Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 04, 2022 | |
Cover | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Document Transition Report | false | |
Entity File Number | 001-39331 | |
Entity Registrant Name | System1, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 98-1531250 | |
Entity Address, Address Line One | 4235 Redwood Avenue | |
Entity Address, City or Town | Marina Del Rey | |
Entity Address State Or Province | CA | |
Entity Address, Postal Zip Code | 90066 | |
City Area Code | 310 | |
Local Phone Number | 924-6037 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 91,455,846 | |
Entity Central Index Key | 0001805833 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Class A Common Stock | ||
Cover | ||
Title of 12(b) Security | Class A common stock, par value $0.0001 per share | |
Trading Symbol | SST | |
Security Exchange Name | NYSE | |
Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50 per share | ||
Cover | ||
Title of 12(b) Security | Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50 per share | |
Trading Symbol | SST.WS | |
Security Exchange Name | NYSE |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 31,933,000 | $ 47,896,000 |
Restricted cash, current | 7,338,000 | 0 |
Accounts receivable | 78,846,000 | 90,203,000 |
Prepaid expenses and other current assets | 8,756,000 | 7,689,000 |
Total current assets | 126,873,000 | 145,788,000 |
Restricted cash, non-current | 2,772,000 | 743,000 |
Property and equipment, net | 4,349,000 | 830,000 |
Internal-use software development costs, net | 12,599,000 | 11,213,000 |
Intangible assets, net | 506,018,000 | 50,368,000 |
Goodwill | 904,240,000 | 44,820,000 |
Operating lease assets | 6,893,000 | 0 |
Other non-current assets | 708,000 | 3,149,000 |
Total assets | 1,564,452,000 | 256,911,000 |
Current liabilities: | ||
Accounts payable | 12,242,000 | 72,846,000 |
Accrued expenses and other current liabilities | 90,265,000 | 31,284,000 |
Protected.net incentive plan liability, current | 19,266,000 | 0 |
Deferred revenue | 68,289,000 | 1,971,000 |
Operating lease liabilities, current | 2,102,000 | 0 |
Debt, net | 14,954,000 | 170,453,000 |
Total current liabilities | 207,118,000 | 276,554,000 |
Operating lease liabilities, non-current | 6,406,000 | 0 |
Long-term debt, net | 402,273,000 | 0 |
Warrant liability | 18,158,000 | 0 |
Deferred tax liability | 120,724,000 | 7,789,000 |
Protected.net incentive plan liability, non-current | 11,517,000 | 0 |
Other liabilities | 2,909,000 | 969,000 |
Total liabilities | 769,105,000 | 285,312,000 |
Commitments and contingencies (Note 11) | ||
EQUITY / MEMBERS' DEFICIT | ||
Additional paid-in capital | 767,169,000 | 0 |
Accumulated deficit | (150,016,000) | 0 |
Members' deficit | 0 | (28,829,000) |
Accumulated other comprehensive income | 13,000 | 428,000 |
Total equity/members' deficit attributable to System1, Inc. | 617,177,000 | (28,401,000) |
Non-controlling interest | 178,170,000 | 0 |
Total equity/members' deficit | 795,347,000 | (28,401,000) |
Total liabilities and equity/members' deficit | 1,564,452,000 | 256,911,000 |
Class A Common Stock | ||
EQUITY / MEMBERS' DEFICIT | ||
Common stock value | 9,000 | 0 |
Class C Common Stock | ||
EQUITY / MEMBERS' DEFICIT | ||
Common stock value | $ 2,000 | $ 0 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) shares in Thousands | Sep. 30, 2022 $ / shares shares |
Class A Common Stock | |
Common stock, par value (in dollars per share) | $ / shares | $ 0.0001 |
Common stock, shares authorized (in shares) | 250,000 |
Common stock issued (in shares) | 91,490 |
Common stock outstanding (in shares) | 91,490 |
Class C Common Stock | |
Common stock, par value (in dollars per share) | $ / shares | $ 0.0001 |
Common stock, shares authorized (in shares) | 25,000 |
Common stock issued (in shares) | 21,747 |
Common stock outstanding (in shares) | 21,747 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Statement [Abstract] | |||||
Revenue | $ 52,712 | $ 201,176 | $ 171,446 | $ 587,081 | $ 488,586 |
Operating costs and expenses: | |||||
Cost of revenues (excluding depreciation and amortization) | 41,760 | 137,681 | 128,885 | 410,370 | 365,837 |
Salaries, commissions, and benefits | 35,175 | 55,862 | 15,139 | 144,876 | 48,032 |
Selling, general, and administrative | 14,817 | 16,520 | 7,936 | 47,668 | 21,163 |
Depreciation and amortization | 1,000 | 33,420 | 3,459 | 90,128 | 10,260 |
Total operating costs and expenses | 92,752 | 243,483 | 155,419 | 693,042 | 445,292 |
Operating income (loss) | (40,040) | (42,307) | 16,027 | (105,961) | 43,294 |
Other expense: | |||||
Interest expense, net | 1,049 | 10,011 | 4,184 | 22,111 | 12,708 |
Change in fair value of warrant liabilities | 0 | 4,489 | 0 | 14,111 | 0 |
Total other expense | 1,049 | 14,500 | 4,184 | 36,222 | 12,708 |
Income (loss) before income tax | (41,089) | (56,807) | 11,843 | (142,183) | 30,586 |
Income tax (benefit) provision | (629) | (19,228) | 475 | (32,480) | 703 |
Net income (loss) | (40,460) | (37,579) | 11,368 | (109,703) | 29,883 |
Net loss attributable to non-controlling interest | 0 | (5,936) | 0 | (18,871) | 0 |
Net loss | $ (40,460) | $ (31,643) | $ 11,368 | $ (90,832) | $ 29,883 |
Basic net loss per share (in dollars per share) | $ (0.35) | $ (1.02) | |||
Diluted net loss per share (in dollars per share) | $ (0.35) | $ (1.02) | |||
Weighted average number of shares outstanding - basic (in shares) | 91,002 | 88,716 | |||
Weighted average number of shares outstanding - diluted (in shares) | 91,002 | 88,716 | |||
Basic net income (loss) per unit (in dollars per share) | $ (1.97) | $ 0.55 | $ 1.46 | ||
Diluted net income (loss) per unit (in dollars per share) | $ (1.97) | $ 0.55 | $ 1.46 | ||
Weighted average units outstanding - basic (in shares) | 20,488 | 20,488 | 20,488 | ||
Weighted average units outstanding - diluted (in shares) | 20,488 | 20,488 | 20,488 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Statement of Comprehensive Income [Abstract] | |||||
Net income (loss) | $ (40,460) | $ (37,579) | $ 11,368 | $ (109,703) | $ 29,883 |
Other comprehensive income (loss) | |||||
Foreign currency translation income (loss) | 87 | (354) | 101 | (126) | 566 |
Comprehensive income (loss) | (40,373) | (37,933) | 11,469 | (109,829) | 30,449 |
Comprehensive loss attributable to non-controlling interest | 0 | (6,124) | 0 | (19,010) | 0 |
Comprehensive income (loss) attributable to System1, Inc. | $ (40,373) | $ (31,809) | $ 11,469 | $ (90,819) | $ 30,449 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Total | Previously Reported | Revision of Prior Period, Adjustment | Cumulative Effect, Period of Adoption, Adjusted Balance | Common Stock Class A Common Stock | Common Stock Class A Common Stock Previously Reported | Common Stock Class A Common Stock Revision of Prior Period, Adjustment | Common Stock Class A Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance | Common Stock Class C Common Stock | Common Stock Class C Common Stock Previously Reported | Common Stock Class C Common Stock Revision of Prior Period, Adjustment | Common Stock Class C Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance | Common Stock Class D Common Stock | Common Stock Class D Common Stock Previously Reported | Common Stock Class D Common Stock Revision of Prior Period, Adjustment | Common Stock Class D Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance | Additional Paid-In-Capital | Additional Paid-In-Capital Previously Reported | Additional Paid-In-Capital Revision of Prior Period, Adjustment | Additional Paid-In-Capital Cumulative Effect, Period of Adoption, Adjusted Balance | Accumulated Deficit | Accumulated Deficit Previously Reported | Accumulated Deficit Revision of Prior Period, Adjustment | Accumulated Deficit Cumulative Effect, Period of Adoption, Adjusted Balance | Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income Previously Reported | Accumulated Other Comprehensive Income Revision of Prior Period, Adjustment | Accumulated Other Comprehensive Income Cumulative Effect, Period of Adoption, Adjusted Balance | Non-Controlling Interest | Non-Controlling Interest Previously Reported | Non-Controlling Interest Revision of Prior Period, Adjustment | Non-Controlling Interest Cumulative Effect, Period of Adoption, Adjusted Balance |
Beginning balance at Dec. 31, 2021 | $ (28,401) | |||||||||||||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||||||||||||
Net loss | (40,460) | |||||||||||||||||||||||||||||||
Other comprehensive income | 87 | $ 87 | ||||||||||||||||||||||||||||||
Share-based compensation | 27,698 | |||||||||||||||||||||||||||||||
Ending balance (in shares) at Jan. 26, 2022 | 52,680 | 29,017 | 81,697 | 0 | 22,077 | 22,077 | 0 | 2,900 | 2,900 | |||||||||||||||||||||||
Ending balance at Jan. 26, 2022 | $ 466,400 | $ 355,742 | $ 822,142 | $ 5 | $ 3 | $ 8 | $ 0 | $ 2 | $ 2 | $ 0 | $ 0 | $ 0 | $ 525,579 | $ 157,046 | $ 682,625 | $ (59,184) | $ 0 | $ (59,184) | $ 0 | $ 0 | $ 0 | $ 0 | $ 198,691 | $ 198,691 | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||||||||||||
Net loss | (38,059) | $ (29,991) | $ (8,068) | |||||||||||||||||||||||||||||
Issuance of common stock in connection with the acquisition of business (in shares) | 2,000 | |||||||||||||||||||||||||||||||
Issuance of common stock in connection with the acquisition of business | 25,500 | $ 25,500 | ||||||||||||||||||||||||||||||
Conversion of Class D shares to Class A shares (in shares) | 2,900 | (2,900) | ||||||||||||||||||||||||||||||
Conversion of Class D shares to Class A shares | 1 | $ 1 | ||||||||||||||||||||||||||||||
Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC | (6,752) | (6,752) | ||||||||||||||||||||||||||||||
Other comprehensive income | (34) | (28) | (6) | |||||||||||||||||||||||||||||
Share-based compensation | 27,167 | 27,167 | ||||||||||||||||||||||||||||||
Distribution to members | (247) | (247) | ||||||||||||||||||||||||||||||
Ending balance (in shares) at Mar. 31, 2022 | 86,597 | 22,077 | 0 | |||||||||||||||||||||||||||||
Ending balance at Mar. 31, 2022 | 829,718 | $ 9 | $ 2 | $ 0 | 728,540 | (89,175) | (28) | 190,370 | ||||||||||||||||||||||||
Beginning balance (in shares) at Jan. 26, 2022 | 52,680 | 29,017 | 81,697 | 0 | 22,077 | 22,077 | 0 | 2,900 | 2,900 | |||||||||||||||||||||||
Beginning balance at Jan. 26, 2022 | $ 466,400 | $ 355,742 | $ 822,142 | $ 5 | $ 3 | $ 8 | $ 0 | $ 2 | $ 2 | $ 0 | $ 0 | $ 0 | $ 525,579 | $ 157,046 | $ 682,625 | $ (59,184) | $ 0 | $ (59,184) | $ 0 | $ 0 | $ 0 | $ 0 | $ 198,691 | $ 198,691 | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||||||||||||
Net loss | (109,703) | |||||||||||||||||||||||||||||||
Ending balance (in shares) at Sep. 30, 2022 | 91,490 | 21,747 | 0 | |||||||||||||||||||||||||||||
Ending balance at Sep. 30, 2022 | 795,347 | $ 9 | $ 2 | $ 0 | 767,169 | (150,016) | 13 | 178,170 | ||||||||||||||||||||||||
Beginning balance (in shares) at Mar. 31, 2022 | 86,597 | 22,077 | 0 | |||||||||||||||||||||||||||||
Beginning balance at Mar. 31, 2022 | 829,718 | $ 9 | $ 2 | $ 0 | 728,540 | (89,175) | (28) | 190,370 | ||||||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||||||||||||
Net loss | (34,065) | (29,198) | (4,867) | |||||||||||||||||||||||||||||
Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC | 585 | 585 | ||||||||||||||||||||||||||||||
Exercise of warrants (in shares) | 3,969 | |||||||||||||||||||||||||||||||
Exercise of warrants | 27,989 | 27,989 | ||||||||||||||||||||||||||||||
Issuance of restricted stock, net of forfeitures and shares withheld for taxes (in shares) | 21 | |||||||||||||||||||||||||||||||
Other comprehensive income | 262 | 207 | 55 | |||||||||||||||||||||||||||||
Share-based compensation | 3,888 | 3,888 | ||||||||||||||||||||||||||||||
Distribution to members | (1,254) | (1,254) | ||||||||||||||||||||||||||||||
Ending balance (in shares) at Jun. 30, 2022 | 90,587 | 22,077 | 0 | |||||||||||||||||||||||||||||
Ending balance at Jun. 30, 2022 | 827,123 | $ 9 | $ 2 | $ 0 | 761,002 | (118,373) | 179 | 184,304 | ||||||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||||||||||||
Net loss | (37,579) | (31,643) | (5,936) | |||||||||||||||||||||||||||||
Conversion of Class D shares to Class A shares (in shares) | 330 | (330) | ||||||||||||||||||||||||||||||
Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC | 14 | 14 | ||||||||||||||||||||||||||||||
Issuance of restricted stock, net of forfeitures and shares withheld for taxes (in shares) | 573 | |||||||||||||||||||||||||||||||
Issuance of restricted stock, net of forfeitures and shares withheld for taxes | (2,035) | (2,035) | ||||||||||||||||||||||||||||||
Other comprehensive income | (354) | (166) | (188) | |||||||||||||||||||||||||||||
Share-based compensation | 8,188 | 8,188 | ||||||||||||||||||||||||||||||
Distribution to members | (10) | (10) | ||||||||||||||||||||||||||||||
Ending balance (in shares) at Sep. 30, 2022 | 91,490 | 21,747 | 0 | |||||||||||||||||||||||||||||
Ending balance at Sep. 30, 2022 | $ 795,347 | $ 9 | $ 2 | $ 0 | $ 767,169 | $ (150,016) | $ 13 | $ 178,170 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Changes in Member's Deficit (Unaudited) - USD ($) $ in Thousands | Total | Court Square Capital Partners | OpenMail | Members’ Capital | Members’ Capital Court Square Capital Partners | Members’ Capital OpenMail | Accumulated Other Comprehensive Income (Loss) |
Beginning balance at Dec. 31, 2020 | $ (48,229) | $ (47,886) | $ (343) | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income (loss) | 6,743 | 6,743 | |||||
Accumulated other comprehensive income | 441 | 441 | |||||
Share-based compensation expense | 146 | 146 | |||||
Contribution from OpenMail | $ 147 | $ 147 | |||||
Ending balance at Mar. 31, 2021 | (40,752) | (40,850) | 98 | ||||
Beginning balance at Dec. 31, 2020 | (48,229) | (47,886) | (343) | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income (loss) | 29,883 | ||||||
Ending balance at Sep. 30, 2021 | (26,959) | (27,182) | 223 | ||||
Beginning balance at Mar. 31, 2021 | (40,752) | (40,850) | 98 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income (loss) | 11,772 | 11,772 | |||||
Accumulated other comprehensive income | 24 | 24 | |||||
Share-based compensation expense | 120 | 120 | |||||
Contribution from OpenMail | 3 | 3 | |||||
Distribution from partners | $ (1,814) | (877) | $ (1,814) | (877) | |||
Ending balance at Jun. 30, 2021 | (31,524) | (31,646) | 122 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income (loss) | 11,368 | 11,368 | |||||
Accumulated other comprehensive income | 101 | 101 | |||||
Share-based compensation expense | 89 | 89 | |||||
Contribution from OpenMail | 109 | 109 | |||||
Distribution from partners | $ (4,088) | $ (3,014) | $ (4,088) | $ (3,014) | |||
Ending balance at Sep. 30, 2021 | (26,959) | (27,182) | 223 | ||||
Beginning balance at Dec. 31, 2021 | (28,401) | (28,829) | 428 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income (loss) | (40,460) | (40,460) | |||||
Accumulated other comprehensive income | 87 | 87 | |||||
Share-based compensation expense | 27,698 | 27,698 | |||||
Ending balance at Jan. 26, 2022 | $ (41,076) | $ (41,591) | $ 515 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |||||
Jan. 26, 2022 | Mar. 31, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Jan. 27, 2022 | Dec. 31, 2021 | |
Cash flows from Operating Activities: | ||||||||||
Net income (loss) | $ (40,460) | $ (38,059) | $ (37,579) | $ 11,368 | $ 6,743 | $ (109,703) | $ 29,883 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | ||||||||||
Depreciation and amortization | 1,000 | 33,420 | 3,459 | 90,128 | 10,260 | |||||
Share-based compensation | 27,698 | 79,802 | 334 | |||||||
Amortization of debt issuance costs | 0 | 3,540 | 1,696 | |||||||
Noncash lease expense | 115 | (203) | 0 | |||||||
Change in fair value of contingent consideration and CEO equity profit interest | (9) | 0 | 4,363 | |||||||
Change in fair value of warrants | 0 | 14,111 | 0 | |||||||
Deferred tax benefits | (816) | (37,827) | (731) | |||||||
Changes in operating assets and liabilities | ||||||||||
Accounts receivable | 11,118 | 6,670 | (14,449) | |||||||
Prepaids and other assets | 905 | 455 | (4,798) | |||||||
Accounts payable | (67,600) | 1,981 | 12,535 | |||||||
Accrued expenses and other liabilities | 57,170 | (19,017) | 65 | |||||||
Protected.net incentive plan liability | 0 | (10,000) | 0 | |||||||
Deferred revenue | 311 | 7,133 | 211 | |||||||
Other long-term liabilities | 78 | (26,549) | 0 | |||||||
Net cash provided by (used for) operating activities | (10,490) | 521 | 39,369 | |||||||
Cash flows from Investing Activities: | ||||||||||
Purchases of property and equipment | 0 | (3,224) | 0 | |||||||
Capitalized software development costs | (441) | (4,796) | (4,901) | |||||||
Acquisition of businesses, net of cash acquired | 0 | (445,405) | 0 | |||||||
Net cash used for investing activities | (441) | (453,425) | (4,901) | |||||||
Cash flows from Financing Activities: | ||||||||||
Proceeds from term loan and line of credit | 0 | 449,000 | 0 | |||||||
Repayment of term loan | 0 | (182,488) | (9,886) | |||||||
Member capital contributions | 0 | 0 | 259 | |||||||
Payments for financing costs | 0 | (24,845) | 0 | |||||||
Payments for earnouts | 0 | (1,715) | 0 | |||||||
Taxes paid related to net settlement of restricted stock awards | 0 | (2,035) | 0 | |||||||
Redemptions of class A common stock | 0 | (510,469) | 0 | |||||||
Proceeds from warrant exercises | 0 | 5,027 | $ 5,027 | 0 | ||||||
Cash received from the Backstop | 0 | 246,484 | 0 | |||||||
Payments on contingent consideration from purchase of companies | 0 | 0 | (6,715) | |||||||
Related party loan | 0 | 0 | ||||||||
Related party loan | (1,500) | |||||||||
Distributions to members | 0 | (1,511) | (9,793) | |||||||
Net cash used for financing activities | 0 | (22,552) | (27,635) | |||||||
Effect of exchange rate changes in cash, cash equivalent and restricted cash | (132) | (54) | 363 | |||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (11,063) | (475,510) | 7,196 | |||||||
Cash and cash equivalents and restricted cash, beginning of the period | 48,639 | $ 37,576 | $ 29,013 | 37,576 | 48,639 | 29,013 | ||||
Cash and cash equivalents and restricted cash, end of the period | 37,576 | 42,043 | 36,209 | 42,043 | 42,043 | 36,209 | ||||
Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets: | ||||||||||
Cash and cash equivalents | 36,833 | 31,933 | 36,209 | 31,933 | 31,933 | 36,209 | $ 47,896 | |||
