System1 (SST) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $88.8 million, up 1% year-over-year, with all key results at or above guidance high-end; nine-month revenue was $268.3 million, down 12% from the prior year.

• Adjusted EBITDA reached $10.3 million, up 28% year-over-year and 4% sequentially, exceeding guidance.

• Net loss attributable to System1, Inc. for Q3 2024 was $23.6 million, improved from $131.5 million in Q3 2023; GAAP net loss was $30.6 million, up from $25.9 million in Q3 2023.

• Owned and operated (O&O) products performed strongly, with revenue up 7% year-over-year and 16% sequentially, and notable growth in CouponFollow.com and Startpage app engagement.

• Sale of the Protected business completed in November 2023; results from this business are reported as discontinued operations.

Financial highlights

• Adjusted gross profit was $39.5 million, nearly flat year-over-year; GAAP gross profit was $24.8 million, flat year-over-year.

• O&O advertising revenue reached $70.8 million, up 7% year-over-year but down 9% sequentially; product businesses within O&O generated $20.7 million, up 31% year-over-year and 16% sequentially.

• Partner network revenue was $18 million, down 17% year-over-year but up 5% sequentially; adjusted gross profit for this segment was $13 million.

• Operating expenses net of add-backs were $27.3 million, down $1.5 million quarter-over-quarter and $1.8 million year-over-year.

• Cash and cash equivalents at September 30, 2024 were $69.1 million, with $50 million available on the revolving facility; term loan principal outstanding was $285.1 million.

Outlook and guidance

• No Q4 guidance provided due to ongoing volatility in the advertising marketplace, particularly related to the Google SPN.

• Management expects existing cash, cash flows from operations, and financing activities to be sufficient to fund operations and commitments for at least the next 12 months.

• Focus remains on expanding advertising partners, optimizing user monetization, and reducing operating expenses and debt service.

• Optimism for growth in 2025 as SPN stabilizes and product investments continue to pay off.