscriber base continues to decline.

Current wording

Total Billings decreased by $8.6 million, or 15.0%, to $48.9 million for third quarter 2024 as compared to $57.6 million for second quarter 2024. The decrease is distributed across the business as the overall subscriber case continues to decline with some additional impact driven by our Legacy Research Group brands, which began winding down operations in mid-February 2024.

Previous wording

We earn net revenue from the sale of advertising placements on our websites and from the sale of print products and events. We also recognize net revenue through revenue share agreements where we earn a commission for successful sales by other parties generated through the use of our customer list. We expect advertising and other net revenue to increase in absolute dollars as our business grows.

Current wording

We earn net revenue from the sale of advertising placements on our websites and from the sale of print products and events. We also recognize net revenue through revenue share agreements where we earn a commission for successful sales by other parties generated through the use of our customer list.

Previous wording

As of June 30, 2024, MarketWise, Inc.’s controlling interest in MarketWise, LLC was 12.1% and the noncontrolling interest was 87.9%. For the three and six months ended June 30, 2024, net income attributable to controlling interests included a $0.8 million tax provision and a $1.5 million tax provision, respectively, both of which were solely attributable to the controlling interest.

Current wording

As of September 30, 2024, MarketWise, Inc.’s controlling interest in MarketWise, LLC was 12.3% and the noncontrolling interest was 87.7%. For the three and nine months ended September 30, 2024, net income attributable to controlling interests included a $1.0 million tax provision and a $2.5 million tax provision, respectively, both of which were solely attributable to the controlling interest.

Previous wording

As of June 30, 2023, MarketWise, Inc.’s controlling interest in MarketWise, LLC was 10.0% and the noncontrolling interest was 90.0%. For the three and six months ended June 30, 2023, net income attributable to controlling interests included a $0.4 million tax provision and a $1.4 million tax provision, respectively, both of which are 100% attributable to the controlling interest.

Current wording

As of September 30, 2023, MarketWise, Inc.’s controlling interest in MarketWise, LLC was 10.6% and the noncontrolling interest was 89.4%. For the three and nine months ended September 30, 2023, net income attributable to controlling interests included a $0.7 million tax provision and a $2.0 million tax provision, respectively, both of which were solely attributable to the controlling interest.

Previous wording

The increase in net revenue was primarily driven by a $7.2 million increase in membership subscription revenue, partially offset by a $6.6 million decrease in term subscription revenue.

Current wording

The decrease in net revenue was primarily driven by a $7.7 million decrease in term subscription revenue, and a $1.0 million decrease in membership subscription revenue.

Previous wording

Membership subscription revenue increased during the three months ended June 30, 2024 primarily driven by the runoff of deferred revenue from previous periods. Term subscription revenue decreased during the three months ended June 30, 2024 primarily due to lower Billings as compared to the 2023 period which was driven by reduced engagement of prospective and existing subscribers in the 2024 period.

Current wording

Term subscription revenue decreased during the three months ended September 30, 2024 primarily due to lower Billings as compared to the 2023 period which was driven by reduced engagement of prospective and existing subscribers in the 2024 period. Membership subscription revenue decreased during the three months ended September 30, 2024 primarily driven by lower Billings.

Previous wording

Cost of revenue decreased primarily driven by a $2.1 million decrease in salaries, taxes and benefits, a $1.4 million decrease in credit card fees, a $0.5 million decrease in stock-based compensation expense, and a $0.2 million decrease in outside labor, primarily related to customer service. This was partially offset by a $0.9 million increase in incentive compensation.

Current wording

Cost of revenue decreased primarily driven by a $1.5 million decrease in credit card fees and a $0.4 million decrease in salaries, taxes and benefits. This was partially offset by a $0.7 million increase in freelance editorial expenses, and a $0.2 million increase in incentive compensation.

Previous wording

Sales and marketing expense decreased primarily driven by a $4.5 million decrease in marketing expense, as we have reduced our marketing spend as part of our cost reduction initiatives, a $0.9 decrease in salaries, taxes and benefits due to a reduction in workforce, and a $0.7 million decrease in amortization of deferred contract acquisition costs.

Current wording

Sales and marketing expense decreased primarily driven by a $8.5 million decrease in marketing expense, as we have reduced our marketing spend as part of our cost reduction initiatives, a $5.7 million decrease in amortization of deferred contract acquisition costs, and a $2.1 million decrease in salaries, taxes and benefits due to a reduction in workforce. This was partially offset by a $0.2 million increase in outside labor.

Previous wording

General and administrative expense decreased primarily driven by a $4.2 million decrease in incentive compensation and profits interest expense, a $2.0 million decrease in stock-based compensation expense, a $1.1 million decrease in salaries, taxes and benefits, and a $0.5 million decrease in insurance expense. This was partially offset by a $1.3 million increase in professional fees.

