Q4 2024 System1 Inc Earnings Call
Speaker Change: Thank you for standing by and welcome to the fourth quarter of 2024 earnings conference call for System1.
Speaker Change: Joining me today to discuss System1's business and financial assaults are co-founder and chief executive officer Michael Blend and chief financial officer Tridivesh Kidambi. A recording of this conference call will be available on our Investor Relations website shortly after this call is ended.
Speaker Change: 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.
Speaker Change: 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 include in our annual report on Form 10K for the fiscal year 2024, File No March 10th, as well as the current uncertainty and unpredictability in our business, the markets and the global economy generally.
Speaker Change: You should not rely on our Ford-looking statements as predictions of future events. All Ford-looking statements that would make on this call are based on management, assumptions, and police as of the date hereof, and System1 just claims any obligation to update any Ford-looking statements except as required by law.
Speaker Change: Our discussion today will include non-GAAP financial measures, including a Justity Beda and a Justice Grouse profit. These non-GAAP measures should be considered in addition to, and not as a substitute for or an isolation from our gap results.
Speaker Change: Historical performance and future estimates provided during this call exclude results from total security.
Speaker Change: 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.
Speaker Change: I would now like to turn the conference call over to System1's co-founder and chief executive officer, Michael Blend.
Michael Blund: We wrapped up the year with solid execution across the business for the fourth quarter system, one delivered $76 million in revenue and $45 million and gross profit adjusted.
Michael Blund: Adjusted EBITDA came in at $17 9 million, which is a 79% year over year increase.
Michael Blund: It is good to see our financial performance starting to reflect all the hard work and progress by our team over the past year.
Michael Blund: Although we performed well overall, our strong results were primarily driven by our owned and operated products with revenue, increasing 30% sequentially from Q3, and 60% compared to Q4 last year.
Michael Blund: Our products like start page, Matt question coupon policy higher engagement.
Michael Blund: Fitting from improvements in S E T O user experience and product expansion.
Michael Blund: In contrast, our marketing driven businesses continue to be negatively affected by fluctuations in our Google related business.
Michael Blund: As I discussed during my remarks last quarter, we continue to see ongoing ongoing volatility due to changes enacted by Google in their search partner network.
Michael Blund: These changes have the longer term goal of improving advertiser conversions in chocolate quality quality to the Google partner network.
Michael Blund: However, in the short term they continue to cause significant volatility and lower payments by Google to Google partners like system wide.
Michael Blund: As Google pays out less for traffic system, one made corresponding adjustments to the amount we pay for traffic in order to ensure marketing businesses remain profitable.
Michael Blund: Consequently, lower monetization from Google caused our advertising expenses declined 26% sequentially.
Michael Blund: Now Google has been implementing rapid fiery changes to its search partner network products over the last 18 to 24 months and frankly, keeping up with these changes has been a challenging process for our team.
Michael Blund: That said, we remain steadfast in our Google partnership.
Michael Blund: We've continued to invest heavily in our wrap platform. When we are strategically positioned ourselves when the Google network ultimately rebounds.
Michael Blund: On the technology front, our investment in an AI powered automation within ramp has yielded very promising results. It's.
Michael Blund: It's been increasing efficiency and scale across all of our marketing operations and.
In 2025, we are strengthening our focus on AI integrations across all facets of ramp and our overall organization and we expect to see continued improved efficiency.
Michael Blund: Now, let's go into more detail on our owned and operated segment, which includes both our marketing driven businesses and our owned and operated properties.
Michael Blund: Total owned and operated revenue reached $65 million, reflecting a 19% year over year decline and a 9% sequential decrease.
Michael Blund: This decline was driven by 40% year over year revenue decline in our marketing businesses offset by a 60% increase in our owned and operated products.
Michael Blund: While revenue declined adjusted gross profit was up at $32 million. This marks a 20% year over year increase a 21% sequential rise from the third quarter.
Michael Blund: The growth gross profit expansion, despite a revenue decline.
Michael Blund: Highlights our ability to drive efficiency and margin growth within this segment as well as the higher gross profit margins of our owned and operated products.
Michael Blund: Sessions across our owned and operated properties totaled $1 9 billion down 8% from Q3 due to reduced outspend, but up 79% year over year.
Michael Blund: Our year over year growth reflects the increased scale of campaigns being run on a ramp.
Michael Blund: Well as growth in our owned and operated products.
