Q4 2023 System1 Inc Earnings Call

Operator: Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Systems 1 fourth quarter and full year conference call and webcast. All lines have been placed on mute to prevent any background noise.

Good morning, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the systems, one fourth quarter and full year conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again press star one. Thank you. I would now like to turn the conference over to Kyle Ostgaard, Vice President of Finance. Kyle, you may begin your presentation. Thank you, Operator.

I'd like to ask a question during that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw that question again press star one. Thank you I would now like to turn the conference over to Kyle off Guard Vice President of Finance Kyle you May begin your conference.

Thank you operator, joining me today to discuss system ones business and financial results are co founder and CEO, Michael blend and our Chief financial Officer to divest Gadhafi a recording of this conference call will be available on our Investor Relations website. Shortly after this call has ended.

Kyle Ostgaard: Joining me today to discuss Sys1's business and financial results are our co-founder and CEO, Michael Blend, and our Chief Financial Officer, Tridivesh Kidambi. A recording of this conference call will be available on our Investor Relations website shortly after this call has ended. I'd like to take this opportunity to remind you that during the call, we will be making certain forward-looking statements. These include statements relating to the operating performance of our business, future financial results and guidance, strategy, long-term growth, and overall future prospects. We may also make statements regarding regulatory or compliance. These statements are subject to known and unknown risks and uncertainties that could cause our actual results to differ materially from those projected or implied during this call, in particular those described in our risk factors, including our annual report on Form 10-K for the fiscal year 2023, filed on March 15th, as well as the current uncertainty and unpredictability in our business, the markets, and the global economy generally. You should not rely on our forward-looking statements as predictions of future events.

I'd like to take this opportunity to remind you that during the call we will be making certain forward looking statements. This includes statements relating to the operating performance of our business future financial results and guidance strategy long term growth and overall future prospects. We may also make statements regarding regulatory or compliance matters. These statements are subject to known and unknown.

Risks and uncertainties that could cause our actual results to differ materially from those projected or implied during this call. In particular those described in our risk factors included in our annual report on Form 10-K for the fiscal year 2023 filed on March 15th as well as the current uncertainty.

Ability in our business the markets in the global economy generally.

You should not rely on our forward looking statements as predictions of future events. All forward looking statements that we make on this call are based on management's assumptions and beliefs as of the date hereof and system. One disclaims any obligation to update any forward looking statements, except as required by law. Our discussion today will include non-GAAP financial measures, including adjusted EBITDA and adjusted.

Kyle Ostgaard: All forward-looking statements that we make on this call are based on management's assumptions and beliefs as of the date hereof, and Sys1 disclaims any obligation to update any forward-looking statements except as required by law. Our discussion today will include non-GAAP financial measures, including adjusted EBITDA and adjusted gross profit. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Historical performance and feature estimates provided during this call exclude results from total security.

Gross profit. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results historical performance and future estimates provided during this call exclude results from total security.

Kyle Ostgaard: Additionally, for all periods discussed, unless otherwise noted, the company will be referring to its results adjusted for the divestiture of the total security business, which closed on November 30th, 2020. Information regarding our non-GAAP financial measures, including a reconciliation of our non-GAAP financial measures to our most comparable historical GAAP financial measures, may be found on our investor relations website. I would now like to turn the conference call over to Sys1's Co-Founder and Chief Executive Officer, Michael Blend. Thanks, Kyle.

Additionally for all periods discussed unless otherwise noted the company will be referring to as a result adjusted for the divestiture of the total security business, which closed on November 30 of 2023.

Information regarding our non-GAAP financial measures.

Reconciliations of our non-GAAP financial measures to our most comparable historical GAAP financial measures may be found on our Investor Relations website.

I would now like to turn the conference call over to system ones co founder and Chief Executive Officer, Michael blend.

Thanks, Kyle good morning, everyone and thanks for joining us on our Q4 system one earnings call.

Michael L. Blend: Good morning, everyone, and thanks for joining us on our Q4 System 1 earnings call. We have a lot to discuss today. The fourth quarter of 2023 was pretty jam-packed for our company, as we completed a number of important strategic shifts for Sys1. We believe these moves have set us up well for the future, and I'll go into them one by one. First, as we've previously announced, we sold our total security subscription business towards the end of the quarter, and I'll talk about that in more detail in a moment. Importantly, though, we also saw solid execution in our remaining advertising business on a number of fronts. As a result, we believe we are set up well for what we hope will be a secular re-acceleration of spending on online advertising in 2024. But, as you know, if you follow System 1.

We have a lot to discuss today the fourth quarter of 2023 was pretty jam packed for our company as we completed a number of important strategic shifts for system one.

We believe these moves to set us up well for the future and I will go into them one by one.

First as we previously announced we sold our total security subscription business towards the end of the quarter and I'll talk about that in more detail in a moment.

Importantly, though we also saw solid execution in our remaining advertising business on a number of fronts.

As a result, we believe we are set up well for what we hope to be a secular re acceleration of spending in online advertising in 2024.

As you know if you follow someone.

Michael L. Blend: We sold our total security business during the quarter for consideration consisting of $240 million in cash, the redemption of 29 million of our outstanding shares, and the termination of certain earn-out payments associated with our D-SPAC merger. I want to say a few words about our rationale behind the divestiture of that business and how it helps our remaining advertising business going forward. Now, while Total Security was and remains a great business... Like most subscription businesses, it has high upfront capital requirements to cover new customer acquisition costs. As the business grew under our ownership, Total Security required increasing amounts of capital to maintain a healthy new subscriber growth rate. When Sys1 acquired the business in early 2022, the heavy upfront marketing costs were not really a significant concern for us. We had a low cost of capital during that low interest rate environment, and spending $1 up front to make $3 over the long term was a great investment for our company. Things changed significantly towards the end of 2022 and heading into 2023, as interest rates and our corresponding interest expense costs rose over that period.

We sold our total security business during the quarter for consideration consisting of $240 million in cash.

<unk> of $29 million of our outstanding shares and the termination of certain earn out payments associated with our destock merger.

I wanted to say a few words about our rationale behind the divestiture of that business and how it helps our remaining advertising business going forward.

Now while total security was and remains a great business like most subscription business as it has high upfront capital requirements to cover new customer acquisition costs.

As the business grew under our ownership total security required increasing amounts of capital to maintain a healthy new subscriber growth rate.

With system wide acquired the business in early 2022.

Heavy upfront marketing costs, we're not really a significant concern for us.

Had a low cost of capital during that low interest rate environment.

Spending one dollar upfront to make $3 over the long term was a great investment for our company.

Things change significantly towards the end of 2022 and heading into 2023.

As interest rates and our corresponding interest expense costs.

Those over that period.

Michael L. Blend: Our cost of capital to support total securities up from marketing expense went up quite a bit. And at the same time, our advertising business suffered a downturn along with our industry generally, and this left our overall business more highly leveraged than we would have liked. In the current operating environment where cash is king and debt is expensive, once we received an offer for total security, we decided to run an extensive process. In the end, we determined the offer from the total security management team, combined with private equity, was the best deal for Sys1. From a financial perspective, the sale of total security provided us with approximately $240 million of cash, which has allowed us to significantly de-lever our remaining business. The total security sale also included the redemption of 29 million shares held by the total security manager.

Our cost of capital just to support total securities upfront marketing expense went up quite a bit.

And at the same time, our advertising business suffered a downturn along with our industry generally.

And this has led to our overall business more highly leveraged than we would've liked.

And the current operating environment, where cash is king and that is expensive. Once we received an offer for total security we decided to run an extensive process.

And we determined the offer from the total security management team.

Combined with private equity was the best deal for system wide.

From a financial perspective, the sale of told US security provided us with approximately $240 million of cash. This cash has allowed us to significantly delever our remaining business.

The total security sale also included the redemption of 29 million shares held by the total security management.

