System1(SST) - 2025 Q2 - Quarterly Results

Financial & Operational Highlights System1's Q2 2025 revenue decreased 17% to $78.1 million, yet profitability improved with GAAP Gross Profit up 7% and Adjusted EBITDA up 18%, driven by Products segment growth Q2 2025 Financial Highlights (YoY) | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $78.1 million | -17% | | GAAP Gross Profit | $27.9 million | +7% | | Adjusted Gross Profit | $41.0 million | +6% | | GAAP Net Loss | $21.5 million | 38% Improvement | | Adjusted EBITDA | $11.7 million | +18% | - The Products segment demonstrated strong growth, with revenue increasing 34% year-over-year to $24.0 million and adjusted gross profit growing 32% to $22.7 million[9] - Operational momentum continued with CouponFollow.com seeing a 44% YoY increase in organic sessions and Startpage.com achieving a 25% increase in daily active users in June 2025 versus the prior year[9] - The company launched 1.org, a new charitable-focused search engine, and a white-label consumer mapping solution in collaboration with Startpage and Mapquest[9] Management Commentary Management attributes strong performance to company-wide AI adoption, driving accelerating growth and margin expansion in organic products and an 18% Adjusted EBITDA increase - CEO Michael Blend stated that the strong quarterly performance reflects a continued turnaround driven by company-wide AI adoption, with organic products showing accelerating revenue growth and margin expansion[3] - CFO Tridivesh Kidambi highlighted the 6% and 18% year-over-year increases in adjusted gross profit and adjusted EBITDA, respectively, as evidence of the business's resilience and ability to innovate[3] Financial Statements Unaudited Q2 2025 financial statements show decreased revenue but improved net loss, with total assets slightly down from year-end 2024 Consolidated Statements of Operations Q2 2025 revenue was $78.1 million, down from $94.6 million, with operating loss narrowing and net loss improving year-over-year Q2 Statement of Operations (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $78,115 | $94,581 | | Operating Loss | $(15,905) | $(29,086) | | Net Loss | $(21,542) | $(34,845) | | Net Loss Attributable to System1, Inc. | $(17,463) | $(26,373) | Consolidated Balance Sheets As of June 30, 2025, total assets were $429.2 million, down from $459.1 million at year-end 2024, with liabilities stable and cash at $63.6 million Balance Sheet Summary (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $63,648 | $63,607 | | Total Assets | $429,249 | $459,129 | | Total Liabilities | $375,805 | $374,133 | | Total Stockholders' Equity | $53,444 | $84,996 | Non-GAAP Financial Measures & Reconciliations System1 uses non-GAAP metrics like Adjusted Gross Profit and Adjusted EBITDA to assess core performance, with Q2 2025 figures increasing to $41.0 million and $11.7 million respectively - Adjusted Gross Profit and Adjusted EBITDA are key non-GAAP metrics used by management to measure operational strength and performance[14] Reconciliation of Revenue to Adjusted Gross Profit Q2 2025 Adjusted Gross Profit was $41.0 million, up from $38.8 million, derived by adding back amortization to GAAP Gross Profit Reconciliation to Adjusted Gross Profit (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $78.1 | $94.6 | | Gross profit | $27.9 | $26.1 | | Add: amortization | $13.1 | $12.7 | | Adjusted Gross Profit | $41.0 | $38.8 | Reconciliation of Net Loss to Adjusted EBITDA System1's Q2 2025 Adjusted EBITDA increased 18% to $11.7 million, derived from GAAP Net Loss by adjusting for various non-operating items Reconciliation to Adjusted EBITDA (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net loss | $(21.5) | $(34.8) | | Depreciation and amortization | $20.6 | $19.9 | | Interest expense | $7.1 | $7.9 | | Acquisition and restructuring costs | $2.3 | $15.6 | | Adjusted EBITDA | $11.7 | $9.9 | Business Outlook System1 will not provide Q3 2025 financial guidance due to market uncertainties, including advertising partner issues, online ad demand volatility, and evolving tariff policies - The company is not providing financial guidance for Q3 2025[5] - Reasons for withholding guidance include uncertainty with a key advertising partner, volatility in online ad demand, and evolving tariff policies[5] Forward-Looking Statements & Risk Factors This section warns that forward-looking statements carry significant risks and uncertainties, directing investors to SEC filings for comprehensive risk factors - The press release contains forward-looking statements that are not guarantees of future performance and are subject to risks and uncertainties[7][10] - Key risks include the ability to maintain relationships with network partners, effectively use first-party data, adapt to changing customer demand, and integrate new technologies like AI[12]