Q1 2025 System1 Inc Earnings Call

Our co founder and Chief Executive Officer, Michael <unk>, and Chief Financial Officer, Trinidad Colombia.

Speaker Change: A recording of this conference call will be available on our Investor Relations website. Shortly after this call has ended.

Speaker Change: I would 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.

Speaker Change: We may also make statements regarding regulatory or compliance matters. These statements are subject to known and unknown risks and uncertainties that could cause our actual results to differ materially from those projected or implied during this call. In particular those described in our risk factors included in our annual report on Form 10-K for fiscal year 2024.

Speaker Change: On March 10, as well as the curtain current uncertainty and unpredictability in our business the markets and the global economy generally.

Speaker Change: You should not rely on our forward looking statements as predictions of future events.

Speaker Change: All forward looking statements that would 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.

Speaker Change: Our discussion today will include non-GAAP financial measures, including adjusted EBITDA. 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.

Speaker Change: Information regarding our non-GAAP financial measures, including a reconciliation of our non-GAAP financial measures turned most comparable historical GAAP financial measures may be found on our Investor Relations website.

Kyle Ostgaard: Business and Financial Results, our co-founder and Chief Executive Officer, Michael Blend, and Chief Financial Officer, Tridivesh Kidambi.

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

You should not rely on our Fortwood and Statement as predictions of future events.

All forward-looking statements that would make them this call are based on management, assumptions, and beliefs as of the date year of, and System1 describes any obligation to update any forward-looking statements, except as required by law.

Operator: 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. This includes statements relating to the operating performance of our business, future financial results and guidance, strategy, long-term growth, and overall future prospects. We may also make statements regarding regulatory or compliance matters. These statements are subject to known, unknown risks and uncertainties that could cause our actual results to differ materially from those projected or implied during this call.

Kyle: Thanks Kyle.

Kyle: Good afternoon, everyone and thank you for joining system one on our Q1 earnings call.

Kyle: I'm happy to share that our team executed really well in Q1 and delivered another solid quarter.

Our discussion today will include non-GAAP financial measures, including a just-to-be-but-a just-to-gross profit. These non-GAAP measures should be considered in addition to it not as a substitute for an isolation from our gap results.

Revenue as well as our key operating metrics gross profit and EBITDA.

Kyle: Were all above the high end of our guidance range.

Kyle: First quarter revenue was approximately $75 million and adjusted gross profit was $41 5 billion, which is up 33% year over year increase.

Historic performance and feature estimates provided during this call exclude results from total security.

Kyle: Adjusted EBITDA came in at $12 1 million up from just $400000 in the prior year quarter.

Operator: In particular, those described in our risk factors included in our annual report on Form 10-K for fiscal year 2024, filed on March 10th, 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: These year over year comps are good indicators of the progress we have made over the last year driven by strong execution and a lot of very hard work by our team.

Kyle: Our owned and operated products continued to perform well with revenue increasing 51% year over year.

Thanks, Kyle. Good afternoon, everyone, and thank you for joining System1 on our Q1 Ernie's call.

Operator: All forward-looking statements that we make on this call are based on management's assumptions and beliefs as of the date hereof, and System1 disclaims any obligation to update any forward-looking statements except as required by law.

Kyle: As a reminder, our primary Illinois products include coupon follow and the discount shopping vertical.

Kyle: Chart page and private search and map question mapping.

Kyle: Each of these are among the leaders in their respective category and we had good momentum across our entire portfolio.

Operator: 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.

source quarter revenue was approximately $75 million and adjusted gross profit was $41.5 million which is 33% year-over-year increase.

Kyle: Our marketing driven businesses continue to be impacted by the Google related product changes, we mentioned last quarter.

Kyle: Although so far we have done a very good job navigating the ongoing volatility.

Adjusted EBITDA came in at $12.1 million from just $400,000 in the prior year quarter. His year-over-year comps are good indicators of the progress we have made up the last year, driven by strong execution and a lot of very hard work by our team.

Kyle: While overall marketing driven revenue is down on an annual basis margins are up significantly and our network business in particular continues to do well.

Operator: Information regarding our non-GAAP financial measures, including a reconciliation of our non-GAAP financial measures, termed most comparable historical GAAP financial measures, may be found on our investor relations website.

Kyle: On the technology front at system, one we continue to lean in heavily on AI powered automation driven by agenda coding.

Michael Blend: I would now like to turn the conference call over to System1's co-founder and chief executive officer, Michael Blend. Thanks, Kyle. Good afternoon, everyone, and thank you for joining System1 on our Q1 Earnings Call. I'm happy to share that our team executed really well in Q1 and delivered another solid quarter. revenue, as well as our key operating metrics, gross profit, and EBITDA were all above the high end of our guidance range. First quarter revenue was approximately $75 million and adjusted growth profit was $41.5 million, which is a 33% year-over-year increase. Adjusted EBITDA came in at $12.1 million, up from just $400,000 in the prior year quarter.

Kyle: We are incorporating agenda coding across the entire company and are using it to increase scale accelerate product development and streamline many of our business operations.

Each of these are among the leaders in their respective category and we have good momentum across our entire portfolio.

Kyle: Overall, it's a really exciting time to be in technology, if you're pushing heavily into agenda coding system what is <unk>.

Kyle: If you'd asked me 18 months ago with our biggest obstacle to growth was.

Kyle: Would have said the difficulty finding a net engineering and product resources developer to develop our technology.

Kyle: Now with agenda coding productivity is through the roof.

While overall marketing driven revenue is down on an annual basis, margins are up significantly and our network business in particular continues to do well.

Kyle: And the biggest challenge is picking the right ideas to go after.

Kyle: Let's go into more detail on our owned and operated segment, which includes both our marketing driven businesses and our owned and operated products.

Michael Blend: These year-over-year comps are good indicators of the progress we have made over the last year, driven by strong execution and a lot of very hard work by our team. Our owned and operated products continue to perform well with revenue increasing 51% year over year. As a reminder, our primary own-owned products include Coupon Follow in the Discount Shopping Vertical, Start Page in Private Search, and MapQuest in Mapping. Each of these are among the leaders in their respective category and we have good momentum across our entire portfolio. Our marketing-driven businesses continue to be impacted by the Google-related product changes we mentioned last quarter.

On the technology-fronted system one, we continue to lean in heavily on AI-powered automation driven by agentic coding. We are incorporating agentic coding across the entire company and are using it to increase scale, accelerate product development, and streamline many of our business operations.

Kyle: Total owned and operated revenue came in at $58 million for <unk>.

Kyle: Putting a 16% year over year decline and a 10% decrease sequentially.

Kyle: This decline was driven by a 34% annual revenue decrease in our marketing businesses, which is primarily due to a decline in a noncore low gross margin business segment.

Overall, it's a really exciting time to be in technology if you're pushing heavily into a gentle coating of System1's.

If you would ask me 18 months ago what our biggest obstacle to growth was, I would have said the difficulty of finding enough engineering and product resources to develop our technology.

Kyle: The marketing decline was partially offset by a 51% increase in our owned and operated products line.

Kyle: Adjusted gross profit was $28 million up 24% year over year and down 13% sequentially from Q4.

Now with the gentle coating, productivity is through the roof, and the biggest challenge is picking the right ideas to go after.

Michael Blend: Although so far, we have done a very good job navigating the ongoing volatility. While overall marketing-driven revenue is down on an annual basis, margins are up significantly, and our network business in particular continues to do well. On the technology front at System1, we continue to lean in heavily on AI-powered automation driven by agentic coding. We are incorporating agentic coding across the entire company and are using it to increase scale, accelerate product development, and streamline many of our business operations. Overall, it's a really exciting time to be in technology if you're pushing heavily into agentic coding as System1 is.

Kyle: The sequential decline, primarily primarily was driven by seasonality coming off a seasonally strong fourth quarter for shopping.

Let's go into more detail on our owned and operated segment, which includes both our marketing driven businesses and our own and operated products.

Kyle: Sessions across our Illinois properties totaled $1 3 billion down 32% from Q4, but up 6% year over year our.

Total owned and operated revenue came in at $58 million.

Kyle: Our year over year growth reflects increased scale of marketing campaigns running through our ramp platform as well as growth in our owned and operated properties.

for funding a 16% year-over-year decline in a 10% decrease sequentially. This decline was driven by a 34% annual revenue decrease in our marketing businesses, which was primarily due to decline in a non-core low-growth margin business segment.

Kyle: International markets remain a key focus for us with international revenue, representing 30% of total owned and operated revenue up slightly from 29% in Q1 of 2024.

The marketing decline was partially offset by a 51% increase in our own to not create a product [inaudible]

Kyle: A bright spot in our marketing driven businesses the increased scale of our marketing campaigns.

Michael Blend: If you had asked me 18 months ago what our biggest obstacle to growth was, I would have said the difficulty of finding enough engineering and product resources to develop our technology. Now with agentic coding, productivity is through the roof, and the biggest challenge is picking the right ideas to go after.

I just a gross profit with $28 million of 24% year-over-year and down 13% sequentially from Q4. The sequential decline primarily was driven by seasonality, coming off as seasonally strong fourth quarter for shopping.