Michael L. Blend: So going forward, we have a smaller shareholder base to realize the benefits of future growth in our remaining advertising business. Having a healthy amount of cash on our balance sheet is very important to our remaining advertising business. On the buy side of the business, Access to Capital gives us substantial capacity to scale our marketing spend and offer aggressive payment terms in return for buy side discounts. On the technology front, we can continue to invest in new innovations utilizing generative AI to incorporate into our RAMP platform. And finally, our improved balance sheet gives us capacity for any accretive or strategic token acquisitions we may identify.

Going forward, we have a smaller shareholder base to realize the benefits from future growth and our remaining advertising business.

Having a healthy amount of cash on our balance sheet is very important to our remaining advertising business on the buy side of the business access to capital gives us substantial capacity to scale, our marketing spend and offer aggressive payment terms in return for buy side discounts.

On the technology front, we can continue to invest in new innovations utilizing generative AI to incorporate into our wrap platform.

And finally, our improved balance sheet gives us capacity for any accretive or strategic tuck in acquisitions, we may identify it.

Michael L. Blend: Now on to the advertising business server. I want to spend some time discussing our core advertising business in more detail. Let's talk about the nature of our go-forward business, changes and developments in the business over the past year, and our plans to grow the business going forward. Our advertising business has been the core of Sys1 since we founded the company a decade ago. Except for the last two years, it was our only business.

Now onto the advertising business overview.

I wanted to spend some time discussing our core advertising business in more detail.

Let's talk about the nature of our go forward business changes and developments in the business over the past year and our plans to grow the business going forward.

Our advertising business has been the core system wide since we founded the company a decade ago, except for the last two years. It was our only business and so by divesting Charles Security, we are returning to our core routes.

Michael L. Blend: And so, by divesting Social Security, we are returning to our core. The advertising business has two basic components. First, our network business, and second, our owned and operated business. Each of these, in turn, is organized between our paid and our organic business lines. Our paid business lines rely on paid marketing to fuel their growth, and our organic business lines are primarily driven by consumers going directly to our properties or utilities. All of these components are powered by our proprietary responsive acquisition marketing platform, which we refer to as RAMP. Our network business is the original legacy business of Sys1, and it's historically been a very profitable business line for us. In this business, hundreds of network partners buy traffic on their own behalf and then use our Ramp platform to monetize this traffic. In our network business, we do not take any risk on the buy side.

The advertising business has two basic components.

So we're starting that work business and second our owned and operated business.

Each of these in turn are organized between our paid and our organic business lines.

Our paid business lines rely on paid marketing to fuel their growth.

Organic business volumes are primarily driven by consumers going directly to our properties or utilities.

All of these components are then powered by our proprietary responsive acquisition marketing platform, which we referred to as ramp.

Our network business is the original legacy business the system, one and that's historically been a very profitable business line for us.

And this business hundreds of network partners by traffic on their own behalf and then use our ramp platform to monetize this traffic.

And our network business, we do not take any risk on the buy side.

Michael L. Blend: Our partners incur all the traffic acquisition costs and then send that traffic through RAMP for Sys1 to monetize for them. These are paid, owned, and operated advertising businesses similar to the network business I just described. The primary difference is that in our own and operated business, we purchase traffic for our own digital destinations while utilizing both the buy side and monetization functionalities within RAMP. The simple way to think of this is that RAM supports both hundreds of network partners, as well as our own internal team, with our internal team being the largest customer of RAM. Having a large owned and operated business also provides a lot of long-term value to our network partners. The scale of our O&O business gives us very good insights into the challenges and opportunities faced by our network partners with respect to both buy-side and monetization dynamics.

Our partners incur all of the traffic acquisition costs, and then send that traffic through ramp for system wide to monetize for them.

Our paid owned and operated advertising business is similar to the network business I just described.

The primary differences in our owned and operated business, we purchased traffic for our own digital destinations, while utilizing both the buy side and monetization functionalities within ramp.

The simple way to think of this as it ramps supports both hundreds of network partners as well as our own internal team with our internal team being the largest customer of ramp.

Having a large owned and operated business also provides a lot of long term value to our network partners.

The scale of our <unk> business gives us very good insights into the challenges and opportunities faced by our network partners with respect to both buy side and monetization dynamics.

Michael L. Blend: We utilize these insights to continually improve RAMP, and we can seamlessly test these improvements through their impact on our paid, owned, and operated channels. When we are convinced that our new improvements are effective... We roll these out to our. In doing so, we constantly invest in the success of our network partners, attract new partners, and, in turn, make our RAMP platform that much stickier for our network partners. One example of the synergies derived between our paid O&O and the network businesses is the launch of our Ramp Partner Console, which we publicly announced last August. The Ramp Partner Council provides self-serve tools that allow our partners to create and manage campaigns.

We utilize these insights to continually improve ramp and we can seamlessly testes improvements through their impact on our paid owned and operated business.

When we are convinced that our new improvements are effective.

We roll these out to our partners.

In doing so we constantly invest in the success of our network partners attract new partners and in turn make our ramp platform that much stickier for our network partners.

One example of the synergies derived between our paid or no in the network businesses is the launch of our ramp partner console, which we publicly announced last August.

The Revpar of our console provides self serve tools that allow our partners to create and manage campaigns adjust bidding strategies.

Michael L. Blend: Adjust bidding strategy, access financial reporting, and get detailed analytics and reporting in real-time. Essentially, we provide to our partners most of the tools that we use to manage our paid O&O bill. As a result, both our paid O&O business and our network business experienced solid growth in Q4. Our network business grew 37% year over year, and our paid O&O business grew 20% sequentially over Q3. While some of this growth is attributable to typical Q4 seasonality, our technology improvements and rapid incorporation of AI into our RANP platform are having a materially positive effect on our overall business. Since first releasing the RAMP Partner Console to partners in late 2022, the number of active network partners has increased 50 percent from 135 at the end of 2022 to over 200 today. The partner console has also allowed our partners to go quick.

<unk> financial reporting and get detailed analytics and reporting and near real time.

Essentially we provide to our partners most of the tools that we use to manage our paid <unk> business.

As a result of both our paid <unk> business in our network business experienced solid growth in Q4.

Our network business grew 37% year over year, and our paid O&M business grew 20% sequentially over Q3.

While some of this growth is attributable to a typical Q4 seasonality our technology improvements and rapid incorporation of AI into our wrap platform or having a materially positive effect on our overall business.

Since first releasing the ramp partner console to partners in late 2022, the number of active network partners increased 50% from 135 at the end of 2022 to over 200 today.

The partner console has also allowed our partners to grow quicker.

Michael L. Blend: For example, in Q4 of 2023, three of our top 10 partners were new to the network during the year, and the remaining seven top 10 partners grew 120% collectively year over year in Q4. In addition to our marketing-driven owned and operated business, we have several great organic traffic businesses, such as MapQuest, StarPage, and Coupon Follow. These businesses are fairly distinct from our marketing-driven business lines as they do not rely heavily on paid marketing and say they are mostly powered by consumers directly navigating to these destinations or reaching them via non-paid organic search results.

For example in Q4 of 2023 three of our top 10 partners were new to the network in the year and the remaining seven top 10 partners grew 120% collectively year over year in Q4 and.

In addition to our marketing driven owned and operated business. We have several great organic traffic businesses, such as map quest start page and coupon follow.

These businesses are fairly distinct from a marketing driven business lines.

As they do not rely heavily on paid marketing.

And said Theyre, mostly powered by consumers direct navigating to these destinations for reaching them via non pay organic search results.

