Q1 2024 System1 Inc Earnings Call
Sarah: Hello, my name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the System 1 Q1 earnings call. All lines have been placed on mute to prevent any background noise.
Hello, My name is Sarah and I will be your conference operator today at this time I would like to welcome everyone to the system. One Q1 earnings call all lines have been placed on mute to prevent any background noise.
Sarah: After the Speakers' remarks, there will be a question and answer session and instructions will be provided at that time.
Sarah: After the speaker's remarks, there will be a question and answer session, and instructions will be provided at that time. I would now like to turn the conference over to Kyle Ostgaard, Vice President of Finance. You may begin.
Kyle Ostgaard: I'd now like to turn the conference over to Kyle asked Guard Vice President of Finance you may begin.
Kyle Ostgaard: Thank you for standing by and welcome to the first quarter of 2024 conference call for system one.
Kyle Ostgaard: Thank you for standing by, and welcome to the first quarter of 2024 conference call for System 1. Joining me today to discuss Sys1's business and financial results are co-founder and CEO Michael Blend and our Chief Financial Officer Tridivesh Kidambi.
Kyle Ostgaard: Joining me today to discuss system was business and financial results, our cofounder and CEO, Michael <unk>, and our Chief financial officer to the Us could Avi.
Kyle Ostgaard: 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, including 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.
Speaker Change: A recording of this conference call will be available on our Investor Relations website. Shortly after this call has ended.
Kyle Ostgaard: 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. These include, 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.
Kyle Ostgaard: 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 matters. These statements are subject to known and on.
Kyle Ostgaard: Known risks and uncertainties that could cause our actual results to differ materially from those projected or implied during this call and particularly those described in our risk factors included in our annual report on Form 10-K for the fiscal year 2023 filed on March 15, as well as the current uncertainty and unpredictability in our business the markets in the global economy.
Kyle Ostgaard: Generally.
Kyle Ostgaard: 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.
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 future estimates provided during this call exclude results from total security. Information regarding our non-GAAP financial measures, including a reconciliation of our non-GAAP financial measures to our most comparable historical GAAP financial measures, can be found on our Investor Relations website.
Kyle Ostgaard: 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.
Kyle Ostgaard: Historical performance and future estimates provided during this call exclude results from total security.
Kyle Ostgaard: 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.
Kyle Ostgaard: I would now like to turn the conference call over to Sys1's Co-Founder and Chief Executive Officer, Michael Blend. Thanks, Kyle. Good job.
Kyle Ostgaard: I would now like to turn the conference call over to system ones co founder and Chief Executive Officer, Michael Bowen.
Michael L. Blend: Thanks, Kyle. Good afternoon, everyone, and thanks for joining us on our Q1 System 1 earnings call. Let's get right into our quarterly performance. I'm happy to announce that Sys1 was able to deliver financial results that exceeded our earlier guidance. Sys1 delivered $85 million of revenue and $31 million of gross profit; adjusted EBITDA was $423,000; owned and operated revenue was $69 million, down 35% year over year and down 13% from last quarter. This was driven by a 12% sequential decline in advertising spend.
Michael L. Blend: Thanks, Kyle good afternoon, everybody and thanks for joining us on our Q1 system one earnings call.
Michael L. Blend: So, let's get right into our quarterly performance.
Michael L. Blend: I'm happy to announce that system was able to deliver financial results, which exceeded our earlier guidance.
Michael L. Blend: System, one delivered $85 million of revenue and $31 million of gross profit adjusted EBITDA was $423000.
Michael L. Blend: Owned and operated revenue was $69 million down 35% year over year and down 13% from last quarter.
Michael L. Blend: This was driven by a 12% sequential decline in advertising spend we generated over $1 2 billion sessions, and 18% year over year increase and a 14% quarter over quarter increase.
Michael L. Blend: We generated over 1.2 billion sessions, an 18% year-over-year increase, and a 14% quarter-over-quarter increase. Spread was approximately $0.02 per session. International revenue continued to remain a highlight, with international revenue representing approximately 29% of owned and operated revenue. This is up from 25% of owned and operated revenue in Q4 of 2023. Overall, Q1 was somewhat choppy but ended on a positive note. The overall advertising marketplace started off a bit weak in January but improved as the quarter progressed. This pattern was expected to match what we see in a typical QWIM.
Michael L. Blend: That was approximately <unk> <unk> per session.
Michael L. Blend: International revenue continued to remain a highlight with international revenue, representing approximately 29% of owned and operated revenue.
Michael L. Blend: This is up from the 25% of owned and operated revenue in Q4 of 2023.
Michael L. Blend: Overall Q1 was somewhat choppy, but ended on a positive note.
Michael L. Blend: The overall advertising marketplace started off a bit weak in January and improved as the quarter progressed.
Michael L. Blend: This pattern was expected to match, what we see in a typical Q1.
Michael L. Blend: Our Q1 volatility was driven primarily by our Google relationship, which, as a reminder, is our largest revenue source. We saw significant volatility from Google during the quarter. Their sell-side pricing moved around more than typical, and the Google product team introduced new features at a very rapid pace with minimal advance notice to us. Longer term, this is a good thing for Sys1. We work closely with Google to integrate new features into our tech stack, and their product improvements almost always lead to increased revenues for Sys1. In the short term, however, the rapid fire of Google changes caused quite a bit of volatility in the overall Google partner ecosystem. However, things have begun to stabilize with Google.
Michael L. Blend: Our Q1 volatility was driven primarily by our Google relationship, which as a reminder, is our largest revenue source.
Michael L. Blend: We saw significant volatility from Google during the quarter, the sell side pricing moved around more than typical and the Google product team introduced new features at a very rapid pace with minimal advanced notice to us.
Michael L. Blend: Longer term. This is a good thing for system wide, we worked closely with Google to integrate new features into our tech stack.
Michael L. Blend: There are product improvements almost always lead to increased revenues for system wide.
Michael L. Blend: In the short term however, the rapid fire, Google changes caused quite a bit of volatility in the overall Google partner ecosystem.
Michael L. Blend: Unfortunately things to begin to stabilize the Google The last couple of weeks of Q1 were particularly strong and these favorable trends have continued through the early weeks of Q2.
Michael L. Blend: The last couple weeks of Q1 were particularly strong, and these favorable trends have continued through the early weeks of Q2. If Google pricing and product rollout stay consistent, we expect all of our marketing-driven business lines to benefit. Partner network revenue was $16 million, and gross profit was $11 million.
Michael L. Blend: A Google pricing and product Rollouts taken assistant we expect all of our marketing driven businesses lines light is the benefit.
Michael L. Blend: Partner network revenue was $16 million in gross profit was $11 million revenue increased 5% year over year, but was down 5% sequentially as we expected due to typical seasonality.
Michael L. Blend: Revenue increased 5% year over year but was down 5% sequentially, as we expected due to typical seasonality. Sessions were $1 billion, up 134% year over year and 32% sequentially as traffic from existing partners increased along with new partners joining the network. Partner Network RPS declined 55% year-over-year and 28% quarter-over-quarter, driven by the same marketplace headwinds that impacted our owned and operated business.