Kyle: In Q1, we launched over 41000 marketing campaigns up five times year over year and up from 22000 in Q4.

Kyle: We continue to make large strides on advertising campaign automation and we're focused on leveraging AI to dramatically increase the scale, we operate on the marketing side.

Sessions across our ONO properties told a 1.3 billion down 32% from Q4 of it up to 6% year over year. A year over year growth reflects increased scale of marketing campaigns running through our RANT platform, as well as growth in our own denocrative properties.

Michael Blend: Let's go into more detail on our Owned and Operated segment, which includes both our marketing-driven businesses and our owned and operated products. Total owned and operated revenue came in at $58 million. reflecting a 16% year-over-year decline and a 10% decrease sequentially. This decline was driven by a 34% annual revenue decrease in our marketing businesses, which was primarily due to a decline in a non-core low-gross margin business segment. The marketing decline was partially offset by a 51% increase in our owned and operated products line. Adjusted gross profit was $28 million, up 24% year-over-year and down 13% sequentially from Q4.

Kyle: Moving onto our <unk> products. The group continues to perform well and is heavily focused on expanding the reach of our couponing mapping and private search services.

International Remarkets remain a key focus for us, with International Revenue representing 30% of total owned and operated revenue, up slightly from 29% in Q1 to 2024.

Kyle: Let's move on to some highlights in those products.

Kyle: I'll start with coupon follow which continues to be a top couponing and promo codes service and Google's organic rankings.

Kyle: In the first quarter coupon Paul as user sessions were up over 160% year over year, driven by our best in class experience for both consumers and merchants.

A bright spot in our marketing driven business is the increased scale of our marketing campaigns.

In Q1, we launch over 41,000 marketing campaigns up five times here over year and up from 22,000 in Q4.

Kyle: We have a great flywheel going on with coupon follow at.

Kyle: As traffic ramps on coupons follow we're able to capture more data on consumer demand. We then leverage that data into better merchant deals that in turn improve the overall consumer experience. The next time our customers come back.

We continue to make large strides on advertising campaign automation when we're focused on leveraging AI to dramatically increase the scale we operate on in the marketing side.

Michael Blend: The sequential decline primarily was driven by seasonality, coming off a seasonally strong fourth quarter for shopping. Sessions across our L&O properties totaled $1.3 billion, down 32% from Q4, but up 6% year-over-year. Our year-over-year growth reflects increased scale of marketing campaigns running through our Rant platform, as well as growth in our owned and operated properties. International real markets remain a key focus for us, with international revenue representing 30% of total owned and operated revenue, up slightly from 29% in Q1 of 2024. A bright spot in our marketing driven business is the increased scale of our marketing campaigns.

Moving on to our ONO products, the group continues to perform well and is heavily focused on expanding the reach of our couponing, mapping, and private search services.

Kyle: Now, let's turn to start page, which as a reminder, is our privacy centric search engine that competes with duct that go.

Kyle: In Q1 start page users sessions grew 11% year over year, and 7% sequentially as we write increased consumer demand for greater privacy.

Let's move on to some highlights in those products.

I'll start with coupon follow, which continues to be a top couponing and promo code service in Google's organic rankings. In the first quarter, coupon follow as user sessions were up over 160% year-over-year driven by our best-in-class experience for both consumers and merchants.

Kyle: The private browser apps, we launched in late 2024 have continued to gain traction as we integrated search widgets like mapping that improve the overall search experience.

Kyle: And lastly, as talk about map quest, which is having a brand and business resurgence.

We have a great flywheel going on with coupon follow. It's traffic ramps on coupon follow. We're able to capture more data on consumer demand. We can leverage that data in the better merchant deals that in turn improve the overall consumer experience, the next time our customers come back.

Kyle: <unk> had some really fun viral moments recently with mentions on CNN and the Stephen Colbert show driven by our Gulf of Mexico naming generator.

Michael Blend: In Q1, we launched over 41,000 marketing campaigns, up five times year over year, and up from 22,000 in Q4. We continue to make large strides on advertising campaign automation, and we're focused on leveraging AI to dramatically increase the scale we operate on in the marketing side.

Kyle: <unk> continues to grow users sessions with Q1 sessions up over 30% year over year.

Now let's turn to start page, which has a reminder is our privacy centric search engine that can piece with duck.go.

Kyle: The Markwest team has been focused on enhancing our mobile labs, adding new mapping functionality and introducing new products.

Michael Blend: Moving on to our O&O products, the group continues to perform well and is heavily focused on expanding the reach of our couponing, mapping, and private search services. Let's move on to some highlights in this product. I'll start with CouponFollow, which continues to be a top couponing and promo code service in Google's organic rankings. In the first quarter, CouponFollow's user sessions were up over 160% year over year, driven by our best-in-class experience for both consumers and merchants. We have a great flywheel going on with Coupon Follow. As traffic ramps on Coupon Follow, we're able to capture more data on consumer demand.

In Q1, Starpage user sessions grew 11% year-over-year and 7% sequentially as we ride increased consumer demand for greater privacy.

Kyle: Now, let's switch gears to our partner network.

Kyle: Network revenue was $17 million up 4% year over year, and 1% sequentially. After adjusting for the out of period revenue adjustments made last quarter.

The private browser apps we launched in late 2024 continue to gain traction as we integrate search widgets like mapping that improve the overall search experience.

Kyle: Adjusted gross profit was $15 million up 37% year over year and 4% sequentially.

And lastly, let's talk about MapQuest, which is having a brand and business resurgence. MapQuest has had some really fun viral moments recently, with mentions on CNN and the Stephen Kaber show driven by our Gulf of Mexico naming generator.

Kyle: Partner network results were positively impacted by the in period recognition of some previously withheld being partner revenue related to invalid traffic that our partners since for us.

Kyle: In Q1 total active partners decreased 14% from Q4 to around 265 partners.

Matt Quest continues to grow user sessions with Q1 sessions up over 30% year-over-year. The Matt Quest team has been focused on enhancing our mobile apps, adding new mapping functionality and introducing new products.

Kyle: The total number of partners was partially offset by 7% quarter over quarter increase in average revenue per partner.

Michael Blend: We then leverage that data into better merchant deals that, in turn, improve the overall consumer experience the next time our customers come back.

Kyle: In Q4, we had 54 scale partners, a 17% decrease from the fourth quarter.

Michael Blend: Now let's turn to the Start page, which as a reminder is our privacy-centric search engine that competes with DuckDuckGo. In Q1, star page user sessions grew 11% year over year and 7% sequentially as we ride increased consumer demand for greater privacy. The private browser apps we launched in late 2024 continue to gain traction as we integrate search widgets like mapping that improve the overall search experience.

Now, let's switch gears to our partner network.

Kyle: We consider platform customer that customer to be a scale partner when they are generating at least $550000 of revenue per quarter on ramp.

Harder-never revenue was $17 million up 4% year-over-year and 1% sequentially after adjusting for the out-of-period revenue adjustments made last quarter. Adjust the gross profit was $15 million up 37% year-over-year and 4% sequentially.

Kyle: The sequential decrease in active partners was impacted by a push to move partners to Google's, new our sock product for monetization.

Kyle: And on this front the team did a great job in Q1 significantly increasing the number of partners monetizing with our Socs.

Partner Network Results were positively impacted by the in-period recognition of some previously withheld being partner revenue related to invalid traffic that our partner sent to us.

Kyle: Looking ahead to the rest of 2025, we remain cautiously optimistic.

Michael Blend: And lastly, let's talk about MapQuest, which is having a brand and business resurgence. MapQuest has had some really fun viral moments recently with mentions on CNN and The Stephen Colbert Show, driven by our Gulf of Mexico naming generator. MapQuest continues to grow user sessions with Q1 sessions up over 30% year-over-year. The MapQuest team has been focused on enhancing our mobile apps, adding new mapping functionality, and introducing new products.

In Q1, total active partners decreased 14% from Q4 to around 265 partners. The total number of partners was partially offset by a 7% quarter-over-quarter increase in average revenue per partner.

Kyle: Our owned and operated products continue to show strong fundamentals.

Kyle: We've been making large strides on the AI technology front.

Kyle: And we're putting ourselves in position to capitalize on the marketing side as we begin to see a little more stability.

In Q4, we have 54 scale partners of 17% decrease from the fourth quarter.

Kyle: Our biggest challenge over the next couple of quarters continues to be related to volatility with Google, which as you know is our biggest revenue partner.

We consider a platform customer to be a scale partner when they are generating at least $550,000 for revenue per quarter on ramp. The sequential decrease in active partners was impacted by a push to move partners to Google's new RSOC product for monetization.

Kyle: Last quarter, we announced that Google informed us of their plan to automatically opt out advertisers from Adsense for domains monetization, which is known as AFD.

Michael Blend: Now let's switch gears to our partner network. Harder network revenue was $17 million, up 4% year-over-year and 1% sequentially after adjusting to the added period revenue adjustments made last quarter. Adjusted gross profit was $15 million, up 37% year-over-year and 4% sequentially. Partner network results were positively impacted by the in-period recognition of some previously withheld Bing partner revenue related to invalid traffic that our partner sent to us. In Q1, total active partners decreased 14% from Q4 to around 265 partners. The total number of partners was partially offset by 7% quarter over quarter increase in average revenue per partner.

