Exhibit 99.2
Filed by Pioneer Merger Corp.
Pursuant to Rule 425 under the Securities Act of 1933, as
amended, and deemed filed pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934, as amended
Subject Company: Acorns Grow Incorporated
Commission File No.: 001-39867
Acorns Analyst Day Presentation Webcast Transcript
September 15, 2021
C O R P O R A T E P A R T I C I P A N T S
Jay Li, Head of Finance
and Investor Relations, Acorns
Noah Kerner, Chief
Executive Officer, Acorns
James Moorhead, Chief
Marketing Officer, Acorns
Manning Field, Chief
Business Officer and Chief Executive Officer, Acorns Securities
Rich Sullivan, Chief
Financial Officer, Acorns Securities
P R E S E N T A T I O N
Jay Li
Good afternoon, everyone. I’m Jay Li, Acorns’
Head of Finance and Investor Relations and welcome to Acorns’ Analyst Day presentation. Thank you for joining us today. We are
delighted to have the opportunity to share our story with you.
Before we kick off today’s presentation, as
a reminder, the information discussed today is qualified in its entirety by the Form 8-K that has been filed today by Pioneer Merger
Corp and may be accessed on the SEC’s website at www.sec.gov, including the exhibits thereto.
During this call, we will be referring to an Analyst
Day Presentation, which can be found on the Investor Relations section of Acorns’ websites, as well as the SEC’s website.
Please review the disclaimers included therein and refer to that as
a guide for today’s call. Statements made during this call that are not statements of historical fact constitute forward-looking
statements and are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those
contemplated in these forward-looking statements.
Existing and prospective investors are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of today’s date. For more information, please refer to the risks,
uncertainties and other factors discussed in the related SEC filings.
All cautionary statements that we make during this call are applicable
to any forward-looking statements that we make whenever they appear. You should carefully consider the risks, uncertainties and other
factors discussed in the related SEC filings.
Slide 4 is an agenda of today’s program. We’ll begin with
Acorns Chief Executive Officer Noah Kerner, who will present an overview of Acorns and the vast opportunity we see in the market. Next,
Acorns Chief Marketing Officer James Moorhead will dive into Acorns’ brand and marketing strategy. We’ll have a short stretch
break after James’ remarks. After that, Acorns Chief Business Officer, Manning Field, will present our Growth Strategy in detail.
And next, Acorns Chief Financial Officer Rich Sullivan will walk through a Financial Overview and Acorns’ Long-Term Value Creation
plan.
Now, I’ll turn it over to Noah.
Noah Kerner
Thank you, Jay, and thank you everyone for joining us virtually this
afternoon. Today is an important milestone in Acorns’ transition from a private to a public company.
For some background, Acorns entered into a business combination agreement
with Pioneer Merger Corp., a SPAC, on May 26, 2021. The transaction is expected to give Acorns a pro forma fully-diluted equity
value of approximately $2.2 billion.
While we always aspired to go public, the urgency of Acorns’
mission – to help everyday Americans responsibly save and invest for the long term – became even more apparent during the
pandemic. Not long after COVID hit the U.S., we watched investors get swept up in get-rich-quick schemes and the meme-stock boom.
It was clearer than ever that more Americans need the tools of responsible
wealth-making, which Acorns provides. Our transaction with Pioneer provided Acorns with a strong partner at a critical time.
Acorns’ expected listing on the NASDAQ will be a catalyst, accelerating
our ability to expand our reach, round out the financial wellness system we’re building, and work to change the long-term financial
trajectory of millions of everyday people
The Acorns story has resonated deeply with the investment community.
Acorns secured PIPE investments from top-tier investors, including Wellington, TPG, and funds and accounts managed by BlackRock. Upon
listing, we are expected to have over $450 million in cash to fuel Acorns’ organic and inorganic growth, execute our strategy and
expand globally.
We are thrilled to be taking this exciting next step in Acorns’
history. Going public means more opportunity ahead for everyday consumers, and it means a partnership between Acorns and long-term investors
to create a future where we all do good in the world and do well together.
Acorns was built with one guiding purpose: to look after the financial
wellness of everyday consumers, organizing their financial lives to benefit from the power of compounding, diversification, sound advice,
transparency, and a long-term view.
Slide 7 is an overview of Acorns’ investment highlights. First,
we believe we are the largest subscription service in U.S. consumer finance today. As we’ll discuss more later, Acorns pioneered
subscription pricing in the investment space to provide transparency, simplicity and predictability for all customers.
We have 4.3 million subscribers that drive our attractive, recurring-revenue
subscription model. And our subscribers are sticky. Acorns retains a remarkable 99% of our subscribers each month. For our third quarter
that ended June 30, 2021, we grew revenue 79% year-over-year.
Second, we are a highly visible brand that our subscribers love and
trust. Our product, brand and philosophy are aligned around financial wellness, with a focus on long-term saving and investing.
We know it’s resonating because our net promoter score is in
the 93rd percentile of financial services companies’. Our Chief Marketing Officer, James Moorhead, will speak to this in detail
later this afternoon.
Third, we believe we are well positioned to address the unmet needs
of the largest consumer market in the world: everyday consumers – including 222 million everyday Americans who make under $100,000
a year according to the 2020 U.S. Census.
Fourth, Acorns is supported by a full-stack, scalable infrastructure
that enables us to achieve gross margin rates currently above 80% and gives us significant operating leverage. It also makes us nimble
and flexible as we innovate on future products. We have an experienced leadership team with deep financial, tech, product and marketing
expertise.
And finally, as a result of the value we provide subscribers and their
trust in us, we believe Acorns has significant consumer, wallet, and ARPU expansion potential as we execute our product roadmap and work
to deliver a complete money management solution for everyday individuals and families.
