System1(SST) - 2024 Q2 - Quarterly Report

Revenue Performance - Revenue for the three months ended June 30, 2024, was $94,581,000, a decrease of 2$96,914,000 in the same period of 2023[106]. - Total revenue for the six months ended June 30, 2024, was $179,498 million, a decrease of 18$218,032 million in the same period of 2023[112]. - Owned and Operated Advertising revenue for the six months ended June 30, 2024, was $146,426 million, down 20$183,325 million in the prior year[113]. - Partner Network revenue decreased by 12% for the three months ended June 30, 2024, totaling $17,185 million compared to$19,614 million in the same period of 2023[112]. Operating Loss and Expenses - Operating loss for the three months ended June 30, 2024, was $(29,086,000), representing 31$(21,825,000) or 23% of total revenue in 2023[106]. - Total operating expenses for the three months ended June 30, 2024, were $123,667,000, an increase of 4$118,739,000 in the same period of 2023[106]. - Operating loss for the six months ended June 30, 2024, was $(54,882) million, an increase in loss of 19$(46,054) million in the prior year[112]. - Salaries and benefits expenses increased by 25% to $33,937,000 in Q2 2024, up from$27,054,000 in Q2 2023[106]. - Salaries and benefits increased by $3,219 million for the six months ended June 30, 2024, primarily due to share-based liabilities[119]. Net Loss - Net loss from continuing operations for the three months ended June 30, 2024, was$(34,845,000), compared to $(29,507,000) in the same period of 2023, an increase of 18$(36,910) million, a decrease of 46% compared to $(68,103) million in the same period of 2023[112]. - The company experienced a net loss of$85.9 million for the six months ended June 30, 2023, despite cash provided by operating activities of $1.4 million[131]. Cash Flow and Liquidity - As of June 30, 2024, the company had unrestricted cash and cash equivalents of$75.7 million and $50.0 million available to borrow on its 2022 Revolving Facility[127]. - For the six months ended June 30, 2024, the company reported cash outflows of$63.2 million, primarily driven by a net loss of $48.6 million and a$51.8 million repayment of its Term Loan[127]. - Cash used in operating activities for the six months ended June 30, 2024, was $6.0 million, influenced by changes in net income and working capital balances[130]. - Cash used in investing activities for the six months ended June 30, 2024, was$3.2 million, mainly for costs capitalized for internally developed software[132]. - Cash used in financing activities for the six months ended June 30, 2024, was $53.9 million, primarily related to the repayment of the 2022 Term Note[133]. Business Operations - As of June 30, 2024, the company processes approximately 175 million daily advertising campaign optimizations and ingests over 13 billion rows of data daily across approximately 41 advertising vertical categories[92]. - The company operates approximately 40 owned and operated websites, including leading search engines and digital media publishing sites[94]. - The company is contractually obligated to spend a remaining$10.0 million under a multi-year service agreement through June 2026[136]. Market Conditions and Risks - The company is subject to various risks in international operations, including changes in tax laws and regulatory frameworks[97]. - The company's revenue is significantly dependent on two key advertising partners, Google and Microsoft[127]. - Adverse macroeconomic conditions have impacted advertising demand, potentially affecting future financial performance[126]. - The company is focused on reducing cash operating expenses and optimizing advertising spend to improve liquidity[126]. Interest Expense - Interest expense, net, decreased by 36% to $7,871,000 in Q2 2024, down from$12,334,000 in Q2 2023[106]. - Interest expense, net decreased by 33% for the six months ended June 30, 2024, totaling $15,841 million compared to$23,736 million in the prior year[122].