System1(SST) - 2025 Q1 - Quarterly Results

Financial and Operational Highlights Management Commentary Management expressed satisfaction with Q1 2025 results, which exceeded guidance, highlighting strong execution, particularly in Owned and Operated products, and the positive impact of AI investments, with the company returning to year-over-year growth in several key metrics and remaining focused on expense reduction and long-term growth - The CEO noted that key financial metrics were above the high end of guidance, attributing the success to strong team execution and investments in AI[2] - The CFO highlighted the return to year-over-year growth across several key financial metrics and the continued focus on operating expense reduction initiatives[2] Q1 2025 Financial Highlights In Q1 2025, System1 reported a 12% year-over-year decrease in revenue to $74.5 million, while profitability metrics showed significant improvement: GAAP Gross Profit increased by 53%, Adjusted Gross Profit rose by 33%, and Adjusted EBITDA surged by 2754% to $12.1 million, though the GAAP Net Loss widened by 44% to $19.9 million Q1 2025 Key Financial Metrics (Year-over-Year) | Metric | Q1 2025 Value | YoY Change | | :--- | :--- | :--- | | Revenue | $74.5 Million | -12% | | GAAP Gross Profit | $28.4 Million | +53% | | Adjusted Gross Profit | $41.5 Million | +33% | | GAAP Net Loss | $19.9 Million | +44% | | Adjusted EBITDA | $12.1 Million | +2754% | Q1 2025 Operational Highlights The company enhanced its RAMP platform with generative AI, leading to faster development cycles and improved monetization efficiency, with CouponFollow.com achieving a 162% year-over-year increase in organic sessions, and a successful marketing campaign for MapQuest driving approximately 280,000 active users and 180,000 new mobile app downloads - The RAMP platform was updated with agentic coding and generative AI, accelerating development cycles and improving monetization efficiency[7] - CouponFollow.com posted a 162% year-over-year increase in organic sessions in Q1 2025[7] - MapQuest's "Gulf of Mexico/America Naming Generator" campaign attracted 280,000 active users and drove 180,000 mobile app downloads[7] Business Outlook System1 will not provide financial guidance for the second quarter of 2025, a decision attributed to uncertainty related to a key advertising partner's marketplace, potential volatility in online advertising demand, and evolving tariff policies - The company declined to provide financial guidance for Q2 2025 due to uncertainties with a key advertising partner, online advertising demand, and tariff policies[4] Financial Statements Consolidated Statements of Operations For the three months ended March 31, 2025, System1's revenue decreased to $74.5 million from $84.9 million in the prior year, significantly narrowing its operating loss to $13.1 million from $25.8 million in Q1 2024 primarily due to a reduction in the cost of revenue, though the net loss attributable to System1, Inc. increased to $15.9 million compared to a $10.5 million loss in the same period last year Q1 2025 vs Q1 2024 Statement of Operations (In thousands) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $74,513 | $84,917 | | Cost of revenue | $46,077 | $66,318 | | Operating loss | $(13,126) | $(25,796) | | Net loss | $(19,856) | $(13,791) | | Net loss attributable to System1, Inc. | $(15,883) | $(10,537) | Consolidated Balance Sheets As of March 31, 2025, System1 held total assets of $419.2 million, down from $459.1 million at year-end 2024, with total liabilities decreasing to $351.5 million from $374.1 million, cash and cash equivalents standing at $43.9 million (a decrease from $63.6 million), and total stockholders' equity declining to $67.7 million from $85.0 million over the same period Balance Sheet Comparison (In thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $43,913 | $63,607 | | Total current assets | $114,182 | $134,477 | | Total assets | $419,154 | $459,129 | | Total current liabilities | $89,682 | $105,095 | | Total liabilities | $351,495 | $374,133 | | Total stockholders' equity | $67,659 | $84,996 | Non-GAAP Financial Measures Definition of Non-GAAP Measures The company utilizes Adjusted Gross Profit and Adjusted EBITDA as key non-GAAP metrics to evaluate the operational strength of its core business, with Adjusted Gross Profit defined as gross profit plus depreciation and amortization from cost of revenues, and Adjusted EBITDA as net income (loss) adjusted for items like interest, taxes, D&A, stock-based compensation, and other specific non-recurring costs, while acknowledging these measures have limitations and may not be comparable to those of other companies - Adjusted Gross Profit is defined as gross profit plus depreciation and amortization related to cost of revenues[12] - Adjusted EBITDA is defined as net income (loss) before interest expense, income taxes, depreciation and amortization, stock-based compensation, and other specified costs[12] - System1 acknowledges that these non-GAAP measures have limitations and may not be comparable to similarly titled measures from other companies[13] Reconciliation of Revenue to Adjusted Gross Profit For Q1 2025, the company reconciled its $74.5 million in revenue to a GAAP Gross Profit of $28.4 million and an Adjusted Gross Profit of $41.5 million, representing a 33% year-over-year increase in Adjusted Gross Profit from $31.2 million in Q1 2024 Reconciliation to Adjusted Gross Profit (In millions) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $74.5 | $84.9 | | Gross profit | $28.4 | $18.6 | | Adjusted Gross Profit | $41.5 | $31.2 | Reconciliation of Net Loss to Adjusted EBITDA The company reconciled its Q1 2025 Net Loss of $19.9 million to an Adjusted EBITDA of $12.1 million, marking a substantial improvement from Q1 2024, where a Net Loss of $13.8 million was reconciled to an Adjusted EBITDA of only $0.4 million Reconciliation to Adjusted EBITDA (In millions) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net loss | $(19.9) | $(13.8) | | Adjustments (Interest, D&A, etc.) | $32.0 | $14.2 | | Adjusted EBITDA | $12.1 | $0.4 | Forward-Looking Statements and Risk Factors This section provides a standard "safe harbor" disclaimer for forward-looking statements, which are subject to various risks and uncertainties, directing readers to the company's SEC filings (10-K, 10-Q, 8-K) for a detailed discussion of risk factors, including maintaining relationships with partners and advertisers, managing first-party data, RAMP platform performance, and changes in market demand and competition - The press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, which are not guarantees of future performance[6][8] - Readers are advised to review the "Risk Factors" in the company's SEC filings for a comprehensive understanding of potential risks[9] - Key risks include maintaining relationships with network partners, effective use of first-party data, RAMP performance, changing customer demand, competition, and regulatory changes[10]