Michael L. Blend: Session is over $1 billion up 134% year over year, and 32% sequentially as traffic from existing partners increase along with new partners joining the network.
Michael L. Blend: Network, Rps declined 55% year over year, and 28% quarter over quarter, driven by the same marketplace headwinds that impacted our own owned and operated business.
Michael L. Blend: The marketplace headwinds, we faced in our O&M business, namely narrowing rps spreads and volatility and sell side pricing were shared by our partners as well.
Michael L. Blend: The marketplace headwinds we faced in our O&O business, namely narrowing RPS spreads and volatility in sell-side pricing, were shared by our partners as well. But notwithstanding that, our partner network business continues to perform through solid execution, as well as what we believe is the attractiveness of our RAMP platform. Key metrics evidencing this include, in Q1 of 24, total active partners grew 5% from Q4 to over 250 total partners. Average revenue per partner decreased sequentially by 9% due to Q1 seasonality and shoppiness in the marketplace.
Michael L. Blend: But notwithstanding that our partner network business continued to perform through solid execution as well as what we believe is the attractiveness of our ramp platform.
Michael L. Blend: Key metrics evidenced this include in Q1 of 'twenty four total active partners grew 5% from Q4 to over 250 total partners.
Michael L. Blend: Average revenue per partner decreased sequentially by 9% due to Q1 seasonality and choppiness in the marketplace.
Michael L. Blend: Remember, when partners join our RANP platform, there's a time frame during which they begin to scale up with us. This is a function of the partner getting more familiar with our platform, as well as our constant evaluation and monitoring of their traffic quality. We consider a platform partner to be a scaled partner when they're generating at least $50,000 of revenue per quarter on-ramp.
Michael L. Blend: Remember when partners join our ramp platform there is a timeframe during which they begin to scale up with US. This is a function of the partner getting more familiar with our platform as well as our constant evaluation and monitoring of their traffic quality.
Michael L. Blend: We consider a platform partner partner to be a scaled partner when they are generating at least $50000 of revenue per quarter on ramp.
Michael L. Blend: At the end of Q1, we had 57 scale partners compared to 50 scale partners in Q1, 23, representing a 14% growth rate. Moreover, as I mentioned previously, our partners are using us more and for more sessions. It is our hope that as the advertising market continues to improve, the combination of our growth in the number of scale partners and the increase in the number of sessions will accelerate the growth of our partner network.
Michael L. Blend: At the end of Q1, we had 57 scale partners compared to 50 scale partners in Q1 of 'twenty, three representing a 14% growth rate.
Michael L. Blend: Moreover, as I mentioned previously our partners are using us more and for a more sessions. It is our hope that as the advertising market continues to improve the combination of our growth in number of scale partners and the increase in the number of sessions.
Michael L. Blend: We will accelerate the growth of our partner network business.
Michael L. Blend: Moving to our organic businesses, they had a good quarter on several fronts. First, we saw a significant increase in organic traffic to MapQuest and CouponFollow that began in March and should continue through Q2. These increases were driven primarily by favorable changes in the Google search algorithm.
Michael L. Blend: Moving to our organic businesses they had a good quarter on several fronts first we saw a significant increase in organic traffic. The Mac question coupon follow that began in March and should continue through Q2.
Michael L. Blend: These increases were driven primarily by favorable changes in the Google search algorithms.
Michael L. Blend: We've been working very hard to improve the customer experience on these sites and with the hope that our Google rankings would improve. Fortunately, our efforts have begun paying off with increased traffic that directly drives corresponding increases in revenue. We also saw the launch of several key business development partnerships with our start page and coupon file properties that we expect to begin paying dividends as the year progresses. Going forward, we are focused on a few key areas.
Michael L. Blend: Been very working very hard to improve the customer experience on these sites and the hope or Google rankings would improve.
Michael L. Blend: Fortunately our efforts to begin begin paying off with increased traffic that directly drives corresponding increases in revenue.
Michael L. Blend: We also saw the largest launch of several key business development partnerships with our to start patient coupon followed properties that we expect to begin paying dividends as the year progresses.
Michael L. Blend: Going forward, we are focused in a few key areas.
Michael L. Blend: First, we are continuing to invest in our RAMP platform. AI has materially improved our ability to scale our buy-side capabilities, and we plan to open up our buy-side to partners who currently use us primarily for sell-side monetization. Second, our organic properties will keep focusing on their on-site experiences, we'll be launching new and improved apps, and we'll be integrating additional distribution partnerships. Third, we're planning to start expanding our subscription business by rolling out more internally developed subscription products.
Michael L. Blend: First we are continuing to invest in our wrap platform AI has materially improved our ability to scale, our biocide capabilities and we plan to open up our buy side to partners, who currently use is primarily for sell side monetization.
Michael L. Blend: Second our organic properties will keep focusing on their own site experiences will be launching new and improved apps.
Michael L. Blend: We will be integrating additional distribution partnerships.
Michael L. Blend: Third we are planning to start expanding our subscription business by rolling out more internally developed subscription products.
Michael L. Blend: And finally, we have been back to exploring the M&A market again as the digital market has stabilized and pricing has started to get a bit more rational.
Michael L. Blend: And finally, we have been back to exploring the M&A market again as the digital market stabilizes and pricing has started to get a bit more rational. Overall, I'm very pleased with our execution in Q1, especially with respect to product enhancements on RAMP focused on AI-driven automation. We're executing with focus, and we're shipping products faster than ever. Our execution is starting to show up in our performance, and I'm increasingly confident we are moving back into growth mode.
Michael L. Blend: Overall, I'm very pleased with our execution in Q1, especially with respect to product enhancements on ramp focus on AI driven automation.
Michael L. Blend: We are executing with focus and we're shipping products faster than ever.
Michael L. Blend: Execution is starting to show up in our performance and I'm increasingly confident we are moving back into growth mode.
Michael L. Blend: I'm also happy to have Chuck Orsini rejoin Sys1 in an official capacity as our President and COO. Chuck and I co-founded SystemWayne, and Chuck was our original CEO. He has driven much of our execution in the last year, and I'm happy to have him back in an official capacity.
Michael L. Blend: I also I'm happy to have checkers scenery rejoined system wide in an official capacity as our president and COO.
Michael L. Blend: Chuck and I co founded system wide and Chuck was our original CEO gives.
Michael L. Blend: He has driven much of our execution in the last year and I'm happy to have him back in official capacity.
Michael L. Blend: As I mentioned every quarter system, one management has much of our network and.
Michael L. Blend: As I mentioned, every quarter, Sys1 management has much of our net worth in Sys1 shares. We're highly aligned with our longer-term shareholders. Management is in this for the long haul, and we welcome investors who want to come along for the ride. I'll now hand things off to Tridivesh to discuss our quarterly results in more detail, as well as our Q2 guidance. Take it away, Tridivesh.
Tridivesh: <unk> system, one shares we're highly aligned with our longer term shareholders Manley.