Our Chief Business Officer Manning Field will speak in-depth today
about our growth strategy. These are some of the key takeaways from our presentation today. But to fully understand Acorns and our story,
it’s important to know that while we are a growth company, we are not a grow-at-all-costs company.
We are a company guided by our mission and the best interests of our
customers. We recognize that we are only here because of the trust and loyalty of our customers.
To that end, as we have announced previously, we intend to introduce
a loyalty program that will allow eligible subscribers to own a share of Acorns and earn more as they invite others on the path toward
financial wellness. I plan to gift 10% of my personal ownership to help fund this effort, and Pioneer plans to do the same. We have gotten
here because of our subscribers, and we plan to keep growing together.
Throughout my career building and growing startups, my focus has always
been on simplifying experiences and broadening access – Acorns does just that, by creating a world where everyone has access to
tools of wealth-making.
The rise of day trading, widespread access to exotic financial tools,
and meme-stocks drew a lot of new investors into the market last year. But as history has proven time and again, a diversified investment
strategy and the power of compounding are the most reliable ways to build wealth.
So I want to be clear that Acorns is not a traditional brokerage or
a trading platform. Instead, we provide financial wellness and encourage our customers to save and invest the long term. Our mission
is to look after the financial best interests of the up-and-coming, beginning with the empowering, proud step of micro investing.
A key point of our mission is that we’re focused on everyday
consumers who we call the “up-and-coming.” This term describes our belief that all people have unlimited potential. The empowering,
proud step of micro-investing refers to our core service. We are focused on helping people save and invest small sums of money, consistently,
over time.
For example, Acorns Round-Ups, our first feature, allows people to
automatically invest spare change into diversified investment portfolios. It is the essence of our brand motto: “from tiny acorns,
mighty oaks do grow.”
So let’s talk about our vision. Acorns is building what we call
a financial wellness system so individuals and families will responsibly manage and grow their money over the long-term.
A system means that the products we offer today, and the ones we’ll
build in the future, work seamlessly together to help our subscribers achieve financial wellness.
We plan to scale rapidly to provide more products and subscription
tiers that allow people to grow their wealth and enhance financial wellness for themselves and their families.
Our team is totally committed to our mission and vision. Our accomplishments
to date, and our plans to strategically expand our impact, would not be possible without our nearly 350 dedicated team members, including
what we believe to be a best-in-class management team that you see here on slide 9.
We’re proud to be attracting exceptional talent and building
a deep bench, with complementary expertise and diverse skills. Most recently, Acorns welcomed David Hijirida as our President. David
was director of global payments at Amazon and CEO of the neobank Simple.
We also recently welcomed Rich Sullivan as Chief Financial Officer.
Rich was VP of finance at Twitter. And you’ll be hearing from Rich later today.
All this is to say, we have terrific talent in place to support our
ambitions – including reaching 10 million subscribers by 2025, and building a multigenerational company that delivers the tools
of wealth-building to more and more everyday consumers around the globe.
So who is our customer? Slide 10 is a snapshot of Acorns’ subscriber
base. Our subscribers have a median household income of $50,000 to $75,000. Their average age is 34 and they’re geographically
diverse across the U.S., as we have penetrated just about every market.
Notably, over 60% of our customers are first-time investors. Half
are parents, and that’s why we have subscription tiers for both individual and families. The addressable market we serve is massive
and extremely left out by the financial services industry today.
As of 2020, there were 222 million everyday Americans with income
under $100,000 a year. With our 4.3 million subscribers, we reach just 2% of the American addressable market today. But long-standing
economic inequalities in the United States and the lack of easy-to-use savings and investment tools have created significant opportunity
for Acorns.
As of 2020, those everyday Americans spent on average $490 a year
for financial services, including investing fees, banking fees, credit card fees and interest, excluding mortgage debt. This equates
to over $100 billion of addressable revenue opportunity for Acorns.
It’s easy to underappreciate the reality of these 222 million
everyday Americans, and the barriers they face to financial wellness. But the statistics are staggering. 99% of Americans don’t
get professional financial advice. 45% of Americans do not invest in the stock market. 40% of Americans have less than $400 in emergency
savings.
56% of Americans fail a basic financial literacy test. 53% of American
parents have no savings or investments for their kids. And 73% of Americans will die with debt. It is clear that the needs of everyday
Americans have not been met.
Slide 12 shows our subscriber growth trajectory. Acorns pioneered
the subscription model in consumer financial services, and we have delivered accelerating subscriber growth. It took us 12 quarters to
get to our first 1 million customers; and it took us just 3 quarters to grow from 3 million to 4 million subscribers. Our goal is to
reach 10 million paying subscribers by 2025.
We believe that Acorns can achieve our subscriber growth goal in the
U.S. alone, even though you’ll hear from us throughout the day today that we have global ambitions. As we build out our product
offering, we will continue to ensure that our features and tiers tie back to our core focus: long term saving and investing for everyday
consumers
So what does our strategy and offering look like? Acorns serves two
core audiences: the first is the individual, and the second is the family. In the Personal line, today we have a $1 per month product
and a $3 per month product. In the future, we’re going to be launching a $10 per month personal product that holistically manages
money for everyday Americans.
We’re going to mention holistic money management a lot today.
What we mean is that we are expanding Acorns into every important area of our subscriber’s financial lives to deliver financial
wellness and peace of mind.
Our $10 tier will make sure that our subscriber is allocating money
appropriately between emergency savings, long term investments, retirement savings, debt payments, expenses, and cash to spend. Most
everyday consumers don’t want to deal with the headache of money management.
