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Share Name | Share Symbol | Market | Type |
---|---|---|---|
System1 Inc | NYSE:SST | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.50 | 0 | 12:06:49 |
System1, Inc. (NYSE: SST) (“System1” or the “Company”), an omnichannel customer acquisition marketing platform, announced its financial results for the second quarter of 2022.
“System1 made considerable progress in Q2 on our key operating priorities that will enable us to triple our scale over the next few years. We launched new subscription products, began rolling out our next-generation RAMP technology, and integrated our latest acquisitions,” commented Michael Blend, Co-Founder & Chief Executive Officer. “Despite macro headwinds in the advertising environment, we are forecasting substantial growth and increasing cashflow. We are continuing to invest in our platform and remain focused on the opportunities that will drive our long-term growth. Further, our newly authorized stock and warrant repurchase program demonstrates our confidence in our long-term prospects and the underlying fundamentals of our business.”
Tridivesh Kidambi, Chief Financial Officer of System1, commented, “We are pleased with our second quarter financial and operating results, as we delivered growth in revenue, adjusted gross profit and adjusted EBITDA. Similar to our peers, we are seeing softness in the advertising marketplace, which has impacted our full year outlook. We remain confident in both the power and efficiency of RAMP and our business model, and we expect the slowdown in growth to be temporary.”
Explanatory Note of Year-Over-Year Comparisons
For financial reporting purposes, S1 Holdco has been determined to be the accounting predecessor and therefore its financial results are presented for all periods prior to the Business Combination with Trebia. In order to present comparable financial information, year-over-year comparisons of financial results against the second quarter of 2021 combine the unaudited financial results of Protected with the unaudited financial results of S1 Holdco for the second quarter of 2021. The Company believes it is important to provide these pro forma financial results for investors and other stakeholders to properly evaluate its performance in 2022 relative to comparable information provided in prior periods. Please refer to the tables at the end of this release for a reconciliation of the pro forma financial results as presented herein to the individual financial results of S1 Holdco, Protected and System1, respectively, for the respective successor and predecessor periods. These pro forma financial results are not prepared in accordance with Article 11 of Regulation S-X.
Second Quarter 2022 Financial Highlights
Full-Year 2022 Guidance
Second Quarter 2022 Business Highlights
_________________________ 1 Gross profit is defined as revenue less cost of revenue (exclusive of depreciation and amortization). 2 Please refer to the tables at the end of this release for a reconciliation of pro forma financial results to reported S1 Holdco results in Q2 2021.
About System1, Inc.
System1 combines best-in-class technology & data science to operate its advanced Responsive Acquisition Marketing Platform (RAMP). System1’s RAMP is omnichannel and omnivertical, and built for a privacy-centric world. RAMP enables the building of powerful brands across multiple consumer verticals, the development & growth of a suite of privacy-focused products, and the delivery of high-intent customers to advertising partners. For more information, visit www.system1.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes “forward-looking statements “ within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, particularly any statements or materials regarding System1’s future results or “guidance” for fiscal year 2022. Forward-looking statements include, but are not limited to, statements regarding System1 or its management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause System1’s actual financial results or operating performance to be materially different from those expressed or implied by these forward-looking statements. Readers or users of this press release should evaluate the risk factors summarized below, which summary list is not exclusive. Readers or users of this press release should also carefully review the “Risk Factors” and other information included in our registration statements on Form S-4 (including the related proxy statement/prospectus) with respect to the Business Combination with Trebia Acquisition Corp. and on Form S-1, each filed with the Securities and Exchange Commission (the “SEC ”), as well as System1’s Form 10-K, Form 8-K and other reports filed with the SEC from time to time. Please refer to the SEC filings for additional information regarding the risks and other factors that may impact System1’s business, prospects, financial results and operating performance following completion of the Business Combination.