Michael L. Blend: Organic businesses are stable sources of high gross margin revenue and, in 2024, are projected to provide over 35% of our total revenue minus marketing expenses. These businesses are strong cash flow generators and have a relatively light engineering and overhead footprint within our organization. Together, our organic businesses provide a nice degree of consistent profitability, and they also present opportunities for high-margin growth as they seek to attract more organic users. On the technology side, we have also made substantial improvements to our RAMP platform over both the past quarter and year. In addition to the launch of the Ramp Partner Console, we've also been highly focused on integrating AI into the critical aspects of Ramp within our business process. AI is enabling us to scale the creation and distribution of our marketing campaigns at a pace we haven't previously seen. And we believe that we are just beginning to scratch the surface on this front.

Our organic businesses are stable sources of high gross margin revenue and in 2024 are projected to provide of our 35% of our total revenue less marketing expenses.

These businesses are strong cash flow generators and have a relatively light engineering at overhead footprint within our organization.

Together, our organic businesses provide a nice degree of consistent profitability and they also represent opportunities for high margin growth as they seek to attract more organic users.

On the technology side, we have also made substantial improvements to our ramp platform over both the past quarter and year.

In addition to the launch of the ramp partner console. We've also been highly focused on integrating AI and a critical aspects of ramp and our business processes.

AI is enabling us to scale, the creation and distribution of our marketing campaigns at a pace. We haven't previously seen and we believe that we are just beginning to scratch the surface on this front.

Michael L. Blend: For example, in our O&O businesses, we've been utilizing AI machine learning tools to build optimized buy-safe capabilities that are directly linked to the performance of our ramp monetization platform. To give you a sense of the impact and our ability to scale, this initiative has permitted our internal teams who are testing it to identify, launch, optimize, and monetize five times as many campaigns per week per buying resource than we were able to achieve just six months ago. While we continue to refine the AI capabilities incorporated into RAMP, our ultimate goal is to be a one-stop buy and sell side platform for performance marketers across the internet. As our next step towards this goal, we are working to make our side by side capabilities available to our network partners. These partners have historically used us only for sell-side monetization, and we plan to open up buy-side capabilities in 2024. If we are able to successfully roll this out, our partners will be able to manage almost all of their business operations via RAM.

For example, in our <unk> businesses, we have been utilizing AI machine learning tools to build optimized <unk> capabilities that are directly linked to the performance of our ramp monetization platform.

To give you a sense of the impact on our ability to scale. This initiative has permitted our internal teams who are testing it to identify launch optimize and monetize five times as many campaigns per week for buying resource than where we were able to achieve just six months ago.

While we continue to refine the AI capabilities incorporated into ramp our ultimate goal is to be a one stop buy and sell side platform for performance marketers across the internet.

As our next step towards this goal we are working to make our buy side capabilities available to our network partners.

These partners have historically used us only for cell site monetization and we plan to open up by site capabilities over 2024.

If we are able to successfully roll this out our partners will be able to manage almost all of their business operations via ramp.

Michael L. Blend: In addition to providing an integrated platform to our partners, we also plan to use our healthy balance sheet to help them scale their business. One example of this is Sys1 providing revenue guarantees across buyside channels in return for favorable pricing, and then passing the savings on to our partners. In return, we can enable the partners to further scale their business on the RAMP platform. In addition to the momentum that we've realized from our technological improvements and stronger balance, we're anticipating some tailwinds from market changes as Google deprecates cookies within its industry-leading Chrome browser. We believe this change represents an opportunity for us, given our vast amounts of first-party data and our focus on contextual-based advertising. However, we do expect there to be some disruption in the marketplaces once these changes are rolled out. So we could see some volatility in these markets during the second half of the year.

In addition to providing an integrated platform to our partners. We also plan to use our healthy balance sheet to help them scale their businesses.

One example of system, one providing revenue guarantees across biocide channels in return for favorable pricing and then passing the savings onto our partners.

In return, we can enable the partners to further scale our business on the ramp platform.

In addition to the momentum that we realized from our technology improvements and stronger balance sheet. We are anticipating some tailwind from market changes as Google deprecating cookies within its industry, leading chrome browser.

We believe this change represents an opportunity for us given our vast amounts of first party data and our focus on contextual based advertising.

We do expect there to be some disruption in the marketplaces. Once these changes are rolled out so we could see some volatility in these markets during the back half of the year.

Michael L. Blend: However, as always, we welcome the volatility and believe Ramp is well positioned to take advantage of any choppiness in the advertising market. We also feel well positioned to capitalize on an anticipated reacceleration in digital lab spending in the latter half of this year. Looking forward to 2024 and beyond.

However, as always we welcome to volatility and believe ramp is well positioned to take advantage of any choppiness in the advertising markets.

We also feel well positioned to capitalize on and anticipate a reacceleration in digital AD spending in the latter half of this year.

Looking forward to 2024 and beyond.

Michael L. Blend: I believe Sys1 is a very rejuvenated, refocused, and well-capitalized company set up for a return to solidity. We have excellent technology, solid assets, and strong relationships with our network and advertising partners. Most importantly, we have a focused and highly motivated team all moving in the same direction.

I believe system, one is a very rejuvenated refocused and well capitalized company set up for a return to solid growth.

We have excellent technology solid assets.

<unk> ships with our network and advertising partners and most importantly, we have a focused and highly motivated team all moving in the same direction.

Michael L. Blend: That said, while we are optimistic about 2024, I, as always, don't have a crystal ball about what the overall economic environment is going to look like. And after a rocky 2023, I don't want to promise an operating performance that we aren't confident we can deliver. I encourage our shareholders to view Sys1 as a long-term investment opportunity and judge our success on an annual basis, rather than on near-term quarterly results. As a much leaner and focused digital advertising business, we are ready for the next chapter. I'll now hand things out to Tridivesh to discuss the quarterly results in more detail, as well as our Q1 2024 guide. Take it away, Tridivesh.

That said, while we are optimistic about 2024 I as always don't have a crystal ball about what is the overall economic environment is going to look like.

After a rocky 2023, I don't want to promise in operating performance that we aren't confident we can meet or exceed.

I encourage our shareholders to view system, one is a long term investment opportunity.

George access on an annual basis, rather than on near term quarter to quarter results.

As a much leaner and focus digital advertising business, we are ready for the next chapter of system one.

I'll now hand things off the treaty to discuss the quarterly results in more detail as well as our Q1 2024 guidance.

Take it away treaty.

Tridivesh Kidambi: Thanks, Michael. Thank you, everyone, for joining us. I wanted to start by echoing Michael's comments on the recently completed total security transaction. While we remain believers in the opportunity for RAMP to power owner and operator subscription businesses at significant scale, the total security business, in particular, was characterized by high upfront customer acquisition capital requirements and, in turn, required an increasing amount of our available capital to maintain its healthy growth.

Thanks, Michael.

Thank you everyone for joining us today I wanted to start by echoing Michael's comments on the recently completed total security transaction.

While we remain believers in the opportunity for ramped power owned and operated subscription businesses at significant scale.

Total security business in particular was characterized by high upfront customer acquisition capital requirements.

And in turn required an increasing amount of our available capital to maintain a healthy growth rate.

Tridivesh Kidambi: Given the increased interest rate environment compared to when we acquired it, when combined with the secular headwinds we faced in our advertising business over the past 18 months. The divestiture was an important step in right-sizing our capital structure and improving our balance. We used a portion of the cash proceeds to pay down approximately $155 million of notional debt, in addition to our scheduled mandatory amortization of $5 million per quarter, and we still retain substantial liquidity on the balance to grow our core advertising, which we believe is at or nearing a secular trial. Now, on to our opera.

Given the increased interest rate environment compared to when we acquired the business.

When combined with the secular headwinds we faced in our advertising business over the past 18 months the.

The divestiture was an important step in right sizing, our capital structure and improving our balance sheet.

As a result of the transaction we used a portion of the cash proceeds to pay down approximately $155 million of notional debt.

In addition to our scheduled mandatory amortization of $5 million per quarter and.

And we still retain substantial liquidity on the balance sheet to grow our core advertising business, which.

Which we believe to be at or nearing a secular trough.

Now onto our operating results.