The same goes for our Family line, which is all about ensuring parents
are planning not just for their own financial needs, but also for their kids’ financial futures. Today, we have a $5 investing
system for the Family, anchored by our Acorns Early product. And we’re actively building a $15 holistic money management system
for Families that will launch in the future.
Overall, as subscribers tier up, the experience adds products, benefits,
add-ons, and smarts, and Acorns has the ability to drive transactional revenue as customers use certain products in the different tiers.
Our subscription model is unique in our industry. The reason a subscription
model works well for our customers is that it provides clarity, transparency and predictability, building the trust we know is critical
for a long term relationship. It also, of course, provides a dependable and durable base for our business.
Slide 14 outlines the products in our current offering. For Acorns
Lite at $1 a month, you access an Acorns Invest portfolio, fueled by Round-Ups or automated Recurring Investments. You also access educational
content powered by Acorns and CNBC, and when you shop with one of our 15,000 retail partners’ stores, they contribute bonus investments
to your diversified portfolio through Acorns Earn.
Next, we have a $3/month tier, Acorns Personal. This is where the
full Wellness System really starts to come to life. In addition to the features included in Acorns Lite, you get: Acorns Later, a retirement
planning account; Acorns Checking, a full checking account and debit card that invests in you; and Smart Deposit, which takes your paycheck
and automatically makes allocations among your investment accounts
And we have a $5 Family tier today. This is our most popular tier
with new subscribers. It includes the Acorns Personal products that I mentioned, plus Acorns Early, our kids’ investment account,
family financial literacy, family rewards, and a gifting feature so that extended family members can also contribute to the kids’
investment account.
Each tier offers a bundle of products that unlock saving and investing
benefits and delivers increased customer value. The bundles were developed and validated with the input of consumer research.
As subscribers tier up, there are more products and more benefits.
And we know from our subscriber retention and premium tier upgrade trends that as we build more capabilities into the Acorns system,
our subscribers take advantage of them.
Historically, subscribers have naturally migrated into premium tiers
as Acorns has introduced them. The chart on the left shows that before 2018, Acorns was only a $1/month product. Then we launched a $2
per month tier that included our retirement account feature, Acorns Later.
We’ve scaled up our subscription tiers rapidly in the years
since then, launching our $3 tier in 2019, then our $5 tier in 2020. You can imagine how we plan to effectively launch our $10 and $15
tiers on this trajectory.
We did two additional important things in 2020 that have been transformative
for our business and set us up for the future. In July 2020, we overhauled our new customer registration funnel so that customers
can subscribe to any tier at the moment of sign up.
Since then, 75% of all new customers sign up directly into our premium
$3 or $5 tiers. And secondly, for the first time ever, we migrated customers from one tier to another – in this case, from the
$2 tier into the $3 tier.
We believe the tier migration was successful for two reasons: first,
because our subscribers understand the added benefits they get in the $3 tier, and second, because we allowed our $2 customers to remain
at $2 if they needed to for economic hardship reasons. Most customers chose to migrate.
Our proven track record gives us confidence in taking a similar step.
This month, Acorns has begun migrating our $1 tier subscribers into the $3 tier – one that delivers enhanced value and better serves
them.
Legacy $1 tier subscribers will have an option to remain at the $1
tier. If existing customers in any one of our tiers need to in the future, they can downgrade to the $1 tier through what will be the
Acorns Assist program.
We believe that in hardship cases, subscribers should be able to continue
with that $1 level of service. But just like in our $2 tier migration, we expect that the majority of current $1 tier subscribers will
roll into the $3 tier, and with that begin to experience the more complete value of our Financial Wellness System.
As you can see on the right side of slide 15, 50% of the subscribers
in our $5/month family tier today originally subscribed to Acorns at a lower tier and upgraded for more benefits. 45% of our current
$3/month tier did the same.
The rest comes from new customers acquired directly into those tiers.
So we’ve been very successful at both encouraging our customers to organically migrate into premium tiers, and also at acquiring
new customers directly into them.
The left side of slide 16 is a key proof point. This chart shows our
new customer mix in the month of August. About 90% of our customers today subscribe directly into premium tiers. Zooming out, our performance
also shows another very powerful trend: that our subscriber retention improves as our premium tier mix grows. The more our subscribers
commit to Acorns, the stickier they become.
This gives us even more confidence in our premium tier model, as well
as in the migration of the $1 tier to the $3 tier.
We expect the launch of higher-tier options will drive continued upgrade
activity as we build trust and support subscribers holistically, while generating significant ARPU and LTV growth for Acorns.
Diving deeper into retention, our business model drives strong, predictable
retention. Expansion into premium tiers strengthens it. In short, we have sticky customers getting stickier as they tier up within our
system.
We are currently operating at nearly 99% monthly retention. After
the first 12 months, we retain nearly 80% of our subscribers for the next 5 years. And of the subscribers who do leave, 30% boomerang
back to Acorns within the next 12 months. More broadly, the sustained stickiness leads to a solid revenue retention.
Slide 18 illustrates Acorns’ revenue retention model in detail.
As we have added more premium tiers, we have been able to increase our revenue retention for later cohorts. As this chart shows, our
2016 cohort revenue declined to approximately 54% of the first month revenue over the first three years before rebounding over the next
two years to 78%. By contrast, our 2019 cohort had lower attrition and a faster increase in revenue.
We believe that as we continue to add additional tiers and reasons
for consumers to upgrade, this should allow us to continue to improve our subscriber retention, both on number of subscribers and revenue.
I also want to mention that engagement improves as we add premium
subscription tiers. Our DAU rate is twice as large at the $5 tier as it is at the $1 tier. Our average $5 tier subscriber’s balance
is over three times greater than that of the subscriber balance at the $1 tier.
