All Key Financial Results Above the High-End of Guidance
Range
- Revenue Increased $9.7 Million Over Prior Quarter to $94.6
Million
- Gross Profit Increased 40% Over Prior Quarter to $26.1
Million
- Adjusted Gross Profit Increased 24% Over Prior Quarter to $38.8
Million
- GAAP Net Loss Increased 152% Over Prior Quarter to $34.8
Million
- Adjusted EBITDA Increased $9.5 Million Over Prior Quarter to
$9.9 Million
- Company Provides Third Quarter Guidance of: $86 Million to $88
Million of Revenue and $8 Million to $10 Million of Adjusted
EBITDA
System1, Inc. (NYSE: SST) ("System1" or the "Company"), an
omnichannel customer acquisition marketing platform, announced its
financial results for the second quarter of 2024.
"We are pleased to report a strong quarter reflecting solid
sequential growth in which all of our key financial metrics
significantly exceeded our guidance for the period," commented
Michael Blend, System1’s Co-Founder & Chief Executive Officer.
"Strong execution by our team and continued investment in our RAMP
platform leave System1 well-positioned to take advantage of a
stabilizing advertising market going forward."
Tridivesh Kidambi, Chief Financial Officer of System1,
commented, "We are pleased with our second quarter financial
results that exceeded the top end of our guidance ranges. We exited
the quarter with significant momentum across our businesses, and we
expect this positive momentum to deliver year-over-year increases
in financial results for the remainder of the year."
Note: Adjusted Gross Profit and Adjusted EBITDA are
non-GAAP metrics that are defined and reconciled at the end of this
release.
Second Quarter 2024 Highlights
- The Company renewed one of its primary monetization
relationships with Google.
- CouponFollow.com experienced a 36% year-over-year increase in
organic visitors to its site, and its savings-focused browser
extensions surpassed 15 million monthly active users.
- Startpage launched its Private Browser app and has seen over
50,000 downloads with significantly positive user feedback,
including over 2,000 five-star ratings to date across the iOS and
Android app stores.
- MapQuest saw 10% year-over-year growth in organic visits to its
site in the second quarter as a result of the Company’s investments
in new content, faster page load speed and improved data quality.
MapQuest also launched a custom "Mini Takes the States" mobile
navigation application in partnership with BMW in conjunction with
its bi-annual "Mini Takes the States" road trip rally event.
Third Quarter 2024 Guidance
The Company expects for the third quarter of 2024:
- Revenue between $86 million and $88 million.
- Gross Profit between $23 million and $25 million.
- Adjusted Gross Profit between $36 million and $38 million.
- Adjusted EBITDA between $8 million and $10 million.
In reliance on the unreasonable efforts exception for
forward-looking information provided under Regulation S-K, the
Company is not reasonably able to provide a quantitative
reconciliation of Adjusted EBITDA to net loss, the most directly
comparable GAAP financial measures without unreasonable effort due
to uncertainties regarding purchase accounting, stock-based
compensation, taxes and other potential adjustments. The difference
between Gross Profit and Adjusted Gross Profit is primarily
depreciation and amortization related to the cost of revenues,
which are estimated to be approximately $13 million. The
variability of these items could have an unpredictable, and
potentially significant, impact on the Company’s future GAAP
financial results. For the third quarter of 2024, the Company
expects interest expense in the range of $8.0 million to $8.5
million, depreciation and amortization expense in the range of
$20.5 million to $21.0 million, and acquisition and restructuring
costs to be in the range of $2.0 million to $2.5 million.
The Company’s achievement of the anticipated results is subject
to risks and uncertainties, including those disclosed in its
filings with the U.S. Securities and Exchange Commission. The
outlook does not take into account the impact of any unanticipated
developments in the business or changes in the operating
environment.
About System1, Inc.
System1 combines best-in-class technology & data science to
operate its advanced Responsive Acquisition Marketing Platform
(RAMP). System1’s RAMP is omnichannel and omnivertical, and built
for a privacy-centric world. RAMP enables the building of powerful
brands across multiple consumer verticals, the development &
growth of a suite of privacy-focused products, and the delivery of
high-intent customers to advertising partners. For more
information, visit www.system1.com.
Cautionary Statement Regarding Forward-Looking
Statements
This press release includes "forward-looking statements" within
the meaning of the "safe harbor" provisions of the United States
Private Securities Litigation Reform Act of 1995, particularly any
statements or materials regarding System1’s future results.