Kyle: While this has created some uncertainty for us we have not yet seen material impact to our performance for revenue from that policy change.

and on this front the team did a great job in Q1, significantly increased the number of partners monetizing with our stock.

Kyle: That being said, we do anticipate Google's continued shift away from AMD to their newer our sock product is going to continue to cause volatility it will have to manage and navigate over the next few quarters.

Looking ahead to the rest of the year 2025, we remain cautiously optimistic.

Our own and operator products continue to strobe strong fundamentals. We've been making large strides on the AI technology front, and we're putting ourselves in position to capitalize on the marketing side as we begin to see a little more stability.

Kyle: As a result of this uncertainty as well as broader volatility in online advertising demand and the potential impact of evolving tariff policies. We do not plan to provide financial guidance for the second quarter of 2025.

Our biggest challenger of the next couple quarters continues to be related to volatility with Google, but as you know is our biggest revenue partner.

Michael Blend: In Q4, we had 54 scale partners, a 17% decrease from the fourth quarter. We consider a platform customer to be a scale partner when they are generating at least $550,000 of revenue per quarter on-ramp. The sequential decrease in active partners was impacted by our push to move partners to Google's new RSOC product for monetization. And on this front, the team did a great job in Q1, significantly increasing the number of partners monetizing with RSOC.

Kyle: But most importantly, we remain well position regardless of how these shifts evolve.

Last quarter, we announced that Google informed us of their plan to automatically opt out advertisers from AdSense for Domain's monetization, which is known as AFD.

Kyle: We're continuing to benefit from our longstanding Abbvie partnership while also leaning into the momentum behind our stock.

Well, this has created some uncertainty for us. We have not yet seen material impact to our performance or revenue from that policy change.

Kyle: As our stock continues to gain traction, we're seeing new opportunities to diversify and grow alongside Google with their evolving monetization strategy.

That being said, we do anticipate Google's continued shift away from AFD to their newer R-SARC product is going to continue to cause volatility that we'll have to manage and navigate over the next few quarters.

Kyle: Overall, I would say our system one team is executing very well across the board.

Kyle: We have quickly made the transition to become an AI first product and engineering organization and we can see this paying off and faster execution is also beginning to show up in our financials.

Michael Blend: Looking ahead to the rest of 2025, we remain cautiously optimistic. Our owned and operated products continue to show strong fundamentals. We've been making large strides on the AI technology front. And we're putting ourselves in position to capitalize on the marketing side as we begin to see a little more stability. Our biggest challenge over the next couple of quarters continues to be related to volatility with Google, which as you know, is our biggest revenue partner. Last quarter, we announced that Google informed us of their plan to automatically opt out advertisers from AdSense for domains monetization, which is known as AFD.

As a result of this uncertainty, as well as broader volatility in online advertising demand and the potential impact of evolving tarot policies, we do not plan to provide financial guidance for the second quarter of 2025.

Speaker Change: As treaty will detail below we arent yet prepared to give full year guidance as we plan to wait to see how the Google product transition shakes out.

Kyle: That being said once we get through the Google volatility over the next couple of quarters.

But most importantly, we remain well positioned regardless of how these shifts evolve all.

Kyle: I believe we're really well positioned for the medium and long term here system one too.

We're continuing to benefit from our longstanding AFD partnership, while also leading into the moment to behind our stock. As our stock continues to gain traction, we're seeing new opportunities to diversify and grow alongside Google with their evolving monetization strategy.

Kyle: To close I want to reiterate as I always do system ones leadership team remains fully aligned with our shareholders and as a group we remain one of the company's largest shareholder basis.

Michael Blend: While this has created some uncertainty for us, we have not yet seen material impact to our performance or revenue from that policy change. That being said, we do anticipate Google's continued shift away from AFD to their newer RSoC product is going to continue to cause volatility it will have to manage and navigate over the next few quarters.

Kyle: As one example, I through my family Foundation recently purchased four 5 million shares of SSD and I believe strongly in the company's future.

Overall, I would say our System1 team is executing very well across the board. We have quickly made the transition to become an AI first product and engineering organization, and we can see this paying off in faster execution that is also beginning to show up in our financials.

Kyle: Our system one continues our transition back to growth mode.

Kyle: We appreciate your continued support and we look forward to delivering long term value to our shareholders.

As treaty will detail below, we aren't yet prepared to give full-year guidance as we plan a way to see how the Google product transition shakes out.

Speaker Change: With that I'll hand things over to treat you to go over our financials.

Michael Blend: As a result of this uncertainty, as well as broader volatility in online advertising demand and the potential impact of evolving tariff policies, we do not plan to provide financial guidance for the second quarter of 2025. But most importantly, we remain well positioned regardless of how these shifts evolve. will continue to benefit from our longstanding AFD partnership while also leaning into the momentum behind RSOC. As our stock continues to gain traction, we're seeing new opportunities to diversify and grow alongside Google with their evolving monetization strategy. Overall, I would say our System1 team is executing very well across the board.

Speaker Change: Get away Treaty.

Speaker Change: Thanks, Michael.

That being said, once we get through the Google volatility over the next couple quarters, I believe we're really well positioned for the meeting and long term here, System1.

Speaker Change: We are pleased with our first quarter financial results as we were above the high range of guidance on revenue adjusted gross profit and adjusted EBITDA.

Speaker Change: The $12 1 million of adjusted EBITDA in the first quarter represents significant year over year growth and highlights the high level of execution by our team across all of our businesses, which has resulted in both year over year gross profit growth in.

To close, I want to reiterate, as I always do, System1's leadership team remains fully aligned with our shareholders, and as a group, we remain one of the company's largest shareholder bases.

As one example, I, through my family foundation, recently purchased four and a half million shares of SST, and I believe strongly in the company's future.

Speaker Change: And ongoing G&A efficiencies, resulting in reductions to operating expenses.

Speaker Change: Let's get into the details.

Q1 revenue was $74 $5 million, representing a 12% year over year decrease and a sequential decline of 1%.

As System1 continues our transition back to growth mode, we appreciate your continuous support and we look forward to delivering long-term value to our shareholders.

Michael Blend: We have quickly made the transition to become an AI-first product and engineering organization, and we can see this paying off in faster execution that is also beginning to show up in our financials.

Speaker Change: Owned and operated advertising revenue was $57 9 million down 16% year over year and 10% sequentially.

With that, I'll hand things over to Tridi to go over our financials. Take it away, Tridi.

Speaker Change: The year over year decrease was driven by a 35% decrease in advertising spend which is the result of a mix shift change between our marketing driven business lines and our owned and operated product lines.

Michael Blend: As Tridi will detail below, we aren't yet prepared to give full year guidance as we plan to wait to see how the Google product transition shakes out. That being said, once we get through the Google volatility over the next couple of quarters, I believe we're really well positioned for the medium and long term here at System1.

Thanks, Michael.

Tridi: We are pleased with our first quarter financial results as we were above the high range of guidance on revenue, adjusted gross profit, and adjusted EBITDA. The 12.1 million of adjusted EBITDA on the first quarter represents significant year-to-year growth and highlights the high level of execution by our team across all of our businesses.

Speaker Change: Owned and operated product revenue was $22 3 million, representing 38% of total owned and operated advertising revenue compared to 21% of total revenue in Q1 of 'twenty for.

Speaker Change: The sequential decline was largely attributable to an expected decrease in owned and operated product revenue as Q4 is a seasonally strong quarter for our owned and operated product businesses.

Michael Blend: To close, I want to reiterate, as I always do, System1's leadership team remains fully aligned with our shareholders, and as a group, we remain one of the company's largest shareholder bases. As one example, I, through my family foundation, recently purchased four and a half million shares of SST, and I believe strongly in the company's future. As System1 continues our transition back to growth mode, we appreciate your continued support and we look forward to delivering long-term value to our shareholders.

Tridi: which is resulted in both year-to-year gross profit growth and ongoing GNA efficiencies resulting in reduction to operating expenses.

Speaker Change: Network revenue was $16 6 million and was buttressed by the benefit of a contra revenue charge related to the reversal of certain prior period network partner Rev share payments.

Let's get into the details.

Tridi: Q1 revenue is $74.5 million, representing a 12% uRR your decrease, and it's a little decline of 1%.

Speaker Change: That was related to invalid traffic sent by some of our network partners in Q2 of 'twenty four.

Tridi: Eleanor and Operated Advertising Revenue is 57.9 million, down 16% year-to-year, and 10% sequentially. The year-to-year decrease is driven by a 35% decrease in advertising spend, which is a result of a mixed shift change between our marketing driven business lines and our own and operator product lines.

Speaker Change: Revenue was up 1% sequentially, excluding the gross to net accounting revenue adjustment made in Q4.

Speaker Change: Adjusted gross profit was $41 5 million up 33% year over year and down 7% sequentially, primarily due to typical Q4 to Q1 seasonality.

Michael Blend: With that, I'll hand things over to Tridi to go over our financials. Take it away, Tridi.