Current wording

General and administrative expense decreased primarily driven by a $4.9 million decrease in incentive compensation, a $0.9 million decrease in administrative expenses related to outside labor, and a $0.7 million decrease in stock-based compensation expense. This was partially offset by a $3.0 million increase in professional fees, and a $1.7 million increase in severance expense primarily related to the Legacy Reorganization.

Previous wording

The decrease in net revenue was primarily driven by a $24.9 million decrease in term subscription revenue, partially offset by a $8.4 million increase in membership subscription revenue and a $0.7 million increase in non-subscription revenue.

Current wording

The decrease in net revenue was primarily driven by a $32.7 million decrease in term subscription revenue, partially offset by a $7.4 million increase in membership subscription revenue and a $0.4 million increase in non-subscription revenue.

Previous wording

Term subscription revenue decreased during the six months ended June 30, 2024 primarily due to lower Billings as compared to the 2023 period which was driven by reduced engagement of prospective and existing subscribers in the 2024 period. Membership subscription revenue increased during the six months ended June 30, 2024 primarily driven by the runoff of deferred revenue from previous periods.

Current wording

Term subscription revenue decreased during the nine months ended September 30, 2024 primarily due to lower Billings as compared to the 2023 period. Membership subscription revenue increased during the nine months ended September 30, 2024 primarily driven by the recognition of deferred revenue from previous periods.

Previous wording

Cost of revenue decreased primarily driven by a $1.1 million decrease in salaries, taxes and benefits, and a $1.0 million decrease in credit card fees. This was partially offset by a $0.9 million increase in incentive compensation.

Current wording

Cost of revenue decreased primarily driven by a $3.0 million decrease in credit card fees, and a $2.8 million decrease in salaries, taxes and benefits. This was partially offset by a $1.2 million increase in incentive compensation.

Previous wording

Sales and marketing expense decreased primarily driven by a $4.1 million decrease in marketing expense as we have reduced our marketing spend as part of our cost reduction initiatives and due to higher per unit subscriber acquisition costs, a $2.6 million decrease in salaries, taxes and benefits, and a $0.6 million decrease in stock-based compensation expense.

Current wording

Sales and marketing expense decreased primarily driven by a $12.4 million decrease in marketing expense as we have reduced our marketing spend as part of our cost reduction initiatives and due to higher per unit subscriber acquisition costs, a $5.6 million decrease in salaries, taxes and benefits, a $5.1 million decrease in amortization of deferred contract acquisition costs, and a $0.4 million decrease in stock based compensation.

Previous wording

General and administrative expense decreased primarily driven by a $1.7 million decrease in incentive compensation, and a $1.4 million decrease in stock-based compensation expense.

Current wording

General and administrative expense decreased primarily driven by a $7.2 million decrease in incentive compensation, and a $2.8 million decrease in salaries, taxes and benefits.

Previous wording

In addition to our results determined in accordance with GAAP, we believe that the below non-GAAP financial measures are useful in evaluating our operating performance. We use the below non-GAAP financial measures, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. This non-GAAP financial information is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related

Current wording

In addition to our results determined in accordance with GAAP, we believe that the below non-GAAP financial measures are useful in evaluating our operating performance. We use the below non-GAAP financial measures, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. This non-GAAP financial information is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

Previous wording

CFFO and Adjusted CFFO was negative for the six months ended June 30, 2024 primarily driven by lower Billings during the period, partially due to the Legacy wind down, incentive compensation payouts during the first quarter, and payments related to renegotiated employment agreements.

Current wording

CFFO and Adjusted CFFO were negative for the nine months ended September 30, 2024 primarily driven by lower Billings during the period, partially due to the Legacy wind down, incentive compensation payouts during the first quarter, and payments related to renegotiated employment agreements.

Previous wording

We refer to this accumulation of cash as our “float” which we view as a valuable resource that we may invest or use to expand our operations. We expect that as we grow our business, the amount of our float will increase. The Company estimates that the amount of float was approximately $124.4 million and $120.5 million as of June 30, 2024 and December 31, 2023, respectively. As part of the Company's broader capital allocation strategy, our consolidated cash balance may from time to time decline below our estimate of the long term float requirement.

Current wording

We refer to this accumulation of cash as our “float” which we view as a valuable resource that we may invest or use to expand our operations. We expect that as we grow our business, the amount of our float will increase. The Company estimates that the amount of float was approximately $119.9 million and $120.5 million as of September 30, 2024 and December 31, 2023, respectively. As part of the Company's broader capital allocation strategy, our consolidated cash balance may from time to time decline below our estimate of the long term float requirement.

Previous wording

For the three and six months ended June 30, 2024, the Company earned interest income of $1.5 million and $3.4 million, respectively, on our cash portfolio.

Current wording

For the three and nine months ended September 30, 2024, the Company earned interest income of $1.4 million and $4.8 million, respectively, on our cash portfolio.