Such risks, uncertainties and assumptions include, but are not limited to: (1) our ability to grow and manage growth profitably, and retain its key employees; (2) our ability to acquire businesses on acceptable terms and to successfully integrate and recognize anticipated synergies from acquired businesses; (3) use of cash and other available liquidity to grow and invest in our businesses; (4) continued growth of our digital media and subscription offerings; (5) international growth; (6) our ability to develop or introduce new products, services, features and technologies; (7) our liquidity and our ability to repay or refinance our outstanding indebtedness; (8) technology, platform and infrastructure systems capacity, coverage, reliability and security; (9) changes in or recent developments related to applicable laws or regulations (including those concerning data security, consumer privacy and/or information sharing); (10) the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and (11) the impact of Covid-19 and other political or societal developments. The foregoing list of factors is not exclusive.
Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from any forward-looking statements contained in this press release. System1’s independent auditors have not audited, reviewed, compiled or performed any procedures with respect to the forward-looking statements for the purpose of their inclusion in this press release, and accordingly, do not express an opinion or provide any other form of assurance with respect thereto for the purpose of this press release. System1 will not undertake any obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. You should not take any statement regarding past trends or activities as a representation that such trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements.
Non-GAAP Measures: Adjusted Gross Profit and Adjusted EBITDA
Adjusted Gross Profit and Adjusted EBITDA are non-GAAP financial measures and represent key metrics used by System1’s management and board of directors to measure the operational strength and performance of its business, to establish budgets, and to develop operational goals for managing its business. Adjusted Gross Profit is defined as revenue less cost of revenues plus certain discrete items impacting a particular segment’s results in a particular period. Adjusted EBITDA is defined as net income (loss) before interest expense, income taxes, depreciation and amortization expense, stock-based compensation expenses, deferred compensation, management fees, minority interest expense, restructuring charges, impairment and certain discrete items impacting a particular segment’s results in a particular period.
System1 believes Adjusted Gross Profit and Adjusted EBITDA are relevant and useful metrics for investors because it allows investors to view performance in a manner similar to the method used by management. There are limitations on the use of Adjusted Gross Profit and Adjusted EBITDA and it may not be comparable to similarly titled measures of other companies. Other companies, including companies in System1’s industry, may calculate non-GAAP financial measures differently than System1 does, limiting the usefulness of those measures for comparative purposes.
Adjusted Gross Profit should not be considered a substitute for revenue less cost of revenue. Adjusted EBITDA should not be considered a substitute for income (loss) from operations, net income (loss), or net income (loss) attributable to System1 on a consolidated basis that System1 reports in accordance with GAAP. Although System1 uses Adjusted Gross Profit and Adjusted EBITDA as financial measures to assess the performance of its business, such use is limited because it does not include certain costs necessary to operate System1’s business. System1’s presentation of Adjusted Gross Profit and Adjusted EBITDA should not be construed as indications that its future results will be unaffected by unusual or nonrecurring items.
The Company is not able to reasonably reconcile Adjusted EBITDA to net income, its nearest GAAP metric, in its guidance for future periods due to uncertainties regarding purchase accounting, stock-based compensation, taxes and other potential adjustments.
Unaudited Condensed Statements of Operations
(In thousands)
Successor
Predecessor
Three Months Ended June 30, 2022
Three Months Ended June 30, 2021
Revenue
$
219,797
$
169,579
Operating costs and expenses:
Cost of revenues (excludes depreciation and amortization)
152,558
126,167
Salaries, commissions, and benefits
45,555
17,698
Selling, general, and administrative
16,167
6,277
Depreciation and amortization
33,397
3,112
Total operating costs and expenses
247,677
153,254
Operating income (loss)
(27,880
)
16,325
Other expense (income):
Interest expense
7,324
4,476
Change in fair value of warrant liabilities
(4,139
)
—
Total other expense (income), net
3,185
4,476
Income (loss) before income tax
(31,065
)
11,849
Income tax (benefit) provision
3,000
77
Net income (loss)
$
(34,065
)
$
11,772
Net loss attributable to non-controlling interest
(4,867
)
—
Net income (loss) attributable to System1, Inc.
