Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- System1 Inc (SST, Financial) exceeded the high end of guidance across key financial metrics, with $95 million in revenue and $39 million in gross profit.
- Adjusted EBITDA was $9.9 million, 42% higher than the high end of the guidance range.
- International revenue represented approximately 36% of owned and operated revenue, up from 29% in the first quarter.
- CouponFollow saw a significant increase in site traffic and corresponding revenue, with June organic sessions up nearly 80% year-over-year.
- Startpage launched a private browser app with over 50,000 downloads and positive user feedback, including over 2,000 5-star ratings.
Negative Points
- Revenue per session was down nearly 60% year-over-year due to lower cost per click rates in the United States and a shift towards international markets.
- Partner Network revenue decreased 12% year-over-year, although it was up 8% sequentially.
- Partner Network RPS declined 71% year-over-year and 19% quarter-over-quarter.
- Operating expenses, although reduced, still present a challenge with a net leverage of approximately 7.5x.
- The company is not modeling in any significant contribution from new initiatives in 2024, indicating potential delays in expected growth.
Q & A Highlights
Q: Are you seeing anything in the marketplace that gives you pause regarding forward guidance, and what contributions should we expect from new initiatives?
A: (Tridivesh Kidambi, CFO) No, we haven't seen anything that would give us pause. The advertising markets are behaving as expected. (Michael Blend, CEO) For new initiatives, we don't anticipate significant contributions in 2024, but we are confident in our buy-side platform's potential to scale our partners' capabilities.
Q: How does Google's decision not to deprecate third-party cookies impact CPMs and the industry?
A: (Michael Blend, CEO) We don't anticipate much change. We expected volatility if cookies were deprecated, but Google's delay wasn't surprising. The industry might breathe a sigh of relief, but we weren't overly concerned about the impact.
Q: Can you provide more details on international growth and its impact on future growth?
A: (Michael Blend, CEO) We're bullish on international growth, particularly in programmatic markets. We've seen success with TikTok and Pengo across Asia, South America, and Europe. We expect continued rapid growth and increasing contribution to overall revenue.
Q: What are the expectations for the new subscription product and its market launch?
A: (Michael Blend, CEO) We anticipate having at least one subscription product in market by Q4. It's close to being ready for testing, but we're not modeling significant contributions yet.
Q: How are the owned and operated products performing, and what is their impact on revenue and gross profit?
A: (Tridivesh Kidambi, CFO) Owned and operated products like CouponFollow, MapQuest, and Startpage rely on organic traffic, providing diversification and higher margins. They made up 19% of total revenue and 42% of total adjusted gross profit in Q2, with revenue and gross profit up significantly year-over-year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