Restricted cash | 743 | 10,110 | 0 | 10,110 | 10,110 | 0 | ||||
Total cash, cash equivalents and restricted cash | 37,576 | $ 42,043 | $ 36,209 | 42,043 | $ 42,043 | 36,209 | $ 517,553 | $ 48,639 | ||
Supplemental cash flow information: | ||||||||||
Cash paid for operating lease liabilities | 175 | 1,580 | 0 | |||||||
Operating lease assets obtained in exchange for operating lease liabilities | 7,987 | 2,064 | 0 | |||||||
Capitalized assets financed by accounts payable | 0 | 309 | 0 | |||||||
Tenant improvements paid by lessor | 0 | 139 | 0 | |||||||
Stock-based compensation included in capitalized software development costs | $ 0 | $ 340 | $ 0 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | ORGANIZATION AND DESCRIPTION OF BUSINESS System1, Inc. and subsidiaries (“System1” or the “Company”) operates an omnichannel customer acquisition platform, delivering high-intent customers to advertisers and sells antivirus software packages to end user customers. The Company provides its omnichannel customer acquisition platform services through its proprietary responsive acquisition marketing platform (“RAMP”) . Operating seamlessly across major advertising networks and advertising category verticals to acquire users on its behalf, RAMP allows the Company to monetize such users through its relationships with third party advertisers and advertising networks (“A dvertising Partners ”) . RAMP also allows third party advertising platforms and publishers (“ Network Partners ”) , to send user traffic to, and monetize user traffic on, the Company’s owned and operated websites. RAMP operates across the Company’s network of owned and operated websites and related products, allowing it to monetize user traffic that it sources from various acquisition marketing channels, including Google, Facebook, Taboola, Snapchat and TikTok. The Company, through its wholly owned subsidiary Protected.net Group Limited, a private limited company incorporated in England and Wales (“Protected.net ” ), also provides antivirus software solutions, offering its customers a single packaged solution that provides protection and reporting to the end user. The Company delivers its antivirus software solutions directly to end-user customers across the world. The antivirus software solutions product offering comprises a core security package with varying levels of extra protection based on a customer's specific needs. The Company’s primary operations are in the United States; and the Company also has operations in Canada, the United Kingdom, and the Netherlands. Operations outside the United States are subject to risks inherent in operating under different legal systems and various political and economic environments. Among these risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation, government foreign exchange controls, and exposure to currency exchange fluctuations. The Company does not engage in hedging activities to mitigate its exposure to fluctuations in foreign currency exchange rates. For the purposes of the condensed consolidated financial statements, periods on or before January 26, 2022 reflect the financial position, results of operations and cash flows of S1 Holdco, LLC, a Delaware limited liability company ("S1 Holdco") and its consolidated subsidiaries prior to the Merger (as defined in Note 3—MERGER |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation, Principles of Consolidation and Summary of Significant Accounting Policies The Company was a special purpose acquisition company originally incorporated as a Cayman Islands exempted company on February 11, 2020 under the name Trebia Acquisition Corp. (“Trebia”). The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Merger”). On January 27, 2022, the Company consummated its Merger, which resulted in the acquisition of S1 Holdco and System1 SS Protect Holdings, Inc. (“Protected”). As a result of the Merger, the results of operations, financial position and cash flows of the Predecessor and Successor are not directly comparable. The Company was deemed the accounting acquirer in the Merger based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805, Business Combinations . S1 Holdco was deemed to be the predecessor entity based on an analysis. Accordingly, the historical financial statements of S1 Holdco became the historical financial statements of the Company, upon the consummation of the Merger. As a result, the financial statements included in this report reflect (i) the historical operating results of S1 Holdco prior to the Merger and (ii) the combined results of the Company, including S1 Holdco and Protected following the closing of the Merger. The accompanying financial statements include a Predecessor period, which includes the period through January 26, 2022 concurrent with the Merger, and a Successor period from January 27, 2022 through September 30, 2022. A black-line between the Successor and Predecessor periods has been placed in the condensed consolidated financial statements and in the tables to the notes to the condensed consolidated financial statements to highlight the lack of comparability between these two periods as the Merger resulted in a new basis of accounting for S1 Holdco. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated financial statements include the accounts of System1, Inc. and its subsidiaries for the Successor period, and S1 Holdco for the Predecessor periods. All intercompany accounts and transactions have been eliminated in the consolidation of the financial statements. The condensed consolidated financial statements have been prepared by the Company and are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such SEC rules and regulations. The interim condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. The year-end condensed consolidated balance sheet data was derived from audited financial statements of S1 Holdco and related notes included in the Company’s final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on April 19, 2022 (the “Prospectus”), but does not include all disclosures required by U.S. GAAP. The condensed consolidated statements of operations for the period from January 1, 2022 through January 26, 2022 (Predecessor) and for the period from January 27, 2022 through September 30, 2022 (Successor) are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2022 or thereafter. Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform with the current period presentation. These reclassifications had no effect on the results of operations or financial position for any period presented. ASC 842 Adoption On January 1, 2022, the Company adopted ASC 842, Leases , under the modified transition approach. This lease accounting standard provides several optional practical expedients in transition. The Company elected the “package of practical expedients,” which permits the Company to not reassess its prior conclusions about lease identification, lease classification and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption. Accordingly, for those leases that qualify, the Company did not recognize an operating lease asset or operating lease liability for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components for its leases. The adoption of the lease standard did not have any effect on its previously reported condensed consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. The Company recorded $6,786 of operating lease assets, $7,987 of lease liabilities and reclassified $1,201 of deferr ed rent liabilities as a reduction to the beginning operating lease assets upon implementation of ASC 842. See Note 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Leases and Note 7—LEASES for additional details. Capital Resources, Liquidity, and Concentrations To date, the Company’s available liquidity and operations have been financed through the initial public offering of Trebia, the Merger (as defined in Note 3—MERGER) , credit facilities, and cash flows from operations. The Company is subject to certain business and operational risks, including competition from alternative technologies, as well as dependence on key Advertising Partners, key employees, key contracts, and growth to achieve its business and operational objectives. The following table illustrates the level of concentration as a percentage of total revenues for its key Advertising Partners: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Google 67 % 84 % 70 % 88 % 84 % Microsoft 3 % 5 % 3 % 4 % 5 % As of September 30, 2022, the Company has (i) two paid search advertising partnership contracts with Google, and (ii) one paid search advertising partnership contract with Microsoft. One of the Google contracts was renewed with an effective date of March 1, 2021, and has a two-year term through February 28, 2023. The other Google contract was renewed with an effective date of August 1, 2021, and has a two-year term through July 31, 2023. The Company renewed its advertising contract with Microsoft with an effective date of July 1, 2022, and has a three-year term through June 30, 2025. All three agreements may be terminated by the respective Advertising Partner immediately or with minimal notice under certain circumstances. Accounts receivable are primarily derived from Advertising Partners located within the United States. As of September 30, 2022 (Successor), two of the Company’s largest Advertising Partners, Google and Yahoo, represented 64% and 12%, respectively, of the Company’s accounts receivables balance. As of December 31, 2021 (Predecessor), these two Advertising Partners represented 72% and 10%, respectively, of the Company’s accounts receivable balances. Use of Estimates The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to: (1) valuation of goodwill, acquired intangible assets and long-lived assets, (2) valuation and recognition of the Company's share-based compensation awards, (3) income taxes, (4) contingent consideration and (5) determination of the fair value of the warrant liabilities. Significant estimates affecting the condensed consolidated financial statements have been prepared on the basis of the most current and best available information, including historical experience, known trends and other market-specific or other relevant factors that the Company believes to be reasonable. Management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in periods which they become known. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the condensed consolidated financial statements. Cash and Cash Equivalents Cash and cash equivalents consist of amounts held as bank deposits. Accounts Receivable Accounts receivable primarily represent amounts due from Advertising Partners, and these accounts receivable are stated at the amount the Company expects to collect from outstanding balances and do not bear interest. The Company does not require collateral for its accounts receivable. The Company considers the following factors when determining the collectability of specific customer accounts: past transaction history with the customer and current economic industry trends. These accounts receivables have historically been paid on a timely basis. Due to the nature of the accounts receivable balance, the Company believes there is no significant risk of non-collection and therefore no allowance for doubtful accounts was required as of September 30, 2022 (Successor) and December 31, 2021 (Predecessor). The payment terms for the Company's accounts receivable are typically 30 days. Concentration of Credit Risk Cash is deposited with high-credit-quality financial institutions and, at times, such balances with any one financial institution may exceed the insurance limits of the prevailing regulatory body. Historically, the Company has not experienced any losses related to these cash balances and believes that there is minimal risk of expected future losses. However, there can be no assurance that there will not be losses on these deposits. Foreign Currency The Company’s reporting currency is the U.S. Dollar. The balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. The statements of operations amounts have been translated using the average exchange rate for the month in which the activity related. Accumulated net translation adjustments and foreign currency transaction gains/losses resulting from exchange rate fluctuations on transactions denominated in a currency other than the functional currency were not material. Warrant Liability The Company accounts for the Public Warrants and Private Placement Warrants (collectively, the “Warrants”; which are discussed in further detail in Note 13—WARRANTS and Note 14—FAIR VALUE MEASUREMENT ) in accordance with ASC 815-40 under which the Warrants do not meet the criteria for equity classification, and therefore must be recorded as liabilities. The fair value of the Public Warrants has been estimated using the Public Warrants’ quoted market price. The fair value of the Private Placement Warrants has been estimated using the fair value of the Public Warrants. Fair Value of Financial Instruments The provisions of ASC 820, Fair Value Measurements and Disclosures ( "ASC 820") , relate to financial and nonfinancial assets and liabilities, as well as other assets and liabilities carried at fair value on a recurring basis. ASC 820 provides a single authoritative definition of fair value, sets out a framework for measuring fair value, and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. The Company measures fair value based on a three-level hierarchy of inputs, maximizing the use of observable inputs, where available, and minimizing the use of unobservable inputs when measuring fair value. A financial instrument’s level within the three-level hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three-level hierarchy of inputs is as follows: Level 1 : Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 : Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 : Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on the Company’s own assumptions about current market conditions and require significant management judgment or estimation. Financial instruments consist of cash, cash equivalents, restricted cash, accounts receivable, other assets accounted for at fair value, accounts payable, accrued liabilities, and warrant liabilities. Cash equivalents and restricted cash are stated at fair value on a recurring basis. Accounts receivable, accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date. As of September 30, 2022, the Company's outstanding debt included a Term Loan, of which its fair value was estimated using an observable market quotation (Level 2). The carrying value and estimated fair value of the Term Loan were $368,228 and $374,400, respectively, as of September 30, 2022. Refer to Note 12—DEBT, NET for additional information. The Company does not have any assets, with the exception of cash, cash equivalents and restricted cash, that are required to be carried at fair value on a recurring basis at September 30, 2022 (Successor) and December 31, 2021 (Predecessor). The Company’s liabilities measured at fair value relate to the Public Warrant liabilities (Level 1), Private Placement Warrant liabilities (Level 2), the former CEO of S1 Holdco's equity profits interest liability (Level 3), and contingent consideration (Level 3). Certain assets, including goodwill, intangible assets and long-lived assets, are also subject to measurement at fair value on a nonrecurring basis if they are deemed to be impaired as a result of an impairment review. The Company determines the fair value by applying observable inputs to calculate the present value of these assets. To date, no material impairments have been recorded on those assets. Restricted Cash The Company had restricted cash of $10,110 and $743 as of September 30, 2022 (Successor) and December 31, 2021 (Predecessor), respectively. The Company’s restricted cash as of September 30, 2022 (Successor) primarily consists of (i) cash held as collateral at one of the Company’s financial institutions to secure the Company’s letter of credit issued in favor of its landlord under the lease for its corporate office in Marina del Rey, California, (ii) merchant reserve balances with its credit card processors held due to arrangements under which the Company's credit card processors withhold certain credit card funds to cover potential charge backs initiated by the Company’s customers, (iii) the escrow account balance related to the portion of unvested equity awards as of the closing of the Merger that will be cash settled and will be released to the Company's employees as the service requirement is completed, (iv) the escrow account balance related to the indemnification obligations related to its RoadWarrior acquisition and (v) the escrow account balance related to the postcombination compensation arrangement related to the CouponFollow acquisition. The amount of restricted cash as of December 31, 2021 (Predecessor) relates to cash held as collateral at one of the Company’s financial institutions to secure the Company’s letter of credit issued in favor of its landlord under the lease for its corporate office in Marina del Rey, California. Property and Equipment, net Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Repairs and maintenance are charged to expense as incurred, while improvements are capitalized. Upon the sale or retirement of property and equipment, the accounts are relieved of the cost and the related accumulated depreciation, and any resulting gain or loss is included in the condensed consolidated statement of operations. The estimated useful lives of the Company’s property and equipment for purposes of computing depreciation are as follows: Useful Life (Years) Computer equipment 3 Office equipment 3 Software 4 Furniture, fixtures and equipment 3 - 7 Motor vehicles 4 Leasehold improvements Shorter of the remaining lease term or estimated useful life for leasehold improvements. Internal-use Software Development Costs, net Internal-use software development costs are stated at cost, less accumulated amortization. The Company capitalizes certain internal-use software development costs associated with creating and enhancing internally developed software related to the Company’s technology infrastructure, including continuing to develop and deploy its RAMP platform. These costs are comprised of personnel costs, which include