Michael Blund: International markets remain a key driver with international revenue, representing 36% of total owned and operated revenue up from 26% in Q4 2023.
Michael Blund: In Q4, we launched over 22000 marketing campaigns, a 5% at five times year over year increase.
Michael Blund: The huge increase in marketing campaigns simply would not have been possible prior to our embrace of AI.
Michael Blund: Our medium term goal for scaling marketing campaign launches the 130000 per quarter for launching a new marketing campaign every minute of every day around the clock.
Michael Blund: As I mentioned, while we are confident in our ramps ability to scale, we are being eliminated by fluctuations in the Google SPM performance.
Michael Blund: One recent change made by Google is worth highlighting as it helps explain how Google changes directly impacted our business.
Michael Blund: A few weeks ago system, one was informed by Google that they plan to automatically opt out advertisers on a rolling basis from participating in their adsense for domains product known as AFD. Beginning later this month.
Michael Blund: The practical effect of Google's pending changes that are <unk> monetization is likely to materially decline.
Michael Blund: It significantly more difficult to profitably since acquired traffic the ft powered websites.
Michael Blund: This AFD change will be both a short term negative and medium term positive for system one.
Michael Blund: In the short term, both our owned and operated and partner network lines do substantial AFD related business and we expect that business to decline as Google Rolls out this change on us ASCII product on.
Michael Blund: On the flip side, Google is making this change to a F E to encourage adoption of its newer related search on content product, which is known in the industry as our sock.
Michael Blund: Our company is well positioned to navigate this transition of our stock as system. When it's been allocating significant resources into our our sock efforts for for both owned and.
Michael Blund: And network partners over the last 24 months.
One is a leading partner with Google on this new and exciting product.
Michael Blund: So.
Michael Blund: While we believe system one is among the best position in the market to navigate this change from <unk> to our site.
Michael Blund: <unk> decision to opt out advertisers from AFG will likely cause significant business and product disruption.
Michael Blund: We are rapidly shifting our remaining owned and operated and partner network <unk> businesses over to the newer our sop product, while also keeping pace with rapid changes Google is making to our stock as it continues to rollout this product offering.
Michael Blund: Now ultimately we welcome this disruption to the Google search partner network.
Michael Blund: It is aimed at weeding out bad actors from the ecosystem and ultimately is going to benefit the technology driven companies, who are focused on high quality consumer and advertiser experiences.
Michael Blund: While we expect the stormy weather will continue for a bit longer.
Michael Blund: We're looking forward to the Sunny days ahead, where we can return our focus on scaling our Google business back up.
Michael Blund: With that.
Michael Blund: Let's move on to some highlights from our products group.
Michael Blund: Which as I mentioned is on a stellar run.
Michael Blund: First let's go ahead and start with coupons follow our leading couponing and promo codes service.
Michael Blund: Our coupons, Paul I had a very strong holiday shopping season, and a great fourth quarter with the site continuing to perform well following Google search algorithm updates in 2024.
Our focus on a high quality user experience and delivering verified real time promotional codes continues to pay off.
Michael Blund: Organic sessions rose more than 20% sequentially from Q3.
Michael Blund: Sessions were up 129% year over year.
Michael Blund: In addition to our growth in site traffic our browser extension users have more than doubled year over year.
Michael Blund: We have a very nice flywheel going with coupons follow.
Michael Blund: As our usage increases we get better signals on which promo codes are currently working for users.
Michael Blund: Got it enables a higher quality experience for users because of promo codes that the users try actually work.
Michael Blund: This in turn brings in users and more users and more data and so on.
Michael Blund: And as coupon power continues to scale, we're able to land more direct deals with brands, which in turn improves the accuracy and deals found on coupon followed.
Michael Blund: In 2025, we're going to aggressively capitalize on these great trends and with a continued focus on providing a better experience for both consumers and merchants.
Michael Blund: Now I'm going to move on to start page, our privacy focused search engine.
Michael Blund: Start page continues to gain traction as global concerns around online privacy and data security showed no signs of letting up.
Michael Blund: As regulations that GDP in Europe, and evolving U S privacy laws place greater emphasis on consumer data protection Sharp page is very well positioned to provide an alternative to mainstream search engines.
Michael Blund: Page user sessions grew over 20% year over year as more users seek private search.
Michael Blund: And in addition, the start page private browser apps relaunched last year already have more than 200000 downloads across both Android and iOS.
