System1(SST) - 2024 Q1 - Quarterly Report

Revenue Performance - Revenue for the three months ended March 31, 2024, was $84,917, a decrease of 30$121,118 in the same period of 2023[120] - Owned and Operated Advertising revenue decreased by 35% to $69,030 for the three months ended March 31, 2024, from$106,025 in the prior year[124] - Partner Network revenue increased by 7% to $10,919,000 for the three months ended March 31, 2024, compared to$10,217,000 in the prior year[130] - Total adjusted gross profit decreased by 17% to $33,381,000 for the three months ended March 31, 2024, down from$40,056,000 in the prior year[130] Operating Expenses - Operating expenses totaled $110,713 for the three months ended March 31, 2024, down 24$145,347 in the prior year[120] - The cost of revenue (excluding depreciation and amortization) was $53,698 for the three months ended March 31, 2024, a decrease of 35$82,953 in the same period of 2023[120] - Salaries and benefits decreased by $1.9 million in stock-based compensation and$1.8 million in salary expense due to lower headcount for the three months ended March 31, 2024[131] - Selling, general, and administrative expenses decreased by $1.7 million for the three months ended March 31, 2024, primarily due to reduced advisory and consulting fees[132] Net Loss and Financial Changes - The net loss from continuing operations for the three months ended March 31, 2024, was$13,791, a reduction of 55% compared to $30,393 in the same period of 2023[120] - Interest expense, net, decreased by 30$7,970 for the three months ended March 31, 2024, from $11,402 in the prior year[120] - The gain from debt extinguishment was$19,676 for the three months ended March 31, 2024, compared to no gain in the same period of 2023[120] - The change in fair value of warrant liabilities improved by 82%, decreasing to $251 from$1,409 in the prior year[120] - Total other income expense, net, was $(11,957) for the three months ended March 31, 2024, compared to$9,993 in the same period of 2023, reflecting a significant change of 220%[120] Cash Flow and Financing - Cash outflows from operations were $16,000,000 for the three months ended March 31, 2024, compared to$5,801,000 in the prior year[152] - The company had unrestricted cash and cash equivalents of $69.9 million as of March 31, 2024[143] - The principal amount outstanding on the Term Loan was$296.3 million as of March 31, 2024, following a repurchase of $63.7 million in principal amount[145][148] - Cash used in financing activities was$48,158,000 for the three months ended March 31, 2024, primarily due to repayment of the 2022 Term Note[157] - The company expects existing cash and cash equivalents and cash flows from operations to be sufficient to fund operating activities for at least the next 12 months[141] Strategic Focus - The company is focused on expanding the number of advertising partners and optimizing bids to drive higher returns on advertising spend[142] - The number of Owned & Operated Advertising sessions increased by 183 million to 1,209 million from 1,026 million compared to the prior year[125]