Tridivesh: Management is in this for the long haul and we welcome investors who want to come along for the ride.
Tridivesh: I'll now hand things off the treaty discuss our quarterly results in more detail as well as our Q2 guidance.
Tridivesh: Take it away treaty.
Tridivesh: Thanks, Michael.
Tridivesh Kidambi: Thanks, Michael. As Michael mentioned, there were market-related challenges in Q1, especially early in the quarter, but we remain bullish given that March came in not just above the first two months of the quarter but also above expectations. And we delivered results above the high end of the guidance range for revenue, gross profit, and adjusted earnings. As I discussed with you about results, I want to highlight that year-over-year comparisons continue to be a challenge.
Tridivesh: As Michael mentioned, there were market related challenges in Q1, especially early in the quarter, but we remain bullish given that March came in not just about the first two months of the quarter, but also above expectations.
Tridivesh Kidambi: And we delivered results above the high end of the guidance range for revenue gross profit and for adjusted EBITDA.
Tridivesh Kidambi: As I discuss Q1 results I want to highlight that year over year comparisons continue to be a challenge as we haven't yet rebounded to the levels of advertising demand. We saw in the first half of 2023.
Tridivesh Kidambi: Due to continued macro declines in the advertising market through the first three quarters of last year.
Tridivesh Kidambi: As we haven't yet rebounded to the levels of advertising demand we saw in the first half of 2020, due to continued macro declines in the advertising market through the first three quarters of last year. And in Q1 of last year, our owned and operated SEM business still contributed $6 million of gross profit, as compared to approximately $2 million of gross profit a quarter starting in Q2 of 2023 and continuing through last year. Also, we typically expect a sequential decline in Q1 versus a seasonally strong. Now on to our operating.
Tridivesh Kidambi: And in Q1 of last year, our owned and operated SCM business still contributed $6 million or gross profit as compared to approximately $2 million of gross profit a quarter starting in Q2 of 2023 and continuing through last quarter.
Tridivesh Kidambi: Also we typically expect a sequential decline in Q1 versus a seasonally strong Q4.
Tridivesh Kidambi: Now onto our operating results Q1 revenue was $84 9 million, representing a 30% year over year decline in sequential decline of 12%.
Tridivesh Kidambi: Q1 revenue was $84.9 million, representing a 30% year-over-year decline and a sequential decline of 12%. That was good for $900K above the top end of our Q1 revenue guidance range that we provided. Own and operated advertising revenue was $69 million, representing a 35% year-over-year decline and a sequential decline of $13. Network advertising revenue was $15.9 million, up 5% year-over-year and down 5%. Adjusted gross profit was $31.2 million, down 18% year-over-year and 17% sequentially, and that was above the high end of guidance by $1.2 million.
Tridivesh Kidambi: That was good for 900 K above the top end of our Q1 revenue guidance range that we provided in March.
Tridivesh Kidambi: Owned and operated advertising revenue was $69 million, representing a 35% year over year decline the sequential decline of 13%.
Tridivesh Kidambi: Network advertising revenue was $15 9 million up 5% year over year and down 5% sequentially.
Tridivesh Kidambi: Adjusted gross profit was $31 2 million down 18% year over year and 17% sequentially.
Tridivesh Kidambi: And that was above the high end of guidance by $1 2 million.
Tridivesh Kidambi: Revenue less advertising spend for our own and operated advertising segment declined 16% sequentially to $22.5 million. Network revenue less agency fees was down 17% to $10.9 million versus the prior quarter. Own and operated, cost per session and revenue per session were both down one cent sequentially to four cents and six cents, respectively, with the spread down slightly to approximately two. On the network advertising basis, revenue per session is $0.02 per session. Most importantly, total sessions processed by RAMP in the most recent quarter were 2.26 billion, up 22% sequentially and 53% year-over-year.
Tridivesh Kidambi: Revenue less advertising spend for our owned and operated advertising segment declined 16% sequentially to $22 5 million.
Tridivesh Kidambi: Network revenue less agency fees was down 17% to $10 9 million versus the prior quarter.
Tridivesh Kidambi: Owned and operated cost recessionary revenue per session, where both down <unk> <unk> sequentially to <unk> success, respectively, with the spread down slightly to approximately <unk>.
Tridivesh Kidambi: On the network advertising business revenue per session was <unk> <unk> per session.
Tridivesh Kidambi: Most importantly, total sessions processed by ramp in the most recent quarter was $2 6 billion up 22% sequentially and 53% year over year.
Tridivesh Kidambi: Adjusted EBITDA impacting operating expenses, which are net of add-backs, were $30.8 million, down 7% year-over-year. As a reminder, we expect T1 to be the high water mark for OPEX, driven by FY23 audits. Adjusted EBITDA was $422,000 versus $5.2 million last year, which came in above the high end of the Q1 guidance range by $1.4 million. With respect to liquidity, we ended the quarter with $69.9 million of unrestricted cash on our balance sheet and a term loan balance of $296 million.
Tridivesh Kidambi: Adjusted EBITDA impacting operating expenses, which are net of add backs were $30 8 million down 7% year over year.
Tridivesh Kidambi: As a reminder, we expect Q1 to be the high watermark for Opex driven by FY2023 audit costs.
Tridivesh Kidambi: Adjusted EBITDA was 422000 versus $5 2 million last year, which came in above the high end of the Q1 guidance range by $1 4 million.
Tridivesh Kidambi: With respect to liquidity, we ended the quarter was $69 9 million of unrestricted cash on our balance sheet and a term loan balance of $296 million.
Tridivesh Kidambi: Our net leverage at quarter end was approximately 9.19. I want to reiterate my comments from our last earnings call with respect to capital structure. We remain comfortable that our current liquidity, including the $50 million of availability on a revolver, provides ample cushion for all of our short and medium-term liquidity needs. We remain highly focused on maximizing equity value for our shareholders while remaining focused on continuing to de-lever the business, and we will continue to be opportunistic on Debt Reapers. For example, we extinguished an additional $1.2 million of term debt for $720,000 in cash on April 31st.
Tridivesh Kidambi: Our net leverage at quarter end was approximately $9 one nine times.
Tridivesh Kidambi: I want to reiterate my comments from our last earnings call with respect to capital structure, we remain comfortable that our current liquidity, including the $50 million of availability on our revolver to provide ample cushion for all of our short and medium term liquidity needs.
Tridivesh Kidambi: We remain highly focused on maximizing equity value for our shareholders, while remaining focused on continuing to delever the business.
Tridivesh Kidambi: And we will continue to be opportunistic on debt repurchases. For example, we extinguished an additional $1 $2 million of term debt for $720000 of cash on April 30, and.
Tridivesh Kidambi: And, per Michael's comments, we will continue to explore creative M&A where we have a track record of execution and success. Most importantly, we will continue to prioritize investment and execution to drive organic growth in our core advertising. Although we have recently seen more stability in the market through the first several weeks of Q2, there's still quite a bit of uncertainty in the online advertising environment in which we operate, as evidenced by the recent news about Google delaying the deprecation.
