SST — System1, Inc.

Summary of SST Q3 2025 Earnings Call

1. Key Financial Results and Metrics:

• Total Revenue: Approximately $61.6 million, down 31% year-over-year and 21% sequentially.
• Adjusted Gross Profit: $36.1 million, down 4% year-over-year and down 12% sequentially.
• Adjusted EBITDA: $9.9 million, down 4% year-over-year and down 16% sequentially.
• Marketing Revenue: $39.1 million, down 43% year-over-year and down 28% sequentially.
• Product Revenue: $22.5 million, up 8% year-over-year but down 6% sequentially.
• Sessions: Increased by 23% year-over-year and 12% sequentially, indicating strong user engagement.
• Revenue Per Session (RPS): Declined by 12% year-over-year and 16% sequentially to $0.04.

2. Strategic Updates and Business Highlights:

• Continued integration of AI across the company, with significant developments in product offerings.
• Strong growth in the Product segment, particularly with Startpage, MapQuest, and CouponFollow, which are focusing on international expansion and enhanced user engagement.
• Launch of new features in MapQuest and CouponFollow aimed at attracting younger demographics and improving user experience.
• Introduction of "Vanish," a private AI chat product under Startpage, addressing consumer privacy concerns while using AI.

3. Forward Guidance and Outlook:

• The company is not providing specific Q4 2025 guidance but anticipates stabilizing conditions in the marketing segment as the transition from Google's AFD to RSOC is nearly complete.
• Plans to increase investment in Product segments and new growth initiatives leveraging AI technology.
• Management believes the marketing business is at a trough and expects a return to growth in the coming quarters.

4. Bad News, Challenges, or Points of Concern:

• The effective sunsetting of Google's AdSense for Domains (AFD) product significantly impacted marketing revenue, contributing to a 43% year-over-year decline in marketing revenue.
• Ongoing volatility and uncertainty in the marketing segment, with a noted 54% decrease in advertising spend year-over-year.
• Concerns regarding traffic quality from a large advertising partner, with potential legal action being considered to recover losses from invalid traffic.

5. Notable Q&A Insights:

• Management is actively working with Microsoft and has seen improved performance on Bing, suggesting a potential shift in marketing efforts towards Bing as it gains market share.
• The company is leveraging partnerships with AI models like ChatGPT and Claude to enhance product development and plans to roll out more AI-driven consumer products in the future.

Overall, while System1 faced significant challenges in its marketing segment due to external factors, it demonstrated resilience in its Product segment and is positioning itself for future growth through innovation and strategic investments.