salaries, bonuses, stock-based compensation and employee benefits’ expenses for employees who are directly associated with, and who devote significant time to, software projects, as well as external direct costs of materials and services consumed in developing or obtaining the software. Internal-use software development costs that do not meet the qualification for capitalization are expensed as incurred, and correspondingly recorded in Salaries, commissions, and benefits expense in the condensed consolidated statement of operations. Internal-use software development activities generally consist of three stages: (i) the planning stage, (ii) the application and infrastructure development stage, and (iii) the post-implementation stage. Costs incurred in the planning and post-implementation stages of software development, including costs associated with the post configuration training and repairs and maintenance of the developed technologies, are expensed as incurred. The Company capitalizes costs associated with software developed for internal use when the preliminary project stage is completed, management has authorized further funding for the completion of the project, and it is probable that the project will be completed and the software will perform as intended. Costs incurred in the application and infrastructure development stage, including significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete, and the software and technologies are ready for deployment for their intended purpose(s). Internal-use software development costs are amortized using a straight-line method over an estimated useful life of three (3) years, commencing when the software is ready for its intended use. The straight-line recognition method approximates the manner in which the expected benefit will be derived. The Company does not transfer ownership of its software or lease its software to third parties. Intangible Assets Intangible assets primarily consist of acquired technology, customer relationships and trade names/trademarks. The Company determines the appropriate useful life based on management’s estimate of the applicable intangible asset’s remaining economic useful life at the time of acquisition. Intangible assets are amortized over their estimated economic useful lives using a straight-line method, which approximates the pattern in which the economic benefits are consumed. Certain customer relationship intangibles are amortized on an accelerated basis based upon the expected timing of economic benefits which are, derived from an analysis of customer attrition rates over the expected life. The fair value of the intangible assets acquired are determined using either the income, market or replacement cost methodologies. The estimated useful lives of the Company’s intangible assets are as follows: Useful Life (Years) Developed technology 4 Customer relationships 3 - 5 Trademarks and trade names 10 Other intangibles 4 Impairment of Long-Lived Assets The Company assesses the recoverability of its long-lived assets when events or changes in circumstances indicate that their carrying value may not be recoverable. Such events or changes in circumstances may include a significant adverse change in the extent or manner in which a long-lived asset is being used; significant adverse changes in legal factors or in the business climate that could affect the value of a long-lived asset; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset; current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset; or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company assesses recoverability of its long-lived assets by determining whether the carrying value of the asset group can be recovered through projected undiscounted cash flows over their remaining useful lives. If the carrying value of the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized and measured as the amount by which the carrying amount exceeds the estimated fair value. An impairment loss is charged to operations in the period in which management determines such impairment has occurred. For the periods presented in this quarterly report, the Company has not recorded any impairments of long-lived assets. Business Combinations The results of a business acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition. The Company allocates the purchase price, which is the sum of the consideration provided which may consist of cash, equity, or a combination of the two, paid in a business combination for the identifiable assets and liabilities of the acquired business at their acquisition-date fair values. Any excess amount paid over the identifiable net assets is recorded as goodwill. The process for estimating the fair values of the acquired business involves the use of significant estimates and assumptions, including estimating average industry purchase price multiples, customer and service attrition rates and estimating future cash flows. The Company estimates the fair value based on assumptions which the Company's management believes to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. At the conclusion of the measurement period, any subsequent adjustments are reflected in the Company’s condensed consolidated statements of operations. Transaction costs associated with business combinations are expensed as incurred and are included in Selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. When purchase consideration includes contingent consideration, the Company records the fair value of the contingent consideration as of the date of acquisition, and subsequently remeasures the contingent consideration at fair value as of each reporting date through the Company’s condensed consolidated statements of operations. Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired and identifiable intangibles in a business combination. The Company accounts for goodwill in accordance with ASC 350, Intangibles—Goodwill and Other , which requires the Company to test goodwill at the reporting unit level for impairment at least annually. The Company has the option (i) to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount or (ii) to perform the quantitative impairment test. The quantitative impairment test involves comparing the estimated fair value of a reporting unit with its respective book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If, however, the fair value of the reporting unit is less than book value, an impairment loss is recognized in an amount equal to the excess. The determination of fair value(s) requires the Company to make significant estimates and assumptions. These estimates include, but are not limited to, future expected cash flows from a market participant perspective, discount rates, industry data and management’s prior experience. Unanticipated events or circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results. The Company tests for goodwill impairment annually at December 31st. For the periods presented in this quarterly report, there were no triggering events identified, and therefore no impairment charges recorded on goodwill during the interim periods were required. Leases On January 1, 2022, the Company adopted ASC 842 , Leases , and recognized operating lease assets and operating lease liabilities in its condensed consolidated balance sheet. A contract is or contains a lease when, (1) the contract contains an identified asset and (2) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration. The Company assesses whether an arrangement is or contains a lease at commencement of the contract. For all leases, other than those that qualify for the short-term recognition exemption, the Company recognizes as of the lease commencement date, on the balance sheet a liability for its obligation related to the lease and a corresponding asset representing the Company’s right to use the underlying asset over the period of use. The Company’s operating leases are included in operating lease assets and operating lease liabilities in the Company’s condensed consolidated balance sheet as of September 30, 2022 (Successor). An operating lease asset represents the Company’s right to use an underlying asset for the lease term and an operating lease liability represents the Company’s obligation to make lease payments arising from the lease. Operating lease assets and operating lease liabilities are initially recorded based on the present value of lease payments over the lease term, which may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. As the rate implicit for each of the Company’s leases is not readily determinable, the incremental borrowing rate based on the information available on the commencement date of the lease is used to determine the present value of lease payments, which include taxes, insurance, utilities and maintenance costs. Operating lease assets include any lease incentives. Lease agreements with lease and non-lease components are accounted for as a single lease component. Lease expense is recognized on a straight-line basis over the term of the lease. Operating lease expenses are included in Selling, general, and administrative expenses in the accompanying condensed consolidated statements of operations. See Note 7—LEASES for additional details. Revenue The Company recognizes revenue when control of the promised services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those services. The Company determines revenue recognition through the following steps: • Identification of a contract with a customer, • Identification of the performance obligations in the contract, • Determination of the transaction price, • Allocation of the transaction price to the performance obligations in the contract, and • Recognition of revenue when or as the performance obligations are satisfied. The Company’s revenue is principally derived from the following areas: Advertising and Other Revenue The Company earns revenue by directly acquiring traffic to its owned and operated websites and utilizing its RAMP platform and related services to connect its Advertising Partners to its owned and operated websites. For this revenue stream, the Company is the principal in the transaction and reports revenue on a gross basis for the amounts received from its Advertising Partners. For this revenue, the Company has determined that it is the principal since it has a risk of loss on the traffic that it is acquiring for monetization with its Advertising Partners, and, in the case of its owned and operated websites, the Company maintains the website, provides the content and bears the cost and risk of loss associated with its websites’ advertising space. Revenue is also earned from revenue-sharing arrangements with the Company’s Network Partners for the use of its RAMP platform and related services that enable them to direct advertising provided by our Advertising Partners to their advertising inventory. The Company has determined it is the agent in these transactions and reports revenue on a net basis, because (a) the Company does not control the underlying advertising space, (b) the Company does not acquire the traffic and does not have risk of loss in connection therewith and (c) the pricing is in the form of a substantively fixed-percentage revenue-sharing arrangement. The Company reports this revenue on a net basis with respect to the amount retained under its revenue-sharing arrangements, which represents the difference between amounts received by the Company from the Advertising Partners, less amounts remitted to the Network Partners based on underlying contracts. The Company recognizes revenue upon delivering traffic to its Advertising Partners based on a cost-per-click or cost-per-thousand impression basis. Subscription Revenue In connection with the Merger and acquisition of Protected.net discussed in Note 3—MERGER , the Company is also engaged in selling antivirus, adblock, webshield and VPN software as a service subscription ("SaaS") to customers. The subscription business provides real-time antivirus protection, a safe-browsing feature, adblocking, blocking of malicious websites and data breach monitoring. Subscription revenue is primarily derived from the (i) delivery of the antivirus software and (ii) delivery of the additional add-on service(s), which all are provided on a fixed-price basis. The performance obligations related to subscription, maintenance and support are satisfied over the term of the customer contract and the associated subscription revenue is recognized over the contract term on a ratable basis, which is consistent with transfer of control. The Company’s services rendered to customers are generally paid for in advance with cash receipts recorded as deferred revenue, which represents a liability |
MERGER
MERGER | 9 Months Ended |
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
MERGER | MERGER On June 28, 2021, the Company entered into a Business Combination Agreement (as amended on November 30, 2021, January 10, 2022 and January 25, 2022), (the “Business Combination Agreement”) by and among S1 Holdco, Trebia, and Protected (collectively, the “Companies”). On January 26, 2022 (the “Closing Date”), the Company consummated the business combination (the “Merger”) pursuant to the Business Combination Agreement. Following the consummation of the Merger, the combined company is organized via an “Up-C” structure, in which substantially all of the assets and business operations of System1 are held by S1 Holdco. The combined Companies’ business continues to operate through the subsidiaries of S1 Holdco and Protected. Additionally, Trebia’s ordinary shares, warrants and units ceased trading on the NYSE, and System1 Inc.'s Class A common stock and the Public Warrants began trading on the NYSE on January 28, 2022 under the symbols “SST” and “SST.WS,” respectively. The consideration paid to the existing equity holders of S1 Holdco and Protected in connection with the Merger was a combination of cash, Class A common stock and Class C common stock. The aggregate cash consideration under the Business Combination Agreement (“Closing Cash Consideration”) was $442,168. The aggregate equity consideration under the Business Combination Agreement was $421,047, consisting of Replacement Awards and shares of Class A common stock. The fair value of the Class A common stock was determined by utilizing the transaction closing price per share per the Business Combination Agreement of $10.00 and a discount of 10%, as the shares were not immediately available for sale upon issuance and this restriction is viewed to be a function of the security characteristics. Additionally, the aggregate Class B units in S1 Holdco retained by S1 Holdco equity holders at the Closing Date resulted in a non-controlling interest. The 22,077 Class B units in S1 Holdco and the corresponding Class C common stock in the Company were determined to have an estimated value of $198,691. As the Class B units in S1 Holdco together with the corresponding shares of Class C common stock in the Company are exchangeable for shares of Class A common stock on a one-for-one basis, the fair value was determined using the same method as for the shares of Class A common stock, utilizing the transaction closing price of $10.00 and a discount of 10% (as the units and the corresponding shares of Class C common stock were not immediately available for sale upon issuance and this restriction is viewed to be a function of the security characteristics). The fair value of $198,691 was recorded as non-controlling interest in the accompanying condensed consolidated balance sheet and presented as non-controlling interests in the accompanying condensed consolidated statements of changes in stockholders' equity. In connection with the Merger, System1 and Cannae Holdings, Inc. (“Cannae”) entered into a backstop agreement (the “Backstop Agreement”) whereby Cannae agreed, subject to the other terms and conditions, to subscribe for System1 Class A common stock in order to fund a certain amount of redemptions by shareholders of System1 redeemed at the Closing Date. As a result of shareholder redemptions, System1 shareholders provided $7,031 of the cash used to fund the Closing Cash Consideration, and Cannae provided $246,484 of the cash used to fund the Closing Cash Consideration pursuant to its obligations under the Backstop Agreement. Concurrently with the Merger, System1 entered into a tax receivable agreement with certain of the then-existing members of S1 Holdco, (the “Tax Receivable Agreement” or “TRA”), pursuant to which, among other things, the parties to the Tax Receivable Agreement agreed to the allocation and payment of 85% of the actual savings, if any, in U.S. federal, state and local income taxes that System1 may realize as a result of certain tax benefits (if any) related to the transactions contemplated by the Business Combination Agreement and future exchanges of Class B units in S1 Holdco (together with the corresponding shares of the Company’s shares of Class C common stock) in exchange for shares of the Company’s Class A common stock. As of the Closing Date, the fair value of obligations under the TRA were determined to be zero as any tax savings were uncertain. The TRA is contingent consideration and subsequent changes in fair value of the contingent liability are recognized in earnings. Refer to TRA discussion in Note 10—INCOME TAXES. The Business Combination Agreement that gave effect to the Merger, also included the Protected.net Incentive Plan. Refer to Note 18—SHARE-BASED COMPENSATION for additional information. The Company adopted ASU No. 2021-08 on January 1, 2022 and accordingly, has recorded contract assets and contract liabilities acquired as part of the Merger based on what the Company would have recorded under ASC 606, Revenue from Contracts with Customers, as of the acquisition date, as if the Company had entered into the original contract at the same date and on the same terms as S1 Holdco and Protected. The Merger has been accounted for as a business combination using the acquisition method of accounting. The total purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The purchase price is preliminary and may be subject to additional adjustments. The Company expects to finalize the purchase accounting as soon as practicable, but not later than one year from the acquisition date. The purchase consideration was allocated to the following assets and