Tridivesh Kidambi: Q4 revenue was $96.1 million, representing a 31% year-over-year decline, which was narrower as compared to the 44% decline that we saw in. This also represents growth of 9% sequentially, compared to an 11% sequential decline from Q3 to Q4 of 2005. This comes in above the top end of our Applied Q4 Revenue Guidance range that we provided, own and operated advertising revenue of $79.4 million, representing a 38% year-over-year decline, also narrower than the 54% decline that we find. Last year, own and operated advertising declined quarter over quarter from Q3 to Q4 by 11%. Network Advertising revenue was $16.7 million.

Q4 revenue was $96 1 million representing.

Representing a 31% year over year decline, which was narrower as compared to the 44% decline that we saw in Q3.

This also represents growth of 9% sequentially compared to the 11% sequential decline from Q3 to Q4 of 2022.

This comes in above the top end of our implied Q4 revenue guidance range that we provided in December.

Owned and operated advertising revenue was $79 4 million, representing a 38% year over year decline.

Also narrower than the 54% decline that we saw in Q3, a sequential growth of 20%.

Last year owned and operated advertising declined quarter over quarter from Q3 to Q4 by 11%.

Network advertising revenue was $16 7 million up 37% year over year as.

Tridivesh Kidambi: As Michael mentioned during his remarks, we remain incredibly bullish about the growth potential of our network advertising, especially given the investments in additional features and tools for our RAMP platform that we are now making available to our partners. Adjusted gross profit was 37.6%, down 12% year-over-year versus an 18% year-over-year decline in Q3 of 2020, but it comes in above the high end of the implied Q4 adjusted gross profit guidance range previously Revenue less advertising spend for our own and operated advertising segment declined 24% to 26.6%, versus a 36% decline in Q3.

As Michael mentioned during his remarks, we remain incredibly bullish about the growth potential of our network advertising business, especially given the investments in additional features and tools for our ramp platform that we are now making available to our partners.

Adjusted gross profit was $37 6 million down 12% year over year versus 18% year over year decline in Q3 of 'twenty three.

It comes in above the high end of the implied Q4 adjusted gross profit guidance range previously provided.

Revenue less advertising spend for our owned and operated advertising segment declined 24% to $26 6 million.

Versus a 36% decline in Q3 of 'twenty three.

Tridivesh Kidambi: Network revenue less agency fees was up 35% to $13.1 million versus $9.7 million in the prior year; owned and operated cost per session and revenue per session were both flat sequentially at five cents and seven cents, respectively, with the spread also flat sequentially at two and a half cents. In the network advertising business, RPS was too sensitive. Most importantly, total sessions processed by RAMP in the most recent quarter were 1.85 billion, up 4% sequentially at 31%. Operating expenses net of ADVACs were $27.6 million, down 3% year-over-year and down 5% sequentially. Adjusted EBITDA was $10 million vs. $14.4 million last year, down 31% year-over-year, but up 24% quarter-over-quarter.

Network revenue less agency fees was up 35% to $13 1 million versus $9 7 million in the prior year quarter.

Owned and operated cost per session and revenue per session, where both flat sequentially at <unk> and <unk>, respectively with a spread also flat sequentially at two five.

On the network advertising business Rps was <unk> <unk> per session.

Most importantly, total sessions processed by ramp in the most recent quarter was $1 85 billion up 4% sequentially at 31% year over year.

Operating expenses net of add backs were $27 6 million down.

Down 3% year over year and down 5% sequentially.

Adjusted EBITDA was 10 million versus $14 4 million last year.

131% year over year, but up 24% quarter over quarter.

Tridivesh Kidambi: This represents a margin on adjusted gross profit of 26.6%, versus 21.8% in Q3 of 2020, and came in above the high end of the implied Q4 guidance. With respect to liquidity, we ended the year with $135.3 million of unrestricted cash on our balance sheet and a balance of $365 million of term loans under our credit facility, taking into account the modified Dutch auction to repurchase term loan debt under our credit agreement that we completed in mid-January. We had $94.4 million of unrestricted cash and a balance of $301.3 million of term loans under our accreditation.

This represents a margin on adjusted gross profit of 26, 6% versus 21, 8% in Q3 of 'twenty three and came in above the high end of the implied Q4 guidance range.

With respect to liquidity, we ended the year with $135 3 million of unrestricted cash on our balance sheet and a balance of $365 million of term loans under our credit agreement.

Taking into account the modified Dutch auction to repurchase term loan debt under our credit agreement that we completed in mid January we had $94 4 million of unrestricted cash and a balance of $301 3 million of term loans under our credit agreement.

Our implied net leverage at year end pro forma for the impact of the completed modified Dutch auction is slightly above seven times on a run rate basis after giving effect to the operating expense cuts. We made throughout 2023 as well as the increased professional services costs that we incurred to assist in the restatement of our Q1 through Q3.

Tridivesh Kidambi: Our implied net leverage at year-end, pro forma for the impact of the completed modified Dutch auction, on a run rate basis after giving effect to the operating expense cuts we made throughout 2020, as well as the increased professional services costs that we incurred to assist in the restatement of our Q1 through Q3 2022 financial statement, would be approximately 4.8%. While we are comfortable that our current capital structure, including the $50 million of availability on our revolver, provides ample cushion for all of our short and medium-term liquidity needs, we remain highly focused on continuing to delever in a prudent manner in the current market, including through further attractive and opportunistic debt repurchase. Acquired M&A, and most importantly, through the organic growth of our core advertising, and our entire team is now singularly focused on execution to achieve this organically. We remain cautiously optimistic about macro trends in digital advertising generally. We are also bullish on our identified near-term opportunities, as well as our team's ability, to continue to improve and optimize our RAMP platform, including offering both greater cell-side and bi-side functionality to our patients. That being said, an upturn in macro trends is unproven at the moment.

22 financial statements, our pro forma net leverage would be approximately four eight times.

While we are comfortable that our current capital structure, including the $50 million of availability on our revolver provides ample cushion for all of our short and medium term liquidity needs. We remain highly focused on continuing to delever and a prudent matter and the current market.

Including through further attractive and opportunistic debt repurchases.

Accretive M&A and most importantly through the organic growth of our core advertising business.

And our entire team is now singularly focused on execution to achieve this organic growth.

We remain cautiously optimistic about macro trends in digital advertising generally.

We are also bullish on or identified near term opportunities as well as our team's ability to continue to improve and optimize our ramp platform, including offering both greater sell side and buy side functionality to our partners.

That being said an upturn in macro trends is unproven at this point.

For example to date in Q1 of 'twenty four we're not seeing evidence of a comparable rebound to what we experienced in the first half of 2023 much.

Much less the first half of 2022.

Tridivesh Kidambi: For example, to date in Q1 of 24, we are not seeing evidence of a comparable rebound to what we experienced in the first half of 2020, much less the first half of it. Moreover, we view Google's anticipated cookie deprecation on its Chrome web browser, currently anticipated in or around late 2024, as a net positive for our overall business. The change does create a significant amount of uncertainty in the online advertising environment in which we operate. As a result, at this time, we will not be providing full-year guidance for 2020. We are estimating Q1 revenue to come in between $82 million and $84 million, representing a 31% year-over-year decline. We are estimating adjusted gross profit to come in between $28 million and $30 million, representing a 24% decline.

Moreover, while we view google's anticipated cookie deprecation on its chrome web browser currently anticipated inner around late 2024 as a net positive for our overall business. The change does create a significant amount of uncertainty and the online advertising environment in which we operate.

As a result at this time, we will not be providing full year guidance for 2024.

We are estimating Q1 revenue to come in between $82 million and $84 million, representing a 31% year over year decline at the midpoint.

We're estimating adjusted gross profit to come in between $28 million and $30 million, representing a 24% decline at the midpoint.