Tridi: owned and operated product revenue is 22.3 million, representing 38% of total owned and operated advertising revenue compared to 21% of total revenue in Q1 and 24.

Tridivesh Kidambi: Thanks, Michael. We are pleased with our first quarter financial results, as we were above the high range of guidance on revenue, adjusted gross profit, and adjusted EBITDA. The $12.1 million of adjusted EBITDA in the first quarter represents significant year-over-year growth and highlights the high level of execution by our team across all of our businesses. which has resulted in both year-over-year gross profit growth and ongoing G&A efficiencies resulting in reductions to operating expenses.

Speaker Change: Revenue less AD spend for our owned and operated advertising segment was $27 8 million, representing a 24% year over year increase and a 13% decline sequentially revenue.

Tridi: The sequential decline was largely attributable to an expected decrease in owner-operated product revenue, as Q4 is a seasonally strong quarter for our owner-operated product businesses.

Speaker Change: Revenue is AD spend for our owned and operated products was $21 million up 53% year over year and down 18% sequentially with a quarter over quarter decline driven by seasonality.

Tridi: Network Revenue was $16.6 million, and was buttressed by the benefit of a contra-revenue charge related to the reversal of certain prior period network partner rev share payments that was related to invalid traffic sent by some of our network partners in Q2-24.

Speaker Change: Network revenue less agency fees was $15 million up 37% year over year and up 4% sequentially.

Tridivesh Kidambi: Let's get into the details. Q1 revenue is $74.5 million, representing a 12% year-over-year decrease and a sequential decline of 1%. Own-and-operated advertising revenue is $57.9 million, down 16% year-over-year and 10% sequentially. The year-over-year decrease is driven by a 35% decrease in advertising spend, which is the result of a mixed-shift change between our marketing-driven business lines and our own-and-operated products. Owned and operated product revenue is $22.3 million, representing 38% of total owned and operated advertising revenue, compared to 21% of total revenue in Q1 and 24. The sequential decline was largely attributable to an expected decrease in owned and operated product revenue, as Q4 is a seasonally strong quarter for our owned and operated product business.

Speaker Change: First quarter owned and operated advertising sessions were $1 3 billion up 6% year over year and down 32% sequentially.

Tridi: Revenue was up 1% sequentially, excluding the gross to net accounting revenue adjustment made in Q4.

Speaker Change: Rps was $4.05 an increase of 32% from the fourth quarter and Cps is $2 <unk> up 36% sequentially with the sequential increase resulting largely from a combination of mix shift changes and our percentage of international traffic and the networks, we advertise on the.

Tridi: Adjested Gross Profit was 41.5 million, a 33% year-to-year, and down 7% sequentially, primarily due to typical Q4 to Q1 seasonality.

Tridi: Revenue less ad spend for own and operated advertising segment was 27.8 million, representing a 24% year-over-year increase in a 13% decline sequentially.

Speaker Change: The spread between Rps, and Cps was 92% compared to 98% in Q4 or 48% in Q1 of 'twenty four.

Tridi: Revenueless ads benefit for own and operated products was 21 million of 53% year-to-year and down 18% sequentially with the quarter-over-quarter decline driven by seasonality.

Speaker Change: Network partner sessions were $1 7 billion up 11% year over year and down 8% sequentially.

Speaker Change: Partner network, Rps decreased 6% year over year and increased 10% sequentially. After adjusting for the out of period revenue adjustment in Q4.

Tridi: Network revenue, less agency fees, was 15 million, up 37% year-to-year, and up 4% sequentially.

Tridivesh Kidambi: Network revenue was $16.6 million and was buttressed by the benefit of a contra revenue charge related to the reversal of certain prior period network partner rev share payments that were that was related to invalid traffic sent by some of our network partners in Q2 of 24. Revenue is up 1% sequentially, excluding the gross to net accounting revenue adjustment made in Q4. Adjusted gross profit was $41.5 million, up 33% year-over-year and down 7% sequentially, primarily due to typical Q4 to Q1 seasonality. Revenue less ad spend for our own and operated advertising segment was $27.8 million, representing a 24% year-over-year increase and a 13% decline sequentially.

Speaker Change: Total sessions process by ramp in the most recent quarter was 3 billion up 9% year over year and down 20% sequentially.

Tridi: 1st quarter owner operator advertising sessions were 1.3 billion, up 6% year-to-year, and down 32%

On to operating expenses and adjusted EBITDA.

Tridi: RPS was 4.5 cents, an increase of 32% from the fourth quarter, and CPS is 2.3 cents of 36% sequentially. With its sequential increase resulting largely from a combination of makeshift changes in our percentage of international traffic and the networks we advertise on.

Speaker Change: In Q1, Opex net of add backs for $29 4 million down 5% year over year and up 10% sequentially.

Speaker Change: The quarter over quarter increase was expected and was impacted by non wage related employee costs.

Speaker Change: Q1 of 25 marks the seventh straight quarter of year over year declines in Opex, and we will continue to focus on reducing costs in order to create greater operating leverage.

Tridi: The spread between RPS and CPS was 92%, compared to 98% in Q4, 48% in Q1 and 24.

Speaker Change: Adjusted EBITDA was $12 1 million in Q1 versus just 400000 in the same quarter last year.

Tridi: Network partner sessions were 1.7 billion, up 11% year-by-year, and down 8% defunctually. Partner network RPS decreased 6% year-by-year, and increased 10% defunctually, after addressing for the out-of-grade revenue adjustment in Q4.

Speaker Change: Q1 represented the fourth consecutive quarter of year over year increases in adjusted EBITDA.

Tridivesh Kidambi: Revenue-less ad spend for owner-operated products was $21 million, up 53% year-over-year, and down 18% sequentially, with a quarter-over-quarter decline driven by seasonality. Network revenue less agency fees was $15 million, up 37% year-over-year and up 4% sequentially. First quarter owner-operated advertising sessions were $1.3 billion, up 6% year-over-year, and down 32% sequentially. RPS was $0.045, an increase of 32% from the fourth quarter, and CPS was $0.023, up 36% sequentially, with a sequential increase resulting largely from a combination of makeshift changes in our percentage of international traffic and the networks we advertise on. The spread between RPS and CPS was 92% compared to 98% in Q4, 48% in Q1 of 24.

Speaker Change: With respect to liquidity, we ended the quarter with $43 9 million of unrestricted cash on our balance sheet.

Tridi: Total sessions processed by Ramp and the most recent quarter was 3 billion, up 9% year-by-year and down 20% subsequently.

Speaker Change: Our $20 million use of cash in the quarter was primarily driven by $13 million cash payment related to the coupon follow acquisition earn out.

Tridi: on to operating expenses in the Jesse Deepda. In Q1, Off-Ex net of addbacks for $29.4 million, down 5% year-to-year and up 10% sequentially. The quarter of a recorder increase was expected and was impacted by non-wage-related employee costs.

Speaker Change: As well as a $4 4 million outflow related to the payment of our 2024 annual bonuses, which were approved and paid in Q1 of this year.

Speaker Change: As of March 31, we had an outstanding balance of $275 million of term loan debt under our credit agreement.

Tridi: Q1-25 marks a 7th straight border of year-over-year declines in OptX, and we will continue to focus on reducing costs in order to create greater operating leverage.

Speaker Change: And our net consolidated leverage at quarter end was approximately four six times.

Speaker Change: We also have $50 million of availability under our revolver as of the end of Q1.

Tridi: Adjusted EBITDA with 12.1 million and Q1, versus just 400,000 in the same quarter last year.

Michael: As Michael mentioned due to evolving dynamics in announced changes and Google's adsense for domains marketplace.

Speaker Change: Q1 represented the fourth consecutive quarter of year-rear increases in the adjustability of the top.

Tridivesh Kidambi: Network partner sessions were $1.7 billion, up 11% year-over-year and down 8% sequentially. Partner network RPS decreased 6% year-over-year and increased 10% sequentially after addressing for the out-of-period revenue adjustment in Q4. Total sessions processed by RAMP in the most recent quarter was $3 billion, up 9% year-over-year and down 20% sequentially.

Michael: Along with the broader market uncertainty tied to advertising demand and other potential macro headwinds. We are currently not in a position to provide financial guidance for Q2 of $25 for the balance of the year.

Speaker Change: With respect to liquidity, we ended the quarter with 43.9 million of unrestricted cash on our balance sheet.

Speaker Change: Our $20 million use of cash in the quarter was primarily driven by a $13 million cash payment related to the coupon follow-up acquisition turnout, as well as a $4.4 million outflow of related to the payment of our 2024 annual bonuses, which were approved and paid in Q1 of this year.

Michael: We believe it is prudent at this time to wait for greater clarity on these items before offering financial projections.

Michael: But in the interim we remain focused on executing efficiently in this dynamic environment.

Tridivesh Kidambi: on to operating expenses and adjusted EBITDA. In Q1, OffX net of add-backs were $29.4 million, down 5% year-over-year and up 10% sequentially. The quarter-over-quarter increase was expected and was impacted by non-wage related employee costs. Q1 of 25 marks the 7th straight quarter of year-over-year declines in OPEX, and we will continue to focus on reducing costs in order to create greater operating leverage. adjusted EBITDA was $12.1 million in Q1 versus just $400,000 in the same quarter last year. Q1 represented the fourth consecutive quarter of year-over-year increases in adjusted EBITDA.