liabilities. Amount Tangible assets acquired and liabilities assumed: Cash and marketable securities $ 68,748 Accounts receivable 79,086 Prepaid expenses 10,804 Property, plant & equipment, net 1,551 Internal-use software development costs, net 11,316 Other assets 6,946 Accounts payable (9,798) Deferred revenue (60,768) Accrued expenses and other current liabilities (99,726) Notes payable (172,038) VAT tax liability (12,280) Deferred tax liabilities (142,806) Other liabilities (8,474) Total tangible assets acquired and liabilities assumed (327,439) Intangible assets 555,500 Goodwill 833,845 Net assets acquired $ 1,061,906 Consideration: Cash $ 442,168 Equity 421,047 Total consideration 863,215 Noncontrolling interest 198,691 Total $ 1,061,906 During the three months ended September 30, 2022, the Company reduced the DTL related to the acquisition by $2,468 due to a refinement of acquired tax attributes related to the period prior to the Merger. This adjustment was recorded as a measurement period adjustment during the three months ended September 30, 2022, and accordingly, goodwill was reduced by the corresponding amount. The intangible assets as of the closing date of the acquisition included: Amount Weighted Average Useful Life (in Years) Trademarks $ 243,200 10 Customer relationships 115,300 4 Technology 197,000 4 Total $ 555,500 Trademarks – Identified trademarks relate to the estimated fair value of future cash flows related to any trademarks acquired. The Company valued trademarks using the relief-from-royalty method under the income approach. Key assumptions include forecasted revenue, an estimated royalty rate applicable to the trademark and a discount rate. Customer relationships – The value of customer relationships represent the fair value of future projected revenues that will be derived from the sale to customers acquired. The Company valued customer relationships using an excess-earnings method utilizing distributor inputs. Key assumptions include customer attrition rate, revenue growth rate, existing customer revenue, deferred revenue, and a discount rate. Technology – Technology represents existing technology acquired and incorporated into the Company’s existing infrastructure. The Company valued technology using the excess-earnings method utilizing company-specific inputs. Key assumptions include forecasted revenue and a discount rate. The goodwill balance is primarily attributable to the expected revenue opportunities with the Company's applications and services offerings, assets acquired and acquired workforce. Goodwill is not deductible for tax purposes. Unaudited Pro Forma Information The following table provides unaudited pro forma information as if the Merger occurred as of January 1, 2021. The unaudited pro forma information reflects adjustments for additional amortization resulting from the fair value adjustments to assets acquired and liabilities assumed, adjustments for alignment of accounting policies, and transaction expenses as if the Merger and acquisitions of Answers, CouponFollow and RoadWarrior (each as defined in Note 4—ACQUISITIONS) occurred January 1, 2021. The pro forma results do not include any anticipated cost synergies or other effects of the combined company. Accordingly, pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on the dates indicated, nor is it indicative of the future operating results of the combined company. Three months ended Nine months ended September 30, 2021 September 30, 2022 September 30, 2021 Pro forma revenue $ 218,590 $ 657,186 $ 630,822 Pro forma net (loss) $ (22,362) $ (95,189) $ (141,058) |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
ACQUISITIONS | ACQUISITIONS Answers Holdings, Inc. On May 4, 2022, the Company acquired the assets of Answers Holdings, Inc. and its subsidiaries, collectively ("Answers") for total cash consideration of $4,632 . The acquisition of Answers constitutes a business combination under ASC 805. The acquisition expands the Company's portfolio of Owned & Operated publishing sites and search destinations to include a destination for higher education and lifelong learning content. The results of Answers' operations since the date of the acquisition have been included in the Company's condensed consolidated financial statements. The amounts of revenue and net loss for the period from May 4, 2022 to September 30, 2022 (Successor) were $607 and $456, respectively, and the amounts of revenue and net loss for the three months ended September 30, 2022 (Successor) were $534 and $403, respectively. The operating results of Answers are reported within the Owned and Operated segment prospectively from the date of acquisition. The total purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The purchase price is preliminary and may be subject to additional adjustments, including working capital adjustments. The Company expects to finalize the purchase accounting as soon as practicable, but not later than one year from the acquisition date. The purchase consideration was allocated to the following assets and liabilities: Amount Assets acquired and liabilities assumed: Working capital $ 32 Trademark - 10 years weighted average useful life 1,100 Goodwill 3,500 Net assets acquired $ 4,632 Total consideration: Cash $ 4,632 The goodwill arising from the acquisition consists largely of the expected synergies from combining operations. The goodwill is deductible for tax purposes over 15 years. Trademarks – Identified trademarks relate to the estimated fair value of future cash flows related to any trademarks acquired. The Company valued trademarks using the relief-from-royalty method under the income approach. Key assumptions include forecasted revenue, an estimated royalty rate applicable to the trademark and a discount rate. NextGen Shopping, Inc. On March 4, 2022, the Company acquired NextGen Shopping, Inc. (d/b/a “CouponFollow”) for total cash consideration of $75,087, of which $16,446 was deferred, $5,600 was held-back, and $25,500 related to the fair value of 2,000 shares of Class A common stock issued. The fair value of the shares of Class A common stock was determined by utilizing the closing price per share of the Company's Class A common stock listed on the NYSE as of March 3, 2022, and a discount rate of 7.5%, as the shares were not immediately available for sale upon issuance, and this restriction was deemed to be a function of the security characteristics. During the three months ended June 30, 2022, the deferred consideration of $16,446 was paid. The held-back consideration amount will become payable eighteen months subsequent to the acquisition date, subject to the Company's satisfaction of any potential post-closing purchase price adjustments and indemnification claims. The cash payment included the transaction costs of $3,129 that the Company paid on behalf of CouponFollow in connection with the closing of the transaction. The acquisition of CouponFollow constitutes a business combination under ASC 805. In conjunction with the acquisition, the Company also committed to pay postcombination compensation of $8,500, which is payable in cash and subject to continued services from certain individuals of CouponFollow. Separately, in conjunction with the acquisition, the Company entered into the CouponFollow Incentive Plan, providing up to $10,000 of postcombination compensation which is payable in stock or cash at the option of the Company, and subject to continued service from certain individuals, and up to $25,000 which is payable in stock or cash at the option of the Company contingent upon achieving certain financial thresholds and the continued employment of certain key individuals of CouponFollow. Refer to Note 18— SHARE-BASED COMPENSATION for additional information. The acquisition leverages CouponFollow’s reputation, software and large organic traffic to vertically integrate with the Company’s RAMP platform and generate paid traffic for shopping-related products. The results of CouponFollow’s operations as of and after the date of acquisition have been included in the Company’s condensed consolidated financial statements from March 4, 2022. The amounts of revenue and net income for the period from March 4, 2022 to September 30, 2022 (Successor) were $12,658 and $1,882, respectively, and the amounts of revenue and net income for the three months ended September 30, 2022 (Successor) were $5,342 and $22, respectively. The operating results of CouponFollow are reported within the Owned and Operated segment prospectively from the date of acquisition. The total purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The purchase price is preliminary and may be subject to additional adjustments, The purchase consideration was allocated to the following assets and liabilities: Amount Cash and cash equivalents $ 21,232 Accounts receivable 5,860 Other current assets 446 Accounts payable (116) Accrued expenses and other current liabilities (955) Deferred tax liabilities (8,094) Assets acquired and liabilities assumed 18,373 Intangible assets 30,300 Goodwill 51,914 Net assets acquired $ 100,587 Consideration: Cash $ 75,087 Equity 25,500 Total consideration $ 100,587 Upon the initial acquisition accounting for CouponFollow during the three months ended March 31, 2022, the Company recorded total cash consideration of $78,426. During the three months ended June 30, 2022, the Company reduced this amount by $3,339 due to an error in the determination of consideration. This adjustment was recorded during the three months ended June 30, 2022, and accordingly, goodwill was reduced by the corresponding amount. The goodwill arising from the acquisition consists largely of the expected synergies from combining operations as well as the value of the workforce. The goodwill is not deductible for tax purposes. The Company incurred $73 in transaction costs related to the acquisition in the period from January 27, 2022 through September 30, 2022 (Successor). There were no transaction costs related to the acquisition in the period from January 1, 2022 through January 26, 2022 (Predecessor). Following are the details of the purchase price allocated to the intangible assets for the CouponFollow acquisition: Amount Weighted Average Useful Life (in Years) Trademark $ 26,400 10 Software 3,900 4 Total $ 30,300 Trademarks – Identified trademarks relate to the estimated fair value of future cash flows related to any trademarks acquired. The Company valued trademarks using the relief-from-royalty method under the income approach. Key assumptions include forecasted revenue, an estimated royalty rate applicable to the trademark and a discount rate. Software – Software technology represents existing technology acquired that will be incorporated into the Company’s existing infrastructure. The Company valued software using the relief from royalty method. Key assumptions include forecasted revenue, an estimated royalty rate applicable to the software and a discount rate. RoadWarrior, LLC On February 9, 2022, the Company acquired the assets of RoadWarrior, LLC (“RoadWarrior”) for total cash consideration of $19,636. The acquisition of RoadWarrior constitutes a business combination under ASC 805. The acquisition expands the Company’s Mapquest.com website technology, and provides additional functionality for customers centered around route planning for delivery drivers and teams. The results of RoadWarrior’s operations as of and after the date of acquisition have been included in the Company’s condensed consolidated financial statements. The amounts of revenue and net income for the period from February 9, 2022 to September 30, 2022 (Successor) were $3,395 and $2,192, respectively, and the amounts of revenue and net income for the three months ended September 30, 2022 were $1,158 and $500, respectively. The operating results of RoadWarrior are reported within the Owned and Operated segment prospectively from the date of acquisition. The total purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The purchase price is preliminary and may be subject to additional adjustments, including working capital adjustments. The Company expects to finalize the purchase accounting as soon as practicable, but not later than one year from the acquisition date. The purchase consideration was allocated to the following assets and liabilities: Amount Working capital $ 155 Intangible assets 4,500 Goodwill 14,981 Net assets acquired $ 19,636 Total consideration: Cash $ 19,636 Upon the initial acquisition accounting for RoadWarrior during the three months ended March 31, 2022, the Company recorded total consideration of $20,317, which included contingent consideration of $681. During the three months ended September 30, 2022, the Company received additional information clarifying the amount originally designated as contingent consideration did not qualify as consideration. This adjustment was recorded as a measurement period adjustment during the three months ended September 30, 2022, and accordingly, goodwill was reduced by the corresponding amount. The goodwill arising from the acquisition consists largely of the expected synergies from combining operations as well as the value of the workforce. The goodwill is deductible for tax purposes over 15 years. The Company incurred $286 in transaction costs related to the acquisition in the period from January 27, 2022 through September 30, 2022 (Successor). Following are the details of the purchase price allocated to the intangible assets for the RoadWarrior acquisition: Amount Weighted Average Useful Life (in Years) Trademark $ 2,200 10 Software 1,000 4 Customer relationships 1,300 3 Total $ 4,500 Trademarks – Identified trademarks relate to the estimated fair value of future cash flows related to any trademarks acquired. The Company valued trademarks using the relief-from-royalty method under the income approach. Key assumptions include forecasted revenue, an estimated royalty rate applicable to the trademark and a discount rate. Software – Software technology represents existing technology acquired and incorporated into the Company’s existing infrastructure. The Company valued software using the relief from royalty method. Key assumptions include forecasted revenue, an estimated royalty rate applicable to the software and a discount rate. Customer relationships – The value of customer relationships represent the fair value of future projected revenues that will be derived from the sale to customers acquired. The Company valued customer relationships using an excess-earnings method. Key assumptions include customer attrition rate, revenue growth rate, and a discount rate. |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 9 Months Ended |
Sep. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET Property and equipment, net consisted of the following: Successor Predecessor September 30, 2022 December 31, 2021 Computer equipment $ 793 $ 415 Motor vehicles 234 — Furniture and equipment 1,112 475 Leasehold improvements 2,715 976 Property and equipment—gross 4,854 1,866 Less accumulated depreciation (505) (1,036) Property and equipment—net $ 4,349 $ 830 Total depreciation expense on property and equipment was as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Depreciation expense $ 252 $ 73 $ 520 $ 16 $ 243 |
GOODWILL, INTERNAL-USE SOFTWARE
GOODWILL, INTERNAL-USE SOFTWARE DEVELOPMENT COSTS, NET, AND INTANGIBLE ASSETS, NET | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL, INTERNAL-USE SOFTWARE DEVELOPMENT COSTS, NET, AND INTANGIBLE ASSETS, NET | GOODWILL, INTERNAL-USE SOFTWARE DEVELOPMENT COSTS, NET, AND INTANGIBLE ASSETS, NET Goodwill Goodwill as of September 30, 2022 (Successor), increased from the acquisitions of S1 Holdco, Protected.net, CouponFollow, RoadWarrior and Answers in 2022. The goodwill additions and balances since the Merger, by reportable segments, were as follows: Owned and Operated Partner Network Subscription Total Goodwill additions and balances at September 30, 2022 (Successor) $ 479,606 $ 28,553 $ 396,081 $ 904,240 Goodwill as of December 31, 2021 (Predecessor), resulted from the acquisitions of Concourse Media, Mapquest, and Waterfox in 2019 and the prior acquisitions of InfoSpace/How-Stuff-Works in 2016 and Qool Media, Inc. in 2017. There was no Goodwill activity for the period January 1, 2021 through January 26, 2022 (Predecessor). Goodwill by reportable segments as of December 31, 2021 was as follows: Owned and Operated Partner Network Total Goodwill at December 31, 2021 (Predecessor) $ 24,403 $ 20,417 $ 44,820 Internal-use software development costs and intangible assets Internal-use software development costs and intangible assets consisted of the following: September 30, 2022 (Successor) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Total internal-use software development costs $ 15,591 $ (2,992) $ 12,599 Intangibles: Developed technology $ 198,127 $ (33,399) $ 164,728 Trademarks and trade names 272,953 (18,112) 254,841 Software 3,900 (562) 3,338 Customer relationships 116,600 (33,489) 83,111 Total intangible costs $ 591,580 $ (85,562) $ 506,018 December 31, 2021 (Predecessor) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Total internal-use software development costs $ 21,274 $ (10,061) $ 11,213 Intangibles: Developed technology $ 8,398 $ (7,242) $ 1,156 Trademarks and trade names 69,007 (21,375) 47,632 Professional service agreement 3,100 (2,359) 741 Customer relationships 1,500 (661) 839 Total intangible costs $ 82,005 $ (31,637) $ 50,368 The internal-use software development costs include capitalized costs not ready for its internal use of $5,538 and $2,540 as of September 30, 2022 (Successor) and December 31, 2021 (Predecessor), respectively. Amortization expense for internal-use software development costs and intangible assets were as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Amortization expense for internal-use software development $ 1,145 $ 1,300 $ 4,045 $ 355 $ 3,545 Amortization expense for intangible assets $ 32,023 $ 2,086 $ 85,563 $ 629 $ 6,472 No impairment of internal-use software development cost or intangible assets was identified for any of the periods presented. The weighted average amortization period for all intangible assets is 7 years. As of September 30, 2022 (Successor), the expected amortization expense associated with the Company’s intangible assets and internal-use software development costs was as follows: Amortization Expense Remainder of 2022 $ 33,698 2023 109,983 2024 103,467 2025 91,807 2026 40,405 Thereafter 139,257 Total amortization expense $ 518,617 |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2022 | |