Tridivesh Kidambi: On a per Michael's comments, we will continue to explore accretive M&A, where we have a track record of execution success.
Tridivesh Kidambi: Most importantly, we will continue to prioritize investment in execution to drive organic growth in our core advertising business.
Tridivesh Kidambi: Although we have recently seen more stability in the market through the first several weeks of Q2, there is still quite a bit of uncertainty in the online advertising environment in which we operate as evidenced by the recent news about Google delaying the deprecation of cookies.
Tridivesh Kidambi: So again, we will not be providing full-year guidance for 2024 at this time, other than to say that we expect to deliver year-over-year growth in revenue, adjusted gross profit, and adjusted EBITDA in the second half of 2020. We're estimating Q2 revenue to come in between $88 million and $90 million, representing an 8% year-over-year decline at the minimum. We're estimating adjusted gross profit to come in between $33 and $35 million, representing a 16% decline in the mid-term.
Tridivesh Kidambi: So again, we will not be providing full year guidance for 2024 at this time.
Tridivesh Kidambi: Other than to say that we expect to deliver year over year growth in revenue adjusted gross profit and adjusted EBITDA in the second half of 2024.
Tridivesh Kidambi: We are estimating Q2 revenue to come in between $88 million and $90 million, representing an 8% year over year decline at the midpoint. We're estimating adjusted gross profit to come in between 33 and $35 million, representing a 16% decline at the midpoint and.
Tridivesh Kidambi: And we estimate Q1 adjusted EBITDA to come in between $5 and $7 million, slightly down year-over-year. We remain cautiously optimistic about the digital advertising market stabilizing this year and remain extremely bullish about our ability to execute against both near and long-term opportunities. Thank you.
Tridivesh Kidambi: And we estimate Q1, adjusted EBITDA to come in between five and $7 million.
Tridivesh Kidambi: Slightly down year over year at the midpoint.
Tridivesh Kidambi: We remain cautiously optimistic about the digital advertising market stabilizing this year and remain extremely bullish about our ability to execute against both near and long term opportunities. Thank you.
Sarah: Thank you, Tridivesh. We are now going to open the line for some questions.
Speaker Change: Thank you <unk>, we are now going to open the line for some questions.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad. If you wish to withdraw your question simply press Star one again.
Sarah: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you wish to withdraw your question, simply press star 1 again. Your first question comes from the line of Dan Kurnos with the Benchmark Company. Your line is open.
Daniel Louis Kurnos: Your first question comes from the line of Dan <unk> with the benchmark Company. Your line is open.
Daniel Louis Kurnos: Great. Thanks, good afternoon could start to the year guys.
Daniel Louis Kurnos: Great, thanks. Good afternoon. Good start to the year guys. Maybe I guess we'll start with what Tridi just kind of talked about at a high level, you know, obviously, Google pushing out cookie deprecation till next year. There are a ton of issues around that. You know, we've also had a TikTok ban passed in the house. It seems like kind of the Wild West right now. You know, can you guys just kind of help us think through how your partners are looking at the environment right now and, within the confines of, you know, Google probably making a bunch of changes to Privacy Sandbox and a bunch of other things, just how you're thinking about being able to maintain sort of consistent spread as we go through this volatile period?
Daniel Louis Kurnos: Maybe I guess, we'll start with like Treaty, just kind of talked about kind of high level, obviously, Google pushing out cookie deprecation until next year.
Daniel Louis Kurnos: One of the issues around that we've also had a tick tock band passed in the house it seems like kind of the wild West right now.
Daniel Louis Kurnos: Can you guys just kind of help us think through how your partners are looking at the environment right now and in the confines of Google, probably making a bunch of changes to privacy sandbox and a bunch of other things just how youre thinking about being able to maintain sort of consistent spread as we go through.
Daniel Louis Kurnos: This volatile period.
Daniel Louis Kurnos: Yes.
Speaker Change: Yes, Thanks, Dan and thanks for joining good to hear from you so specifically related to cookie deprecation.
Michael L. Blend: Yeah, thanks, Dan, and thanks for joining us. It's good to hear from you.
Speaker Change: We actually think that's going to be a bit of a tailwind for us.
Michael L. Blend: So, specifically related to cookie deprecation, you know, we actually think that's going to be a bit of a tailwind for us. What's going to happen when cookies are deprecated, we're pretty highly confident, is that contextual advertising is going to be more effective as some of the third-party cookie-based advertising kind of goes away. And so, we're not concerned at all about the cookie deprecation. We're, in fact, a little bit disappointed that they ended up pushing it into 2025. We still remain highly confident that some form of that's going to be coming out. Everything we're hearing from Google is that they're talking about a delay rather than any kind of reversing their course on cookie deprecation.
Speaker Change: Going to happen when cookies are deprecated were pretty highly confident is that contextual advertising.
Michael L. Blend: It's going to be more effective as some of the third party.
Michael L. Blend: The.
Michael L. Blend: Third party Cookie based advertising on it goes away.
Michael L. Blend: And so we're not we're not concerned at all about that.
Michael L. Blend: Cookie deprecation, where we are in fact, a little bit disappointed that Dana that pushing into 2025, we still remain highly confident into some form of thats going to be coming out.
Michael L. Blend: We're hearing it from Google is that they're talking about a delay rather than than kind of <unk>.
Michael L. Blend: Reversing course on Cookie deprecation.
Michael L. Blend: TikTok specifically, we don't have much exposure there. We do advertise on TikTok through the network. It's been pretty effective for us. Most of our exposure, though, is international. So, we don't expect that people from the U.S. will continue to be able to advertise via TikTok in the international market. So, we don't really anticipate any problems there. I mean, overall, at kind of a macro level. You know, we're starting to see, I would say, the overall advertising market, and you've seen this in the people reporting their Q1s. Looks like we're starting to see things relatively stable. We're always reluctant to kind of call it stability and call it growth in the back half, but we don't really see anything that's particularly alarming right now.
Michael L. Blend: Kicked off.
Michael L. Blend: Specifically, we don't have much exposure there we do advertise on take talk to.
Michael L. Blend: The network its been pretty.
Michael L. Blend: Effective for US most of our exposure, though is international.
Michael L. Blend: So we don't expect that domestic people from the U S will continue to be able to advertise via take talk.
Michael L. Blend: In the international markets. So we don't we don't really anticipate any problems there.
Michael L. Blend: I mean overall in kind of a macro level.
Michael L. Blend: We're starting to see I would say the overall advertising market and you've seen this in the people reporting.
Michael L. Blend: Q1s.
Michael L. Blend: Looks like we're starting to see things relatively stable.
Michael L. Blend: We're always reluctant to kind of call the stability and call the growth in the back half, but we don't really see anything that's particularly alarming right now.
Michael L. Blend: Yes.
Michael L. Blend: Yes.
Daniel Louis Kurnos: Got it. That's really helpful. And since you brought up international, Michael, I feel like I ask you this on every call and, you know, sort of like it's coming. It's coming. You know, you flagged it as a highlight, especially in O&O in Q1.