Michael: We remain confident in the fundamentals of our overall business.

Speaker Change: As of March 31st, we had an outstanding balance of 275 million of term-lump debt under our credit agreement and our net consolidated leverage at quarter-end was approximately 4.6 times.

Michael: Owned and operated products are performing well and provide a strong financial foundation or.

Michael: Our focus on cost reduction is evident in the numbers and we remain focused on driving opex savings.

Speaker Change: We also have 50 million of availability under a revolver as of the end of Q1.

Michael: The volatility in our marketing driven businesses has hindered our ability in the near term to sustainably grow those businesses. However, we are confident in the power of our ramp platform and our ability to leverage new technologies, such as AI and egencia coating to create a long term competitive advantage.

Speaker Change: As Michael mentioned, due to evolving dynamics and announced changes in Google's essence for domain's marketplace.

Speaker Change: along with the broader market and certainty tied to advertising demand and other potential macro headwinds.

Speaker Change: We are currently not in a position to provide financial guidance for Q2 at 25 or the balance of the year.

Michael: Thanks for joining us today.

Tridivesh Kidambi: With respect to liquidity, we ended the quarter with $43.9 million of unrestricted cash on our balance sheet. Our $20 million use of cash in the quarter was primarily driven by a $13 million cash payment related to the coupon follow acquisition earn out, as well as a $4.4 million outflow related to the payment of our 2024 annual bonuses, which were approved and paid in Q1 of this year. As of March 31st, we had an outstanding balance of $275 million of term loan debt under our credit agreement, and our net consolidated leverage at quarter end was approximately 4.6 times.

Speaker Change: We believe it is prudent at this time to wait for greater clarity on these items before offering financial projections.

Speaker Change: Thank you Tracy we're now going to open the line for some questions. The first question comes from Tom Forte with Maxim Group Tom Go ahead.

Speaker Change: But in the interim, we remain focused on executing efficiently in this dynamic environment.

We remain confident in the fundamentals of our overall business.

Tom Forte: Hi, John.

Speaker Change: Go in and operate your products with performing well and provide a strong financial foundation. Our focus on cost reduction is evident in the numbers, and we remain focused on driving off-ex statements.

Speaker Change: Okay now my needed Okay. So Michael <unk> congrats on the quarter.

Speaker Change: I have two questions.

Speaker Change: So first off can you hear me.

Speaker Change: We can hear you.

Speaker Change: The volatility in our marketing driven businesses has hindered our ability in the near term to sustainably grow those businesses. However, we are confident in the power of our ramp platform and our ability to leverage new technologies such as AI and to coding to create a long-term competitive advantage.

Speaker Change: Good day, good agree alright, so I recognize you're not providing guidance in the second quarter, given the current uncertainty, but as long term participants in the digital AD market I would appreciate your thoughts and the following.

Tridivesh Kidambi: We also have $50 million of availability under a revolver as of the end of Q1. As Michael mentioned, due to evolving dynamics, it announced changes in Google's AdSense for Domains marketplace. along with the broader market uncertainty tied to advertising demand and other potential macro headlines.

Speaker Change: So it seems like digital advertising is holding up including your own performance.

Speaker Change: And having a lot more resiliency in the current challenging micro when you compare with prior periods of weakness where digital advertising seem to weaken further.

Thanks for joining us today.

Tridivesh Kidambi: We are currently not in a position to provide financial guidance for Q2 of 25 or the balance of the year. We believe it is prudent at this time to wait for greater clarity on these items before offering financial projections. But in the interim, we remain focused on executing efficiently in this dynamic environment. we remain confident in the fundamentals of our overall business. Bone and Operator products are performing well and provide a strong financial foundation. Our focus on cost reduction is evident in the numbers, and we remain focused on driving op-ex savings. The volatility in our marketing driven businesses has hindered our ability in the near term to sustainably grow those businesses.

Speaker Change: Thank you, Tridi. We're now going to open the line for some questions. The first question comes from Tom Forte with Maxim Group. Tom, go ahead.

Speaker Change: What do you attribute the change.

Speaker Change: Well I would say.

Speaker Change: First of all Youre right, we are not seeing any lumpiness, yet in our numbers, which is nice.

Roger.

Tom Forte: Okay, now I'm unmuted. Okay, so Michael, Tridivesh, Congressional powder.

Speaker Change: What I would say is it typically in a downturn I think a leading indicator is going to be more on the branded advertising side in performance marketing where much more performance marketers. So if there is going to end up being any kind of macro downturn.

I have two questions.

So, first off, can you hear me?

We can hear you fine.

Speaker Change: All right, so I recognize you're not providing guidance in the second quarter, given the current uncertainty, but as long time participants in the digital ad market, I'd appreciate your thoughts on the following.

Speaker Change: Really affect in digital marketing I think we will be the last to see it and as you know Tom from the past, sometimes when we do see some some rockiness in performance marketing can benefit us as well.

Speaker Change: So, it seems like digital advertising is holding up, including our own performance and having a lot more resiliency in the current challenging micro when you compare with prior periods of weakness, we're digital advertising soon and we can first.

Tridivesh Kidambi: However, we are confident in the power of our RAMP platform and our ability to leverage new technologies such as AI and agentic coding to create a long term competitive advantage.

Speaker Change: Because it drives down our buy side pricing.

Speaker Change: But I would say that it's probably a little early in any cycle for us to see any any issues.

Tridivesh Kidambi: Thanks for joining us today. Thank you, Tridie.

So, what do you attribute to change?

Speaker Change: Excellent alright, so the second and final question can you discuss and compare what youre seeing in advertising verticals that are likely less directly impacted by tariffs such as health and finance and then how that compares with those that are much more impacted like autos.

Well, I would say...

Tom Forte: We're now going to open the line for some questions. The first question comes from Tom Forte with Maxim Group. Tom, go ahead. Roger. Okay, now I'm unmuted.

Speaker Change: First of all, you're right. We're not seeing any wonkiness yet in our numbers, which is nice.

Speaker Change: What I would say is that typically in a downturn, I think a leading indicator is going to be more in the brand. Advertising side, then performance.

Tom Forte: Okay, so Michael Tridivesh, congrats on the quarter. I have two questions. So, first off, can you hear me? We can hear you fine, yes. Good to hear. All right, so I recognize you're not providing guidance in the second quarter, given the current uncertainty, but as longtime participants in the digital ad market, I'd appreciate your thoughts on the following. So it seems like digital advertising is holding up, including your own performance, and having a lot more resiliency in the current challenging micro when you compare with prior periods of weakness where digital advertising seemed to weaken first.

Marketing. We're much more performance marketers.

Speaker Change: Sure really like I said, we haven't we're just not seeing the big effects yet in really any verticals that you would expect would be affected by tariffs. Some of those were not big players and like some of the.

So...

Speaker Change: If there is going to end up being any kind of macro downturn and really affecting digital marketing, I think we would be the last to see it.

Speaker Change: And as you know, Tom from the past, sometimes when we do see some walkingness in performance marketing, it can benefit us as well because it drives down our by-side pricing.

Speaker Change: Right.

Speaker Change: The <unk> of the world and kind of the shopping.

Speaker Change: <unk>.

Speaker Change: For products that are coming directly from China, We just that's not a big vertical for us but across our range of verticals. We're just not seeing any big movement, yet now that's not to say, it's not going to come.

Speaker Change: But I would say that it's probably a little early in any cycle for us to see any issues.

Speaker Change: Excellent. Alright, so the second and final question, can you discuss and compare what you're seeing in advertising verticals that are likely less directly impacted by tariffs, such as health and finance, and then how that compares with those that are much more impacted like autos.

Speaker Change: That is one of the reasons why we're declining to provide guidance for the quarter is we're waiting to see how the economy plays out and what consumer demand and also advertisers look like but but but so far we're just not seeing anything shipped around much.

Michael Blend: So to what do you attribute the change? Well, I would say. First of all, you're right. We're not seeing any wonkiness yet in our numbers, which is nice. What I would say is that typically in a downturn, I think a leading indicator is going to be more on the branded advertising side than performance marketing. We're much more performance marketers. So if there is going to end up being any kind of macro downturn and really affecting digital marketing, I think we would be the last to see it. And as you know, Tom, from the past, sometimes when we do see some wonkiness in performance marketing, it can benefit us as well because it drives down our buy side prices.

Speaker Change: Sure do you want to comment on that anymore, Yes, no I think thats right.

Speaker Change: Sure, you know, really like I said, we haven't, we're just not seeing the big effects yet in really any verticals that you would expect would be affected by terrorists.

Speaker Change: That's definitely was the lesson last time, there was a major disruption both in 'twenty, two and 2000 and around Covid was.

Specifically AD formats, where if there's a very high measurable return on AD spend and.

Speaker Change: Some of those were not big players in, like some of the, you know, like, the team moves of the world and kind of the shopping for products that are coming directly from China. We just, that's not a big vertical for us.

Speaker Change: Specifically, how we partner.

Speaker Change: For example, with Google.