Michael Blund: As usage and revenues growing start pages more mainstream users seek private search engines by 2025 is going to be about continuing to add the bells and whistles E. These users expect.
Speaker Change: Switched from Google or being or does that go over to start page.
Speaker Change: We also intend to make AI integration of major focus to start paid in 2025.
Speaker Change: And lastly, let's talk about Knockwurst everybody's favorite or that still exists Internet service well.
Speaker Change: I'm happy to let you know that map quest is back.
Speaker Change: Not quest continues to experience strong engagement with users session is growing more than 45% year over year.
Speaker Change: So then the demand for alternative mapping and navigation solutions remained strong, especially as users seek more privacy conscious and feature rich alternatives to dominant platforms.
Speaker Change: Our team has revitalized now request by introducing new functionality, enhancing our mobile experience and optimizing local mapping capabilities.
Speaker Change: Recently, we relaunched private maps.
Speaker Change: For end users and control over their location data.
Speaker Change: In all of these efforts are paying off and they renew map quest recently when viral.
Speaker Change: All of our social media and Markwest has called out in segments on CNN and Stephen Colbert.
Speaker Change: Now I'll move on to our partner network performance.
Speaker Change: Network revenue was $11 million and adjusted gross profit was $14 million up 10% both year over year and sequentially.
Speaker Change: Our partner network results included in the accounting revenue adjustment, which lowered both revenue and Cogs and had no impact on gross profit.
Speaker Change: We will be excluding the adjustment as we make comparisons to prior periods and report business metrics.
Speaker Change: Without the adjustment revenue was $18 million, which represents an 8% year over year increase.
Speaker Change: In Q4 average revenue per partner decreased 6% versus the third quarter, while acumen scaled partners increase.
Speaker Change: Total active partners increased 6% from Q3 to over 300 partners at.
Speaker Change: At the end of Q4, we had 65 scale partners, a 12% increase from the third quarter.
Speaker Change: As a reminder, we consider platform customer to be skilled partner when they are generating at least $50000 of revenue per quarter on ramp.
Speaker Change: Now similar to our owned and operated business. Our partner network team has had to navigate the rapidly changing Google landscape.
Speaker Change: The team has done a great job handling the volatility and we are very well positioned as we ship business over to the new Google Our Sop product.
Speaker Change: Looking forward to the rest of 2025, we remain cautiously optimistic.
Speaker Change: Our owned and operated products continued to demonstrate strong fundamentals and I'm excited to see us expand in our core platforms and couponing private search and mapping.
And on the marketing side, our investments in AI, driven optimizations are positioning our positioning us well for future growth and I'm very glad we made the early decision to invest heavily in the new Google Our Sop product.
Speaker Change: To close I want to reiterate as I always do.
Speaker Change: System. One is leadership team remains fully aligned with our shareholders and as a group we remain one of the companys largest shareholder basis.
Speaker Change: As we continue our transition back to a growth mode.
Speaker Change: We very much appreciate your continued support and we look forward to delivering long term value.
Treaty: With that I'll hand, it over to treaty to go over our financials and provide Q1 guidance taken away treaty.
Treaty: Overall, we are pleased with our fourth quarter financial results with the highlight being our $17 9 million of adjusted EBITDA, representing year over year growth of 79% quarter over quarter growth of 73%.
Treaty: For the year, we generated $38 6 billion of adjusted EBITDA, representing year over year growth of 32% and demonstrating our ability to grow through a challenged marketplace.
Treaty: Now, let's dive into our operating results.
Treaty: Q4 revenue was $75 6 million, representing a 21% year over year decrease in sequential decline of 15%.
Treaty: Owned and operated advertising revenue was $64 $7 million down 19% year over year and 9% sequentially.
Treaty: Decrease in revenue is directly related to an $11 $6 million sequential decline in advertising.
Treaty: Within the owned and operated advertising segment, our <unk> products business generated $27 1 million of revenue up 60% year over year at 30% sequentially as to be expected in a seasonally strong Q4.
Treaty: Our fourth quarter Rps was three and in line with third quarter Cps was one seven.
Treaty: Down 20% from two <unk> in the third quarter.
Treaty: As we lowered our advertising spend we were able to shift towards lower Cps traffic sources.
Treaty: Overall, Rps and Cps were both down significantly year over year as throughout the year. We are called certain acquisition channels that had both higher Rps and higher Cps.
Treaty: <unk> was down 55% year over year at Cps is that 65% year over year.
