System1 (SST) Q1 2025 Earnings Call May 06, 2025 05:00 PM ET Speaker0 Thank you for standing by, and welcome to the first quarter twenty twenty five earnings conference call for SystemOne. Joining me today to discuss SystemOne's business and financial results are Co Founder and Chief Executive Officer, Michael Blend and Chief Financial Officer, Trudhavish Kadambi. A recording of this conference call will be available on our Investor Relations website shortly after this call has ended. I'd like to take this ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from ______ to ______ Commission File Number 001-39331 System1, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation ...

2021 York Mountain Syrah - $78 Investor Deck May 2025 Disclaimer Safe Harbor Disclaimer for Forward-Looking Statements This presentation has been prepared by management of System1, Inc. (together with its subsidiaries, collectively "System1") and does not constitute a prospectus, and should under no circumstances be understood as an offer to sell or the solicitation of an offer to buy securities, nor will there be any sale of securities in any state or jurisdiction in which such offer, solicitation or sale ...

Exhibit 99.1 System1 Announces Strong First Quarter 2025 Financial Results All Key Financial Results At or Above the High-End of Guidance Range LOS ANGELES, CA – May 6, 2025 – System1, Inc. (NYSE: SST) ("System1" or the "Company"), an omnichannel customer acquisition marketing platform, today announced its financial results for the first quarter of 2025. "We are pleased to report another solid quarter where our key financial metrics were all above the high end of our guidance for the period," commented Mich ...

Financial Data and Key Metrics Changes - For Q4 2024, the company reported revenue of $76 million and gross profit of $45 million, with adjusted EBITDA of $17.9 million, reflecting a 79% year-over-year increase [7][37] - Total owned and operated revenue reached $65 million, a 19% year-over-year decline and a 9% sequential decrease, while adjusted gross profit increased to $32 million, marking a 20% year-over-year increase [14][15] - Advertising spend declined by 26% sequentially due to lower monetization from Google [10][41] Business Line Data and Key Metrics Changes - Owned and operated products generated $27.1 million in revenue, up 60% year-over-year and 30% sequentially, while marketing businesses saw a 40% year-over-year revenue decline [39][14] - Partner Network revenue was $11 million, with adjusted gross profit of $14 million, both up 10% year-over-year and sequentially [31] Market Data and Key Metrics Changes - International revenue represented 36% of total owned and operated revenue, up from 26% in Q4 2023 [16] - Total sessions across owned and operated properties totaled 1.9 billion, down 8% from Q3 but up 79% year-over-year [15][41] Company Strategy and Development Direction - The company is focusing on AI integrations across all facets of its operations, particularly within the RAMP platform, to enhance efficiency and scale [12][13] - A strategic shift is underway from Google's AdSense for Domains (AFD) to the newer Related Search on Content (RSOC) product, with the company well-positioned to navigate this transition [20][81] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing volatility due to changes in Google's Search Partner Network, which has impacted advertising spend and revenue [9][10] - The company remains cautiously optimistic about 2025, expecting to leverage its core products in private search, mapping, and couponing for growth [34][47] Other Important Information - The company ended the quarter with $63.6 million in unrestricted cash and $280 million in term loan debt, with a net consolidated leverage of approximately 5.6 times [44][66] - Q1 revenue guidance is estimated between $69 million and $71 million, with adjusted gross profit expected to grow 25% year-over-year [45][46] Q&A Session Summary Question: Thoughts on AI and investment in RAMP - Management noted that advancements in AI are significantly reducing costs and improving operational efficiency, with engineers experiencing productivity improvements of two to four times [53][59] Question: Balance sheet and capital structure management - The company is focused on improving its capital structure, with a net leverage of 5.6 times, which is higher than desired, but management is optimistic about future growth and refinancing opportunities [66] Question: Impact of political advertising on business model - Management indicated that the end of the political advertising season is favorable, as it typically leads to lower advertising costs for the company [68] Question: Readiness for RSOC shift - The company has invested heavily in RSOC and believes it is well-positioned to lead in this new product area, despite expected short-term revenue bumps [80][81] Question: International market growth potential - Management highlighted the increasing percentage of revenue from international markets and the potential for growth in areas like CouponFollow and MapQuest [92][94] Question: Trajectory for adjusted EBITDA margin - The company expects gross profit growth to translate into expanded adjusted EBITDA margins, driven by disciplined operating expense management [96][98]