Previous wording

As of June 30, 2024, our principal sources of liquidity were cash and cash equivalents, and restricted cash of $109.3 million. Cash and cash equivalents are comprised of bank deposits, money market funds, and certificates of deposit. We have financed our operations primarily through cash received from operations, and our sources of liquidity have enabled us to make continued investments in supporting the growth of our business. Our 2021 Credit Facility (as defined and further discussed below) can be used to finance permitted acquisitions, for working capital and general corporate purposes. We expect that our operating cash flows, in addition to cash on hand, will enable us to continue to make investments in the future, and to pay dividends. We expect our operating cash flows to further improve as we increase our operational efficiency and experience economies of scale.

Current wording

As of September 30, 2024, our principal sources of liquidity were cash and cash equivalents, and restricted cash of $94.1 million. Cash and cash equivalents are comprised of bank deposits, money market funds, and certificates of deposit. We have financed our operations primarily through cash received from operations, and our sources of liquidity have enabled us to make continued investments in supporting the growth of our business. We expect that our anticipated operating cash flows, in addition to cash on hand, will enable us to continue to make investments in the future, and to pay dividends. We expect our operating cash flows to further improve as we increase our operational efficiency and experience economies of scale.

Previous wording

Furthermore, to the extent we have taxable income, we will make distributions to the MarketWise Members in amounts sufficient for the MarketWise Members to pay taxes due on their share of MarketWise income at prevailing individual income tax rates, which for the 2023 tax year the highest federal, state and local tax rate the Company used was 49.75%. While historically we have not been required to make tax distributions, we expect to begin making required tax distributions to MarketWise Members, along with a proportionate payment to MarketWise Inc., as early as the second half of 2024. Such amounts will be reflected in our statement of cash flows as cash used in financing activities, and will not decrease the amount of cash from operations or net income reflected in our financial statements. However, such distributions will decrease the amount of cash available for use in our business.

Current wording

Furthermore, to the extent we have taxable income, we will make distributions to the MarketWise Members and to MarketWise, Inc. in amounts sufficient for the recipients to pay taxes due on their share of MarketWise income at prevailing individual income tax rates, which for the 2024 tax year the highest federal, state and local tax rate the Company used was 49.75%. During third quarter 2024, we made our first required tax distribution of $5.8 million in accordance with the MarketWise Operating Agreement. The distribution was made proportionally to all MarketWise Members and to MarketWise, Inc. Such distributions are reflected in our statement of cash flows as cash used in financing activities, and do not decrease the amount of cash from operations or net income reflected in our financial statements. However, such distributions decrease the amount of cash available for use in our business.

Previous wording

Following the commitment to the Reorganization, Legacy Research began to significantly curtail business activities including any marketing efforts to acquire new subscribers. As a result of the Reorganization, the Billings of Legacy Research declined from $30.1 million during the fourth quarter 2023, to $15.8 million and $4.9 million during the first and second quarters of 2024, respectively. Legacy Research continued to serve existing subscribers and fulfill existing subscriptions during the first quarter 2024. During second quarter 2024, we began the process of offering certain Legacy Research subscribers similar products published by other MarketWise brands, consistent with past Company practice when we cease a publication.

Current wording

As a result of the Reorganization, the Billings of Legacy Research declined from $30.1 million during the fourth quarter 2023 to $15.8 million, $4.9 million and $1.9 million during the first, second and third quarters of 2024, respectively. During second quarter 2024, we began the process of offering certain Legacy Research subscribers similar products published by other MarketWise brands, consistent with past Company practice when we cease a publication. We continued this process during third quarter 2024.

Previous wording

In August 2024, we expect to substantially complete our Reorganization and operational transition plans with respect to substantially all of the Legacy Research brands, which resulted in the transfer of the related assets to other businesses within MarketWise for fair consideration. The administrative transfer process is expected to be complete during the third quarter 2024. For the remaining Legacy Research assets that we do not intend to transfer to other businesses within MarketWise, we continue to evaluate a range of potential actions.

Current wording

In October 2024, we completed our Reorganization and operational transition plans with respect to substantially all of the Legacy Research brands, which resulted in the transfer of the related assets and related fulfillment obligations to other businesses within MarketWise for fair consideration. We also entered into agreements in October 2024 to sell certain Legacy Research brands that had immaterial year-to-date September 2024 Billings, one of which was to a related party.

Previous wording

At the time of the announcement, there were 104 employees at Legacy Research, which represented approximately 18% of the Company’s total employees. During the second quarter 2024, we completed actions with respect to the employees, and approximately 48 of these employees had their positions eliminated and the remainder were offered a new role within the Company. Separation costs incurred in the three and six months ended June 30, 2024 totaled approximately $773 and $964, respectively. The annualized compensation cost savings associated with the terminated employees is approximately $13.1 million.

Current wording

Separation costs incurred in the three and nine months ended September 30, 2024 totaled approximately $1.3 million and $2.3 million, respectively. The annualized compensation cost savings associated with the terminated employees is approximately $16.1 million.