Now that we’ve laid the groundwork of Acorns’ mission
and subscription business, I want to take some time to explain how the customer experience comes to life. The visual on Slide 19
illustrates the experience – a simple automated money manager delivering long term growth for everyday individuals and families.
This includes: A full suite of products, maximizing long term saving
and investing over time, products that are easy to set up, a simple way to add and allocate money across products, an experience that
continuously celebrates growth, diversification, milestones, and compounding, opportunities for our customers to earn extra money, and
in the future, pay down debt, manage debt, and get insured; advice, education, and ultimately providing community; and a clear and transparent
pricing model designed to form the bedrock of a trusted, long-term relationship
Slide 20 shows the customer experience in action, using the $3 Acorns
Personal tier as an example. It starts on the left. Money comes into Acorns, and then gets automatically allocated across our products.
You can add money in several simple ways: One-time deposits, recurring deposits, Round-Ups, paychecks and mobile checks.
The second screen shows our banking product – this is one of
the places money gets allocated. It’s a full banking product that helps you save and invest while you spend with our debit card.
The third screen shows your money being nurtured and the celebration
of your milestones as you move along the journey of financial wellness. And the fourth screen shows the 40-year compounding trajectory,
helping subscribers visualize what their money can become over the long-term as they change their contribution levels.
This next slide shows products that are available at every tier. There’s
an earning feature, where subscribers can earn bonus investments as they shop. Subscribers can also earn extra money from millions of
job opportunities and side gigs.
Our education feature allows subscribers to increase their financial
literacy across every area of their financial lives. And our fee negotiation product called Harvest is an AI-powered tool that enables
subscribers to negotiate fees back from banks and, in the future, other types of nuisance fees.
As I mentioned before, 99% of Americans don’t have access to
professional financial advice.
The Acorns experience integrates expert support into our platform.
Dr. Harry Markowitz, a Nobel Prize winner and one of the leading economists who developed modern portfolio theory, helped develop
the Acorns core portfolios.
They’re constructed using low-cost, high-liquidity ETFs. When
a subscriber signs up for Acorns, he or she completes a suitability questionnaire, and gets an algorithmically derived recommendation
for one of our five core portfolios from conservative to aggressive.
We also offer four ESG portfolios, enabling our subscribers to invest
in our planet as well as their future. Acorns has leveraged research on how people make financial decisions from Nobel Prize-winning
behavioral economist Richard Thaler and many other behavioral economists.
Some of our most impactful education has come in the form of interventions.
As the market reacted to uncertainty in the early days of the pandemic, many customers instinctively went to pull their money out of
the market.
Acorns deployed in-app messaging to educate customers about historical
market trends and the implications their actions may have on their long-term futures. Finally, we offer financial literacy tools to subscribers,
including custom financial literacy content that is powered by CNBC. The Acorns system responsibly uses transactional information provided
by our subscribers to deliver better customer experiences.
All of our subscribers link their bank accounts to Acorns, which means
that we connect to most banks in America. This information allows us to personalize investment recommendations, advice, allocations,
offers, and education to help our customers make better decisions.
Underpinning all of Acorns is our proprietary full-stack investment
platform. Unlike most fintechs, Acorns owns the technology platform top to bottom, from our financial wellness system, to our broker
dealer and RIA, our proprietary investment platform, fractional share engine, rebalancing engine, KYC capabilities, record keeping, ledgering,
and a delivery service for statements, trade confirmation and tax forms.
The value that this full-stack technology provides is two-fold. It
allows us to drive high gross margins, and it also allows us to nimbly innovate on future products. We control our own destiny.
One area of innovation that we are very excited about is Custom Portfolios.
I’ll reiterate now that Acorns is not a trading platform or a traditional brokerage. We are firm believers in diversification and
will always encourage our subscribers to responsibly invest in diversified portfolios.
However, some of our customers want the ability to build and diversify
their portfolios on their own terms. We expect our Custom Portfolios will enable them to do that with a slice of their overall investment
portfolio – such as 10% – similar to the way any professional financial advisor would advise their clients. Our focus with
this feature is to provide the flexibility to invest in individual companies, cryptos, etc., while ensuring subscribers maintain
overall diversification and get educated in the process.
To wrap up my remarks, I want to emphasize again that everything
we are building at Acorns serves our core focus: helping everyday Americans save and invest responsibly for the long-term. Our Financial
Wellness System is designed to maximize saving and investing for our subscribers and enhance their overall financial wellness.
We are very excited about becoming a public company. It will accelerate
our growth strategy and enable us to deliver an even more comprehensive solution to everyday consumers that need our help.
Now I’ll turn it over to our CMO James Moorhead to talk about
our differentiated brand and marketing strategy.
James Moorhead
Thank you, Noah, and good afternoon everybody.
As Noah mentioned, I’m going to spend a few minutes sharing
Acorns marketing strategy and how we acquire, retain and grow our subscriber base. This is a delicate balance of both art and science
that helps drive the growth of our business every day. More specifically, how we build our brand (the art) and drive customer acquisition
(the science).
To start I want to go a little bit deeper into the Acorns subscriber.
They are the everyday American that is working hard to make ends meet for themselves and their family.
Let’s put ourselves in their shoes for a few minutes. Pictured
here are photos submitted by our customers. They come from all walks of life and are navigating work, parenting, and their daily bills
so they can provide the best life for their families.
Their stories are similar to the 4.3 million subscribers we have today
and the 220 million everyday Americans we expect to grow with. They have a median household income between $50,000 and $75,000, and in
a recent survey of our customers, 30% reported household income below $50,000.