We estimate Q1, adjusted EBITDA to come in between negative one to negative $2 million, which is reflective of some seasonality in operating expenses, where we see higher professional services expenses, primarily related to our fiscal year audit.

As well as higher beginning of the year accruals for payroll and bonus related expenses.

Tridivesh Kidambi: We estimate Q1 adjusted EBITDA to come in between negative 1 and negative 2 million, which is reflective of some seasonality in operating expenses, where we see higher professional services expenses primarily related to our fiscal year audit, as well as higher beginning of the year accruals for payroll and bonus. I want to reiterate that we are cautiously optimistic about macro trends and digital advertising for this current year. Thank you for joining us. Thank you. If you'd like to ask a question, please press star followed by the number one on your telephone keypad.

I want to reiterate that we are cautiously optimistic about macro trends in digital advertising for this current year and bullish about our abilities to execute against our near term opportunities.

Thank you for joining us today.

Thank you.

To ask a question. Please press star followed by the number one on your telephone keypad and if you'd like to withdraw your question again press Star one.

Our first question comes from the line of Dan <unk> from the Benchmark Company. Please go ahead.

Operator: And if you'd like to withdraw your question, again, press star one. Your first question comes from the line of Dan Kurnos from The Benchmark Company. Please go ahead. Great, thanks. Good morning.

Great. Thanks, good morning.

Michael Treaty.

Do we think is there any way to get some incremental thoughts around this.

Daniel Louis Kurnos: Michael, Trini, just how do we think there is any way to get some incremental thoughts around the integration and streamlining? I mean, this is the year for ad tech in general for streamlining businesses. I'd like to know what you guys are doing in terms of sort of the enhanced offerings. Can we maybe even just get some cadence or timing thoughts on how that could impact the business? And if there's any way to kind of, and you won't maybe put numbers around it, although it'd be great if you did, but any way to kind of think about the size of the impact that could have, Sure. Thanks for joining us, Dan. Thanks for the question. This is Michael here.

The integration and streamlining I mean this is the year for AD Tech in general of streamlining businesses I'd like what you guys are doing in terms of sort of the enhanced offerings can we just maybe even just get some cadence or timing thoughts on how that could impact the business and if there's any way to kind of maybe put number.

Around it although it'd be great. If you did but just any way to kind of think about the size of the impact that could have.

Okay.

Sure.

Thanks for joining Dan. Thanks for the question. This is Michael here.

So as far as streamlined streamlining the business I can answer in a couple of fronts. So first of all we.

The Opex side, we took a bunch of costs out of the business over kind of the latter half of 2022 and 2023.

Michael L. Blend: So, as far as streamlining the business is concerned, I can answer on a couple of fronts. First of all, on the OPEX side, we took a bunch of costs out of the business over the latter half of 2022 and 2023. So, we're operating off of a reduced cost base, and we don't expect that to grow much on a go-forward basis.

So we're operating off of.

Reduced cost base, and we don't expect that to grow much on a go forward basis.

As far as kind of a growth on.

On the business.

I've mentioned, the AI and the incorporation of it into our overall platform and was that is allowing us to do is essentially scale a lot of the processes that typically would have done by employees of the company.

Michael L. Blend: As far as kind of growth for the business, I mentioned AI and the incorporation of it into our overall platform. And what that is allowing us to do is essentially scale a lot of the processes that typically would have been done by employees of the company. And we're automating and scaling, and so the growth of RAMP going forward is going to be largely driven by AI. And we don't expect to hire much headcount to really support that growth. So on a go forward basis, the business is scaling, and it's going to be dropping cash to the bottom line. Trudy, do you want to kind of extrapolate on that?

And we're automating a scaling and so the growth of ramp going forward.

It's going to be largely driven by AI and.

And we don't expect a higher much head count it really.

Support that growth so on a go forward basis as the business is scaling it is going to be dropping cash to the bottom line.

Do you want to kind of extrapolate on that.

Yes, I think just on that point.

As mentioned in our prepared remarks.

Q1, specifically in the Q1 opex per the guidance.

Tridivesh Kidambi: Yeah, I think just on that point, you know, mentioned in the prepared remarks that Q1, specifically the Q1 OpEx, and, you know, per the guidance, 30 and 31 million should be the high point in terms of off X and to Michael's point, um, you know, that's gonna kind of drop throughout the year as we get through some of the accruals. And also, you know, we've said this on previous calls as well, but we do continue to plan, you know, streamline, and continue to take kind of costs out of OffX going forward throughout the year. And so again, as we think about the ad market and ad demand coming back, all of that gross profit growth that we're expecting throughout this year and Akanon Wood here will flow down to Ibadan proper. It's very helpful.

Implied between 30 and $31 million should be the high point in terms of Opex and to Michael's point.

SG&A kind of dropped throughout the year as we get through some of the Q1 accruals.

Also you said this on previous calls as well, but we do continue to plan streamlining continued to take cost out.

Opex going forward throughout the year and so again as we think about just.

After the AD market in AD demand coming back all of that gross profit growth.

They were expecting throughout this year.

Knocking on wood here will slowdown flow down to EBITDA profitability.

That's helpful. Let me, maybe rephrase a little bit I guess I was thinking more just in terms of <unk>.

Integration on buy side simplification of the process when we found out that AD buyers are.

Frankly need a lot more handholding.

And then I think a lot of people thought and so to the extent Michael that you've sort of made the process easier to access you've given them all the tools. They can now be walked through it AI can explain a lot of the more complex components to them just how do we think about sort of the growth opportunity from a revenue perspective.

Daniel Louis Kurnos: Let me maybe rephrase it a little bit. I guess I was thinking more just in terms of integration and buy-side simplification of the process. And when we found out that ad buyers need a lot more hand-holding than I think a lot of people thought, and so to the extent, Michael, that you've sort of made the process easier to access, you've given them all the tools, they can, you know, now we walk through it, AI can explain a lot of the more complex components to them.

Yes, so the way to think about our business on the owned and operated side and this is more of the marketing driven.

Part of our business would be.

Thousands of marketing campaigns that we've put out there across hundreds of different advertising verticals.

Michael L. Blend: Just how do we think about sort of the growth opportunity from a revenue perspective? Yeah, so the way to think about our business on the owned and operated side, and this is more the marketing-driven part of our business, would be, we have thousands of marketing campaigns that we put out there across hundreds of different advertising verticals. And they don't all work.

And they don't all work so in aggregate theyre profitable, but as we're launching new campaigns.

They're not all going to be profitable out of the gate and some of them are going to be negative.

And then when we kind of cut them off as quickly as possible and so what AI has allowed us to do is essentially scale pretty dramatically and I'm talking about if you look at a year ago.

Michael L. Blend: So in aggregate, they're profitable. But as we're launching new campaigns, they're not all going to be profitable out of the gate, and some of them are going to be negative. And so we can basically put more lines in the water.

We're up over I believe five times the number of campaigns. We can we can rollout on a weekly monthly basis.

So we can basically put more lines in the water.

Michael L. Blend: And the more we do that, the more we find profitable campaigns. We can then use AI to optimize our bid pricing on those. And so when things are optimized in a campaign, it's kind of profitable for us on a regular basis. And, you know, we stop seeing volatility in a campaign. We kind of leave it out there running.

And the more we do that the more we find that profitable campaigns and we can then use AI to optimize our bid pricing on those and so we and when things are optimizing the campaign is kind of.

Profitable for us on a regular basis.

We stopped seeing volatility in a campaign, we kind of leave it out there running.

Michael L. Blend: And so it's essentially allowed us to scale that buy side of our business pretty dramatically, as I mentioned. And so when you talk about ramping and opening up the buy side to our network partners, what we're doing is pretty difficult. We're one of the largest, our own and operated business, one of the largest advertising buyers out there, and we run this process through a bunch of different marketing channels, everything from native to social to search buy side. And it's quite difficult to do if you're a smaller average-sized shop.