Treaty: The spread between RPI and CPI in Q4 was $1 seven or <unk>, 98% margin compared to $1 three or 59% in Q3.
Treaty: Network revenue was $10 9 million, but adjusted for our net revenue adjustment was $18 million, which was up 8% year over year and in line with Q3.
Treaty: Total sessions were $1 9 billion up 46% year over year and down 20% sequentially.
Treaty: Partner network Rps after adjusting for the out of period revenue adjustment decreased 26% year over year, but increased 24% quarter over quarter.
Treaty: Adjusted gross profit was $44 7 million up 19% year over year and sequentially.
Treaty: Revenue less advertising spend for <unk> advertising segment increased 21% sequentially to $32 million.
Treaty: Revenue less advertising spend for our <unk> products was $25 6 million up 62% year over year and 27% sequentially.
Treaty: <unk> revenue less agency fees was $14 4 million up 10% year over year and sequentially.
Treaty: Total sessions processed by ramp in the most recent quarter was $3 8 billion up 61% year over year and down 14% sequentially.
Treaty: On to operating expenses and EBITDA.
Treaty: In Q4 operating expenses net of add backs was $26 8 million down half a million dollars quarter over quarter and down 700000 year over year.
Treaty: We continue to focus on reducing opex to create operating leverage.
Treaty: Adjusted EBITDA was $17 9 million in Q4 versus $10 million in the same quarter last year, representing a 79% year over year increase.
Treaty: With respect to liquidity, we ended the quarter was $63 $6 million of unrestricted cash on our balance sheet and an outstanding balance of $280 million of term loan debt under our credit agreement.
Treaty: Our net consolidated leverage at quarter end was approximately five six times now onto Q1 guidance. We are estimating Q1 revenue to come in between $69 million or $71 million down 18% year over year at the midpoint.
Treaty: <unk> revenue declined guidance, we are estimating adjusted gross profit to grow 25% year over year at the midpoint and come in between $38 million to $40 million.
Treaty: We estimate Q1, adjusted EBITDA to come in between $9 million to $11 million up over $9 $5 million year over year at the midpoint.
Treaty: The adjusted EBITA guidance also assumes a benefit from the reversal of the majority of the prior period partner payment balances related to project traffic on our network for Q2 of last year.
Speaker Change: For the reasons outlined by micro during his remarks, specifically around Google volatility, we will not be providing full year guidance at this time.
Speaker Change: As we mentioned during our last earnings call. We have continued to see significant volatility in our market marketing driven businesses due to ongoing sell side product and policy updates. However, our core our core product utilities, such as private search mapping and couponing provide a strong foundation that allow us to navigate these challenges.
Speaker Change: Effectively.
Speaker Change: Looking ahead, 2025% as an opportunity to further scale these products driving consistent user acquisition and engagement.
Speaker Change: By continuing to attract and retain users through differentiated high value services, we not only mitigate market fluctuations, but also create sustained monetization opportunities. Additionally, our ramp platform remains instrumental and generating gross profit and EBITDA as we refine our AI driven strategies to optimize traffic quality in advertising Gill.
Speaker Change: AI driven advancements to our platform and processes will also allow us to continue to optimize our operating expenses throughout the year.
Speaker Change: Our ability to balance growth and known and operated with a disciplined approach to our marketing businesses will be a key focus in the year ahead.
Speaker Change: Thank you for joining us today.
Speaker Change: Thank you Judy we're now going to open the line for some questions. The first question comes from Tom Forte with Maxim Group go ahead Tom.
Tom Forte: Great. So first off Michael a treaty I hope you and your colleagues are okay. When it comes to the California wildfires.
Tom Forte: Second congrats on the improvement in the adjusted EBITDA for both the fourth quarter and full year.
Speaker Change: So I have three questions I'll go one at a time Michael.
Tom Forte: Michael as experts on AI and one of the early users of the technology to adventure business would love your thoughts on deep seek and in general your ability to invest and ramp at much lower capex in your tech peers.
Michael: Thanks, Tom Thanks for joining and for the questions good to see it.
Michael: So I would say as far as deep Sea goes I don't have a specific opinion about what theyre doing except that it's been very nice to see that deep seek along with a lot of some of the other open source providers as well as just general competition in the marketplace is really bringing costs down some.
Michael: Essentially for us.
Michael: What we're seeing is that.
Michael: The price you use these tools has been coming down really every couple of weeks or so and we're also seeing advances in a lot of that code assist tools that we're building where.