Leases [Abstract] | |
LEASES | LEASES The Company leases office facilities under noncancelable operating lease agreements. During the period from January 1, 2022 through January 26, 2022 (Predecessor) and January 27, 2022 through September 30, 2022 (Successor), the Company had leases for office facilities in Marina del Rey, California; Bellevue, Washington; and Guelph, Canada. In March 2021, S1 Holdco entered into an agreement for a sublease of an office space facility in Marina Del Rey, California. The initial term of the sublease expires November 2025 and currently does not provide an option for renewal. The components of lease expense were as follows: Successor Predecessor Three Months Ended September 30, 2022 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Operating lease expense $ 404 $ 1,386 $ 142 Short-term lease expense 216 611 12 Variable lease expense 111 235 — Total lease expense $ 731 $ 2,232 $ 154 Supplemental information related to leases was as follows: Successor As of September 30, 2022 Weighted average remaining lease terms (in years): 7.1 Weighted average discount rate 5.2% Maturities of lease liabilities by fiscal year for the Company's operating leases are as follows as of September 30, 2022 (Successor) : Successor As of September 30, 2022 Operating leases: Remainder of 2022 $ 617 2023 2,508 2024 2,579 2025 2,235 2026 268 Thereafter 1,489 Total lease payments $ 9,696 Less: Imputed interest (1,188) Present value of operating lease liabilities $ 8,508 Rent expense was $581 and $1,643 for the three and nine months ended September 30, 2021 (Predecessor), respectively, which was included in Selling, general, and administrative expenses in the accompanying condensed consolidated statements of operations. As of December 31, 2021 (Predecessor), the expected future operating lease obligation were as follows: Predecessor As of December 31, 2021 Year ending 2022 $ 1,957 2023 $ 1,950 2024 $ 1,950 2025 $ 1,663 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 9 Months Ended |
Sep. 30, 2022 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Successor Predecessor September 30, 2022 December 31, 2021 Payable to employees $ 13,142 $ 10,091 Accrued marketing expenses 42,315 144 Accrued professional fees 1,728 6,242 VAT tax liability 4,718 — Accrued tax liability 1,176 361 Holdback liability 6,819 — Accrued revenue share 1 10,973 — Contingent consideration — 1,682 Former CEO profit interest — 11,132 Other liabilities 9,394 1,632 Accrued expenses and other current liabilities $ 90,265 $ 31,284 1 Accrued revenue share of $9,475 was included in Accounts payable in the condensed consolidated balance sheet as of December 31, 2021. Ian Weingarten was hired as CEO of S1 Holdco on April 10, 2019. He was entitled to a cash-settled profits interest of 5% of the value of S1 Holdco, which was contingent upon (i) a participation threshold of $300 million (which was subject to adjustment as set forth in the S1 Holdco operating agreement) and (ii) on a four-year vesting term, or if a qualifying change in control transaction occurs. In February 2021, Mr. Weingarten's employment with S1 Holdco was terminated and the parties entered into a separation agreement. In connection with the separation agreement, S1 Holdco agreed to payment of separation pay benefits consistent with the terms of Mr. Weingarten’s employment agreement, including the payment of the liability accrued for the cash-settled profits interest of 5% of S1 Holdco, which was deemed vested as to a 3.75% profits interest and forfeited as to the remaining 1.25% profits interest above the applicable adjusted threshold amount (subject to further increase to a 2.5% profits interest in the event that the Merger was not consummated). S1 Holdco recorded a liability for this arrangement of $11,132 as of December 31, 2021 (Predecessor). In January 2022, in conjunction with the consummation of the Merger, S1 Holdco settled the profits interest liability pursuant to the separation agreement with Mr. Weingarten. |
DEFERRED REVENUE
DEFERRED REVENUE | 9 Months Ended |
Sep. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
DEFERRED REVENUE | DEFERRED REVENUE Deferred revenue activities for the period January 1, 2021 through December 31, 2021 (Predecessor), January 1, 2022 through January 26, 2022 (Predecessor) and January 27, 2022 through September 30, 2022 (Successor) are as follows: Deferred Revenue January 1, 2021 (Predecessor) $ 1,889 Additions 5,116 Revenue recognized (5,034) December 31, 2021 (Predecessor) $ 1,971 Deferred Revenue January 1, 2022 (Predecessor) $ 1,971 Additions 620 Revenue recognized (309) January 26, 2022 (Predecessor) $ 2,282 Deferred Revenue January 27, 2022 (Successor) $ — Additions* 187,383 Revenue recognized (119,094) September 30, 2022 (Successor) $ 68,289 * Includes $61,156 from the 2022 acquisitions. During the periods January 27, 2022 through September 30, 2022 (Successor), January 1, 2022 through January 26, 2022 (Predecessor), and January 1, 2021 through December 31, 2021 (Predecessor), $0, $309, and $1,889, respectively, of the deferred revenue recognized existed at the beginning of each respective period. We expect to recognize revenue related to the remaining performance obligations within the next twelve months. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company is the sole managing member of S1 Holdco and, as a result, consolidates the financial results of S1 Holdco. S1 Holdco is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, S1 Holdco is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by S1 Holdco is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of S1 Holdco, as well as any stand-alone income or loss generated by the Company. The following table presents the Company’s Income tax (benefit) provision and the effective income tax rate: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Income tax (benefit) provision $ (19,228) $ 475 $ (32,480) $ (629) $ 703 Effective tax rate 34 % 4 % 23 % 2 % 2 % The provision for income taxes differs from the amount of income tax computed by applying the U.S. statutory federal tax rate of 21% to the income (loss) before income taxes due to the exclusion of non-controlling income (loss), state taxes, foreign rate differential, non-deductible expenses, outside basis adjustments, and Global Intangible Low-taxed Income. The Company evaluates the realizability of its DTA on a quarterly basis and establishes valuation allowances when it is more likely than not that all or a portion of a DTA may not be realized. As of September 30, 2022, there were no material changes to the Company's valuation allowance and the Company's assessment of the realizability of its DTA. The aggregate amount of gross unrecognized tax benefits related to uncertain tax positions was $99 for the period from January 27, 2022, through September 30, 2022 (Successor). The Company files income tax returns in the U.S. federal, states, and various foreign countries. For U.S. federal income tax purposes, as of September 30, 2022 (Successor), the year 2018 and later tax years remain open for examination by the tax authorities. For foreign income tax purposes, as of September 30, 2022 (Successor), the year 2016 and later tax years remain open for examination by the tax authorities under the Netherland’s five-year statute of limitations. The Company contributed all the net assets of CouponFollow to a lower entity taxed as a partnership, System1 OpCo, LLC ("System1 OpCo”). The contribution qualified as a transaction among or with noncontrolling shareholders, which is accounted for as an equity transaction. As a result, the Company recorded $6,112 to additional paid-in-capital for the tax effects of the contribution with an offsetting entry to deferred tax liability in accordance with ASC 740-20-45-11(c). Tax Receivable Agreement Pursuant to the Company's election under Section 754 of the Internal Revenue Code (the “Code”), the Company expects to obtain an increase in its share of the tax basis in the net assets of S1 Holdco when LLC Interests are redeemed or exchanged by the other members of S1 Holdco. The Company intends to treat any redemptions and exchanges of LLC Interests as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that would otherwise be paid in the future to various tax authorities. On January 27, 2022, the Company entered into a Tax Receivable Agreement with certain of the then-existing members of S1 Holdco that provides for the payment by the Company of 85% of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of (i) increases in the Company's share of the tax basis in the net assets of S1 Holdco resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the “TRA Payments”). The Company expects to benefit from the remaining 15% of any tax benefits that may actually realize. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES In June 2021, the S1 Holdco entered into a multi-year agreement with a service provider whereby the Company is contractually obligated to spend $8,000 between July 2022 and June 2023. As of September 30, 2022 (Successor), t he Company remains contractually obligated to spend $5,933 towards this commitment. As of September 30, 2022, the Company had various non-cancelable operating lease commitments for office space which have been recorded as Operating lease liabilities. Refer to Note 7—LEASES for additional information regarding lease commitments. Litigation The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. The Company believes the ultimate liability, if any, with respect to these actions will not materially affect the consolidated financial position, results of operations, or cash flows reflected in the condensed consolidated financial statements. There can be no assurance, however, that the ultimate resolution of such actions will not materially or adversely affect the Company’s condensed consolidated financial position, results of operations, or cash flows. The Company accrues for losses when the loss is deemed probable and the liability can reasonably be estimated. In July 2021, System1 OpCo (f/k/a System1, LLC) received initial correspondence from counsel for a United Kingdom-based marketing research company and its United States subsidiary (collectively, the “Demanding Group”) alleging trademark infringement (i) based on its use of the “SYSTEM1” trade name and mark in the United States, and (ii) subsequently based on its use of the “SYSTEM1” trade name and mark in the United Kingdom. The correspondence demanded that System1 OpCo cease and desist from using the “SYSTEM1” name and mark, and made reference to potential legal action if System1 OpCo did not comply with that demand. While System1 OpCo was engaged in active discussions and correspondence with the Demanding Group to attempt to resolve the matter, the Demanding Group filed a lawsuit in the United States District Court for the Southern District of New York in September 2021 (the “Infringement Suit”), alleging (i) trademark infringement, (ii) false designation of origin, (iii) unfair competition and (iv) certain violations of New York business laws, seeking, among other things, an injunction, disgorgement of profits, actual damages and attorneys’ fees and costs. The Company believes that the Demanding Group’s infringement and other allegations and claims set forth in the Infringement Suit may be subject to a laches defense, among other defenses, and the Company intends to vigorously defend its rights and position in the Infringement Suit. System1 OpCo filed a motion to dismiss the Infringement Suit in November 2021, which was granted in part (without prejudice) and denied in part. As a result of the court’s ruling on the motion to dismiss, the Demanding Group filed an Amended Complaint in October 2022, which matter remains pending. Even though the Company received similar correspondence from the Demanding Group regarding its alleged infringing use of the SYSTEM1 trade name and mark in the United Kingdom, no lawsuit has been filed in the United Kingdom. The Company does not believe that its activities infringe any rights of the Demanding Group in the United Kingdom because, among other defenses, the Company does not actively offer services to customers using the SYSTEM1 trade name and mark in the United Kingdom. The Company’s counsel has informed the Demanding Group’s UK counsel of these circumstances, and the Demanding Group’s UK counsel confirmed receipt of this correspondence, and the parties have not shared any further meaningful correspondence with respect to the Demanding Group’s allegations of infringing use in the United Kingdom. Indemnifications In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to claims related to these indemnifications. As a result, the Company believes the estimated fair value of these agreements was immaterial. Accordingly, the Company has no liabilities recorded for these agreements as of September 30, 2022 (Successor) or December 31, 2021 (Predecessor), respectively. |
DEBT, NET
DEBT, NET | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
DEBT, NET | DEBT, NET As of December 31, 2021 (Predecessor), S1 Holdco had principal of $172,038 outstanding under a term loan secured from Cerberus Business Finance, LLC. Amortization payments of $1,750 were due quarterly and, upon delivery of the prior year’s audited consolidated financial statements, S1 Holdco was required to make a payment of 50% of excess free cash flow, as defined. S1 Holdco also had a $20,000 revolving line of credit, and no amounts were outstanding as of December 31, 2021 under this revolving line of credit. Interest payments on the secured financing were due monthly at London InterBank Offered Rate (“LIBOR”), plus 7% with a LIBOR floor of 1%. Maturity for the secured financing was August 22, 2022. The facility had certain financial and nonfinancial covenants, including a leverage ratio. In connection with the Merger, Orchid Merger Sub II LLC (a subsidiary of S1 Holdco) entered into a new loan (“Term Loan”) and revolving facility (“Revolving Facility”) on January 27, 2022, providing for a 5.5 year term loan with a principal balance of $400,000 and with the net proceeds of $376,000, of which a portion of the proceeds were used by S1 Holdco, to settle the outstanding debt of $172,038 with Cerberus Business Finance, LLC. The Revolving Facility provided for borrowing availability of up to $50,000, of which $49,000 was drawn as of September 30, 2022. In October 2022, the Company borrowed the remaining $1,000 available under its Revolving Facility. For every interest period, the interest rate on the Term Loan is the adjusted Term Secured Overnight Financing Rate (“Term SOFR”) plus 4.75%. The Term Loan is amortized in quarterly installments on each scheduled payment date. The Term Loan comes with a springing covenant, which goes into effect if the utilization on the Revolving Facility exceeds 35% at each quarter-end starting from the first full quarter after the effective date of the Merger, such that the first lien leverage ratio (as defined in the credit agreement) should not exceed 5.40. Through December 31, 2025, $5,000 of the amortization payment will be made quarterly. For March 31, 2026 (scheduled payment date) and thereafter, $7,500 of the amortization payment will be made quarterly. The Revolving Facility will mature five years after the closing date, and accordingly, it is classified within Long-term debt, net on the condensed consolidated balance sheet as of September 30, 2022. The interest rate on the Revolving Facility is the adjusted Term SOFR plus 2.5% with an adjusted Term SOFR floor of 0%. In March 2022, the Company borrowed $49,000 under its Revolving Facility, to fund a portion of the purchase price related to its CouponFollow acquisition. As of September 30, 2022 (Successor), this amount is outstanding. As of September 30, 2022, future minimum principal payments on long-term debt are as follows: Successor Remainder for 2022 $ 5,000 2023 20,000 2024 20,000 2025 20,000 2026 30,000 2027 344,000 Total future minimum principal payment $ 439,000 Less: current portion (20,000) Long-term portion $ 419,000 As of September 30, 2022, loan fees amounting to $1,129 for the Term Loan have been recorded as a reduction of the carrying amount of the debt and are amortized to interest expense using the effective interest method. |
WARRANTS
WARRANTS | 9 Months Ended |
Sep. 30, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