Speaker Change: Got it that's really helpful and since you brought up international Michael I feel like I ask you. This every call and sort of like it's coming it's coming.
Daniel Louis Kurnos: Flagged it as a highlight especially in <unk> in Q1, and just kind of curious what sort of opportunity set you are seeing further from here.
Michael: I mean sure you can kind of talk about the numbers specifically about we're definitely remain under indexed internationally starting to tick up you want to kind of talk about where we are they're treated yes. I think we mentioned in the prepared remarks that international as a percentage of our owned and operated revenue was close to 30%, 29% in Q1 up from 25% in Q4 and so again.
Michael L. Blend: And just kind of curious, what sort of opportunity set are you seeing further from here?
Tridivesh Kidambi: I'm sure you can kind of talk about the numbers specifically, but we definitely remain under indexed. International is starting to pick up. Would you like to kind of talk about where we are there, Tridivesh?
Tridivesh Kidambi: Yeah, I think we mentioned in the prepared remarks that international as a percentage of our own and operated revenue was close to 30 percent, 29 percent in Q1, up from 25 in Q4. And so, again, you know, I think for our internal efforts, we're doing a good job marching against, you know, getting closer to where we think that should be on a worldwide basis, which is, you know, in and around 50 percent.
Tridivesh Kidambi: I think for our internal efforts, we're doing a good job marching against.
Tridivesh Kidambi: We're getting closer to where we think that should be on a worldwide basis, which is in.
Tridivesh Kidambi: And so we think we're making good progress there overall. We're a bit under-indexed in the EU, and the EU, in particular, has had varying – they're rolling out kinds of privacy-related things, and privacy-related regulation at a pretty rapid pace in the EU.
Tridivesh Kidambi: Around 50%.
Tridivesh Kidambi: And so we think we're making good progress there.
Tridivesh Kidambi: Overall.
Tridivesh Kidambi: We're a bit under indexed in the EU and the EU in particular has had a.
Tridivesh Kidambi: Varian.
Tridivesh Kidambi: They're rolling out kind of privacy related things.
Tridivesh Kidambi: Privacy related.
Tridivesh Kidambi: Regulation at pretty rapid pace in the EU, So our owned and operated under indexed in the EU, but also our partner network as well.
Michael L. Blend: So our owned and operated business is under-indexed in the EU, but also, our partner network as well, you know, is under-indexed in the EU, so we see a lot of opportunity there. In Asia, we're doing pretty well. I would say South America; there's opportunity there, although that's not really where the real money is. The real money is going to be international. It's going to be in the EU, a kind of UK and Asia. But, you know, we think we'll continue growing our overall share.
Michael L. Blend: It was under index in the EU, So we see a lot of opportunity there.
Michael L. Blend: Asia, we're doing pretty well I would say South America.
Michael L. Blend: There is opportunity there, although that's not really where the real money is the real money is going to be international is going to be in the EU.
Michael L. Blend: UK and Asia.
Michael L. Blend: But we think we will continue growing our overall share internationally.
Michael L. Blend: Without giving away your roadmap, is there anything else you can share with us on internal developments as it relates to things you're doing with Startpage or Coupon Follow and how that might be additive to the balance of the year? And Michael, it's interesting to hear the commentary about internally developed subscription products, given the history. I'm sure you have plenty of experience now, and you certainly had some before, so I'd love to get some color on how you're thinking about attacking that, Tam.
Michael L. Blend: Without giving away your.
Speaker Change: Road map is there anything else you can share with us on either the internal developments as it relates to things Youre doing with star Pedro coupon follow and how that might be additive to the balance of the year and Michael interesting to hear the commentary about internally developed subscription products given the history I'm sure you have plenty of experience.
Michael L. Blend: Now and you certainly had some before so just love to get some color on how youre thinking about attacking that Tam as well.
Michael L. Blend: Yeah, I'll kind of answer those sequentially, I think, Dan. So we had mentioned one thing on the coupon follow on MapQuest site specifically in Q1 kind of in March. Google started rolling out one of their core algorithm updates, and we benefited from that algorithm update. So MapQuest and achieve some better positioning basically in the Google rankings. Doing that requires a lot of hard work.
Michael: Yes, I'll kind of answer those sequentially I think I think Dan. So so we had mentioned.
Michael L. Blend: One thing on the coupon follow and map quest side specifically.
Michael L. Blend: In Q Q1 kind of in March.
Michael L. Blend: <unk> started the rollout one of their core algorithm updates.
Michael L. Blend: And we benefited from the from that algorithm update so map quest in both coupons follow.
Michael L. Blend: Achieve some some better better positioning basically in the Google and Google rankings.
Michael L. Blend: Doing that requires a lot of hard work you spent some time on the customer experience on your sites and you can spend six to 12 months, improving the customer experience and it takes a long time for that to pay off.
Michael L. Blend: You spend some time on the customer experience on your sites, and you can spend 6 to 12 months improving the customer experience, and it takes a long time for that to pay off in the Google rankings. So we're really pleased to see that roll out and to see its benefits. And that rolled out in March, and so we got some of the benefit in March. I think we'll continue to see that benefit accrue. Really through the rest of the year, because we've remained at that level that we saw in March, and in some cases, we're continuing to improve in the rankings.
Michael L. Blend: And the Google rankings. So we're really pleased to see that see that rollout into <unk> benefit and that rolled out in March and so we got some of that benefit in March I think we'll continue seeing that that benefit.
Michael L. Blend: Crew really through the rest of the year.
Michael L. Blend: It's remained at that level.
Michael L. Blend: That we saw in March and in some cases, we're continuing to improving the rankings.
Michael L. Blend: We have been making, we're not ready to announce anything right now, but we have been making some pretty good progress in putting together what we think are going to be some really interesting apps, related, both on the MapQuest start page and then on the coupon follow side. And so we do intend on rolling those out, you know, most likely in Q2. We could see some slippage into Q3 for one or two of them.
Michael L. Blend: We have been making we're not ready to announce anything right now, but we have been making some pretty good progress.
Michael L. Blend: In in putting together, what we think are going to be some really interesting apps related on both on the map quest start page and then.
Michael L. Blend: On the coupon follow aside.
Michael L. Blend: So we do intend on rolling those out.
Michael L. Blend: Most likely in Q2, we could see some slippage into Q3 for one or two of them.
Michael L. Blend: And those are going to be a mix, Dan, both advertising via kind of our typical monetization via our typical advertising tech stack, and we also are going to be getting – you know, we anticipate getting back into the subscription business. And just as a reminder, Dan, we sold our large subscription business, you know, last year. But we do have a smaller subscription business that we're still operating. And we think we've got a lot of in-house expertise, both in how to build those subscription products and also how to market them. So we're going to leverage that expertise across additional products.
Michael L. Blend: And those are going to be a mix of Dan both advertising via via kind of our typical monetizing via our typical advertising.
Michael L. Blend: Tech stack and we also are going to be getting and we anticipate getting back into a subscription business and just as a reminder, Dan we sold our largest subscription business.