Michael: We've been quite heavy users of AI.
Michael: About that instrument okay.
Michael: We're seeing is like every two weeks people are leapfrogging.
Michael: Their products and so the the level pace at which these tools are developing is.
Michael: Pretty extraordinary.
Michael: The way the AI is specifically affecting our business here system one.
Michael: A couple of different ways. So first of all as we've discussed I think on our last few quarterly earnings calls.
Michael: It's really perfectly built for a lot of the marketing that we do.
Michael: So just tactically doing things like producing better ads.
Michael: Using AI and machine learning to do things like.
Michael: Really rapidly change bid pricing on an advertising, but also produce better categorize make better advertising better content.
Michael: Our entire advertising flow has been improved so on the first side, you've got AI really helping our operations, which has been good but what I would say more recently is what we're seeing are some really dramatic changes in the way that we're able to do product and engineering at our company.
Michael: What we're seeing is that as engineers and product folks are adopting AI. The AI tools, we're seeing like two to four time improvements in efficiency and productivity.
Michael: From our team.
Michael: So we made the decision.
Michael: Relatively early.
Michael: <unk> been coming out of maturing to really go full force into them and we're able to do that given the size of our company and the <unk>.
Michael: Adaptive our engineering and product teams are so we're seeing just really great efficiency improvements, but also on the I'm going to wrap up on the business side.
Michael: Some really cool things are happening as well, we're pushing our not only the product engineers, but also that our entire company.
Michael: To adopt these tools and so we're seeing our people on the business side that have never developed code never written.
Michael: <unk> software and their lives are actually turning out products themselves.
Michael: One interesting thing that we had kind of fun thing a few weeks ago.
Michael: One of our business has on the <unk> side for instance came up with an idea for just an interesting fungal of product.
Michael: One night, a few weeks ago.
Michael: On it that night built.
Michael: Built it himself the next morning or work with one of our engineers to product ties. It in I think about 14 to 15 Irish on business concept, we had a product launched and.
Michael: Few days later that product.
Michael: Oil barrel product are featured on Steve Colbert and CNN.
Speaker Change: That kind of separate it never happened before without these codices tools, where someone can come up with a product and build them at a pace that we've really never seen before so AI leased at our company is.
Speaker Change: Is increasing our efficiency and productivity.
Speaker Change: But it's also kind of unleashing creativity, which is nice to see.
Speaker Change: Excellent all right. So then my second question is.
Speaker Change: Is the question I get most often from investors can.
Speaker Change: Can you talk about at least at a high level your balance sheet and your efforts to improve your capital structure, including managing your debt.
Speaker Change: Sure something we focus on.
Tom Forte: By carefully true do you want to answer that question sure Hey, Tom how are you doing thanks, Sarah Thanks for being here and thanks for the question.
Tom Forte: Obviously, we think about our balance sheet and capital structure.
Tom Forte: Our amount in August of this past year, we did some work around a corporate restructuring.
Tom Forte: That aligned our corporate structure with how we actually manage the business and think about our owned and operated business specifically between the advertising in the products businesses.
Tom Forte: Yes.
Tom Forte: That being said as I mentioned in my prepared remarks, our net leverage at the end of the year was five six times.
Tom Forte: Which frankly is higher than we'd like it to be.
Tom Forte: Probably higher than our lenders would like it to be.
Tom Forte: And definitely higher than we thought and we thought it would be.
Tom Forte: When we started down.
Tom Forte: This path a couple of years ago.
Tom Forte: That being said for all the reasons that we talked about.
Tom Forte: In our prepared remarks that Michael just mentioned around AI.
Tom Forte: We feel very bullish about the prospects of the business to continue to grow.
Tom Forte: And for us to grow into.
Tom Forte: That leverage position and that we're more comfortable with and specifically we still have about two and a half years left on the term of our credit agreement and we believe we'll be in a strong position to refinance that.
Tom Forte: When we get there.
Speaker Change: Great Alright, and then my last question that is very helpful. I appreciate that Michael.
Tom Forte: Michael can you remind me of how periods of heavy political advertising spending impact your business model like we had essentially all 24 and now that we're on the other side of the presidential election can I assume it's a much easier operating environment for you.
Tom Forte: Yes. Good question, Tom So, we're a little bit contrary to a lot of the advertising businesses out there were in Q4 when political is was pretty hot.
Tom Forte: With that does for us as it affects the buy side. So it drives up pricing a bit for us when we're buying our advertising so we actually.