Kyle Ostgaard Thank you for standing by. And welcome to the Fourth Quarter 2024 Earnings Conference Call for System1. Joining me today to discuss System1's business and financial results are our Co-Founder and Chief Executive Officer, Michael Blend; and our Chief Financial Officer, Tridivesh Kidambi. A recording of this conference call will be available on our Investor Relations website shortly after this call has ended. I'd like to take this opportunity to remind you that during the call, we will make cert ...

Revenue Performance - Revenue for Q4 2024 decreased by 21% year-over-year to $75.6 million, while full-year revenue decreased by 14% to $343.9 million[7]. - Revenue for Q4 2024 was $75.6 million, down 21.0% from $96.1 million in Q4 2023; annual revenue decreased from $402.0 million in 2023 to $343.9 million in 2024, a decline of 14.4%[23]. Profitability Metrics - Adjusted Gross Profit for Q4 2024 increased by 19% year-over-year to $44.7 million, and for the full year, it decreased by 1% to $152.3 million[7]. - Adjusted EBITDA for Q4 2024 increased by 79% year-over-year to $17.9 million, while for the full year, it increased by 32% to $38.6 million[7]. - Adjusted EBITDA improved to $17.9 million in Q4 2024 compared to $10.0 million in Q4 2023, and for the year, it increased from $29.2 million in 2023 to $38.6 million in 2024[22]. - Gross profit for Q4 2024 was $31.8 million, up from $24.9 million in Q4 2023; annual gross profit slightly decreased from $103.4 million in 2023 to $101.3 million in 2024[23]. Net Loss and Financial Position - GAAP Net Loss for Q4 2024 decreased by 29% year-over-year to $18.0 million, and for the full year, it decreased by 13% to $97.3 million[7]. - The company reported a net loss from continuing operations of $18.0 million in Q4 2024, an improvement from a loss of $25.4 million in Q4 2023; annual net loss improved from $111.3 million in 2023 to $97.3 million in 2024[22]. - The accumulated deficit increased from $707,662,000 in 2023 to $782,335,000 in 2024, reflecting a worsening financial position[21]. Asset and Liability Changes - Total assets decreased from $605,470,000 in 2023 to $459,129,000 in 2024, a decline of approximately 24.2%[21]. - Total liabilities decreased from $436,155,000 in 2023 to $374,133,000 in 2024, a reduction of approximately 14.2%[21]. - Cash and cash equivalents dropped significantly from $135,343,000 in 2023 to $63,607,000 in 2024, a decrease of about 53%[21]. Strategic Initiatives and Growth - The company expects Q1 2025 revenue to be between $69 million and $71 million, with Adjusted Gross Profit projected between $38 million and $40 million[6][16]. - The RAMP platform saw a 500%+ increase in campaign launches year-over-year in Q4 2024 due to automation and AI initiatives[8]. - CouponFollow.com experienced a 129% year-over-year increase in organic sessions in Q4 2024, indicating strong user engagement[8]. - The company renewed advertising arrangements with Google in October 2024 and February 2025, with agreements extending to 2027[8]. - The company is focused on optimizing its capital structure and enhancing monetization strategies for long-term growth[4]. - System1's operational efficiency and financial discipline were highlighted as key factors in navigating a volatile market[4]. Shareholder Equity - Class A common stock shares issued and outstanding increased from 65,855 in 2023 to 73,653 in 2024[21]. - Additional paid-in capital rose from $843,112,000 in 2023 to $863,033,000 in 2024, indicating increased investment in the company[21].