Speaker Change: That tends to be the last advertising channel that markers Walpole, because they can they can definitively track the ROI on that spend.

Speaker Change: but across our range of verticals we're just not seeing any big movement yet now that's not to say it's not going to come

Michael Blend: But I would say that it's probably a little early in any cycle for us to see any issues. Excellent.

Michael: Good Thanks, Michael Thanks, Judy.

Speaker Change: That is one of the reasons why we're declining to the corner is for waiting to see how the economy plays out.

Speaker Change: Thanks, Jonathan Thanks for joining.

Dan: The next question is from Dan criminals with benchmark Dan.

Michael Blend: All right, so the second and final question, can you discuss and compare what you're seeing in advertising verticals that are likely less directly impacted by tariffs, such as health and finance, and then how that compares with those that are much more impacted like autos? Sure. You know, really, like I said, we haven't, we're just not seeing the big effects yet in really any verticals that you would expect would be affected by tariffs. Some of those we're not big players in, like some of the, you know, like the T-Moves of the world and kind of the shopping for products that are coming directly from China.

Speaker Change: and what consumer demand and also advertisers look like, but so far, we just not seeing anything shift around much.

Alright.

Speaker Change: In line with our strategic plan.

Speaker Change: Yes, Hi, guys. Sorry can you hear me also like Tom who will start off with Tom question.

Speaker Change: Hey, Michael look obviously, you know I'm going to ask.

Speaker Change: I ask you about Google so.

Speaker Change: We've got remedies plans potential breakup of Gan.

Speaker Change: in specifically ad formats, where there's a very high measurable return-on-adspend and

Speaker Change: You guys are super leverage due to the Google networks.

Speaker Change: It's probably going to give you guys a good opportunity because it's been a constant disruption, but just love to hear your thoughts on <unk>.

Speaker Change: You know, specifically, how we partner, you know, for example, with Google, that tends to be the last advertising channel that marketers will pull, because they can definitively track the ROI of that spend.

Speaker Change: If it starts playing out what it means for kind of you in the ecosystem.

Well, there's a lot going on on the Google side as far as regulatory issues go as you know there are several trials and they are starting to hit the damages phase and I think as probably most of the people listening endo as well.

Tridivesh Kidambi: We just, that's not a big vertical for us. But across our range of articles, we're just not seeing any big movement yet. Now, that's not to say it's not going to come. That is one of the reasons why we're declining to provide guidance for the quarter, is we're waiting to see how the economy plays out and what consumer demand and also, you know, advertisers look like. But so far, we're just not seeing things shift around much. Trid, do you want to comment on that anymore? Yeah, no, I think that's right. I mean, and, you know, that's definitely was the lesson, you know, the last time there was a major disruption, both in, you know, 22 and 2000 around COVID was in, you know, specifically ad formats, where there's a very high measurable return on ad spend.

Good. Thanks, Michael. Thanks, Tridivesh.

Thank you. Thank you for drawing.

Speaker Change: The next question is from Daniel Kurnos with Benchbark, Dan.

Speaker Change: Any major dramatic things that would be negative for Google, we're probably going to be years in the future as appeals.

Thank you.

Inland Architecture, Eberts diferent.

Speaker Change: Yeah, hi guys. Sorry, can you hear me? Also, like Tom, we'll start off with the Tom question.

Speaker Change: Go through what I would say is we would welcome.

Speaker Change:

Michael, obviously you know I'm going to ask you.

Speaker Change: The more that Google if Google does end up being split up in any way, but we would guess is that each of those businesses, probably get a little bit more competitive.

Speaker Change: You know I'm going to ask you about Google, so you know we've got remedies, plans, potential breakup of GAM, you know you guys are super levered.

Speaker Change: The Google Network, you know, it's probably going to give you guys a good opportunity because it's going to cause some disruption, but just love to hear your thoughts on, you know, if it starts playing out what it means for kind of you and the ecosystem.

Speaker Change: And that most likely is going to be good for us.

Speaker Change: In terms of if we think that the Google were to lose any market share or.

Speaker Change: For instance in likely their search partner network that we are a major part.

Tom Forte: And, you know, specifically how we partner, you know, for example, with Google, that tends to be the last advertising channel that marketers will will pull because they can they can definitively track the ROI on that. Good. Thanks, Michael. Thanks, Trini. Thanks for joining.

Speaker Change: We'd be looking for more revenue at Google as a whole is going to be looking for search revenues. So.

Speaker Change: Well, there's a lot going on on the Google side as far as regulatory issues go. As you know, there's several trials and there's starting to hit the damages phased. And I think that's probably most of the people listening into as well.

Speaker Change: If you recall with our relationship with Google looks site as we're essentially manufacturing demand for them when.

Speaker Change: When someone goes to Google and types and something they're searching for that is just the organic traffic, but we're doing as we're manufacturing very very similar types of demand by going onto other networks incur.

Speaker Change: Any major dramatic thing, so it would be negative for Google, it's probably going to be years in the future as appeals go through. What I would say is that we would welcome...

Dan Kurnos: The next question is from Dan Kurnos for The Benchmark. Dan? in line. Yeah, hi, guys. Sorry, can you hear me?

Speaker Change: Encouraging consumers to click on ads.

Speaker Change: The more that Google does end up being split up in any way, what we would guess is that each of those businesses probably get a little bit more competitive.

Speaker Change: And then ultimately like expressing their demand by clicking on Google ads. So.

Dan Kurnos: Also, like Tom, we'll start off with the Tom question. Obviously, you know, I'm gonna ask, you know, I'm gonna ask you about Google. So, you know, we've got remedies, plans, potential breakup of GAM. You know, you guys are super levered to the Google network. You know, it's probably going to give you guys a good opportunity because it's going to cause some disruption, but just love to hear your thoughts on, you know, if it starts playing out what it means for kind of you and the ecosystem. Well, there's a lot going on on the Google side as far as regulatory issues go.

Speaker Change: If that part of the business were to come under increasing regulatory pressure, we would expect a Google would become a little bit more dependent and hungry for revenue from its partner base, which would help us quite a bit.

Speaker Change: and that most likely is going to be good for us. In terms of it, we think that we're going to lose any market share, for instance, and likely the search partner network that we are a major part of would be looking for more revenue. Google as a whole is going to be looking for search revenue, so.

Speaker Change: Probably similar things on the display side, a little bit hard to tell how the how that would play out in terms of pricing on the buy and sell side for for instance, a Google display inventory.

Speaker Change: I don't really feel like I can I can make a good judgment call. So that would help us or hurt us, but if it helps us on the buy side is going to.

Michael Blend: As you know, there's several trials and they're starting to hit the damages phase. And I think, as probably most of the people listening in know as well, any major dramatic things that would be negative for Google are probably going to be years in the future as appeals go through. What I would say is that we would welcome The more that Google, if Google does end up being split up in any way, what we would guess is that each of those businesses probably get a little bit more competitive, and that most likely is going to be good for us in terms of if we think that Google were to lose any market share, for instance, then likely their search partner network that we are a major part of would be looking for more revenue.

Speaker Change: It's going to hurt us on the sell side and vice versa. If we get hurt on the sell side is going to help on the buy side.

Speaker Change: We play with Google on both sides of that market. So we don't really expect anything.

Encouraging consumers to click on ads.

Speaker Change: and then ultimately expressing their demand by clicking on Google Ads. Let's start the show.

Speaker Change: Negative to come out of regulatory issues.

Speaker Change: If that part of the business were to come under increasing regulatory pressure, we would expect that Google would become a little bit more dependent and hungry for revenue from its partner base, which would help us quite a bit.

Speaker Change: One thing to keep in mind is we do have a.

Speaker Change: Search engine start page, which is.

Speaker Change: As competitive with the big players out there with the beings in the googles of the world.

Speaker Change: Probably similar things on the display side. A little bit hard to tell how that would play out in terms of pricing on the buy and sell side for instance the Google display inventory.

Speaker Change: Anything that would allow some of the independent search engines to getting a little bit of market share. We think we are directly flowed through to start page. So all in all we think it's probably be a net positive for us, but obviously, we don't welcome any regulatory issues related to Google at this point.

Speaker Change: I don't really feel like I can make a good judgment call that would help us or hurt us, but if it helps us on the by side, it's going to hurt us on the sell side and vice versa. We get hurt on the sell side, it's going to help on the by side.

Michael Blend: Google as a whole is going to be looking for search revenue. So if you recall what our relationship with Google looks like, is we're essentially manufacturing demand for them. You know, when someone goes to Google and types in, you know, something they're searching for, that's just their organic traffic. What we're doing is we're manufacturing very, very similar types of demand by going onto other networks, encouraging consumers to click on ads, and then ultimately expressing their demand by clicking on Google ads. So if that part of the business were to come under, you know, increasing regulatory pressure, we would expect that Google would become a little bit more dependent and hungry for revenue from its partner base, which would help us quite a bit.

Speaker Change: Okay.

Speaker Change: And obviously given the other kind of broader.

Speaker Change: Pressure that I think we're seeing on the market and perhaps front from the top down we've had Cameroon Sheehan exit the market I know you commented on that a second ago, but it is kind of left a vacuum, particularly in the social space, which is it's been plugged pretty well, we haven't seen any real challenges in <unk>. It looks like <unk> in general are been holding up.