Forward-looking statements include, but are not limited to,
statements regarding System1 or its management team’s expectations,
hopes, beliefs, intentions or strategies regarding the future. In
addition, any statements that refer to projections, forecasts or
other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking
statements. The words "anticipate," "believe," "continue," "could,"
"estimate," "expect," "intend," "may," "might," "plan," "possible,"
"potential," "predict," "project," "should," "would" and similar
expressions may identify forward-looking statements, but the
absence of these words does not mean that a statement is not
forward-looking.
These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond our control) or other
assumptions that may cause System1’s actual financial results or
operating performance to be materially different from those
expressed or implied by these forward-looking statements. Readers
or users of this press release should evaluate the risk factors
summarized below, which summary list is not exclusive. Readers or
users of this press release should also carefully review the "Risk
Factors" and other information included in our Annual Report on
Form 10-K for the fiscal year ending December 31, 2023, as well as
our registration statement on Form S-1 filed with the Securities
and Exchange Commission (the "SEC"), as well as System1’s Form
10-Qs, Form 8-Ks and other reports filed with the SEC from time to
time. Please refer to these SEC filings for additional information
regarding the risks and other factors that may impact System1’s
business, prospects, financial results and operating
performance.
Such risks, uncertainties and assumptions include, but are not
limited to: (1) our ability to maintain our key relationships with
network partners and advertisers, including our monetization
arrangements; (2) our ability to collect, process, effectively
utilize and safely store the first party data that we obtain
through our services; (3) the performance of our responsive
acquisition marketing platform, or RAMP; (4) changes in customer
demand for our services and our ability to quickly adapt to such
changes; (5) our ability to maintain and attract consumers and
advertisers in the face of changing economic or competitive
conditions; (6) our ability to improve and maintain adequate
internal control over financial reporting and remediate identified
material weaknesses; (7) our ability to successfully source and
complete acquisitions and to integrate the operations of companies
System1 acquires; (8) our ability to raise financing in the future
as and when needed or on market terms; (9) our ability to compete
with existing competitors and the entry of new competitors in the
market; (10) changes in applicable laws or regulations impacting
the business which we operate and our ability to maintain
compliance with the various laws that our business and operations
are subject to; (11) our ability to protect our intellectual
property rights; and (12) other risks and uncertainties indicated
from time to time in our filings with the SEC. The foregoing list
of factors is not exclusive.
Should one or more of these risks or uncertainties materialize,
they could cause our actual results to differ materially from any
forward-looking statements contained in this press release.
System1’s independent auditors have not audited, reviewed, compiled
or performed any procedures with respect to the forward-looking
statements for the purpose of their inclusion in this press
release, and accordingly, do not express an opinion or provide any
other form of assurance with respect thereto for the purpose of
this press release. System1 will not undertake any obligation to
update or revise any forward-looking statements whether as a result
of new information, future events or otherwise. You should not take
any statement regarding past trends or activities as a
representation that such trends or activities will continue in the
future. Accordingly, you should not put undue reliance on these
statements.
Non-GAAP Measures: Adjusted Gross Profit and Adjusted
EBITDA
Adjusted Gross Profit and Adjusted EBITDA are non-GAAP financial
measures and represent key metrics used by System1’s management and
board of directors to measure the operational strength and
performance of its business, to establish budgets, and to develop
operational goals for managing its business. Adjusted Gross Profit
(Loss) is defined as gross profit plus depreciation and
amortization related to cost of revenues. Adjusted EBITDA is
defined as net income (loss) before interest expense, income taxes,
depreciation and amortization expense, stock-based compensation
expenses, deferred compensation, management fees, minority interest
expense, restructuring charges, impairment and certain discrete
items impacting a particular segment’s results in a particular
period.
System1 believes Adjusted Gross Profit and Adjusted EBITDA are
relevant and useful metrics for investors because it allows
investors to view performance in a manner similar to the method
used by management. There are limitations on the use of Adjusted
Gross Profit and Adjusted EBITDA and it may not be comparable to
similarly titled measures of other companies. Other companies,
including companies in System1’s industry, may calculate non-GAAP
financial measures differently than System1 does, limiting the
usefulness of those measures for comparative purposes.
Adjusted Gross Profit should not be considered a substitute for
revenue or gross profit. Adjusted EBITDA should not be considered a
substitute for income (loss) from operations, net income (loss), or
net income (loss) attributable to System1 on a consolidated basis
that System1 reports in accordance with GAAP. Although System1 uses
Adjusted Gross Profit and Adjusted EBITDA as financial measures to
assess the performance of its business, such use is limited because
it does not include certain costs necessary to operate System1’s
business. System1’s presentation of Adjusted Gross Profit and
Adjusted EBITDA should not be construed as indications that its
future results will be unaffected by unusual or nonrecurring
items.