Tom Forte: Our happy that political the political.
Tom Forte: Quarter is past us and for us to buy side opens up a bit and we see pricing come down a little bit. So it's a good question.
Tom Forte: As I've said and as you mentioned.
Tom Forte: Political season being behind this as a favorable thing for system wide.
Tom Forte: Great. Thanks for taking my questions.
Speaker Change: Thanks, John I appreciate it.
Speaker Change: The next question is from Dan <unk> with benchmark Dan go ahead.
Dan: Great. Thanks, Good afternoon guys.
Michael: Michael there's a lot to unpack.
Dan: And here so.
Michael: Maybe at.
Michael: At the expense of potentially getting a little deeper in the weeds on the our sock shift I'm just curious maybe at a higher level for investors how we.
Michael: Well you are positioned you already talked about investing in the shift it sounds like you're ahead of the curve, we've been talking to a lot of the other premium publishers and some of the agencies about this and it.
Michael: It will be interesting to see when this happens because I don't think there'll be ready but.
Michael: Can you just talk about your readiness and kind of where you still need to invest obviously, it's going to create some havoc in the marketplace, which we thought was going to happen with the cookie deprecation, we are getting this instead so.
Michael: Maybe just kind of talk through what Youre seeing and where you guys are positioning yourselves as we make this pretty big shift.
Michael: Yes sure did I also good to see it so it's a little bit in the weeds for people because Google is such a major part of our business on the revenue side, probably worth expanding a little bit.
Michael: So essentially just.
Michael: To reiterate from my earlier remarks.
Michael: Google has got a few different products.
Michael: Different advertising products that that we use in people in kind of the Google partner ecosystem use.
Michael: Monetize their traffic and one of them historically was a product called AFD.
Michael: And the other one is a product called <unk> and then related to NFS as a product called our sock.
Michael: I don't know 18 months ago, or so Google introduced this new product on our sock.
Michael: And.
Michael: It was a pretty small product at a time not one that had a lot of revenue on it on Google was putting a fair amount of focus on it internally and so we made the decision as system, one to really invest pretty heavily in it.
Michael: I think we made the right decision because fast forward 18 months.
Michael: Google has been.
Michael: Kind of informed us and inform the advertising market.
Michael: The.
Michael: We would expect that the AMD product that they offer.
Michael: Over time is going to be much less important product for Google and theyre going to be shifting around their emphasis into having Google partners such as ourselves promote.
Michael: Our stock product, which stands for related search on content.
Michael: We've as I said, we've been putting a lot of our product and engineering efforts behind this a lot of our marketing efforts behind our stock and we think we're quite well positioned we believe we're the market leader in this product or at least certainly for one of the market leaders in.
Michael: In the product and so and.
Michael: In the short term, we expect to see some bumping is as that as AFD. The revenue that we generate from AFD.
Michael: Shifting over more heavily to our stock.
Michael: But over the medium to long term, we are actually quite supportive of it.
Michael: Our stock we think is a.
Michael: A really good product for consumers and for advertisers.
Michael: And it happens to be one that we're quite well positioned for years of someone so we're happy to see the shift happening a little bit more quickly than I think anybody in the market would have expected, but we think that we're in the right position for it.
Speaker Change: I think you're on mute.
Speaker Change: Very good sorry about that.
Speaker Change: Tricky in the backend here.
Speaker Change: So no Michael Super helpful. I appreciate it and I can confirm you guys are definitely leading the charge on our sock at least based on conversations. So we will see how that plays out but to what you guys guided in Q1 like your let's just call. It revenue ex Tac, which is basically what it is.
Speaker Change: Is.
Speaker Change: You've guided it up pretty strongly and I know thats a lot of that's due to your <unk> properties, but can you guys just talk through I mean, the spread is huge in Q4, you guys crushed it on spread.
Speaker Change: And I'm just curious how you guys are thinking about your ability to grow in this uneven environment.
Speaker Change: Adjusted gross profit revenue ex Tac whatever you want to call it.
Speaker Change: The server that treaty and then ill take over two months, yes, no I mean.
Speaker Change: Again, we are we are guiding to some growth this year.
Speaker Change: Again, it comes down to you we've seen a little bit of stability in the marketplace here to start the year and when we see stability.
Speaker Change: That's good for us that's kind of what ramp is built.
Speaker Change: It's built to take advantage of so sitting here kind of.
