System1(US:SST)2023-08-10 00:17Financial Data and Key Metrics Changes - Revenue for Q2 2023 was $147 million, a 33% decrease year-over-year from $220 million [32] - Adjusted gross profit was $53 million, down 21% year-over-year [13] - Adjusted EBITDA was $14.6 million, down 57% year-over-year, representing a 27% margin on gross profit [41] - Cash on the balance sheet at the end of the quarter was $26.2 million, with gross debt at $430 million [15] Business Line Data and Key Metrics Changes - Owned and operated advertising revenue decreased by 51% year-over-year, while network advertising revenue increased by 3% [32] - Subscription revenue was up 18% year-over-year, with billings increasing 17% to $54.2 million [33] - The number of subscribers increased to almost 2.8 million, reflecting a 21% year-over-year increase [14] Market Data and Key Metrics Changes - Advertising spend was $49.7 million, down 35% sequentially [6] - Revenue per session (RPS) was down $0.01 sequentially to $0.09, while cost per session (CPS) was also down $0.01 to $0.06 [33] - The company generated over 800 million sessions with a spread of $0.03 per session [6] Company Strategy and Development Direction - The company is focused on cost structure and generating operating cash flow in the short term, having reduced headcount by approximately 15% [10] - Plans to spend over $70 million in customer acquisition in the second half of the year, up from $48 million last year [36] - The company aims to continue delivering adjusted EBITDA and operating cash flow while managing liquidity needs [37] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about a rebound in digital marketing, noting volatility in performance marketing [4] - The company expects gross profit for the second half of 2023 to be between $100 million and $105 million, reflecting a 16% decline year-over-year at the midpoint [17] - Management remains bullish on the ability to operate through an uncertain macro outlook, emphasizing alignment with shareholders [30] Other Important Information - The company faced a $3.3 million charge to adjusted EBITDA due to the termination of a network partner by an advertising partner [34] - The network advertising business saw a 30% sequential increase in revenue and gross profit, despite the challenges faced [27] Q&A Session Summary Question: What are the expectations for the advertising market? - Management noted that while recent financial performance has been negatively impacted by market conditions, they believe they are poised for a rebound in advertising marketplaces [39] Question: How are operating expenses expected to trend? - Operating expenses were up 17% year-over-year due to increased accounting and consulting costs, but are expected to revert to previous levels starting in Q3 [41] Question: What is the outlook for the network advertising business? - The network advertising business is expected to continue delivering significant growth, with over 60% growth year-over-year anticipated in the second half [43]