$
(29,198
)
$
11,772
Unaudited Condensed Balance Sheets
(In thousands, except for par values)
Successor
Predecessor
June 30, 2022
December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
37,442
$
47,896
Restricted cash, current
5,757
—
Accounts receivable
93,397
90,203
Prepaid expenses and other current assets
9,671
7,689
Total current assets
146,267
145,788
Restricted cash, non-current
1,532
743
Property and equipment, net
4,330
830
Internal-use software development costs, net
11,647
11,213
Intangible assets, net
537,913
50,368
Goodwill
907,248
44,820
Operating lease right-of-use assets
7,533
—
Other non-current assets
779
3,149
Total assets
$
1,617,249
$
256,911
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
17,286
72,846
Accrued expenses and other current liabilities
97,752
31,284
Deferred revenue
68,368
1,971
Operating lease liabilities, current
2,065
—
Notes payable, current
14,888
170,453
Total current liabilities
200,359
276,554
Operating lease liabilities, non-current
7,073
—
Notes payable, non-current
406,026
—
Warrant liability
13,669
—
Deferred tax liability
137,354
7,789
Protected incentive plan liability
18,163
—
Other liabilities
7,482
969
Total liabilities
790,126
285,312
Commitments and contingencies
EQUITY / MEMBERS' DEFICIT
Class A Common stock - $0.0001 par value; 250,000 shares authorized, 90,587 Class A shares issued and outstanding as of June 30, 2022
9
—
Class C Common stock - $0.0001 par value; 25,000 shares authorized, 22,077 Class C shares issued and outstanding as of June 30, 2022
2
—
Additional paid-in capital
761,002
—
Accumulated deficit
(118,373
)
—
Members' deficit
—
(28,829
)
Accumulated other comprehensive income
179
428
Total equity/members' deficit
642,819
(28,401
)
Non-controlling interest
184,304
—
Total equity/members' deficit
827,123
(28,401
)
Total liabilities and equity/members' deficit
$
1,617,249
$
256,911
The following tables reconcile net income (loss) to Adjusted EBITDA and Pro Forma Adjusted EBITDA for the periods presented for System1, Inc, S1 Holdco LLC and Protected.net.
Successor
System1, Inc.
($ in millions)
Three Months Ended
June 30, 2022
Net (Loss)
$
(34.1
)
Plus:
Income Tax (Benefit)
3.0
Interest Expense
7.3
Depreciation & Amortization
33.4
Other Expense
2.1
Stock-Based Compensation & Distributions To Members
22.4
Non-cash revaluation of warrant liability
(4.1
)
Acquisition & Restructuring Costs
4.6
One-time Ad Credit Impact
6.3
Acquisition Earnout
0.1
Adjusted EBITDA
$
41.0
Three Months Ended June 30, 2021
Predecessor
Unaudited
Pro Forma
($ in millions)
S1 Holdco LLC
Protected.net
Total
Net Income (Loss)
$
11.8
$
7.5
$
19.3
Plus:
Income Tax Expense
0.1
—
0.1
Interest Expense
4.5
(0.2
)
4.3
Depreciation & Amortization
3.1
0.1
3.2
Other Expense
—
2.7
2.7
Stock-Based Compensation & Distribution To Members
3.3
—
3.3
Terminated Product Lines
—
—
—
Acquisition & Restructuring Costs
0.9
0.5
1.4
Acquisition Earnout
—
—
—
Adjusted EBITDA
$
23.7
$
10.6
$
34.3
The following tables reconcile Revenue to Pro Forma Revenue, Adjusted Gross Profit and Pro Forma Gross Profit for the periods presented for System1, Inc, S1 Holdco LLC and Protected.net.
Three Months Ended June 30, 2022
Successor
($ in millions)
System1, Inc.
Revenue
$
219.8
Less: Cost of Revenue (exclusive of depreciation and amortization)
(152.6
)
Gross Profit
$
67.2
One-time Ad Credit Impact
6.3
Adjusted Gross Profit
$
73.5
Three Months Ended June 30, 2021
Unaudited
Pro Forma
($ in millions)
S1 Holdco LLC
Protected.net
Total
Revenue
$
169.6
$
36.0
$
205.6
Less: Cost of Revenue (exclusive of depreciation and amortization)
(126.2
)
(23.4
)
$
(149.6
)
Gross Profit
$
43.4
$
12.6
$
56.0
View source version on businesswire.com: https://www.businesswire.com/news/home/20220811005264/en/
Investors:
Brett Milotte ICR, Inc. Brett.milotte@icrinc.com
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