Revenue Dependence - 78% of the total revenue for the year ended December 31, 2024, was attributable to agreements with Google[94] - Revenue and operating results depend on the effectiveness of the Responsive Acquisition Marketing Platform (RAMP) to acquire users with commercial intent[92] - Changes in Google's advertising practices could adversely affect the company's revenue and operating results[96] - A decrease in mobile, display, and video advertising usage could harm growth prospects and financial condition[131] - Revenue is significantly affected by third-party website publishers; any decline in available media could lead to revenue loss[163] Operational Risks - The company has a limited operating history since its formation in 2013, which increases investment risks[90] - The company faces risks related to data security breaches, which could lead to reputational harm and financial liabilities[99] - Operational issues with the platform, including potential outages and performance errors, could adversely affect financial results and brand reputation[116] - The company must continuously innovate and invest in research and development to remain competitive in a rapidly changing market[121] - The company faces significant risks related to intellectual property claims, which could lead to substantial monetary liabilities or operational restrictions[175] Marketing and Advertising Challenges - The company relies on large-scale acquisition marketing channels, including Google, Meta, Outbrain, and TikTok, for significant consumer Internet traffic[107] - The company has made significant expenditures for search engine marketing, which may not be cost-effective[108] - Advertising spend remains concentrated in traditional media, and a cultural shift towards online marketing is necessary for growth[126] - The company’s marketing efforts may not be successful due to reliance on performance metrics that are subject to change[111] Financial and Compliance Issues - The company’s credit facilities contain covenants that restrict business and financing activities, potentially limiting operational flexibility[112] - The company must comply with various privacy laws and regulations, which may be costly and complex[104] - The company identified material weaknesses in internal control over financial reporting, which could lead to inaccurate financial results and loss of investor confidence[136] - The management team has limited experience in managing a public company, which may affect compliance with reporting and internal control obligations[166] - The company incurs significant expenses related to compliance with public company regulations, which may divert management's attention from business operations[231] International Operations and Expansion - International expansion may incur significant operating expenses and expose the company to economic and political instability, potentially affecting financial results[153] - The company has a limited operating history outside the U.S., which poses challenges in managing international operations and securing quality ad inventory[152] - International operations expose the company to increased management costs, long payment cycles, and regulatory compliance challenges[154] Cybersecurity and Data Privacy - Cybersecurity risks threaten the integrity and availability of the company's IT systems, which could result in significant operational and reputational damage[145] - Privacy and data protection laws may incur unexpected costs and require changes to the business model, potentially adversely affecting operations[178] - The California Consumer Privacy Act (CCPA) imposes civil penalties of up to $7,500 per violation, which could significantly impact financial results[179] - Concerns about data privacy and security could damage the company's reputation and deter clients from using its services[200] Financial Resources and Capital Structure - The company anticipates continued growth will require substantial financial resources for technology improvements and market expansion[128] - The company may issue additional shares or convertible securities in the future, which could dilute existing shareholders' ownership and negatively affect stock prices[219] - The company does not intend to pay dividends on its common stock for the foreseeable future, retaining all available funds for business development and growth[234] Market and Economic Conditions - The company faces risks from unfavorable global economic conditions, including increasing interest rates and inflation, which could weaken demand for its software products[135] - The company is exposed to market risks including interest rate and foreign currency exchange risk, which could materially affect its financial condition and results of operations[354] Technology and Innovation - The company is investing heavily in AI Tools, including machine learning algorithms, to enhance its advertising services, but there are risks associated with the implementation and data quality[215] - The market for AI Tools is rapidly evolving, and the company faces competition that may develop superior or more cost-effective technologies[217] - The company is dependent on third-party data suppliers for its machine learning algorithms, and any withdrawal of data could adversely impact its service offerings and revenue[218]

