System1(US:SST)2025-11-05 23:00Financial Data and Key Metrics Changes - Revenue for Q3 was approximately $62 million, with adjusted gross profit of $36 million and adjusted EBITDA of $9.9 million, each down 4% year over year [5][17] - Marketing revenue came in at $39 million, down 43% year over year and down 28% sequentially [12][16] - Product revenue was $22.5 million, up 8% year over year but down 6% sequentially [17] Business Line Data and Key Metrics Changes - The product segment showed strong year-over-year growth, with revenue increasing 8% from Q3 2024 and adjusted gross profit up 6% year over year [5][7] - Marketing segment profit was $16.6 million, down 14% year over year and down 15% sequentially, driven by lower traffic acquisition costs [12][19] - Sessions increased 23% year over year and 12% sequentially, reflecting strong execution in the product segment [17] Market Data and Key Metrics Changes - The transition away from Google's AdSense for Domains (AFD) product had a significant negative impact on marketing revenue, which previously contributed approximately 39% of marketing platform revenue [18][19] - The company is transitioning to Google's Related Search on Content (RSoC) product, which is expected to provide a more stable revenue stream moving forward [6][13] Company Strategy and Development Direction - The company is focusing on integrating AI across its operations and expanding its product offerings, particularly in the areas of search, shopping, and geolocation [6][11] - There is a strategic emphasis on acquiring direct users to reduce dependency on third-party distribution platforms [11] - The company plans to increase investment in its product segment, which is viewed as having more predictable growth compared to the marketing business [10][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the volatility in the marketing segment but expressed confidence in returning to growth as the transition to RSoC completes [13][21] - The leadership team believes the majority of the volatility tied to Google Marketplace dynamics is behind them and anticipates providing guidance in the near future [21] - The company remains committed to enforcing high standards of traffic quality and is pursuing claims against partners for invalid traffic [14] Other Important Information - The company ended the quarter with $54.6 million of unrestricted cash and an outstanding balance of $265 million of term-loan debt [20][21] - The company is not providing Q4 2025 guidance at this time but expects to stabilize and rebound in the marketing segment [21] Q&A Session Summary Question: Efforts with Microsoft and Bing's market share gains - The company has been working closely with Bing and has seen improved performance, leading to a shift in efforts towards Bing as monetization increases [23][24] Question: Collaboration with OpenAI and Anthropic - The company highlighted its new product Vanish, which focuses on private AI, and mentioned ongoing work with various AI models to enhance its platform [25][26]