That said 30% of our customers report income above $100,000 as our
products and services serve a wide spectrum of income today. The average age is 34, and they’re widely spread across the country
– rural, suburban and urban. They are 56% male and 43% female and this is important to us as we work super hard to bring everybody
along, and many fintech companies skew so heavily male.
Now, who are these people at a psychological level? We’ve learned
a ton about them, and we believe they are optimistic for the future. They hope for progress. They want to grow. And we believe many of
them need to be careful with their money every day, and they find saving and investing to be tricky, and they really fear making mistakes.
From what our customers tell us, they’re not interested in day
trading or actively managing their money themselves. They are a totally different audience than the thrill seekers or day traders. Acorns
customers openly admit to us that they don’t have the expertise and they’d happily hand over their money to an expert or
an algorithm. Our customers want a steady hand to help them save and invest the right way.
So now that you know a little bit more about the consumer we serve, I
would like to share how we build the Acorns brand to engage these customers. And this is the “art” in how we build a differentiated
brand and experience that is so critical to standing out in the sea of sameness in the financial services industry.
So we do this in three main ways. First, we have an amazing line up
of brand ambassadors, from Dwayne Johnson, to JLo and Ashton Kutcher. And each of them helps us grow Acorns in different communities
that we believe can benefit from our Wellness System. And we plan to continue to collaborate with them as we expand our portfolio of
products and services.
The second way we build our brand is through disruptive product launches.
And pictured here in the middle are two examples. The first is from our Acorns early launch where we published a children’s book
and gave it to every new early customer. It served as a constant reminder to continue to save and invest for their children. And similarly,
when we launched our Acorns Checking product, we made the card activation process utilizing augmented reality. Just so different that
what a bank does with a traditional 800-number.
And finally, we have built a world class education platform with our
partners at CNBC called Grow on acorns.com, where millions of monthly unique visitors come to learn about the value of compound interest
and diversified investing. In combination with our brand building efforts is our diversified customer acquisition strategy, which is
the science side of our growth strategy.
As we drive to our medium-term goal of 10 million subscribers by 2025,
our customer acquisition strategy is driven by a diverse set of go to market strategies and tactics, reducing our reliance on any one
operating system, channel or partner.
To start, more than half of our new accounts are driven by organic
or referrals, which reduces our reliance on paid media channels overall. Across the 5 core strategies we deploy, I run a trading
desk focused on optimizing for the highest LTV customers at the lowest marginal cost across our portfolio of investments.
So, let’s dig a little deeper into these five core strategies.
First: Referral. We expect strong growth from our Referral program as we have made significant investments in technology to make it easier
to refer. This is important because we know that referral customers are one of our highest LTV customer segments.
We plan to further accelerate this program with our innovative loyalty
share give-away which will allow our eligible subscribers to earn a share of Acorns and earn more equity as they refer their friends.
The second pillar of our growth strategy is ensuring that we have strong growth across all three operating systems -- iOS, Android and
Web.
Our diverse operating system approach is particularly important right
now given the ongoing privacy changes that are happening in the market. Across systems we maintain an aggressive funnel testing roadmap
to improve conversion and reduce CAC across all channels, whether its iOS, Android or Web.
And in terms of channels, we are well diversified across all digital,
social, video, programmatic and affiliate channels, giving us the flexibility to flow dollars to the lowest marginal cost, highest LTV
customer especially as things continue to change in the media environment and targeting capabilities. So, of course though, the success
of a referral and organic business continues to decrease our reliance on paid media channels overall.
Our 4th pillar is influencers and brand ambassadors. And we have a
strong portfolio of micro and macro influencers that tap cultural trends across channels. We recently partnered with Farres Quadri, pictured
here, a fintech influencer with almost 2 million followers on TikTok. A strong pipeline of these influencers is foundational to staying
relevant and breaking through the clutter in paid media.
And speaking of breaking through the clutter, the last pillar is disruption.
And we have built strong partnerships that help our brand breakthrough in non-traditional spaces. For example, with Cricket Wireless,
we have in-store promotional presence across 4,500 Cricket stores today and our app is being pre-downloaded on new Cricket customer Android
phones.
With our Chevron partnership, we have been featured at the gas pump
across more than 5,000 stations. These partnerships help Acorns drive awareness and conversion in new places.
We also have a killer in-house PR team that helps us drive earned
media coverage with creative ideas like our “Corona Babies” program featured here.
When we saw everyday Americans experiencing deep financial hardship
during the pandemic, we saw an opportunity to comfort new parents during this time and announced that we would give Acorns family free
to babies born during the pandemic. We are proud of our ability to step in when everyday Americans really need us the most.
And at the same time, it's creative ideas like these that breakthrough
and receive a massive amount of earned press, driving word of mouth growth. Our track record and ability to combine the art and science
of marketing is a core competency and advantage for Acorns.
And once we acquire these customers they are happy and stick with
us. Our app is rated 4.7 stars and has over 777,000 reviews in the app store. Given the fact that 55% of our subscribers come from referral
and organic, our ratings are incredibly important.
Take another step back, and imagine you’re making $50K a year
and trying to pick an app to help you manage your financial wellbeing – a daunting task. And ratings and reviews are critically
important in those situations. Similarly, our Net Promoter Score is 62 and the 93rd percentile of financial services companies. This
is another signal that we have built a brand that people trust, love and recommend.
Finally, when we ask our subscribers, 68% validate that we are looking
out for their best financial interests. 66% of subscribers agree that we are helping them feel more hopeful about their future, and 62%
believe that Acorns increased their financial confidence. While we are proud of these results, our work is not done in helping our customers
towards a brighter future and a better customer experience.