WARRANTS | WARRANTSIn June 2020, the Company issued Public Warrants and Private Placement Warrants in conjunction with the initial public offering of Trebia. Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants became exercisable on April 18, 2022, when the S-1/A registration statement, which was required to be filed under the terms of the Warrant Agreement and the Business Combination Agreement, was declared effective. The Public Warrants will expire five years from the completion of the Merger, or earlier upon redemption or liquidation. The Company is not obligated to deliver any shares of Class A common stock pursuant to the exercise of a Public Warrant and has no obligation to settle such Public Warrants exercises unless a registration statement under the Securities Act with respect to the Class A common stock underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. Warrants are exercisable and the Company is obligated to issue a share of Class A common stock upon exercise of each Warrant, as the Warrants have been registered with the SEC. The Company is obligated to use its commercially reasonable efforts to maintain the effectiveness of a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the Warrants, and a current prospectus relating thereto, until the expiration or redemption of the Warrants in accordance with the provisions of the Warrant Agreement. If the effectiveness of a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the Warrants is not maintained, Warrant holders may exercise Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. In addition, if the Company's Class A common stock is, at the time of any exercise of a Warrant, not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of the Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects to do so, the Company will not be required to file or maintain in effect a registration statement, but it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the Public Warrants, multiplied the excess of the “fair market value” less the exercise price of the Public Warrants by (y) the fair market value and (B) 0.361. The “fair market value” shall mean the volume weighted average price of the Class A common stock for the 10 trading days ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent. Redemption of Warrants when the Price per Class A common stock equals or exceeds $18.00 —The Company may redeem the outstanding Public Warrants: ● in whole and not in part; ● at a price of $0.01 per Public Warrant; ● upon not less than 30 days’ prior written notice of redemption to each warrant holder and ● if, and only if, the last reported sale price of the Class A common stock for any 20 trading days within a 30-trading day period ending three business days before sending the notice of redemption to warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like). If and when the Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. However, the Company will not redeem the Warrants unless an effective registration statement under the Securities Act covering the underlying shares of Class A common stock issuable upon exercise of the Warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period. Redemption of Warrants When the Price per Class A common stock equals or exceeds $10.00 —Once the Warrants become exercisable, the Company may redeem the outstanding Warrants: ● in whole and not in part; ● at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the report on Form 10-K for the year ended December 31, 2021 filed on March 31, 2022, based on the redemption date and the “fair market value” of the Class A common stock; ● if, and only if, the Reference Value (as defined in the above under “Redemption of Warrants When the Price per Class A common stock Equals or Exceeds $18.00”) equals or exceeds $10.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like); and ● if the Reference Value is less than $18.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) the Private Placement Warrants must also be concurrently -called for redemption on the same terms (except as described below with respect to a holder’s ability to cashless exercise its warrants) as the outstanding Public Warrants, as described above. The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. The Private Placement Warrants were identical to the Public Warrants underlying the units sold in the initial public offering of Trebia, except that (x) the Private Placement Warrants and the shares of Class A common stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or salable until 30 days after the completion of the Merger, subject to certain limited exceptions, (y) the Private Placement Warrants were exercised on a cashless basis. There are no outstanding Private Placement Warrants as of September 30, 2022 (Successor). The Public and Private Placement Warrants are accounted for as liabilities and marked-to-market at each reporting period, with changes in fair value included as change in fair value of warrant liabilities in the condensed consolidated statements of operations. In April 2022, the Private Placement Warrant holders exercised their Warrants on a cashless basis in exchange for 3,532 shares of the Company's Class A common stock. Additionally, during the nine months ended September 30, 2022, Public Warrant holders exercised 437 warrants on a cash basis resulting in total proceeds paid to the Company of $5,027 . The total outstanding Public Warrants as of September 30, 2022 was 16,813. Share Repurchases In August 2022, the Company's Board of Directors authorized up to $25,000 for the repurchase of the Company's Class A common stock and Public Warrants (the “ 2022 Repurchase Program ” |
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENT | FAIR VALUE MEASUREMENT The following tables present the Company’s fair value hierarchy for liabilities measured at fair value on a recurring basis as of September 30, 2022 (Successor) and December 31, 2021 (Predecessor): September 30, 2022 (Successor) Level 1 Public warrants $ 18,158 December 31, 2021 (Predecessor) Level 3 Former CEO equity interest $ 11,132 Contingent consideration 1,682 Total $ 12,814 The fair value of the Public Warrants has been estimated using the Public Warrants’ quoted market price. The fair value of the Private Placement Warrants was estimated using the Public Warrants’ quoted market price. The fair value of the former CEO of S1 Holdco's equity profits interest was determined with an option pricing model and utilizing significant unobservable inputs for a discount for lack of marketability and projected financial information. The fair value contingent consideration was determined with an option pricing model and contains significant unobservable inputs for projected financial information. Changes in estimated fair value of Level 1, 2 and 3 financial liabilities for the period from January 1, 2022 through January 26, 2022 (Predecessor), the period from January 27, 2022 through September 30, 2022 (Successor), and for the nine months ended September 30, 2021 (Predecessor), respectively, are as follows: Former CEO equity profits interest* Contingent consideration Warrant liability Fair value of liabilities at December 31, 2020 (Predecessor) $ 4,236 $ 8,240 Settlements — (6,715) Change in fair value 4,238 94 Fair value of liabilities at September 30, 2021 (Predecessor) $ 8,474 $ 1,619 Fair value of liabilities at December 31, 2021 (Predecessor) and January 26, 2022 (Predecessor) $ 11,132 $ 1,682 Fair value of liabilities at January 27, 2022 (Successor) $ 1,682 $ 27,012 Settlements (1,715) (22,965) Additions 28 — Change in fair value 5 14,111 September 30, 2022 (Successor) $ — $ 18,158 * Former CEO equity profits interest as further described in executive compensation Note 8—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES . The total impact of the changes in fair values related to contingent consideration and the former CEO's equity profits interest in S1 Holdco are included in Selling, general and administrative expenses, and Salaries, commissions and benefits, respectively in the condensed consolidated statements of operations. There were no transfers in or out of levels during the period January 1, 2022 through January 26, 2022 (Predecessor), the period January 27, 2022 through September 30, 2022 (Successor), or for the nine months ended September 30, 2021 Predecessor). |
NET INCOME (LOSS) PER SHARE
NET INCOME (LOSS) PER SHARE | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
NET INCOME (LOSS) PER SHARE | NET INCOME (LOSS) PER SHARE For the three months ended September 30, 2021 (Predecessor), the period from January 1, 2022 through January 26, 2022 (Predecessor), and for the nine months ended September 30, 2021 (Predecessor), the basic net income (loss) per unit attributable to members was calculated by dividing the net income (loss) attributable to common equity holders by the weighted-average number of membership units. For the three months ended September 30, 2022 (Successor) and the period from January 27, 2022 through September 30, 2022 (Successor), the basic net loss per share was calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Basic and diluted net income (loss) per share was calculated as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Basic and diluted net loss per share $ (0.35) n/a $ (1.02) n/a n/a Numerator: Net loss attributable to System1, Inc. (31,643) n/a (90,832) n/a n/a Denominator: Weighted-average common shares outstanding used in computing basic and diluted net loss per share (shares in thousands) 91,002 n/a 88,716 n/a n/a Basic and diluted net income (loss) per unit n/a $ 0.55 n/a $ (1.97) $ 1.46 Numerator: n/a Net income (loss) n/a 11,368 n/a (40,460) 29,883 Denominator: n/a Weighted-average membership units outstanding - basic n/a 20,488 n/a 20,488 20,488 Shares of Class C common stock outstanding for the period January 27, 2022 through September 30, 2022 (Successor) are considered potentially dilutive of the shares of Class A common stock under the application of the if-converted method, and are included in the computation of diluted loss per share, except when the effect would be anti-dilutive. For the periods presented in the table above, a total of 21,747 shares of Class C common stock were excluded from the computation of net loss per share as the impact was anti-dilutive. Loss per share also excludes 16,813 Public Warrants as their effect was anti-dilutive. |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | SEGMENT REPORTING ASC 280-10, Segment Reporting , establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”), in deciding how to allocate resources and assess performance. The Company's Chief Executive Officer, who is considered to be its CODM, reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance. The CODM measures and evaluates reportable segments based on segment operating revenues as well as adjusted gross margin and other measures. The Company defines and calculates adjusted gross margin as revenue less advertising expense to acquire users. The remaining cost of revenues consist of non-advertising expenses such as set-up costs, royalties and fees. The Company excludes the following items from segment adjusted gross margin: depreciation and amortization of property, equipment and leasehold improvements, amortization of intangible assets and, at times, certain other transactions or adjustments, that the CODM does not consider for the purposes of making decisions to allocate resources among segments or to assess segment performance. Although these amounts are excluded from segment adjusted gross margin, they are included in reported consolidated net income from operations before income tax and are included in the reconciliation that follows. The Company’s computation of segment Adjusted Gross Margin may not be comparable to other similarly-titled measures computed by other companies because all companies do not calculate segment Adjusted Gross Margin in the same fashion. Operating segments do not sell products and services across segments, and, accordingly, there are no intersegment revenues to be reported. The accounting policies for segment reporting are the same as for System1 as a whole. The CODM of the Company reviews operating results, assesses performance and makes decisions by operating segment. Management views each of the Company’s business lines as an operating segment. The Company has four business lines and operating segments: Publishing and Lead Generation, Search & Applications, Partner Network, and Subscription. The Publishing and Lead Generation and Search & Applications operating segments are aggregated into one reportable segment, referred to as Owned and Operated, based on their similar economic characteristics, technology platform utilized, types of services provided, Advertising Partners, and cost structures. The Company has three reportable segments: Owned and Operated, Partner Network and Subscription. The following summarizes revenue by reportable segments: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Owned and Operated $ 146,880 $ 162,606 $ 440,844 $ 49,791 $ 462,848 Partner Network 10,015 8,840 31,314 2,921 25,738 Subscription 44,281 — 114,923 — — Total $ 201,176 $ 171,446 $ 587,081 $ 52,712 $ 488,586 The following summarizes adjusted gross margin by reportable segments: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Owned and Operated $ 40,540 $ 36,202 $ 115,885 $ 9,310 $ 105,902 Partner Network 10,015 8,840 31,314 2,921 25,738 Subscription 22,318 — 57,855 — — Adjusted gross margin $ 72,873 $ 45,042 $ 205,054 $ 12,231 $ 131,640 Other cost of revenues 9,378 2,481 28,343 1,279 8,891 Salaries, commissions and benefits 55,862 15,139 144,876 35,175 48,032 Selling, general and administrative 16,520 7,936 47,668 14,817 21,163 Depreciation and amortization 33,420 3,459 90,128 1,000 10,260 Interest expense 10,011 4,184 22,111 1,049 12,708 Change in fair value of warrant liabilities 4,489 — 14,111 — — Net income (loss) before income tax $ (56,807) $ 11,843 $ (142,183) $ (41,089) $ 30,586 The following table summarizes revenue by geographic region: Three-Month Period Nine-Month Period Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 United States $ 156,726 $ 167,105 $ 459,206 $ 51,701 $ 474,735 United Kingdom 44,281 107 114,924 — 276 Other countries 169 4,234 12,951 1,011 13,575 Total $ 201,176 $ 171,446 $ 587,081 $ 52,712 $ 488,586 The following table summarizes property and equipment, net and operating lease right-of-use assets by reportable segments: Successor Predecessor September 30, 2022 December 31, 2021 Owned and Operated $ 10,312 $ 830 Subscription 930 — Total $ 11,242 $ 830 |
RELATED-PARTY TRANSACTIONS
RELATED-PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
RELATED-PARTY TRANSACTIONS | RELATED-PARTY TRANSACTIONS On October 16, 2018, S1 Holdco and its subsidiaries purchased a 50.1% interest in Protected for $55,000. At the time of the transaction, an investment vehicle known as Lone Investment Holdings ("LIH") was a shareholder and creditor of Protected. LIH owned 7.7% of the equity of Protected, and also was a creditor for $10,500, with respect to shareholder loans for which Protected was the obligor. LIH’s shareholders primarily consist of members of the Company’s management team. As a result of the Merger, LIH’s shareholder loan to Protected was repaid, with interest, and LIH also received $1,158 in proceeds from the sale of its equity. Additionally, during 2021, S1 Holdco extended a loan of $1,500 to its former CEO in connection with his separation agreement. In January 2022, in conjunction with the consummation of the Merger, the loan was repaid in full. Protected.net utilizes multiple payment processors in order to process credit card payments from its subscription customers, including Paysafe Financial Services Limited (“Paysafe”). In March 2021 Paysafe completed a merger with Foley Trasimene Acquisition Corp. II (“Foley Trasimene”), a special purpose acquisition company sponsored by entities affiliated with William Foley, who was also a sponsor of Trebia Acquisition Corp. and is a member of the Company’s Board of Directors. Protected.net’s payment processing agreement with Paysafe was negotiated before the announcements of both (i) the Merger as well as (ii) the business combination between Paysafe and Foley Trasimene. The amount due from Paysafe was $1,585 as of September 30, 2022 (Successor). The Company has agreements with JDI Property Holdings Limited (“JDI”), an entity controlled by a director of the Company, which allows for the Company to occupy desks at JDI’s property in such a place as JDI specifies from time to time in exchange for GBP 42 per month. The agreements with JDI expire on October 31, 2026. Additionally, the Company utilizes a JDI credit card and the Company reimburses JDI monthly. The amount owed to JDI was $117 as of September 30, 2022 (Successor). On August 30, 2022, the Company, Protected.net and Just Develop It Limited (“JDIL”), an entity controlled by a director of the Company, entered into a Conditional Consent, Waiver and Acknowledgement (the “Waiver”) pursuant to which JDIL agreed to waive its right to the Year 3 Stock Bonus Pool (as such term is defined in the BCA, as defined below), consisting of $50,000 of Class A common stock payable in January 2024 and as set forth in Section 12.11(a) of the Business Combination Agreement dated June 28, 2021 (as amended), by and among S1 Holdco, Protected and the other parties signatory thereto (collectively, the “BCA”) in exchange for $40,000 in cash payable in four (4) quarterly installments of $10,000 each, commencing on August 30, 2022 and on each three (3) month anniversary thereafter. In connection with entering into the Waiver, the Company entered into one (1) year contractual lockup agreements with each of Christopher Phillips, a member of the Board of Directors of the Company and the controlling shareholder of JDIL (on behalf of himself and JDIL), pursuant to which Mr. Phillips and JDIL agreed not to sell each their shares of Class A common stock for one year from September 1, 2022 through August 30, 2023 (the “Lockup Period”); provided that Mr. Phillips and JDIL may sell Class A common stock, among other exceptions, at any time during the Lockup Period at prices equal to or in excess of $11.00 per share. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION As described in Note 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES , the Replacement Awards continue to vest over the original vesting schedule of the original underlying awards. The Company recognized a total stock-based compensation expense of $27,698 upon the consummation of the Merger during the period January 1, 2022 through January 26, 2022 (Predecessor). Subsequent to the Merger, the remaining amount of $11,177 will be amortized over the weighted average period of 1 year. The unrecognized stock-based compensation expense associated with these unvested Replacement Awards was $4,552 as of September 30, 2022. The Company recorded the following total share-based compensation expense for the periods presented: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Share-based compensation expense $ 30,583 $ 68 $ 79,802 $ 27,698 $ 334 In addition to the Replacement Awards, the Company issued 2,900 market-based RSUs and restricted stock awards (“RSAs”) in January 2022 that vest upon the Company’s common stock trading at a volume-weighted average price (“VWAP”) equal or exceeding $12.50 per share for any 20 trading days within a 30 trading day period. The VWAP of the Company’s common stock price exceeded the threshold in March 2022 and the Company recorded $25,491 in expense associated with the vesting of these RSUs and RSAs during the period January 27, 2022 through September 30, 2022 (Successor). These RSUs and RSAs were granted as Class D equity instruments, and upon vesting, were converted to the Company's Class A common stock. Since these RSUs and RSAs had a market condition to vest, the Company estimated the fair values of these RSUs and RSAs using a Monte Carlo simulation. The key assumptions used to determine the fair value of these market-based RSUs and RSAs were as follows: Inputs Risk-free interest rate 1.6% Expected stock price volatility 50.0% Cost of equity 23.6% Expected term (years) 5 Fair Value of Class A common stock $10.00 On April 27, 2022, the Company filed a registration statement on Form S-8 covering the shares and awards issued and granted under the System1, Inc. 2022 Incentive Award Plan ("Award Plan”). On May 10, 2022, the Company’s board of directors authorized the issuance of 1.9 million replacement RSUs in connection with S1 Holdco unvested value creation units outstanding at the time of the Merger, pursuant to the terms of the Business Combination Agreement and an additional 4.9 million RSUs from the authorized Award Plan pool of shares. Protected.net Incentive Plan The Notes to the Company’s previously filed unaudited condensed consolidated financial Statements as of and for the period ended March 31, 2022 included a disclosure error. Specifically, the terms of the Company’s Protected.net Incentive Plan, as further described below, were omitted from the Company’s disclosures. Although the performance targets were not considered probable of being achieved as of March 31, 2022, and therefore no expense was recognized during the first quarter of 2022, the Company will revise its financial statements for the period ended March 31, 2022 in future filings, as applicable, to correct for the omitted disclosure. Management has determined the omitted disclosure did not result in the previously issued interim financial statements being materially misstated. In connection with the Merger and acquisition of Protected.net described in Note 3—MERGER , which was consummated on January 27, 2022, the Company effected an incentive plan for eligible recipients as defined in the Business Combination Agreement (see Note 3—MERGER ), which may include employees and non-employees, including the Protected.net CEO, totaling up to $100,000 payable in fully-vested shares of the Company’s Class A common stock. If the last twelve months ("LTM") Cash EBITDA (as defined in the Business Combination Agreement) of the Protected.net business exceeds $55,000 on or prior to December 31, 2023, a bonus pool of $50,000 payable in fully-vested shares of the Company’s Class A common stock (the “2023 Award”) shall be allocated to eligible recipients as of December 31, 2023. Shares under the 2023 Award will be issued to eligible recipients within 30 days of December 31, 2023. Further, if the LTM Cash EBITDA of the Protected.net business exceeds $65,000 on or prior to December 31, 2024, an additional bonus pool of $50,000 also payable in fully-vested shares of the Company’s Class A common stock (the “2024 Award ” ) shall be allocated to eligible recipients as of December 31, 2024. Shares under the 2024 Award will be issued to eligible recipients within 30 days of December 31, 2024. The number of shares payable under the 2023 Award and the 2024 Award will be determined based on the volume-weighted average price of the Company’s Class A common stock over the 20 consecutive trading days preceding the 5 trading days prior to the applicable settlement dates. The distribution of shares to eligible recipients for both the 2023 Award and the 2024 Award shall be at the sole discretion of the Protected.net CEO, or the System1, Inc. Board if the Protected.net CEO is no longer employed by the Company. On August 30, 2022, the Company modified the 2023 Award to change this award from a bonus payable in fully-vested shares of the Company's Class A common stock to a $40,000 cash payment settled in four equal quarterly cash installments beginning upon the modification of the 2023 Award. During the three and nine months ended September 30, 2022, the Company recognized $18,313 and $29,266, respectively, for the 2023 Award, within salaries, commissions, and benefits on the condensed consolidated statements of operations. Although the LTM Cash EBITDA target for the 2024 Award has not been met, the Company determined that it was probable of achievement, and accordingly, it recorded pro rata portions of the $50,000 payable for this award, within salaries, commissions, and benefits on the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 . As of September 30, 2022, stock-based compensation has been recorded as current and non-current Protected.net Incentive Plan liabilities within the condensed consolidated balance sheet . The remaining liability for the modified 2023 Award will be recorded over the remaining service period with graded vesting attribution for each quarterly installm ent. The remaining liability for the 2024 Award will be recorded over the remaining service period to the extent that management determines that the achievement of the LTM Cash EBITDA target and issuance of the Series A common stock is considered probable. CouponFollow Incentive Plan In connection with the acquisition of CouponFollow described in Note 4—ACQUISITIONS, which was consummated on March 4, 2022, the Company approved and adopted the CouponFollow Incentive Plan, which includes CouponFollow’s key employees, including CouponFollow’s founder (“Principal Participant” and together collectively the “Participants”). The CouponFollow Incentive Plan provides for total payments of $35,000 payable at the Company’s option in cash or in fully-vested shares of the Company’s Class A common stock, consisting of a fixed amount of $10,000 and contingent amounts of $25,000, which can be earned over a three calendar year period between each January 1 to December 31 of 2022, 2023 and 2024 (each a “Performance Period” and collectively, the “Performance Periods”). In order to receive any payments under the CouponFollow Incentive Plan, the Participants must maintain continuous employment through the last day of each Performance Period to be eligible for the following earnout payment amounts (with the exception of the Principal Participant who is still eligible if terminated without cause or if he terminates his employment for good reason) in the amounts and at the times set forth below: • Fixed Amount. Over the course of the Performance Periods, the Company shall pay to each of the employed eligible Participants a total of $10,000 (the “Fixed Amount”) in three substantially equal pro rata installment payments (as set forth in each Participant’s applicable award agreement) within 60 days of the end of each Performance Period. • Tier 1 Target. If, during any of the Performance Periods, the CouponFollow business achieves the first tier TTM EBITDA (as defined in the CouponFollow Incentive Plan) for the first time (the “Tier 1 Target”), the Company will pay a total of $10,000 (the “Tier 1 Amount”) in substantially equal pro rata amounts (as set forth in each Participant’s applicable award agreement) at the times in the table set forth below. • Tier 2 Target. If, during any of the Performance Periods, the CouponFollow business achieves the second tier TTM EBITDA for the first time (the “Tier 2 Target”), the Company will pay an additional $7,500 (the “Tier 2 Amount”) in substantially equal pro rata amounts (as set forth in each Participant’s applicable award agreement) at the times in the table set forth below. • Tier 3 Target. If, during any of the Performance Periods, the CouponFollow business achieves the third tier TTM EBITDA for the first time (the “Tier 3 Target” and together with the Tier 1 Target and Tier 2 Target, collectively the “Targets”), the Company will pay an additional $7,500 (the “Tier 3 Amount” and together with the Tier 1 Amount and the Tier 2 Amount, collectively the “Tier Amounts”) in substantially equal pro rata amounts (as set forth in each Participant’s applicable award agreement) at the times in the table set forth below. Performance Period* Fixed Amount Tier 1 Amount** Tier 2 Amount** Tier 3 Amount** Total Maximum Payment per Performance Period Dec. 31, 2022 $ 3,333 $ 3,333 $ — $ — $ 6,666 Dec. 31, 2023 3,333 3,333 3,750 — 10,416 Dec. 31, 2024 3,334 3,334 3,750 7,500 17,918 $ 10,000 $ 10,000 $ 7,500 $ 7,500 $ 35,000 *Payments for each applicable Performance Period are paid within 60 calendar days of the end of the applicable Performance Period. **If the Tier 1 Amount is not achieved in the first Performance Period but is achieved in the second Performance Period, the Tier 1 Amount for the first Performance Period shall be paid out at the end of the second Performance Period and if achieved in the third Performance period the full amount will be paid at the end of the third Performance Period. If the Tier 2 Amount is not achieved in the second Performance Period but is achieved in the third Performance Period, the Tier 2 Amount will be paid at the end of the third Performance Period. If the Tier 2 Amount or the Tier 3 Amount is achieved in the first Performance Period, such Tier Amounts shall be paid as noted in the table above. If a Participant’s continued employment is terminated prior to applicable payment date(s), with the exception of the Principal Participant as discussed above, the Company will reverse all prior liabilities for their pro rata share of any Tier Amounts associated with that Participant. If the Company elects to settle the payment obligations with respect to any Tier Amount in shares of the Company’s Class A common stock, the number of shares payable under the CouponFollow Incentive Plan will be determined based on the VWAP of the Company’s Class A common stock over the 30 trading day period immediately preceding the respective settlement date, but in any event, shall be capped at 4,667 shares of the Company’s Class A common stock in the aggregate. Any amount over the maximum number of shares is to be settled in cash. As of September 30, 2022, the Company has determined that it was not probable that the CouponFollow business would achieve any of the Targets during the Performance Periods, and accordingly, it did not record a liability for any of the Tier Amounts set forth in the CouponFollow Incentive Plan. During the three and nine months ended September 30, 2022, the Company recognized $2,013 and $2,321, respectively, for the Fixed Amount, within Salaries, commissions, and benefits on the condensed consolidated statements of operations. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated financial statements include the accounts of System1, Inc. and its subsidiaries for the Successor period, and S1 Holdco for the Predecessor periods. All intercompany accounts and transactions have been eliminated in the consolidation of the financial statements. The condensed consolidated financial statements have been prepared by the Company and are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such SEC rules and regulations. The interim condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. The year-end condensed consolidated balance sheet data was derived from audited financial statements of S1 Holdco and related notes included in the Company’s final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on April 19, 2022 (the “Prospectus”), but does not include all disclosures required by U.S. GAAP. The condensed consolidated statements of operations for the period from January 1, 2022 through January 26, 2022 (Predecessor) and for the period from January 27, 2022 through September 30, 2022 (Successor) are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2022 or thereafter. Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform with the current period presentation. These reclassifications had no effect on the results of operations or financial position for any period presented. |
Principles of Consolidation | The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated financial statements include the accounts of System1, Inc. and its subsidiaries for the Successor period, and S1 Holdco for the Predecessor periods. All intercompany accounts and transactions have been eliminated in the consolidation of the financial statements. The condensed consolidated financial statements have been prepared by the Company and are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such SEC rules and regulations. The interim condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. The year-end condensed consolidated balance sheet data was derived from audited financial statements of S1 Holdco and related notes included in the Company’s final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on April 19, 2022 (the “Prospectus”), but does not include all disclosures required by U.S. GAAP. The condensed consolidated statements of operations for the period from January 1, 2022 through January 26, 2022 (Predecessor) and for the period from January 27, 2022 through September 30, 2022 (Successor) are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2022 or thereafter. Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform with the current period presentation. These reclassifications had no effect on the results of operations or financial position for any period presented. |
Recent Accounting Pronouncements | ASC 842 Adoption On January 1, 2022, the Company adopted ASC 842, Leases Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13 , including subsequent amendments, Measurement of Credit Losses on Financial Instruments (Topic 326), which modifies the accounting methodology for most financial instruments. The guidance requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. This guidance is effective for the Company for annual periods beginning after December 15, 2022, and early adoption is permitted. The Company does not expect the adoption of this update to have a material effect on its condensed consolidated financial statements. |
Use of Estimates | Use of Estimates The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to: (1) valuation of goodwill, acquired intangible assets and long-lived assets, (2) valuation and recognition of the Company's share-based compensation awards, (3) income taxes, (4) contingent consideration and (5) determination of the fair value of the warrant liabilities. Significant estimates affecting the condensed consolidated financial statements have been prepared on the basis of the most current and best available information, including historical experience, known trends and other market-specific or other relevant factors that the Company believes to be reasonable. Management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in periods which they become known. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the condensed consolidated financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of amounts held as bank deposits. |
Accounts Receivable | Accounts Receivable Accounts receivable primarily represent amounts due from Advertising Partners, and these accounts receivable are stated at the amount the Company expects to collect from outstanding balances and do not bear interest. The Company does not require collateral for its accounts receivable. The Company considers the following factors when determining the collectability of specific customer accounts: past transaction history with the customer and current economic industry trends. These accounts receivables have historically been paid on a timely basis. Due to the |
Concentration of Credit Risk | Concentration of Credit Risk Cash is deposited with high-credit-quality financial institutions and, at times, such balances with any one financial institution may exceed the insurance limits of the prevailing regulatory body. Historically, the Company has not experienced any losses related to these cash balances and believes that there is minimal risk of expected future losses. However, there can be no assurance that there will not be losses on these deposits. |
Foreign Currency | Foreign Currency The Company’s reporting currency is the U.S. Dollar. The balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. The statements of operations amounts have been translated using the average exchange rate for the month in which the activity related. Accumulated net translation adjustments and foreign currency transaction gains/losses resulting from exchange rate fluctuations on transactions denominated in a currency other than the functional currency were not material. |
Warrant Liability | Warrant Liability The Company accounts for the Public Warrants and Private Placement Warrants (collectively, the “Warrants”; which are discussed in further detail in Note 13—WARRANTS and Note 14—FAIR VALUE MEASUREMENT ) in accordance with ASC 815-40 under which the Warrants do not meet the criteria for equity classification, and therefore must be recorded as liabilities. The fair value of the Public Warrants has been estimated using the Public Warrants’ quoted market price. The fair value of the Private Placement Warrants has been estimated using the fair value of the Public Warrants. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The provisions of ASC 820, Fair Value Measurements and Disclosures ( "ASC 820") , relate to financial and nonfinancial assets and liabilities, as well as other assets and liabilities carried at fair value on a recurring basis. ASC 820 provides a single authoritative definition of fair value, sets out a framework for measuring fair value, and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. The Company measures fair value based on a three-level hierarchy of inputs, maximizing the use of observable inputs, where available, and minimizing the use of unobservable inputs when measuring fair value. A financial instrument’s level within the three-level hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three-level hierarchy of inputs is as follows: Level 1 : Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 : Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 : Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on the Company’s own assumptions about current market conditions and require significant management judgment or estimation. Financial instruments consist of cash, cash equivalents, restricted cash, accounts receivable, other assets accounted for at fair value, accounts payable, accrued liabilities, and warrant liabilities. Cash equivalents and restricted cash are stated at fair value on a recurring basis. Accounts receivable, accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date. As of September 30, 2022, the Company's outstanding debt included a Term Loan, of which its fair value was estimated using an observable market quotation (Level 2). The carrying value and estimated fair value of the Term Loan were $368,228 and $374,400, respectively, as of September 30, 2022. Refer to Note 12—DEBT, NET for additional information. The Company does not have any assets, with the exception of cash, cash equivalents and restricted cash, that are required to be carried at fair value on a recurring basis at September 30, 2022 (Successor) and December 31, 2021 (Predecessor). The Company’s liabilities measured at fair value relate to the Public Warrant liabilities (Level 1), Private Placement Warrant liabilities (Level 2), the former CEO of S1 Holdco's equity profits interest liability (Level 3), and contingent consideration (Level 3). Certain assets, including goodwill, intangible assets and long-lived assets, are also subject to measurement at fair value on a nonrecurring basis if they are deemed to be impaired as a result of an impairment review. The Company determines the fair value by applying observable inputs to calculate the present value of these assets. To date, no material impairments have been recorded on those assets. |