So it's essentially allow us to scale that buy side of our business.

Pretty dramatically as I mentioned.

So when you're talking about ramp.

Turning up to the buy side to our network partners.

We're doing some pretty difficult we are one of the largest our owned and operated business one of the largest advertising buyers out there.

We run this process through a bunch of different marketing channels everything from native to social to search by side.

And it's quite difficult to do if you're a smaller average size shop.

Michael L. Blend: So on the network side of our business, as we open up those capabilities, we expect we're gonna enable a fair number of our partners to scale their business on us substantially just by incorporating what we're already doing. Does that answer your question, Dan? Yeah, I know that's helpful. I'm just trying to get some sort of direction on how we should think about the impact of that decision. But obviously, very early, and we'll see what adoption is. One other kind of what I just call a two-parter: you've been unwilling to really get into CTV before it feels like we're having a dead cat bounce and CPMs. I don't know if there's any incremental appetite to get into that side. And we're also seeing some green sheets and international interest in Michael.

So on the network side of our business as we open up those capabilities, we expect we're going to enable.

A fair number of our partners to scale their business on us substantially just by incorporating what we're already doing.

Does that answer your question Dan.

Yes, no. That's helpful. I, just trying to get sort of Directionally, how we should think about the impact of that decision, but obviously very early and we'll see what adoption is.

One other kind of lives was call. It a two parter <unk> been unwilling to really get into CTV before it feels like we're having a dead cat bounce in CPM as I don't know if theres any incremental appetite to get to get into that side and we're also seeing some green shoots in international too Michael So if you want to address both of those topics loved to hear it.

Michael L. Blend: So if you want to address both of those topics, I'd love to hear, Yeah, sure. So I'll address the first and then she can kind of talk about international. So on the CTV side, we're still not really aggressively going after it. You know, as I've mentioned in the past, we're performance-based advertisers, and we need to see measurability in terms of if we put a dollar in on CTV, we need to be able to make sure we're making over a dollar on the sell side. And some of that tracking is not really yet in place to help us support that. What I would say is that when you go beyond CTV and just kind of look at more broad-based video, everything from TikTok to YouTube to Reels, Reels on Facebook, Meta, we are starting to play a bit more heavily in the video side. And we're seeing some pretty nice beginning scales there.

Yeah sure. So I'll address the first and I'm sure you can kind of talk about international so on the CTV side, we're still really not aggressively going after it.

As I've mentioned in the past, we're performance based advertisers and we need to see.

Measure ability in terms of if we put a dollar.

Play in CTV, we need to be able to make sure we're making over one dollar on the sell side and some of that tracking is not not really yet in place to help us support that what I would say is that when you go beyond CTV and just kind of look at more broad based video.

Everything from take talk to Youtube <unk>.

Relies on Facebook on meta we are we are starting to play a bit more heavily in the video side.

And we're seeing some pretty nice.

Beginning scale there we're.

Michael L. Blend: We're seeing pretty good profitability. And that's another area where we have had a pretty good boost from AI, early stages in terms of video creation with AI, but what you've been seeing out there in the market are some capabilities of putting together these video ads in a much, much, much more efficient way. So not much directly on CTV, but video as a whole, we see a pretty good opportunity. And go ahead, Tridion International. Yeah, sure. Thanks, Dan.

We're seeing pretty good profitability and that's another area, where we have had a pretty good boost from from AI.

Early stages in terms of video creation with AI.

What <unk> been seeing out there in the market or some capability to putting together these video ads.

And in a much much much more efficient way so not much directly on CTV, but video as a whole we see pretty good opportunity.

Go ahead treaty on international.

Yes sure. Thanks, Thanks, Dan.

Tridivesh Kidambi: You know, we haven't we haven't talked about it explicitly, but it still remains a growth channel for us. So, you know, again, our current international footprint roughly, a little bit south of 20% of our total total advertising revenue comes from international, we know if we look at how that actual share is, you know, between international US in terms of total advertising spend, eventually mimic that just as we focused on, you know, the platform, the tools, and integrating AI, probably wouldn't have spent as much time thinking about and growing that international business, but it's It's a relatively easy list for us to go and do that. Again, the translation of our content creatives, et cetera, all happens pretty quickly, and being able to test or automatically test our channels, even in different languages, makes it easier for us to grow, try and grow, and focus on all of it.

We haven't talked about it explicitly it's still it's still remains.

Growth channel for Us so again our current.

Our current international footprint, roughly a little bit south of 20% of our total.

Kind of total advertising revenue comes it comes international.

If we look at just how that's how that actual share is internationally you asked in terms of total advertising spend significantly.

Higher international and so we think that we can.

And if that just as we focused on the platform the tools and integrating AI, probably not spent as much time thinking about and growing that international business, but it's still something thats on our radar.

And on the road map and again, just with the integration of these tools and ramp in general.

Relatively easy lift for us to go and do that again to the translation.

Our content creators et cetera, all happens pretty quickly.

And being able to test our automatically test our channels even in different languages makes it easier question Cross that is something we'll continue to kind of we'll continue to try and grow and focus on throughout this year and so forth.

Daniel Louis Kurnos: Awesome. Thanks for all the color, guys. Appreciate it. Yeah, thanks for joining, Dan. Your next question comes from the line of Shweta Kajuria from Evercore ISI. Please go ahead. Hey, this is Luke on behalf of Shweta.

Awesome. Thanks for all the color guys I appreciate it.

Yes, thanks for joining in.

Your next question comes from the line of <unk> <unk> from Evercore ISI. Please go ahead.

Hey, this is Luke on for <unk>.

Luke: Just two questions. Could you give us a sense, just because you operate obviously both on the buy and the sell side, what you're seeing just generally in the digital advertising space so far this year? And as we go into 2024, and you know, I know you mentioned at the end there that you're not seeing a real upturn yet. And then, just a second question, could you remind us of what your target leverage is? I think you might have said it in prior calls. Thanks. Yeah, thanks again. I'll take the first question, Tridi.

Just two questions could you give us a sense just because you operate obviously both on the buy and the sell side, what Youre seeing just generally in the digital advertising space. So far this year and as we go into 2024 and I know you mentioned at the end there that youre not seeing a real upturn yet and then just the second question could you remind us of what your TARP.

<unk> Leverages I think.

You might have said in prior calls thanks.

Yes, so again I'll take the first question is really you can take the second I'd kind of call. It goldilocks at this point in terms of what the overall advertising markets market looks like for US right now not not call, we haven't seen a big bounce back.

Michael L. Blend: You can take the second one. I'd kind of call it Goldilocks at this point, in terms of what the overall advertising market looks like for us right now. Not hot, not cold.

Michael L. Blend: We haven't seen a big bounce back yet. The quarter did start off a little bit slow, and slow for us. A lot of that, we believe, had to do with like the calendar days of the year in terms of when it started, but then kind of heading into kind of the mid to end of January, we started seeing, you know, typical, you know, come back from, from, which was always almost always a slow start to the year. We're not seeing huge acceleration yet, but we're also not seeing any kind of alarming decline in the overall ad market. And, you know, we're not seeing any particular verticals that look, you know, bad or good.

The quarter did start off a little bit slow.

Slowly for us there's a lot of that we believe had to do with.

Really the calendar days of the year.

In terms of when it started but then kind of heading into kind of the mid to end of January.

We started seeing typical come back from from from was always almost always a slow start to the year.

We're not seeing huge acceleration yet, but we're also not seeing any kind of alarming decline.

And the overall ad market.

And we're not seeing any particular verticals verticals look.

Bad or good.

Michael L. Blend: So nothing, really, super out of the ordinary except that we're not ready to call a big, dramatic re-acceleration in the app business. If we see that, obviously, we'll let investors know, but so far, nothing looks like everything's re-accelerating as we talked about in the prepared remarks. Trid, do you want to take the second question?

So nothing.