As I wrap up my remarks, I want to reiterate that we believe
that through building a differentiated product and brand we will continue to accelerate our growth and our mission so that individuals
and families can responsibly manage and grow their money over the long term.
And now, at this time, we’re going to take a 3-minute break
where we will entertain you with some of our latest commercials, customer testimonials, and messages from our investors. When we return,
our Chief Business Officer, Manning Field, will dive further into our Growth Strategy.
Thank you very much for your time and I hope you enjoy the break.
Manning Field
As James shared, subscriber growth is critical, and I am going to
spend the next few minutes talking through our broader growth strategy.
You’ll hear me reference the financial plan several times, and
Rich will go through that in detail after my section. As we look at the broader growth strategy, think of this visual as a high-level
representation of that strategy. When we zoom out, we believe there is a huge greenfield opportunity for Acorns to grow beyond what’s
in the plan we’ve published to date.
This slide is going to be a table of contents for the walk that I
take you through to explain our growth strategy over the next few minutes. On the left here, you can see, everything starts with our
loyal existing subscriber base, which is already larger than great companies like Peloton.
Noah discussed our retention numbers, and this is a source of significant
business value and proof of our subscribers’ loyalty. Those revenue retention number improvements Noah discussed on Slide 18 are
driven in large part by the value our stable, loyal base of subscribers find when they upgrade to premium tiers when Acorns launches
them. We anticipate upturns fueled by the introduction of new premium tiers with new products and benefits bundled for both individuals
and families.
We believe that this upgrade dynamic, along with the existing subscriber
base and most of those new subscribers coming into one of our premium tiers, will drive the majority of the projected growth predicted
within our current financial plan.
However, this is just a small part of this opportunity, and I will
spend the rest of my time talking about what else we have cooking. For example, adding those $10 and $15 tiers Noah mentioned tremendous
growth opportunities on the ARPU side by taking on more of our subscriber’s financial relationship, allowing us to continue to
grow and scale.
We plan to add new products and new value within a given tier that
will keep those subscribers sticky, as well as provide transactional revenue opportunities beyond just pure subscription revenue. We
believe this enables Acorns to grow revenue and ultimately seize the family opportunity.
We believe the metaphor of the acorn growing into the mighty oak is
a global idea that crosses all cultural, language and geographic barriers. We will likely do that via M&A and in a few minutes I
will touch on the M&A strategy in more detail.
Jumping right in, we believe the best way to demonstrate our growth
potential is here on this illustrative ARPU walk. First let’s talk about why subscription ARPU is not the ceiling for growth, but
it’s actually the stable foundation to grow revenue on the transactional side as we deepen the relationship with the subscriber.
Because of our retention strength, most subscribers don’t leave
us, and as we expand our product offering and tiers, we have demonstrated our ability to drive upgrades and more transactional revenue.
Looking forward, we believe that we will continue to have upgrade
success and more transactional revenue will grow. In this walk, subscription ARPU is defined as tiers and add-ons. This represents about
half of this opportunity.
Subscription is not a constraint on ARPU, and it is a real benefit
on LTV. Rich will cover that more in his section. The items on this page maps to our subscribers needs and are backed up by our
research. We are actively working on all of these, but few of them are in our financial forecast.
As we said, the $30 ARPU on this page and the 2023 calendar year
approximate target of $45 ARPU is primarily a reflection of our current premium tier upgrade and new subscriber trends. Everything
else on this page is incremental ARPU upside. We have new subscription tiers, add-ons and transactional revenue opportunities that
allow us to capture more of our subscribers' financial needs.
While the $140 ARPU on this slide is illustrative of long-term potential
ARPU, we believe that this target is achievable as we deliver these solutions.
I am about to share our top-tiers for our wellness system.
We expect to price this at $10 for the Individual level, and I will talk about Family in a moment. This here is simple and holistic personal
money management, so everyday individuals can responsibly manage, nurture and grow their money.
When a subscriber puts money into acorns, our product allocates that
money into all of these destinations and determines the correct amount of money to put into these destinations.
All based on what we know about that subscriber, their situation and
their goals.
This allows us to deliver on our core purpose of saving and investing
and take on the challenge of managing debt that many Americans face today. In our plan, the $10 tier is currently slated to launch in
later 2023, but the team is already developing this premium tier today.
Expanding past the $10 tier, building on the strong marketplace momentum
of last year’s launch of the $5 tier, we are also developing a holistic money management solution for the entire household. Early,
our UGMA for kids launched last summer and has had over 10% of our subscribers upgrade or select this tier at the moment of acquisition.
We have lots of confidence in this $15 tier as most of our new customers
are already selecting the available $5 option, and the retention profile of subscribers in the $5 tier is the most favorable in the portfolio.
As Noah said, we believe this is a very large opportunity. This tier
will allow us to deepen the relationship by introducing an offering that helps parents manage their money and develop good financial
habits for their kids from birth. It will have banking, investments, and allowance features all deeply supported by education.
53% of American parents don’t
have any savings for their kids and over 50% of Acorns subscribers are already parents. Managing the household’s money over the
long term will help drive growth, improve retention, ultimately delivering our cradle to grave strategy.
We’ve completed 3 M&A deals to date. Earlier this year,
we acquired Harvest and Pillar. A big part of why we’re going public is to maintain this momentum. To that end, we continuously
talk to consumer fintechs of all sizes and explore opportunities for potential business combinations.
Our M&A strategy is focused on accelerating the rollout of premium
tiers, adding products to drive ARPU, and ultimately expanding our geographic reach.
We want to create an environment where entrepreneurs and founders
can thrive within a company that can accelerate their vision. One of the benefits of having all these linked bank accounts is that
we understand our subscribers' financial relationships. While there is intensity in market competition, we clearly know the greenfield
opportunity to take on more of our subscribers' financial relationships.