Speaker Change: In the third month of the quarter, we feel we feel pretty good about.
Speaker Change: Our guidance and how the quarter is going to end up and it's it's a function of ramp working the way that it's supposed to work.
Speaker Change: <unk>.
Speaker Change: Yes, I mean, there isn't there isn't much more to say other than that its execution.
Speaker Change: I'd say that in general as we've been kind of mentioned in our earlier remarks.
Speaker Change: <unk> products are doing quite well.
Speaker Change: We're seeing nice growth there and we probably would have a little bit more confidence about the overall year. If we werent finished with this product transition on the Google side.
Speaker Change: So we're really waiting to see how that plays out and I think back half of the year, we're going to have a lot more confidence in what numbers are going to look like.
Speaker Change: But for now we feel good.
Speaker Change: We're coming off.
Speaker Change: Sure.
Speaker Change: 2024, I think was a year in which we.
Speaker Change: Started turning the corner and we're.
Speaker Change: Starting to feel increasingly confident about 25%.
Michael: I know Michael you would be Mad at me if I didn't ask you My standard International question. So.
Speaker Change: It was.
Michael: Obviously a good.
Michael: Good quarter for international it's clearly moving ahead, we continue to hear actually some pretty good things at APAC, Europe's kind of coming back up a little bit although.
Speaker Change: Maybe hit a little bit of a bump now it seems like a real greenfield opportunity for you guys. I know you kind of keep pushing me all saying hey, we're attacking it 36% now.
Michael: How are you thinking about the Tam there and how do you think about that contributing to growth this year.
Michael: Well I mean, we're I think we're making pretty good progress year over year, Youre seeing an increasing percentage of our revenue.
Michael: Coming internationally.
Michael: So we're feeling really good.
Michael: Our efforts R. R.
Michael: Focus.
Michael: We're split domestic and international our internal efforts, but one thing that our AI tools.
Ben: Tools have enabled us to do is very quickly move into international markets its actually Ben.
Ben: Doing things that transition translation, making sure images are better.
Ben: Advertising copies better internationally has become.
Ben: Much much easier for us.
Ben: And we also have we think some growth on.
Ben: Our shopping vertical.
Ben: With coupons follow has very little international presence Matt.
Ben: <unk> has almost no international presence. So if you look on the organic product side. Those are couple of areas, where we could be growing international as well, so we're not going to slow down.
Ben: <unk>.
Ben: The Tam is obviously huge domestically, but we've got a huge Tam international as well.
Ben: Would I suspect is that youre going to continue seeing an increasing percentage of our gross profit from international.
Ben: Got it and I'll bug, you with one more and I'll take the rest offline because I have plenty, but.
Ben: Maybe just for Treaty you called out items in Q1, just around the adjusted EBITDA margin.
Speaker Change: How should we just think about the trajectory for adjusted EBITDA margin. This year should be up and if you are calling for some growth in.
Ben: <unk> gross profit and I know the.
Ben: There is no crystal ball here, but just how do we think about your ability to generate incremental leverage.
Ben: Going forward.
Ben: Yes.
I would expect kind of the bulk of our gross profit to flow through down to adjusted EBITDA. So as I mentioned, we're continuing to look at opex be very maniacal about making sure kind of every dollar we spend we're getting good ROI on it and so we would expect that our gross profit.
Ben: Throughout the year should slowdown at a very high flow through which should lead to expanded.
Ben: EBITDA margins as a percentage of gross profit.
Ben: I would reiterate that what we're seeing from our team is.
Tom Forte: Going back to your question, Tom had the ability of our team to execute.
Ben: And.
Ben: On the engineering and product business side, a lot of it driven by the new AI related products that we've been using.
Ben: It's pretty impressive and so we would expect that we're going to be able to continue with our around our current opex levels.
Ben: Execute.
Ben: Better rollout more products quicker.
Ben: With relatively stable opex, so youre going to see you should see as our gross profit expanded a lot of leverage from that.
Ben: Got it Super helpful. Thank you for the color guys and there was a lot of fun playing with the Gulf of America on map Quest.
Ben: Thank you.
Ben: So I hope you enjoyed it we had a few hundred thousand other people enjoy that as well.
Ben: Well I think as all of our questions I believe.
Ben: I want to thank everybody for joining us this quarter, we look forward to chatting with you next quarter, where we hope to have some good news in.
Ben: Thank you very much.
Ben: Okay.
Ben: Okay.