Michael L. Blend: Last year, we do have a smaller subscription business there were still operating.
Michael L. Blend: And we think we've got a lot of in house expertise both in how to build a subscription products, but also out of market market them. So we're going to leverage that expertise across additional products.
Speaker Change: Perfect Super helpful guys I appreciate it I'll get back in the queue. Thank you.
Daniel Louis Kurnos: Perfect. Super helpful, guys. I appreciate it. I'll get back in the queue. Thank you.
Sarah: Thanks, Dan. Thanks for joining us.
Speaker Change: Thanks, Dan Thanks for joining us.
Sarah: Your next question comes from the line of Thomas Forte with Maxim Group. Your line is open great.
Thomas Forte: Your next question comes from the line of Thomas Forte with Maxim Group. Your line is open. Good.
Thomas Forte: Great. So first off, Michael and Trini, congrats on the quarter. You sound very optimistic about your business, which is encouraging to hear. One question and one follow-up. So Michael, when I think about your core competency, it's connecting advertisers and consumers with intent. The consumer environment, the consumer spending environment right now, is pretty challenging. So I'm wondering how you're navigating those challenges and then whether you've ramped up your efforts in travel or some additional categories to perhaps mirror where discretionary spending is focused today.
Thomas Forte: So first off Michael and treated congrats on the quarter.
Thomas Forte: Sound very optimistic on your business, which is encouraging to hear.
Thomas Forte: One question and one follow up so Michael when I think about your core competency, it's connecting advertisers and consumers with intent.
Thomas Forte: Consumer environment, the consumer spending environment right now is pretty challenging so I'm wondering how you're navigating those challenges.
Thomas Forte: Then if you've ramped your efforts in travel or some additional categories.
Thomas Forte: Sure.
Thomas Forte: Perhaps mirror, where the discretionary spending is focused today.
Thomas Forte: Uh huh.
Michael L. Blend: Yeah, Tom, as we've talked about, you know, over several quarters, so when consumer demand is kind of moving up or down, what that generally does is affect pricing on the buy side. So as the economy is shifting around, while we do see the effects of it, we're able to kind of change our pricing to follow consumer demand. And what we have seen is, you know, I can kind of talk to you about some verticals that we're seeing a movement in.
Speaker Change: Yes, Tom.
Thomas Forte: As we've talked about.
Michael L. Blend: Over several quarters or so.
Michael L. Blend: Z as consumer demand is kind of.
Michael L. Blend: Moving up or down with that generally does it affect pricing.
Michael L. Blend: On the buy side so.
Michael L. Blend: As the economy shifting around.
Michael L. Blend: While we do see the effects of it we're able to kind of change our pricing.
Michael L. Blend: To follow consumer demand, while we have seen.
Michael L. Blend: Is I can kind of talk to you about some verticals that we are seeing movement in.
Michael L. Blend: Because we have exposure across really the entire economy, because we really are.
Michael L. Blend: Because we have exposure across really the entire economy because we effectively are chasing the verticals that consumers are looking for, what we've been seeing is that in the health category, health has probably stayed pretty steady for a long time. And that really matches the overall U.S. economy, so we're seeing a lot of consistency in the health category, which is around 18 to 20 percent of overall advertiser spend, something like that. Interestingly, we're starting to see automotive pick up a little bit, um, that's just in the places where we're advertising. And so obviously, as the automotive industry is picking up and we're seeing, you know, the dealerships come back in and start spending money again, we're going to be focused on that as well.
Michael L. Blend: We effectively are chasing.
Michael L. Blend: Verticals that are that are that consumers are looking for.
Michael L. Blend: So what we've been seeing is in the health, Canada courthouse, probably stay pretty steady for a long time.
Michael L. Blend: And that really matches the overall U S economy. So we're seeing a lot of consistency in the health category, which is around 18% to 20% of overall advertiser spend something like that.
Michael L. Blend: Interestingly, we're starting to we're starting to see automotive pick up a little bit.
Michael L. Blend: That's just in the places where we're advertising.
Michael L. Blend: So obviously as automotive is picking up and we're seeing the dealerships come back in and start spending money again, we're going to be focused on that as well.
Michael L. Blend: And then within finance, you know, finance is such a broad category; we're seeing certain areas of finance, you know, like completely dried up, you know, mortgage, which used to be a pretty big vertical for us. It's going to be very difficult to get any scale right now on mortgages or particularly in the refinancing space. But on the flip side, some of the areas related to more, like higher interest rates going up, are good for us.
Michael L. Blend: And then within finance finance is such a broad category.
Michael L. Blend: We're seeing certain areas of finance it completely dried up mortgage which used to be a pretty big vertical for us.
Michael L. Blend: It's going to be very difficult to get any scale right now on mortgage, particularly in the refinancing space.
Michael L. Blend: But on the flip side some of the areas related to more like higher interest rates going up are good for us. So.
Michael L. Blend: So a lot of things related to banking, getting higher interest rate savings accounts, those things where consumers are starting to kind of perk up at their ability to make some money off of higher interest rates, we're seeing pop up.
Michael L. Blend: A lot of things related to banking getting higher interest rate savings accounts and those things where consumers are starting to perk up to their ability to make some money off of the higher interest rates, we're seeing pop up.
Michael L. Blend: So in general we.
Michael L. Blend: So, you know, in general, We haven't, you know, I would say we're just not seeing the weak, you know, you pointed to, you know, consumer weakness. I would say we're not seeing a decline. You know, I'd say that we're starting to see, you know, some relative stability on the consumer side, and while we're not ready to kind of call it, you know, a return to normal. We're definitely not feeling the way we were in, you know, call it early 2023.
Michael L. Blend: Haven't I would say, we're just not seeing kind of the week you had pointed to consumer weakness I would say, we're not seeing a decline I would say that we're starting to see some relative stability.
Michael L. Blend: On the consumer side, and while again, we're not ready to kind of call.
Michael L. Blend: A return to normal.
Michael L. Blend: We're definitely not feeling the way we were in.
Michael L. Blend: Color early 2023.
Michael L. Blend: Okay.
Michael L. Blend: Great. And then I know you're not giving a full year outlook, but I was hoping that you could just briefly discuss the following. So with this being a presidential election year and the expectation that there'll be a large portion of digital advertising going toward that. Historically, has that presented opportunities and challenges? How have you historically navigated that situation?
Speaker Change: Great and then I know youre not giving your full year outlook, but I was hoping that you could just high level. The following so with this being a presidential election year and the expectation that there'll be a large portion of digital advertising growing toward that.
Michael L. Blend: Historically has that presented opportunities and challenges.
Michael L. Blend: Navigated that situation historically.
Michael L. Blend: We havent seen like in the past so I guess this will be the either third or fourth presidential cycle that we've been through its system one.
Michael L. Blend: We haven't seen this, like in the past, so I guess this will be the either third or fourth presidential cycle that we've been through at Sys1. We haven't seen a lot of changes in the marketplaces we play in as the elections come around. I suspect you'll see that hit the video market a fair amount. We don't play, you know, heavily on the video side. So we're not, we're not projecting anything really kind of kind of any tailwinds or headwinds Relating to you know that what will certainly be a burst of activity in the last couple months of the year, Tri, do you want to like kind of follow up on that related to where we're looking for 2024?