Fintech competitors listed here have de minimis overlap with our subscribers.
Almost all the subscriber growth volume will be sourced from the incumbents.
So, as you can see, we are just scratching the surface of what our
growth potential could be, and we believe executing the strategy will lead to meaningful growth over the long term.
I now hand it off to my partner, Rich, who will take you through the
financial model.
Rich Sullivan
Thanks, Manning.
Much like the way we instruct our customers on their path to financial
wellness, we operate Acorns consistent with these same values: Focusing on smart investing, disciplined spending, and long-term value
creation, we believe with our unique business model that we are well positioned to win in this space, and excited about the market opportunity
ahead of us and our shareholders.
So let’s get into some numbers. At Acorns, we look at several
of key metrics to measure our success.
First: Monetization and ARPU expansion. We are currently operating
at a $28 Annualized Average Revenue Per User, ARPU expansion is a key to our strategy. Adding premium tiers has allowed us to see meaningfully
improvement in this number. Between 2020 and 2022, we expect to see a 40% CAGR of ARPU.
Second: Subscriber Growth. We are focused on growing and retaining
our subscriber base we have 4.3M subscribers through the end of June, almost double our user base since June of 2019. Our goal is
to attain 10 million subscribers by the end of 2025
Subscriber retention is equally
important to growth. At the end of June, our subscriber retention was 85% on an LTM basis.
Increased monetization combined with subscriber growth allows us to
create meaningful performance improvements.
In June we saw $120 million of
Annualized Run-rate Revenue, and between 2019 – 2023, we expect to see a revenue CAGR of about 60%.
Lastly, profitability. One, investments in our own tech stack; Two,
increasing efficiency and scale, and; Three, cost discipline, has delivered gross margins of over 80% for the business.
This is an improvement from an already strong gross margin …which
was over 70% in prior two years. This trend demonstrates the potential for a very profitable and scalable business.
A big driver of this improved profitability is the increased customer
adoption of our premium product. Several years ago nearly, 100% of our customers were on our platform at a “one-size” fits
all $1 tier. Since that time, we have introduced premium offerings for both family and individuals. The migration away from the entry
level product has been the key driver to our recent ARPU expansion. Today, 44% of our subscribers are in a premium product. We expect
that over the next year that only about 20% will be using our legacy $1.
Turning to our most recent Quarterly results through June.
Our premium tiers offerings had a clear impact on ARPU, where we saw
a 34% improvement
on a year over year basis. We closed out the quarter at 4.3 million
subscribers, sequentially adding 300K subs since March and over 1 million subs on a year-over-year basis.
The compounded effect of improved ARPU and subscriber growth led to
meaningful revenue growth. In the quarter, we delivered $29 million of revenue, our highest revenue quarter as a company, and 79% year-over-year
growth. These strong quarterly results demonstrate the strength and predictability of our subscription model.
Today we generate over 80% of our revenue from subscriptions. We really
like the subscription revenue. It is high quality—recurring as well as transparent to our customers. With an approximately 85%
retention rate of subscribers the predictability allows us to be more effectively at managing and allocating resources. So the subscription
model will continue to be our focus. It’s the pricing model our customers prefer, and we think there is significant upside.
However, we are also focused on Transactional Revenue.
When subscribers shop at our partner brands, use their debit card,
or use our AI tools to negotiate down their bank fees, we generate revenue in addition to their recurring subscription. Today we are
seeing between 15%-20% of our current revenue coming from Transactional Revenue. As Manning illustrated, we have several products in
the pipeline to improve revenue and potentially impact revenue mix in a meaningful way. Many of these products we have not yet been factored
into our forecast but would be upside to the meaningful growth we are expecting from subscription.
As we look at the drivers of our revenue model one area of strength
has clearly been our subscriber adoption of new premium tiers. This chart looks specifically at our premium tier adoption by new customers
over the last several years.
Since 2019 we have seen a meaningful shift from 87% of our new subscribers
at $1 tier to 79% of our new customers in fiscal 2021, expected to select our premium offering.
We did this in two ways: One: Funnel optimization—we overhauled
our new customer registration funnel to allow customers to subscribe to any tier at the point of sign up—this resulted in people
selecting into the higher tiered products. Prior to this change subscribers entered at $1 and then had to upgrade
Two: the introduction of the $5 family tier. Family is an important
space for us.
We expect to see more and more of our customers moving into premium
tiers over time, especially as we roll out both the $10 and $15 dollar tier.
Increasing subscriber adoption into premium priced product is a key
driver for many things, including revenue growth, ARPU expansion, increasing LTV, and profitability as we scale.
When we look at the benefits of this ARPU expansion, it creates meaningful
growth, especially when coupled with anticipated subscriber growth. On the left, you can see annualized ARPU for 2019 and 2020 and expected
performance through 2023. Between 2021 and 2022 we expect to see a meaningful jump – going from $27 to over $40.
Again, this is being driven by the impact of our improved funnel registration,
the introduction of the $5 family product – which is now the most popular tier of our new customers – and the continued trend
of our customers migrating away from the $1 tier.
In 2023, we see an additional $4-$5 increase driven by the continued
penetration of our premium tiers, growth of our transactional revenue, and the introduction of the $10 tier in the latter half of 2023.
As you can see to the right, this has a meaningful impact in our ability to deliver top line revenue.
In fiscal 2019, we delivered $40 million in revenue. We expect to
end fiscal 2021 at $107 million in revenue. And we expect to end Fiscal 2023 at $280 million– a CAGR of 63% over that time frame.