Financial Data and Key Metrics Changes - System1 reported Q3 2024 revenue of approximately $89 million, with a gross profit of $38 million and adjusted EBITDA of $10.3 million, exceeding the high end of guidance [6][36] - Adjusted EBITDA grew 28% year-over-year and 4% quarter-over-quarter [36] - Total revenue was $88.8 million, representing a 1% year-over-year increase but a 6% sequential decline [36][37] Business Line Data and Key Metrics Changes - Owned and operated products generated $71 million in revenue, up 7% year-over-year but down 9% sequentially [10][37] - Revenue from marketing-driven business lines decreased due to underperformance in the Google Search Partner Network [8][30] - Partner Network revenue was $18 million, down 17% year-over-year but up 5% sequentially [30][37] Market Data and Key Metrics Changes - International revenue represented 35% of owned and operated revenue, up from 24% in Q3 2023 [12][70] - Total sessions on owned and operated properties exceeded 2 billion, up 125% year-over-year [10] - RPS (Revenue Per Session) and CPS (Cost Per Session) both decreased sequentially, indicating lower monetization rates [11][39] Company Strategy and Development Direction - The company is focused on integrating AI into its RAMP platform to enhance marketing campaign efficiency and effectiveness [9][28] - System1 aims to improve its owned and operated products while navigating the volatility in marketing-driven businesses [18][33] - The company is optimistic about the recovery of its Google-related businesses in 2025 [8][30] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing volatility in the advertising marketplace, leading to the decision not to provide Q4 guidance at this time [34][45] - The company expressed confidence in its ability to capitalize on long-term opportunities despite short-term challenges [46] - Management highlighted the importance of the Google Search Partner Network's recovery for future growth [32][68] Other Important Information - Operating expenses decreased by 5% sequentially, reflecting the company's focus on cost control [9][42] - The company ended the quarter with $69.1 million in unrestricted cash and $285 million in term loan debt, with a net leverage of approximately seven times [44] Q&A Session Summary Question: What has enabled the resurrection of MapQuest? - Management explained that improvements in technology and features, along with a focus on user experience, have revitalized MapQuest [48][50] Question: How does the end of the election cycle affect advertising? - Management indicated that the end of election-related advertising should normalize the marketplace, potentially lowering costs for buying ads [53][54] Question: What adjustments have been made to the RAMP platform? - Management confirmed that significant improvements have been made to RAMP, enhancing its effectiveness in creating engaging ads [57][60] Question: How ready is the company to capitalize on market disruptions? - Management expressed confidence in thriving during market disruptions and welcomed potential advertising spend pullbacks [68]

Revenue Performance - Revenue increased 1% year-over-year to $88.8 million, exceeding guidance[1] - Revenue for the three months ended September 30, 2023, was $88.8 million, compared to $87.8 million for the same period in 2022, representing a year-over-year increase of 1.14%[17] Profitability Metrics - GAAP net loss increased by $4.7 million year-over-year to $30.6 million[1] - Net loss attributable to System1, Inc. was $23.6 million for the quarter, down from $131.5 million in the same quarter last year[13] - Adjusted EBITDA rose 27% year-over-year to $10.3 million[1] - Gross profit for the three months ended September 30, 2023, was $24.8 million, slightly up from $24.7 million in the prior year, indicating a growth of 0.4%[17] - Adjusted Gross Profit for the three months ended September 30, 2023, was $37.6 million, compared to $37.2 million in the same period last year, reflecting an increase of 1.07%[17] Operating Expenses - Total operating expenses for Q3 2024 were $110.6 million, compared to $108.7 million in Q3 2023[13] - Cost of revenue (excluding depreciation and amortization) for the three months ended September 30, 2023, was $51.2 million, up from $50.6 million in the previous year[17] - Depreciation and amortization related to cost of revenue for the three months ended September 30, 2023, was $12.8 million, compared to $12.5 million in the same period last year[17] Cash and Assets - Cash and cash equivalents decreased to $69.1 million from $135.3 million at the end of the previous year[14] - Total assets decreased to $479.3 million from $605.5 million at the end of the previous year[14] User Engagement and Product Development - CouponFollow.com saw over 100% year-over-year increase in organic sessions, with users of savings-focused browser extensions more than doubling[3] - Startpage launched its Private Browser app for Android, achieving over 200,000 downloads across Android and iOS[3] - MapQuest finalized a multi-year deal with HERE for backend mapping technology, improving user experience and offering cost savings[4]