Michael L. Blend: We haven't seen a lot of changes in our in the marketplaces, we play in.
Tri: Elections come around I suspect Youll see.
Michael L. Blend: That hit kind of the video market a fair amount.
Tri: We don't play.
Tri: Italy on the video side.
Tri: So we're not we're not projecting anything really kind of got it kind of any tailwind or headwinds relating from that.
Tri: What will be certainly a burst of activity the last couple of months of the year.
Michael L. Blend: Trey do you want to like kind of a follow up on that related to where we're looking for 2024.
Michael L. Blend: Yeah, I mean, I think to that point, just some of the uncertainty that Michael highlighted around how we're thinking about ad markets. You know, we obviously chose not to guide for the full year.
Tri: Yes, I mean, I think to that point, just some of the uncertainty that Michael highlighted.
Tri: Around how we're thinking about ad markets.
Tri: We obviously chose not to guide for the full year, but we do think kind of given our current trends.
Tri: Stability, we are seeing we do expect to see.
Tri: Growth in the back half.
Tri: <unk>, our second half of 2023.
Tri: You start to see that a little bit in our Q2 guidance specifically around EBITDA.
Tri: But I think kind of Q3 Q4, we expect to be guiding to in delivering growth across all three of the key financial metrics, Yes, we're kind of going to burn off some declines we had in the past and so.
Michael L. Blend: But we do think, kind of, given our current trends, the stability we are seeing, we do expect to see growth in the back half, you know, versus our second half of 2023. You start to see that a little bit in our Q2 guidance specifically around EBITDA. But you know, I think kind of Q3, Q4, we expect to be guiding to and delivering growth across all three of the key financial metrics.
Michael L. Blend: Looking forward towards the end of the year.
Michael L. Blend: We would expect as <unk> said to move back into growth mode.
Speaker Change: I would say Tom just to kind of follow up the I would say bigger bigger for us and I would say also bigger for the overall.
Michael L. Blend: Certainly the digital display market, we do think cookie deprecation.
Michael L. Blend: Yeah, we're kind of going to burn off some declines we have had in the past. And so, you know, looking forward towards the end of the year, we would expect, as Tridi said, to move back into growth mode. I would say, Tom, just to kind of follow up, I would say bigger, bigger for us, and I would say also bigger for the overall, certainly the digital display market. We do think cookie deprecation, when that comes about, we think that's going to have pretty substantial effects from the testing that we've seen and also looking back historically to iOS.
Michael L. Blend: When that comes.
Michael L. Blend: About <unk>.
Michael L. Blend: We think thats going to have pretty substantial effects from the testing that we've seen and also looking back historically two in iOS.
Michael L. Blend:
Michael L. Blend: You know, when a similar change came through in Safari, that had a pretty substantial effect on pricing and in the display and programmatic market. So we would suspect that there's going to be some winners and losers when the Chrome cookie deprecation comes about, but I would say if you're looking towards the future and what's going to happen in the overall app market, that would be, for us, at least, a much bigger lever than anything related to the presidential election.
Michael L. Blend: With a similar change came came through in Safari.
Michael L. Blend: Pretty substantial effect in pricing.
Michael L. Blend: In the display and programmatic market. So we would suspect that that's going to be.
Michael L. Blend: There's going to be some winners and losers when the chrome Cookie deprecation comes about we've every indication we see will be a winner.
Michael L. Blend: But I would say if youre looking towards the future and what's going to happen in the overall AD market that would be for us at least that would be a much bigger.
Michael L. Blend: Lever than anything related to the presidential election.
Speaker Change: Great. Thanks, again for taking my questions.
Thomas Forte: Great, thanks again for taking my question.
Michael L. Blend: Thanks, Tom. Thanks, Tom. Thanks for joining us.
Speaker Change: Thanks, Tom Thanks, John and thanks for joining.
Michael L. Blend: Your next question is a follow up from Dan Arnold Your line is open.
Daniel Louis Kurnos: Your next question is a follow-up from Dan Kurnos. Your line is open.
Daniel Louis Kurnos: Thanks, I thought I'd, just sneak one more in Michael Johnson.
Daniel Louis Kurnos: Thanks. I thought I'd just sneak one more in, Michael.
Daniel Louis Kurnos: Yes.
Daniel Louis Kurnos: On ramp and.
Daniel Louis Kurnos: Scaling the buy side I, just wanted to get a sense from you.
Michael L. Blend: Just on RAMP and, you know, scaling the buy side, I just want to get a sense from you. You kind of talked about it in the past, but a few things, just how you're thinking about the opportunity, how much you have to invest on that side. Obviously, a lot of that's moving towards self-service, it feels like, and you touched on it in the last response to a degree, but it can also theoretically help open up the opportunity with additional formats, whether it's video or other things in theory. So I'm just kind of curious how you're looking at that opportunity and what it might mean for the P&L.
Daniel Louis Kurnos: You kind of talked about it in the past, but a few things just how youre thinking about the opportunity.
Michael L. Blend: How much you have to invest on that side, obviously, a lot of that is moving towards self serve it feels like and you touched on it in the last response to a degree but it also theoretically can help open up the opportunity with additional formats, whether it's video or other things in theory. So I'm just kind of curious how you are looking.
Michael L. Blend: <unk> at that opportunity and what it might mean for the P&L.
Speaker Change: Yeah sure Dan So we kind of caught up.
Michael L. Blend: Yes, so we kind of caught a break with the, you know, with the launch of Genitive AI. And so for us, across all of our different ad formats, so for us, we're kind of almost a unique advertiser in the marketplace. When you think about your typical advertiser, I think it's got to be someone like, you know, Capital One advertising credit cards or, you know, somebody advertising mortgages.
Michael L. Blend: I will say, we caught a break with the.
Michael L. Blend: With the loss of regenerative AI.
Michael L. Blend: And <unk>.
Michael L. Blend: And so for us both across all of our all of our different AD formats. So so for US. We're we're kind of almost a unique advertiser in the marketplace. When you think about your typical advertiser I was talking about it's going to be someone like a capital one advertising credit cards or.
Michael L. Blend: And it's pretty straightforward to come up with your advertising copy and your advertising units and what, if you're going to do video advertising, what that's going to look like. There's only so many permutations you can have on an ad for, you know, get a better credit card.
Michael L. Blend: Somebody advertising mortgages.
Michael L. Blend: And it's pretty straightforward to come up with your advertising copy in your advertising units and what if youre going to do video advertising what that what that is going to look like theres only so many permutations you can have on an AD for <unk>.
Michael L. Blend: Get a better credit card.
Michael L. Blend: When you contrast that with what we do at Sys1, you know, we're advertising in hundreds of different verticals. And so the different advertising permutations, you know, if you've got 100 permutations of advertising across 100 verticals, all of a sudden, you're expanding pretty quickly into 10,000 different app formats. It's actually quite difficult by hand to come up with all those formats in an automated way, recreate, you know, different tones and different colors and all the different changes you can make to the advertising to pull in consumers better.