It is important to note that these numbers are in fiscal year, as
we will be reporting on a September year end going forward. They will look slightly different from our previous view, which showed
our performance on a calendar year basis. For the avoidance of doubt, these revenue numbers are in line with that calendar view and our
long term revenue targets on a calendar basis remain the same.
As we talked about earlier, in addition to ARPU expansion, another
big part of our future growth is our ability to grow subscribers.
We expect that by the end of the fiscal year we will be at approximately
4.4 million subscribers. This will be the second year in a row where we have added a million new customers.
Going forward, we have an opportunity for sustainable and meaningful
subscriber growth.This will be driven by continued product innovation, our strong referral programs and by effective and efficient targeting
through paid channels. Our goal is to reach 10 million subscribers by 2025—it’s ambitious but attainable.
However, we are also going to be thoughtful in our approach, especially
in the short term.
As many of you know, there have been recent external factors that
have impacted effectiveness of some of our customer acquisition channels, especially on iOS. As James laid out, we have multiple channels
to target customers giving us an opportunity to be strategic and disciplined.
As we move forward, we plan to continue to invest in subscriber growth
when and where we think it is appropriate, but also pull back on these channels when we do not think it’s in the economic best
interest of the company.
As a result, we are not going to guide to specific short-term subscribers
targets on our path to 10 million.
We believe this allows us to manage the business more effectively,
maintain maximum flexibility in our approach to subscriber growth, on a month-over-month or even a day-by-day basis, and remain disciplined
as market conditions evolve.
As Noah said we are a Growth company and not a grow at all cost company,
which means we will have a disciplined approach to growth, and how much we spend to achieve it.
When we talk about a disciplined approach we are really focused on
the expected value of a customer, reflected on this chart as Life Time Value (LTV), versus the cost to acquire a new subscriber or “CAC”.
The expected ARPU expansion we talked about earlier also results in significant LTV improvement, represented here in the green bars.
With more subscribers joining premium tiers, our new subscriber LTV
grew from $73 in fiscal 2020 to an expected $150 in 2021 – more than double.
As the penetration of family tier continues, and we see the benefit
of the $10 tier, we expect to see this number increase to an LTV of $250 in 2023.
It’s also important to note that with the product features and
the new tools that Manning laid out on our future roadmap, such as add-on’s, banking features, lending, we have the opportunity
to significantly improve on this number, increasing it by 2-3 times. As our ability to monetize improves, so does our customers’
LTVs, and so does our ability to spend more to acquire customers.
We believe this is another benefit of the subscription model and high
retention rates. We believe we have a really good sense of what customers are worth to us in the long term, so we also believe we know
how much we should spend to acquire them.
A good rule of thumb for us will be to target LTV to CAC at about
3.0 - 3.5 times. This will fluctuate over time depending on a number of internal and external factors, but as long as we are executing
this LTV to CAC range, we feel good about the economic return. Over time, we expect that with scale we will bring our customer acquisition
cost down relative to both top line and LTV.
What allows us to make these meaningful investments in growth is the
profitability we are generating on a gross margin basis. As Noah discussed before, we own and operate our full-stack scalable technology
platform, which gives us a competitive advantage and strong operating leverage. The cost to onboard our subscribers, banking and processing
fees, and infrastructure costs make up the majority of these costs contributing to gross margin.
Looking at the far left, we were operating with gross margins in the
mid-70’s in both 2019 and 2020. And as we continue to see the subscribers on premium tiers increase, so too has our gross margin.
We expect that over 80% of our customers will be in a premium tier by 2022, resulting in a gross margin over 85%. This level of gross
profit gives the company a lot of flexibility and the opportunity to aggressively invest in our growth, while also focusing on profit
generation.
Today with our scale and revenue growth, coupled with our technology
advantage and cost discipline, we are on a path to profitability.
Illustrated on this slide we show total operating expense as a percentage
of revenue. Expenses are adjusted for non-cash items including such as amortization for in-kind marketing services, stock-based compensation,
and acquisition-related charges. As I mentioned earlier, we are a growth company, and we will continue to invest in this growth for the
foreseeable future. Sales and marketing and more specifically paid channels to acquire subscribers is a place we will continue to spend
and will be a meaningful cost item for us in the future.
It is worth noting that if we weren’t leaning into marketing
for customer acquisition today, we would be profitable on an adjusted EBITDA basis.
We are also investing in our product innovation. This is the main
driver of the total expense excluding sales and marketing.
We believe these are the right investments to be making at this time.
However, we believe we are on a path to achieve meaningful economies of scale, even with significant investment over the next several
years, we expect to be on a path to breakeven on an adjusted EBITDA basis as we move through 2023 and into 2024.
Overall we are on a good path toward profitability without sacrificing
investment or growth, and with the scale we can strike the right balance between profits and top line growth.
Before I conclude, I’d like to spend a few minutes on capital
allocation.
Upon completion of the transaction with Pioneer, we expect to have
cash balance of over $450 million. This will give us significant capital flexibility and put us in a good position to further invest
in our business.
We will use these proceeds in several areas: One—continue to
spend on product innovation. It's the most important use of capital as we build out our financial wellness platform. Two— we will
continue to achieve scale by investing in subscriber growth on our path to 10 million. And lastly, we expect to pursue a disciplined
acquisition strategy to target deals that accelerate the roadmap of our premium tiers, add products and benefits to ARPU growth, and
expand our geographic footprint.
With that, let me turn it back over to Noah for a few closing remarks.
Noah Kerner
Thank you for joining us today and listening to our story. It’s
a story about possibility and hope for so many people. It’s a story about tiny acorns growing into mighty oaks - not just as a
metaphor for our subscribers but also for what this great company is meant to become. We look forward to taking this journey of financial
wellness together.