Speaker Change: because we play with Google in both sides of that market. So we don't really expect anything.

Negative to come out of regulatory issues and...

Speaker Change: You know, one thing to keep in mind is we do have a independent search engine start page.

Speaker Change: Which, you know, is competitive with the big players out there.

Speaker Change: In the programmatic space, but.

Speaker Change: Is it disruption, creating and the opportunity for you to go after incremental market share domestically and then internationally. The alternative is tick tock spin.

with the beings and the Googles of the world.

Speaker Change: and anything that would allow some of the independent search engines to gain a little bit of market share we think would directly flow through your start page so all in all we think it's probably a net positive for us but obviously we don't welcome any regulatory issues related to Google at this point.

Michael Blend: Probably similar things on the display side, a little bit hard to tell how that would play out in terms of pricing on the buy and sell side, for instance, the Google display inventory. I don't really feel like I can make a good judgment call if that would help us or hurt us, but if it helps us on the buy side, it's going to hurt us on the sell side, and vice versa. If we get hurt on the sell side, it's going to help on the buy side, because we play with Google on both sides of that market.

Speaker Change: So <unk> kind of left the U S. Tictoc is been a great international opportunity its something <unk> talked about it feels like a great platform over there you guys have been growing international exposure. So.

and like obviously given the other kind of broader.

Speaker Change: Can you just talk about the two different shots on goal I think that you have domestic versus international given some of the disruptions.

Speaker Change: Well certainly we welcome lower pricing on the on the buy side. So if you have some of the big Chinese app advertisers pulling out of market, particularly in the social space. If I recall correctly I think that just those two companies alone were north of 10% of the of the med advertising revenue. So.

Michael Blend: So we don't really expect anything negative to come out of regulatory issues. And, you know, one thing to keep in mind is we do have an independent search engine, StartPage, which is competitive with the big players out there, with the Bings and the Googles of the world. And anything that would allow some of the independent search engines to gain a little bit of market share, we think, would directly flow through to StartPage. So all in all, we think it's probably a net positive for us, but obviously we don't welcome any regulatory issues related to Google at this point.

Speaker Change: It's been plugged pretty well. We haven't seen a real challenges in PLA. It looks like ECPMs in general or have been holding up in the programmatic space but, you know,

Speaker Change: As theres more advertisers pulling out internationally that should help us domestically. We are seeing some I would say green shoots on social right now I wish has been favorable so we would in many ways welcome fewer advertisers.

Speaker Change: and then internationally, the alternative is TikTok has left the US. TikTok has been a great international opportunity. It's something you and I have talked about. It feels like a great platform over there. You guys have been growing international exposure.

Speaker Change: On the social side same thing internationally Tictoc as you mentioned and they've got an audience network as well has been really good source of traffic for us.

Speaker Change: You know, kind of just talk about the two different shots on goal. I think that you have domestic versus international given some of the disruptions. [inaudible]

Speaker Change: We continue to lean in pretty heavily on that.

Speaker Change: We're seeing some good results internationally I know that treat treat you mentioned.

Dan Kurnos: Um, and like, obviously, given the other kind of broader pressure that I think we're seeing on the market. And perhaps from the top down, you know, we've had Temu and Sheehan exit the market. I know you commented on that a second ago, but it's kind of left a vacuum, particularly in the social space, which has been plugged pretty well. We haven't seen any real challenges in PLA. It looks like eCPMs in general have been holding up in the programmatic space. But, you know, Is the disruption creating any opportunity for you to go after incremental market share domestically?

Speaker Change: Well, certainly we welcome lower pricing on the buy side. So if you have some of the big Chinese app advertisers pulling out a market, you know, particularly in the social space.

It's still a big part of our business and growing part of our business and so we don't really see.

Speaker Change: Any issues on that.

Speaker Change: If I recall correctly, I think that just those two companies alone were, you know, north of 10% of the meta-abortizing revenue.

Speaker Change: Any negatives in terms of both those areas you talked about and as we mentioned before we're not really heavily leveraged on tech talk in the United States.

Speaker Change: So, as there's more advertisers pulling out internationally, that should help us domestically. You know, we are seeing some, I would say, green shoes on social right now, which has been favorable. So, we would, in many ways, welcome fewer advertisers on the social side.

Speaker Change: Wood.

Speaker Change: We're kind of agnostic as to whether Tictoc remains in the U S or not I think at this point people are I believe generally feeling that take talk will remain an app that's available for usage in the U S. If so we will be buying and.

Dan Kurnos: And then internationally, the alternative is TikTok's been, you know, having kind of left the U.S., TikTok's been a great international opportunity. It's something you and I have talked about. It feels like a great platform over there. You guys have been growing international exposure.

Speaker Change: But more of an effort behind that but it is not is not really going to help or hurt us in any material way.

Speaker Change: Same thing internationally, TikTok, as you mentioned, and they've got an audience network as well has been really good source of traffic for us.

Speaker Change: Look I mean, the question was definitely framed in a benefit to you and not as a disruptor to you Michael just given what's going on marketplace.

Speaker Change: We continue to lean in pretty heavily on that. We're just seeing some good results internationally. I know that Tree mentioned still a big part of our business and growing part of our business. And so, you know, we don't really see

Michael Blend: So, you know, kind of just talk about the two different shots on goal, I think, that you have domestic versus international given some of the disruptions. Well, certainly we welcome lower pricing on the buy side, so if you have some of the big Chinese app advertisers pulling out of market, particularly in the social space, if I recall correctly, I think that just those two companies alone were north of 10% of the meta advertising revenue. So as there's more advertisers pulling out internationally, that should help us domestically. We are seeing some, I would say, green shoes on social right now, which has been favorable.

Speaker Change: Can you just talk a little bit you mentioned.

Speaker Change: Yep go ahead sorry.

Speaker Change: At Triton.

Speaker Change: Any issues on any negatives in terms of both those areas that you talked about and as we mentioned before we're not really heavily leveraged on TikTok in the United States you know we would

Speaker Change: Maybe just maybe just double click a little bit on the productivity gains from shifting to a downtick and look obviously, you and I could have a lengthy conversation about that here, but we want for the sake of everybody on this call. So.

Speaker Change: Maybe just like dumb it down for people and help people understand.

Speaker Change: What that means more shots on goal cheaper to produce products either.

Speaker Change: <unk> Bruce creative anything that you want to give more color on so that people can understand exactly what it means to kind of the platform.

Michael Blend: So we would, in many ways, welcome fewer advertisers on the social side. Same thing internationally, TikTok, as you mentioned, and they've got an audience network as well, has been a really good source of traffic for us. We continue to lean in pretty heavily on that. We're seeing some good results internationally. I know that Triti mentioned, it's still a big part of our business and a growing part of our business, and so we don't really see... any issues, any negatives in terms of both those areas that you talked about.

Speaker Change: I mean, the question was definitely framed in a benefit to you, not as a disruptor to you, Michael, just given what to go to our marketplace.

Speaker Change: Sure I mean, it's kind of a cliche at this point I think everybody is talking about AI and using agenda coding.

Speaker Change: Be more efficient in their business I can tell you we've been very fortunate given the size of our company and our engineering and product teams.

Can you just put a little bit of bench in the second? Yep, go ahead.

Speaker Change: Maybe just double click a little bit on the productivity gain from shifting to a dentic and you know look obviously you and I could have a lengthy conversation about that here but we won't for the sake of everybody on this call so maybe just like dumb it down for people and help people understand

Speaker Change: We've made some pretty aggressive moves to move the entire company heavily into agenda coding and both on the on the business side and on the product engineering side. So I'll start with the business side first.

Michael Blend: And as we mentioned before, we're not really heavily leveraged on TikTok in the United States. You know, we would We're kind of agnostic as to whether TikTok remains in the U.S. or not. I think at this point, you know, people are, I believe, generally feeling that TikTok will remain an app that's available for usage in the U.S. If so, we'll be buying and put more of an effort behind that. But if it's not, it's not really going to help hurt us in any material way.

Speaker Change: And it's pretty remarkable like I don't want to it's hard to overstate. The effects said that this is having on not only our company, but I think a lot of companies in this space that are.

Speaker Change: You know, kind of what that means. Can you have more shots on goal cheaper to produce products? Either, you know, cheaper to produce creative. Anything that you want to give more color so that people can understand exactly what it means to, you know, kind of the platform. [inaudible]

Speaker Change: Really leaning in heavily into agenda coding on the business side, we're seeing things like.

Speaker Change: Business processes related to things like signing partners up the contracts and.

Speaker Change: Sure, I mean, it's kind of a cliche at this point. I think everybody is talking about AI and using agenda coding to be more efficient in their business. I can tell you, we've been very fortunate given the size of our company and our engineering and product teams.

Speaker Change: Marking up new product ideas said business leaders may have in.

Dan Kurnos: And look, I mean, the question was definitely framed in a benefit to you, not as a disrupter to you, Michael, just given what's going on in the marketplace. Can you just double click a little bit? Sorry, go ahead.