Michael L. Blend: When you contrast that with what we do at system. One we're advertising in hundreds of different verticals and so the different advertising permutations. If you've got 100 permutation of advertising across 100 verticals all of a sudden you're expanding pretty quickly into 10000 different ad formats.
Michael L. Blend: It's actually quite difficult by hand to come up with all those formats in an automated way.
Michael L. Blend: Re create different.
Michael L. Blend: Different tones in different colors in all the different changes you can make the advertising.
Michael L. Blend: To pull to poll consumers better.
Michael L. Blend: And so AI came along and allowed us to automate a lot of those processes. And so, in addition to that, we're using machine learning AI to handle the bid pricing. So, you know, when you think about not only all the verticals we're in but all the different places we advertise. So, you know, everywhere from Facebook to Google to, you know, TikTok to, you know, any place you can spend money.
Michael L. Blend: And so AI came along and allowed us to automate a lot of those processes.
Michael L. Blend: And so in addition of that we're using machine learning AI to handle the bid pricing. So when you think about not only the all the verticals were in but all the different places we advertise so.
Michael L. Blend: Everywhere from Facebook to Google to.
Michael L. Blend: Talk to any place you can spend money all of a sudden you've got a bunch of different advertising channels multiply that times, the number of AD permutations and the entire system gets pretty complex pretty quickly.
Michael L. Blend: All of a sudden, you've got a bunch of different advertising channels, multiply that times the number of ad permutations, and the entire system gets pretty complex pretty quickly. So where we are now is we've got the ability to scale our advertising in a much more automated manner as we have very quickly incorporated AI into our platform. And so when doing that, we're one of the biggest advertisers in the world at this point.
Michael L. Blend: So where we are now is we've got the ability to scale our advertising in a much more automated manner as we very quickly have incorporating AI into our platform.
Michael L. Blend: And so what we were doing that were one of the biggest advertisers in the world at this point.
Michael L. Blend: And so what we're going to be doing going forward is opening up those capabilities on the buy side to people that want to use our platform, which we really haven't done before. And we think it's going to really give people using our platform an advantage in the marketplace because they can really dovetail with all the capabilities that we built ourselves. And if you think about the average partner of ours, they don't have a 100-person engineering team to go develop these BISA capabilities. You know, our average partner might be anywhere from five to, you know, 30 employees.
Michael L. Blend: So what we're going to be doing going forward is opening up those capabilities on the buyer side.
Michael L. Blend: To people that want to use our platform, which we really haven't done before.
Michael L. Blend: And we think it's going to really give people using our platform and advantage in the marketplace because they can really dovetail with the off the capabilities that we built ourselves and if you think about the average partner of ours. They don't have a 100 person engineering team to go develop these by say capabilities, our average partner might be.
Michael L. Blend: Everywhere anywhere from five to.
Michael L. Blend: 30 employees and so by offering of that by size scale, we think that we have the ability to.
Michael L. Blend: And so by offering up that BISA scale, we think that we have the ability to, you know, turn RAMP into much more of a software-type product, almost a DSP-type product. And we think that, you know, not only is it going to help our owned and operated business scale, and we're already really seeing the effects of that, but we think by opening up the buy side, we're going to get a lot more people on the platform. It's going to be a lot more sticky.
Michael L. Blend: Turn ramp into much more of a software type product.
Michael L. Blend: Almost almost a DSP type product.
Michael L. Blend: And we think that the.
Michael L. Blend: Not only is going to help our owned and operated business scale and we're already seeing the effects of that.
Michael L. Blend: We think by opening up the buy side, we're going to get a lot more people on the platform, it's going to be a lot more sticky.
Tridivesh Kidambi: And Dan, this is Trid, just to hop in on kind of the P&L impact, you know, our, as you kind of said, our OPEX base. At the end of last year, we kind of already recalibrated and reorganized how we think about product and development again, these specific initiatives and goals. And to Michael's point, really, it's creating a platform that we can use end to end internally and then, you know, think about potentially how that gets syndicated out.
Speaker Change: And Dan This is treated just to hop in on kind of the P&L impact R. R.
Tridivesh Kidambi: Set our Opex space.
Tridivesh Kidambi: At the end of last year, we kind of already Recalibrated and reorganized how we think about product in development against.
Trid: The specific initiatives and goals and to Michael's point really it's.
Tridivesh Kidambi: Create a platform that we can use end to end internally and then think about potentially how that gets syndicated out and so at least for I would say at least the next 12 months. The team that we have here in the Opex kind of the opex load that we have.
Tridivesh Kidambi: And so, you know, for at least the next 12 months, the team that we have here and the OpEx load that we have should be sufficient to kind of build out these medium-term initiatives. So the short answer is no increase from the P&L. Yeah, don't expect a lot of costs; a lot of incremental costs going into this. So that's another benefit we've had is that a lot of the automation on our platform is allowing us to do more with the same number of people.
Tridivesh Kidambi: Should be sufficient to kind of build build out this decent these medium term initiatives. So short answer is no increase yes from the P&L don't.
Tridivesh Kidambi: Don't expect a lot of cost.
Tridivesh Kidambi: Incremental costs going into this so that's another benefit we've had is a lot of the automation on our platform is allowing us to do more with the same number of people.
Speaker Change: That is really helpful. Thanks for the complete.
Tridivesh Kidambi: That is really helpful. Thanks for the complete answer. I appreciate it, guys.
Tridivesh Kidambi: Complete answers I appreciate it guys.
Speaker Change: I appreciate that thank you.
Tridivesh Kidambi: Okay.
Michael L. Blend: This concludes the question and answer session. I will turn the call over to Michael Blend for closing remarks.
Tridivesh Kidambi: This concludes the question and answer session I will turn the call to Michael Glenn for closing remarks.
Michael L. Blend: Okay, well, thanks, everybody for joining us today.
Michael L. Blend: Thank you everybody for joining us today. If you've been following us at Sys1 closely, you know it's been a choppy few quarters for us, but the team has been really heads down executing, and it feels like we're starting to see all that hard work paying off. I'd say we're getting increasingly optimistic about our trajectory here at the company, and so we look forward to speaking with all of you on our Q2 earnings call. Thank you very much. Thanks for joining us.
Michael L. Blend: If you've been following US assistant one closely you know has been a choppy a few quarters for us, but the team has been really heads down executing.
Michael L. Blend: And it feels like we're starting to see all that hard work paying off.
Michael L. Blend: We're getting increasingly optimistic about our trajectory here at the company.
Michael L. Blend: And so we look forward to speaking with you all of you at our Q2 earnings call. Thank you very much thanks for joining.
Speaker Change: This concludes today's conference. Thank you for joining you may now disconnect your lines.
Sarah: This concludes today's conference. Thank you for joining us. You may now disconnect your line.
Sarah: Okay.
Sarah: Yeah.