Super out of the ordinary except that we are.

We are not ready to call kind of a big big dramatic re acceleration.

And the AD business and we will if we see that we will obviously, we will let investors know, but so far.

Nothing nothing.

Looks like Everything's re accelerating as we talked about in the prepared remarks.

Sure do you want to say the second question.

Tridivesh Kidambi: Perfect. Thanks, Luke. So yeah, our target, like we have to this report, so our target leverage is to get closer to, you know, that three times range. Again, above that now, I mentioned in my remarks, a little bit south of five times a 4.8, you know, after the Dutch. But, you know, our target where we'd like to be operating or, you know, we're trying to get through both organic growth and other things is push. Great, thank you so much.

Okay. Thanks, Thanks Luke.

So yes, our target like we have said is of course, our target leverages should get closer to that three times range.

Again.

Above that now as I mentioned in my remarks, a little bit south of five times or four eight.

After the Dutch auction.

But our target, we're where we'd like to be operating or I'm trying to get through both the organic growth and other things is questions about three times.

Great. Thank you so much.

Thomas Forte: Thanks. Your next question comes from the line of Thomas Forte from Maxim Group. Go ahead. Great, so Michael and Tridie, congrats on the quarter and the successful divestiture. I think I have six total, so I'll go one at a time.

Thanks.

Your next your next question comes from the line of Thomas Forte from Maxim Group.

Please go ahead.

Great. So Michael its really congrats on the quarter and the successful divestiture I think six total so I'll go one at a time.

Michael L. Blend: You've made a lot of progress on strengthening your balance sheet. Can you talk about your plans to continue doing so in 2024? Sure. And then, you know, I can give you a brief overview entry. You can follow up if you want. So thanks, Tom. And thanks for joining us.

You've made a lot of progress on strict in your balance sheet can you talk about your plan to continue doing so in 2024.

Okay.

Sure and then I can give you a brief overview entry you can follow up if you want.

Thanks, Tom and thanks for joining yes, it was a.

Michael L. Blend: Yeah, it was Q4 and selling total security had a really positive effect on our balance sheet. We're happy about that. On a go forward basis, we're, you know, we've got cash on the balance sheet, we're going to be pretty conservative about how we use that. You know, we can, you know, take a look at, find some dead bats that that would have a good effect.

Q4, selling until security was a had a really positive effect on our balance sheet. We're happy about that on a go forward basis.

Cash on the balance sheet, we're going to be pretty conservative about how we use that.

We can take a look at it.

Some debt that.

That would have a good effect.

Michael L. Blend: We're going to look at acquisitions. If we do acquisitions, they've got to be low risk and accretive quite quickly. Probably what we're most focused on would be our organic growth.

We're going to look at.

Acquisitions, if we do acquisitions they've got to be.

Low risk and accretive quite quickly.

Probably what we're most focused on would be our organic growth.

Michael L. Blend: We believe we've got a nice business ready to scale, and as that business is organically growing, we'll be using that cash to, you know, further pay down the debt on our balance sheet. So, you know, I guess, in summary, we do have cash on the balance sheet that can be used. But when we do use it, we're going to be pretty conservative with it. And organic growth is what we're focused on. Trid, do you have any follow-up to that? Oh, yeah, no, that's the total menu. Yeah.

We believe we've got a nice business ready to scale.

And as that business is organically growing will be using that cash to further pay down the debt.

On our balance sheet so.

I guess in summary, we do have cash on the balance sheet to be used.

But when we do use it we're going to be pretty conservative with it.

Organic growth is what we're focused on.

Do you have any follow up to that.

Yes.

That's the total many of you.

Michael L. Blend: So, Michael, you sort of touched on this in that answer, but on the M&A front, I would imagine there are a lot of assets that might be available at attractive prices. Can you just talk about whether we should assume that your strategy going forward has been, I guess, the strategy you've employed mostly over time, which is smaller scale, kind of widely accretive deals versus maybe larger scale ones? Yeah, I mean, that's a good assumption, Tom.

So Michael you touched on this in that answer but on the M&A front.

I would imagine.

There is a lot of assets that might be available at attractive prices.

Can you just talk about.

Should we assume that your strategy going forward.

Has been I guess, the strategies employed mostly overtime, which is smaller scale kind of widely accretive deals versus maybe larger scale ones.

Yes, I mean, that's a good assumption Tom so so you're correct on the first part were seeing a lot of companies.

Michael L. Blend: So, you're correct on the first part, we're seeing a lot of companies in the market right now. And, you know, while I haven't done kind of a formal analysis on multiples, I can tell you that it does seem as though pricing is coming down, people are starting to be a little more realistic about the value of their companies, and we're just seeing a lot of them out there. You know, we do plan on being conservative; anything we buy has got to be pretty low risk, and likely, it's got to be, we're looking for tuck-in acquisitions that complement the core business. I don't think right now we're looking to do anything dramatically large.

In market right now.

And.

Well I havent done kind of a formal analysis on multiples I can tell you that.

It does seem as though pricing is coming down people are starting to be a little more realistic about the value of their companies and were just seeing a lot of them out there.

So are we.

We do plan on being conservative we anything we buy has got to be pretty low risk.

Likely has got to be we're looking for tuck in acquisitions that complement the core business.

I don't think right now we're looking to do anything.

Dramatically large.

Michael L. Blend: And so, you know, kind of on a go forward basis, I said, we're really looking for deals that are going to support the organic growth of the core business that is right in our wheelhouse. If we do go into other areas on the advertising side, it likely would be with. Pretty small acquisitions that might have a product that would get us to market quicker, but nothing super aggressive planned right now. Great. And then for my next one, this is one of those where I really don't know the answer, so I look forward to your thoughts on this one, Michael.

And so you know kind of on a go forward basis as I said, we're really looking for deals that are going to support the organic growth.

The core business that are right in our wheelhouse, if we do go into other areas of on the advertising side, it likely would be with.

Pretty small acquisitions it might have a product that that would get us to market quicker.

But nothing Super aggressive planned right now.

Great and then for my next one this is one of those where.

Really don't know the answer so I look forward to your thoughts on this and Michael So with this being a presidential election year. Historically is that a is that had a positive or negative impact on your digital advertising efforts, including raising the cost of AD impressions.

Michael L. Blend: So with this being a presidential election year, historically, has that had a positive or negative impact on your digital advertising, including raising the cost of Adam? So we would see that you get what you'll see more with the election year advertising is kind of on the branded side of the business, not so much from the performance side. I think that you'll see growth in overall impressions as people are just kind of tuned to the news a bit more. We typically haven't really seen a really measured effect on election year advertising in our business.

Yeah.

So we would see that you get.

You'll see more with the election your advertising is kind of on the branded side.

Of the business not so much on performance side, I think that Youll see.

Growth in overall impressions as people are just kind of two new the news a bit more.

We typically haven't really seen a really measured effect.

On election, your advertising on our business.

Michael L. Blend: Unlike, you know, some businesses, I'm sure CTV, you know, I would suspect will do all right as ads come on. But what I would mention, Tom, is, kind of heading into the latter half of the year on the branded side of programmatic advertising, you're going to see a pretty substantial market shift as Google deprecates Cookies and Chrome, which it looks like they're still going to be doing in the back half of the year. We expect that will bring down pricing overall for display and programmatic.

Unlike some businesses I'm sure CTV obviously.

Spectrum.

As Bret.

Does come on but what I would mentioned time, Inc.

Kind of heading into the latter half of the year on the branded side.

Programmatic advertising, you're going to see a pretty substantial.

Uh huh.

Market shift as Google deprecated cookies in chrome, which it looks like there's still going to be doing the back half of the year.

We expect that will bring.

Bring down pricing.

Overall in display and programmatic and so any kind of effect you would see on the election side with.

