System1(SST) - 2024 Q3 - Quarterly Report

Revenue and Financial Performance - Revenue for the three months ended September 30, 2024, was $88,832,000, representing a 1$87,818,000 in the same period of 2023[115] - Total revenue for the nine months ended September 30, 2024, was $268,330 million, a decrease of$37,521 million or 12% compared to $305,851 million in the same period of 2023[116] - Owned and Operated Advertising revenue for the three months ended September 30, 2024, was$70,798 million, an increase of $4,611 million or 7$51,106 million, a decrease of $5,233 million or 9$56,339 million in the same period of 2023[123] Operating Loss and Expenses - Operating expenses totaled $110,648,000 for the three months ended September 30, 2024, a 2$108,672,000 in the prior year[115] - The operating loss for the three months ended September 30, 2024, was $21,816,000, compared to an operating loss of$20,854,000 in the same period of 2023[115] - Operating loss for the nine months ended September 30, 2024, was $(76,698) million, an increase in loss of$9,788 million or 15% compared to $(66,910) million in the same period of 2023[116] - Salaries and benefits increased by$5.5 million for the three months ended September 30, 2024, primarily due to share-based liabilities[130] Net Loss - Net loss from continuing operations for the three months ended September 30, 2024, was $30,639,000, an 18$25,928,000 in the prior year[115] - The company reported a net loss attributable to System1, Inc. of $23,602,000 for the three months ended September 30, 2024, compared to a net loss of$131,490,000 in the same period of 2023, reflecting an 82% improvement[115] - Net loss attributable to System1, Inc. for the nine months ended September 30, 2024, was $(60,512) million, a decrease of$139,080 million or 70% compared to $(199,592) million in the same period of 2023[116] - The company experienced a net loss of$249.1 million for the nine months ended September 30, 2023, adjusted for noncash items[146] Interest Expense - Interest expense, net, decreased by 39% to $7,957,000 for the three months ended September 30, 2024, down from$13,053,000 in the prior year[115] - Interest expense, net decreased by $12,991 million or 35$69.1 million and $50.0 million available to borrow on its 2022 Revolving Facility[141] - For the nine months ended September 30, 2024, the company reported cash outflows of$69.9 million, primarily due to $56.8 million repayment of its Term Loan[141] - Cash used in operating activities for the nine months ended September 30, 2024 was$6.0 million, influenced by favorable changes in net income and working capital balances[145] - Cash used in investing activities for the nine months ended September 30, 2024 was $5.0 million, primarily for costs capitalized for internally developed software[147] - Cash used in financing activities for the nine months ended September 30, 2024 was$59.0 million, mainly related to the repayment of the 2022 Term Note[148] - The company is focused on improving liquidity by expanding advertising partners and optimizing advertising spend[140] Business Operations - The company ingested over 13 billion rows of data daily across approximately 40 advertising vertical categories during the three months ended September 30, 2024[99] - As of September 30, 2024, the company owned and operated approximately 40 websites, including leading search engines and digital media publishing sites[101] - The company completed the sale of its Protected business on November 30, 2023, with results presented as net loss from discontinued operations[106] - The company operates primarily in the United States, with additional operations in Canada and the Netherlands, facing various geopolitical and economic risks[104] Advertising Performance - Owned and Operated Advertising sessions increased by approximately 2.5 billion to 5.3 billion for the nine months ended September 30, 2024, compared to 2.8 billion in the prior year[124] - Network sessions increased approximately 3.9 billion to 5.9 billion for the nine months ended September 30, 2024, compared to 2.0 billion in the prior year[125] Future Commitments and Risks - The company remains contractually obligated to spend a remaining $8.0 million towards a service agreement commitment through June 2026[151] - Adverse macroeconomic conditions may impact advertising demand, affecting financial condition and operating results[140] - The company does not have any off-balance sheet arrangements that could materially affect its financial statements[150]