Unaudited Condensed Statements of
Operations
(In thousands)
Three Months Ended June
30,
2024
2023
Revenue
$
94,581
$
96,914
Operating expenses:
Cost of revenue (excluding depreciation
and amortization)
55,798
56,657
Salaries and benefits
33,937
27,054
Selling, general, and administrative
13,989
15,340
Depreciation and amortization
19,943
19,688
Total operating expenses
123,667
118,739
Operating loss
(29,086
)
(21,825
)
Other expense (income):
Interest expense, net
7,871
12,334
Gain from debt extinguishment
(433
)
—
Change in fair value of warrant
liabilities
(1,501
)
2,018
Total other expense (income), net
5,937
14,352
Loss before income tax
(35,023
)
(36,177
)
Income tax benefit
(178
)
(6,670
)
Net loss from continuing operations
(34,845
)
(29,507
)
Net loss from discontinued operations, net
of tax
—
(13,484
)
Net loss
(34,845
)
(42,991
)
Less: Net loss from continuing operations
attributable to non-controlling interest
(8,472
)
(6,165
)
Less: Net loss from discontinued
operations attributable to non-controlling interest
—
(2,525
)
Net loss attributable to System1, Inc.
$
(26,373
)
$
(34,301
)
Unaudited Condensed Balance
Sheets
(In thousands, except for par values)
June 30, 2024
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
75,651
$
135,343
Restricted cash, current
4,253
3,813
Accounts receivable, net
61,915
56,093
Prepaid expenses and other current
assets
6,805
6,754
Total current assets
148,624
202,003
Restricted cash, non-current
371
4,294
Property and equipment, net
2,613
3,084
Internal-use software development costs,
net
13,447
11,425
Intangible assets, net
259,671
297,001
Goodwill
82,407
82,407
Operating lease right-of-use assets
3,759
4,732
Other non-current assets
444
524
Total assets
511,336
605,470
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
6,248
9,499
Accrued expenses and other current
liabilities
76,817
59,314
Operating lease liabilities, current
2,385
2,333
Debt, net
16,272
15,271
Total current liabilities
101,722
86,417
Operating lease liabilities,
non-current
2,339
3,582
Long-term debt, net
263,338
334,232
Warrant liability
936
2,688
Deferred tax liability
7,042
8,307
Other non-current liabilities
6,680
929
Total liabilities
382,057
436,155
Stockholders' equity:
Class A common stock - $0.0001 par value;
500,000 shares authorized, 69,255 and 65,855 Class A shares issued
and outstanding as of June 30, 2024 and December 31, 2023,
respectively
7
7
Class C common stock - $0.0001 par value;
25,000 shares authorized, 21,204 and 21,513 Class C shares issued
and outstanding as of June 30, 2024 and December 31, 2023,
respectively
2
2
Additional paid-in capital
854,270
843,112
Accumulated deficit
(744,572
)
(707,662
)
Accumulated other comprehensive loss
(295
)
(181
)
Total stockholders' equity attributable to
System1, Inc.
109,412
135,278
Non-controlling interest
19,867
34,037
Total stockholders' equity
129,279
169,315
Total liabilities and stockholders'
equity
$
511,336
$
605,470
The following table reconciles net loss to Adjusted EBITDA for
the periods presented (in millions):
Three Months Ended June
30,
2024
2023
Net loss from continuing operations
$
(34.8
)
$
(29.5
)
Plus:
Income tax benefit
(0.2
)
(6.7
)
Interest expense
7.9
12.3
Depreciation and amortization
19.9
19.7
Other expense
—
0.3
Stock-based compensation &
distributions to members
3.4
4.3
Gain on extinguishment of debt
(0.4
)
—
Non-cash revaluation of warrant
liability
(1.5
)
2.0
Acquisition and restructuring costs
15.6
3.7
Adjusted EBITDA
$
9.9
$
6.1
The following table reconciles Revenue to Gross Profit and
Adjusted Gross Profit for the periods presented (in millions):
Three Months Ended June
30,
2024
2023
Revenue
$
94.6
$
96.9
Less: Cost of revenue (excluding
depreciation and amortization)
(55.8
)
(56.7
)
Less: Depreciation and amortization
related to cost of revenue
(12.7
)
(12.4
)
Gross profit
26.1
27.8
Add: Depreciation and amortization related
to cost of revenue
12.7
12.4
Adjusted Gross Profit
$
38.8
$
40.2
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version on businesswire.com: https://www.businesswire.com/news/home/20240808710166/en/
Investors: Brett Milotte ICR, Inc.
Brett.Milotte@icrinc.com
System1 (NYSE:SST)
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