Michael L. Blend: And so any kind of effect you would see on the election side with, you know, pricing going up, potentially with a little bit more cash coming into the system, we believe would be more than counterbalanced by pricing coming down related to cookie deprecation. If that happens, which we're hoping, you know, frankly for Sys1, it will happen, we should see some pretty positive effects on the buy side of our business, keeping in mind that a lot of our business is gonna be contextual-based advertising, not really reliant on third-party cookies. Great All right, three more.

With pricing going up potentially with a little bit more cash coming into the system.

We believe would be more than counterbalanced by.

Pricing coming down related to cookie deprecation.

If that happens, which we're hoping.

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We should see some pretty positive effects on the buy side of our business.

Keeping in mind that a lot of our business is going to be contextual based advertising not really reliant on third party cookies.

Great Alright, three more so there've been a number of e-commerce companies, commenting that T moonshine or raising the cost of their digital advertising, giving their heavy spending is this the situation that's impacted you or did you.

Michael L. Blend: So there have been a number of e-commerce companies commenting that Timo and Shine are raising the cost of their digital advertising due to their heavy spending. Is this a situation that's impacted you, or that you've been able to take advantage of? So we're not, again, this is an area where we have not seen a direct effect. It may be moving some of the market, actually, I'm relatively confident it's moving some market prices on kind of the app side of the business and within, you know, kind of the Facebook ecosystem and TikTok ecosystem, but some of those areas are where we're kind of beginning to scale much more, and so we're working on a smaller And then, as AI is employed more broadly in search, how may that have a positive or negative impact on your ability to measure consumer intent and on RAMP in general? So it's kind of, I guess I'd answer that in two parts. So.

Been able to take advantage of.

Okay.

So we're not again this is an area, where we have not seen indirect effect.

It may be moving some of the market actually I am relatively confident it's moving some market pricing on kind of the.

The app side of the business and.

Within kind of the Facebook ecosystem, and Tic Tac ecosystem, but some of those areas are where were kind of being a scale much more.

And so we're working off a smaller base for instance on the video side.

On the buy side and so I I at this point can't really can't really point to any directly no negative effect on our business from from kind of the Chinese E Commerce companies.

Great and then as AI is employed more broadly in search hanmi that have any positive or negative impact on your ability to measure consumer intent and on.

Ramp in general.

So it's kind of a I guess I'd answer that in two parts. So.

Michael L. Blend: AI for us, you know, I've kind of mentioned the incorporation directly into our platform, which has been really good. We've seen really positive effects. On the AI side of search, if that kind of starts eating away at the search market share, we won't be exposed to that in a broad way.

AI for us.

Mentioned, the incorporation directly into our platform, which has been really good.

We've seen really positive effects on the AI side on search.

If that if that kind of starts eating away at search market share.

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We won't be we won't be exposed to that in a Broadway.

Michael L. Blend: What we would expect to see, particularly given our relationships with some of the really large search engines out there, like Google and Bing, being the most prominent. If they start seeing declines in overall search query volume, then they would look more towards their partner business, which we play a part in, to get distribution for their advertising networks. So, what we would suspect is that if they start seeing reduced queries on their own search engines, they might be a little bit more aggressive in working with their network partners like Sys1. And so, while we don't see any really..., you know, potential negative effects on our buy side of the business. We would anticipate seeing some positive effects on the sales side of our business. Great, last one, and then thanks again for taking all my questions.

What we would expect to see particularly given our relationships.

Some of the really large search engines out there Google.

Google and being being the most prominent.

If they started seeing declines in overall search query volume then they would look more towards their partner business, which we play a part of to get distribution for their advertising networks.

So we would suspect is that if they started seeing reduced queries on their own search engines.

There might be a little bit more aggressive and working with their network partners like system one.

So while we don't see really.

Okay.

Potential negative effects on our buy side of the business.

We would anticipate seeing some positive effects on the sell side of our business.

Great last one and thanks again for taking all my questions can you tell us where you are today on leveraging tic Tac and if the law were passed in the U S spanning it from App stores would that have any impact on you.

Michael L. Blend: Can you tell us where you are today on leveraging TikTok and if the law were passed in the U.S. banning it from app stores, would that have any impact? Yeah, so we're just starting to scale TikTok. You know, we are seeing that, you know, pretty decent volume from their network. Some of that is international. You know, some of it's domestic.

Yes, so we're just starting to scale tick tock.

We are seeing.

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Pretty decent volume from their network that some of that is international.

Some of it's domestic.

Michael L. Blend: So but the nice thing about TikTok and our kind of move into video on the buy side is that the ad creatives are pretty similar across all the networks. So the work we're doing, for instance, in which we're starting with TikTok, and then kind of moving those that advertising over to YouTube and Reels, and some of the other video platforms, what we would expect to see if TikTok were, you know, to dramatically go away, is a lot of those video views are going to move over to the other video platforms, people just aren't going to change their media consumption and people, you know, like the average consumer, that's, you know, somewhat addicted to scrolling through TikTok is now starting to scroll through Reels in the same manner.

So, but the nice thing about take talk in our in our kind of move into video on the buy side is that the AG creators are pretty similar across all the networks. So the work we're doing for instance, in which Youre, starting with Tic Toc, and then kind of moving those that advertising over to Youtube in Reals.

And some of the other video platforms, but we would expect to see it take time.

Dramatically go away is a lot of those video views are going to move over to.

The other video platforms people, just aren't going to change their media consumption and people like the average consumer.

That's somewhat addicted to scrolling through take Tog is now starting to scroll through reals in the same manner.

Michael L. Blend: And so we would suspect a lot of that, a lot of that viewership would go over to the other platforms where we're starting to scale. So we wouldn't anticipate a big, big negative effect that TikTok will go away. There will for sure be disruption in the market if that happens. And you're going to see a lot of advertising dollars that are currently on TikTok roll over to the other platforms relatively quickly. So, while we don't anticipate, you know, negative effects, I would think that if TikTok were to get banned from the U.S. app store, there would be two or three months of pretty significant disruption in that particular marketplace.

And so we would suspect a lot of that a lot of that viewership would go over to the other platforms, where we're starting to scale. So we would anticipate.

Big.

Big negative effects. It tick tock will go away there will for sure be disruption in the market if that happens.

And youre going to see a lot of advertising dollars.

Currently on take tug rollover to the other platforms.

Relatively quickly.

So while we don't anticipate negative effects I would think over it.

Kicked off where to get banned from the U S. App store theres going to be two or three months of.

Yeah.

Pretty large disruption in that particular marketplace.

Michael L. Blend: Great. Thanks, Michael. Thanks, Trudy, for taking my question. Thanks, Tom. We have no further questions in our queue at this time. I will now turn the call back over to Michael Blend for closing remarks. Okay, great.

Great. Thanks, Michel Thanks, Judy for taking my questions.

Thanks, Tom I appreciate it.

I suddenly have no we have no further questions in our queue. At this time I will now turn the call back over to Michael blend for closing remarks.

Michael L. Blend: Well, thanks, everybody, for joining us early on a Monday morning. We appreciate your following Sys1, and we appreciate your support. As I mentioned, Q4 was a pretty substantial, very busy quarter for us, and we made some pretty big changes to our business. We believe these set us up for a lot of success on a go-forward basis.

Okay, great well, thanks, everybody for joining us early on a Monday morning.

We appreciate your following system one appreciate your support.

As I mentioned Q4 was a pretty substantial.

Very busy quarter for us and we've made some pretty big changes to our business, we believe setting us up for success.

Success on a go forward basis. So we look forward to reporting that to you in the future and I'm going to wrap up the call, but look forward to joining you next quarter for our next quarter's earnings call. Thank you very much.

Operator: So we look forward to reporting that to you in the future. And I'm going to wrap up the call, but look forward to joining you next for our next quarterly earnings call. Thank you very much. This concludes today's conference call. Thank you for your participation, and you may now disconnect.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Okay.

Yeah.

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Yeah.

Yeah.