Speaker Change: In the past for something related to two putting together like an automated contract signed out form for instance.

Speaker Change: We've made some pretty aggressive moves to move the entire company heavily into agentic coding in both on the business side and on the project engineering side, so I'll start with the business side first.

Speaker Change: So one of our business I would have had to go to engineer greater product designer and actually have that builds and.

Michael Blend: Maybe just maybe just double click a little bit on the the productivity gain from shifting to Agentic and you know look obviously you and I could have a lengthy conversation about that here but we won't for the sake of everybody on this call so maybe just like dumb it down for people and help people understand you know kind of what that means can you more shots on goal cheaper to produce products either you know or cheaper to produce creative anything that you want to give more color so that people can understand exactly what it means to you know kind of the platform Sure.

Speaker Change: And now at this point, where we're seeing our business people building that on their own.

Speaker Change: So theyre going on than just using things like Claude.

Speaker Change: It's pretty remarkable, like I don't want to, it's hard to overstate the effects that this is having on not only our company, but I think a lot of companies in the space that are...

Speaker Change: To build their own products has speed up their business processes, and it's pretty amazing like if you walk around our company right now and Youre looking at the screens of some of our business leaders youre going to see them actually developing products on their own.

Speaker Change: And Thats something really amazing.

Speaker Change: I know tree you can talk to you about we're starting to lean in on the finance and legal areas as well.

Speaker Change: and mocking up new product ideas that business leaders may have in the past, you know, for something related to putting together like an automated contract sign-up form, for instance.

Michael Blend: I mean, it's kind of a cliche at this point. I think everybody's talking about AI and using agentic coding to be more efficient in their business. I can tell you we've been very fortunate given the size of our company and our engineering and product teams. You know, we've made some pretty aggressive moves to move the entire company heavily into agentic coding, and both on the business side and on the product engineering side. So I'll start with the business side first. And it's pretty remarkable, like, I don't want to, it's hard to overstate the effects that this is having on not only our company, but I think a lot of companies in the space that are, you know, really leaning heavily into agentic coding.

Speaker Change: But as.

Speaker Change: As far as the product and engineering teams go.

Speaker Change: What we did is we made a decision it was really about two generations ago of some of the agenda coding tools got to be good enough, where we decided that we would take.

Speaker Change: You know, someone on a business side would have had to go to an engineer, go to a product designer and actually have that built. [inaudible]

Speaker Change: and now at this point where we're seeing our business people building that on their own.

Speaker Change: A lot of our engineers and just stopped and developing on our core platform and really come up to speed very quickly on using these new coding tools and what we're seeing is in many cases at three to five times.

So they're going on and just using things like Clawd.

Speaker Change: to build their own products, to speed up their business processes, and it's pretty amazing. Like, if you walk around our company...

Speaker Change: Right now, and you're looking at the screens of some of our business leaders.

Speaker Change: Increase in productivity on product development.

Speaker Change: You're going to see them actually developing products on their own, and that's something really amazing. I know Trey can talk to you about we're starting to lean out on the finance and legal areas as well.

Speaker Change: And that's allowing us to do is move much more quickly in terms of getting products to market, it's allowing us to come up with more ideas and get more products to market. So.

Michael Blend: On the business side, we're seeing things like, you know, business processes related to things like signing partners up to contracts and mocking up new product ideas that business leaders may have. In the past, you know, for something related to putting together, like, an automated contract signup form, for instance, you know, someone on the business side would have had to go to an engineer, go to a product designer, and actually have that built. And now, at this point, what we're seeing are business people building that on their own. So, they're going on and just using things like Claude, you know, to build their own products that speed up their business processes.

But...

Speaker Change: As far as the PROC and engineering teams go, what we did is we made a decision, it was really about two generations ago of some of the agentic coding tools got to be good enough where we decided that we would take.

Speaker Change: The productivity increase is real.

Speaker Change: To the point, where if people are not if companies are kind of not leaning into the end of this new way of developing products, they're going to be left behind quite quickly.

Speaker Change: And what's been nice system. One is we were fairly early in the process of really.

Speaker Change: A lot of our engineers and just stop then developing on a core platform and really come up to speed very quickly on using these new coding tools. And what we're seeing is in many cases at three to five times.

Speaker Change: Moving to this new way of product development.

Speaker Change: We're doing things like <unk>.

Speaker Change: Headquarters in Los Angeles, we hosts like the kind of southern California AI.

Increase in Productivity on Product Development.

Michael Blend: And it's pretty amazing, like, if you walk around our company right now, and you're looking at the screens of some of our business leaders, you're going to see them actually developing products on their own. And that's something really amazing.

Speaker Change: Meet up those kind of things, where we've got kind of the leading the leading developers and leading product people that are that are kind of at the forefront of this of <unk> and <unk>.

Speaker Change: and what's that that's allowing us to do is move much more quickly in terms of getting products to market. It's allowing us to come up with more ideas and get more products to market so.

Speaker Change: Meetings are happening at our offices.

Michael Blend: I know Tri can talk to you about, we're starting to lean in on the finance and legal areas as well. But as far as the product and engineering teams go, you know, what we did is we made a decision, it was really about two generations ago of some of the agentic coding tools got to be good enough where we decided that we would take a lot of our engineers and just stop them developing on our core platform and really come up to speed very quickly on using these new coding tools. And what we're seeing is, in many cases, a three to five times increase in productivity on product development.

Speaker Change: And so.

Speaker Change: I'm pretty amazed how quickly our company has transformed and I think youre going to see that only accelerating as more and more people companywide or are using these tools, but also the tools themselves. We're getting much better you got anything to add to that treaty.

Speaker Change: The productivity increase is real, you know, to the point where if people are not, if companies are kind of not leaning into this new way developing products.

Speaker Change: They're going to be left behind quite quickly and what's been nice is System1 is we were fairly early in the process of really, you know.

Speaker Change: I think just specifically our ability to to test new ideas and new initiatives.

Speaker Change: It's so much faster and not having to make an investment decision early do we need to allocate 345 heads or design resources engineering resources to test something.

Moving to this new way of product development.

Speaker Change: You know, we're doing things like, you know, we're headquarters in Los Angeles. We host like the kind of Southern California AI.

Speaker Change: It just allows us to innovate much quicker to which I've definitely seen it just in the last quarter.

Speaker Change: you know, meet up, those kind of things where we've got kind of the leading developers and leading product people that are kind of at the forefront of this, of a offices.

Speaker Change: Quarter two quarters here.

Speaker Change: Okay.

Michael Blend: And what that's allowing us to do is move much more quickly in terms of getting products to market. It's allowing us to come up with more ideas and get more products to market. So the productivity increase is real, you know, to the point where if people are not, if companies are kind of not leaning into this new way of developing products, they're going to be left behind quite quickly. And what's been nice at System1 is we were fairly early in the process of really, you know, moving to this new way of product development. You know, we're doing things like, you know, we're, our headquarters in Los Angeles.

Speaker Change: That ends our questions now going to turn it over to Michael Brown for closing remarks.

and so...

I'm pretty amazed how quickly our company has transformed.

Michael Brown: I will thanks, everyone for joining us on our Q1 earnings calls so nice to have a little bit of momentum here, we're glad we put up.

Speaker Change: And I think you're going to see that only accelerating as more and more people, you know, company-wide or using these tools, but also the tools themselves were getting much better.

Michael Brown: Nice Q4, followed up by a good Q1 look forward to everybody joining next quarter, where I hope we're going to continue continues the momentum. Thank you everybody.

Speaker Change: You got anything to add to that treaty? Yeah, I mean, I think just you know specifically our ability to to test new ideas and new initiatives. It's so much faster and. [inaudible]

Speaker Change: Not having to make an investment decision early. Do we need to allocate three, four, five heads or design a resource engineering resource to test something? It just allows us to innovate much quicker too, which I've definitely seen it just in the last quarter and a half to quarter, sir.

Tridivesh Kidambi: We host like the kind of Southern California AI, you know, meetup, those kind of things where we've got kind of the leading, the leading developers and leading product people that are, that are kind of at the forefront of this, of agentic coding. And these meetings are happening at our offices. And so.

Speaker Change: That ends our questions, now we're going to turn over to Michael Blend for close-new remarks.

Tridivesh Kidambi: I'm pretty amazed how quickly our company has transformed, and I think you're going to see that only accelerating as more and more people, you know, company-wide are using these tools, but also the tools themselves are getting much better.

Tridivesh Kidambi: You got anything to add to that, Trudy? Yeah, I mean, I think just, you know, specifically our ability to test new ideas and new initiatives. It's so much faster, and not having to make an investment decision early, you know, do we need to allocate three, four, five heads or design resources, engineering resources to test something. It just allows us to innovate much quicker too, which, you know, where I've definitely seen it just in the last, you know, quarter and a half, two quarters here.

Operator: That ends our questions.

Michael Blend: Now we're going to turn it over to Michael Blend for closing remarks.

All right, well, thanks everyone for joining us on our Q1 earnings call. So, nice to have a little bit of momentum here. We're glad we put up a, you know, nice Q4, followed up by a good Q1. Look forward to everybody joining next quarter, where I hope we're going to continue the momentum. Thank you, everybody.