Restricted Cash | The Company’s restricted cash as of September 30, 2022 (Successor) primarily consists of (i) cash held as collateral at one of the Company’s financial institutions to secure the Company’s letter of credit issued in favor of its landlord under the lease for its corporate office in Marina del Rey, California, (ii) merchant reserve balances with its credit card processors held due to arrangements under which the Company's credit card processors withhold certain credit card funds to cover potential charge backs initiated by the Company’s customers, (iii) the escrow account balance related to the portion of unvested equity awards as of the closing of the Merger that will be cash settled and will be released to the Company's employees as the service requirement is completed, (iv) the escrow account balance related to the indemnification obligations related to its RoadWarrior acquisition and (v) the escrow account balance related to the postcombination compensation arrangement related to the CouponFollow acquisition. The amount of restricted cash as of December 31, 2021 (Predecessor) relates to cash held as collateral at one of the Company’s financial institutions to secure the Company’s letter of credit issued in favor of its landlord under the lease for its corporate office in Marina del Rey, California. |
Property and Equipment, net | Property and Equipment, net Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Repairs and maintenance are charged to expense as incurred, while improvements are capitalized. Upon the sale or retirement of property and equipment, the accounts are relieved of the cost and the related accumulated depreciation, and any resulting gain or loss is included in the condensed consolidated statement of operations. The estimated useful lives of the Company’s property and equipment for purposes of computing depreciation are as follows: Useful Life (Years) Computer equipment 3 Office equipment 3 Software 4 Furniture, fixtures and equipment 3 - 7 Motor vehicles 4 Leasehold improvements Shorter of the remaining lease term or estimated useful life for leasehold improvements. |
Internal-use Software Development Costs, net and Intangible Assets | Internal-use Software Development Costs, net Internal-use software development costs are stated at cost, less accumulated amortization. The Company capitalizes certain internal-use software development costs associated with creating and enhancing internally developed software related to the Company’s technology infrastructure, including continuing to develop and deploy its RAMP platform. These costs are comprised of personnel costs, which include salaries, bonuses, stock-based compensation and employee benefits’ expenses for employees who are directly associated with, and who devote significant time to, software projects, as well as external direct costs of materials and services consumed in developing or obtaining the software. Internal-use software development costs that do not meet the qualification for capitalization are expensed as incurred, and correspondingly recorded in Salaries, commissions, and benefits expense in the condensed consolidated statement of operations. Internal-use software development activities generally consist of three stages: (i) the planning stage, (ii) the application and infrastructure development stage, and (iii) the post-implementation stage. Costs incurred in the planning and post-implementation stages of software development, including costs associated with the post configuration training and repairs and maintenance of the developed technologies, are expensed as incurred. The Company capitalizes costs associated with software developed for internal use when the preliminary project stage is completed, management has authorized further funding for the completion of the project, and it is probable that the project will be completed and the software will perform as intended. Costs incurred in the application and infrastructure development stage, including significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete, and the software and technologies are ready for deployment for their intended purpose(s). Internal-use software development costs are amortized using a straight-line method over an estimated useful life of three (3) years, commencing when the software is ready for its intended use. The straight-line recognition method approximates the manner in which the expected benefit will be derived. The Company does not transfer ownership of its software or lease its software to third parties. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company assesses the recoverability of its long-lived assets when events or changes in circumstances indicate that their carrying value may not be recoverable. Such events or changes in circumstances may include a significant adverse change in the extent or manner in which a long-lived asset is being used; significant adverse changes in legal factors or in the business climate that could affect the value of a long-lived asset; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset; current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset; or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company assesses recoverability of its long-lived assets by determining whether the carrying value of the asset group can be recovered through projected undiscounted cash flows over their remaining useful lives. If the carrying value of the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized and measured as the amount by which the carrying amount exceeds the estimated fair value. An impairment loss is charged to operations in the period in which management determines such impairment has occurred. For the periods presented in this quarterly report, the Company has not recorded any impairments of long-lived assets. |
Business Combinations | Business Combinations The results of a business acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition. The Company allocates the purchase price, which is the sum of the consideration provided which may consist of cash, equity, or a combination of the two, paid in a business combination for the identifiable assets and liabilities of the acquired business at their acquisition-date fair values. Any excess amount paid over the identifiable net assets is recorded as goodwill. The process for estimating the fair values of the acquired business involves the use of significant estimates and assumptions, including estimating average industry purchase price multiples, customer and service attrition rates and estimating future cash flows. The Company estimates the fair value based on assumptions which the Company's management believes to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. At the conclusion of the measurement period, any subsequent adjustments are reflected in the Company’s condensed consolidated statements of operations. Transaction costs associated with business combinations are expensed as incurred and are included in Selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. When purchase consideration includes contingent consideration, the Company records the fair value of the contingent consideration as of the date of acquisition, and subsequently remeasures the contingent consideration at fair value as of each reporting date through the Company’s condensed consolidated statements of operations. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired and identifiable intangibles in a business combination. The Company accounts for goodwill in accordance with ASC 350, Intangibles—Goodwill and Other , which requires the Company to test goodwill at the reporting unit level for impairment at least annually. The Company has the option (i) to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount or (ii) to perform the quantitative impairment test. The quantitative impairment test involves comparing the estimated fair value of a reporting unit with its respective book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If, however, the fair value of the reporting unit is less than book value, an impairment loss is recognized in an amount equal to the excess. The determination of fair value(s) requires the Company to make significant estimates and assumptions. These estimates include, but are not limited to, future expected cash flows from a market participant perspective, discount rates, industry data and management’s prior experience. Unanticipated events or circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results. The Company tests for goodwill impairment annually at December 31st. For the periods presented in this quarterly report, there were no triggering events identified, and therefore no impairment charges recorded on goodwill during the interim periods were required. |
Leases | Leases On January 1, 2022, the Company adopted ASC 842 , Leases , and recognized operating lease assets and operating lease liabilities in its condensed consolidated balance sheet. A contract is or contains a lease when, (1) the contract contains an identified asset and (2) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration. The Company assesses whether an arrangement is or contains a lease at commencement of the contract. For all leases, other than those that qualify for the short-term recognition exemption, the Company recognizes as of the lease commencement date, on the balance sheet a liability for its obligation related to the lease and a corresponding asset representing the Company’s right to use the underlying asset over the period of use. The Company’s operating leases are included in operating lease assets and operating lease liabilities in the Company’s condensed consolidated balance sheet as of September 30, 2022 (Successor). An operating lease asset represents the Company’s right to use an underlying asset for the lease term and an operating lease liability represents the Company’s obligation to make lease payments arising from the lease. Operating lease assets and operating lease liabilities are initially recorded based on the present value of lease payments over the lease term, which may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. As the rate implicit for each of the Company’s leases is not readily determinable, the incremental borrowing rate based on the information available on the commencement date of the lease is used to determine the present value of lease payments, which include taxes, insurance, utilities and maintenance costs. Operating lease assets include any lease incentives. Lease agreements with lease and non-lease components are accounted for as a single lease component. Lease expense is recognized on a straight-line basis over the term of the lease. Operating lease expenses are included in Selling, general, and administrative expenses in the accompanying condensed consolidated statements of operations. See Note 7—LEASES for additional details. |
Revenue | Revenue The Company recognizes revenue when control of the promised services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those services. The Company determines revenue recognition through the following steps: • Identification of a contract with a customer, • Identification of the performance obligations in the contract, • Determination of the transaction price, • Allocation of the transaction price to the performance obligations in the contract, and • Recognition of revenue when or as the performance obligations are satisfied. The Company’s revenue is principally derived from the following areas: Advertising and Other Revenue The Company earns revenue by directly acquiring traffic to its owned and operated websites and utilizing its RAMP platform and related services to connect its Advertising Partners to its owned and operated websites. For this revenue stream, the Company is the principal in the transaction and reports revenue on a gross basis for the amounts received from its Advertising Partners. For this revenue, the Company has determined that it is the principal since it has a risk of loss on the traffic that it is acquiring for monetization with its Advertising Partners, and, in the case of its owned and operated websites, the Company maintains the website, provides the content and bears the cost and risk of loss associated with its websites’ advertising space. Revenue is also earned from revenue-sharing arrangements with the Company’s Network Partners for the use of its RAMP platform and related services that enable them to direct advertising provided by our Advertising Partners to their advertising inventory. The Company has determined it is the agent in these transactions and reports revenue on a net basis, because (a) the Company does not control the underlying advertising space, (b) the Company does not acquire the traffic and does not have risk of loss in connection therewith and (c) the pricing is in the form of a substantively fixed-percentage revenue-sharing arrangement. The Company reports this revenue on a net basis with respect to the amount retained under its revenue-sharing arrangements, which represents the difference between amounts received by the Company from the Advertising Partners, less amounts remitted to the Network Partners based on underlying contracts. The Company recognizes revenue upon delivering traffic to its Advertising Partners based on a cost-per-click or cost-per-thousand impression basis. Subscription Revenue In connection with the Merger and acquisition of Protected.net discussed in Note 3—MERGER , the Company is also engaged in selling antivirus, adblock, webshield and VPN software as a service subscription ("SaaS") to customers. The subscription business provides real-time antivirus protection, a safe-browsing feature, adblocking, blocking of malicious websites and data breach monitoring. Subscription revenue is primarily derived from the (i) delivery of the antivirus software and (ii) delivery of the additional add-on service(s), which all are provided on a fixed-price basis. The performance obligations related to subscription, maintenance and support are satisfied over the term of the customer contract and the associated subscription revenue is recognized over the contract term on a ratable basis, which is consistent with transfer of control. The Company’s services rendered to customers are generally paid for in advance with cash receipts recorded as deferred revenue, which represents a liability under a noncancelable contract. Cost of Revenues Cost of revenues primarily consists of traffic acquisition costs, which are the costs to place advertisements to acquire customers to the Company’s websites and subscription services, as well as content, publishing, domain name registration costs, licensing costs to provide mapping services to Mapquest.com, credit card processing fees, and licensing costs related to the antivirus and other software available via APIs for sale and distribution of its SaaS products to end customers. The Company does not pay for costs up-front. Incentive payments or bonuses and such costs are expensed as incurred. |
Salaries, Commissions, and Benefits | Salaries, Commissions, and Benefits Salaries, commissions and benefits expenses include salaries, bonuses, stock-based compensation, non-capitalized personnel costs incurred in the internal-use software development, and employee benefits costs. |
Share-Based Compensation | Share-Based Compensation Compensation cost related to share-based payments is measured based on the fair value of the units issued and recognized within “Salaries, commissions, and benefits” in the company’s condensed consolidated statement of operations. The Company has elected to treat share-based payment awards with time-based service condition(s) only as a single award, with the related compensation expense recognized on a straight-line basis. The assumptions used in the Black-Scholes model to value equity in the Predecessor period are based upon the following: • Fair Value of common stock: S1 Holdco’s equity was not publicly traded, therefore the fair value was determined by S1 Holdco’s board of directors, with input from management and contemporaneous valuation reports prepared by a third-party valuation specialist. • Expected Term: The expected term of the award is estimated by considering the contractual term and vesting period of the award, the employees’ expected exercise behavior and the post-vesting employee turnover rate. For non-employees, the expected life equals the contractual term of the award. • Risk-free Interest Rate: The risk-free interest rate is based on published U.S. Treasury Department interest rates for the expected term of the underlying award. • Volatility: The volatility was based on the expected unit price volatility of the underlying units over the expected term of the award which is based upon historical share price data of an index of comparable publicly traded companies. Pursuant to the Merger, the Company was required to replace certain profits interests awards with restricted stock units (“RSUs”) in System1 (the “Replacement Awards”). The Company’s fair value of these Replacement Awards was derived from the market price of its Class A common stock, which is traded on the NYSE. The Merger triggered a liquidating event, therefore, the portion of the Replacement Awards issued in connection with the Merger that was associated with services rendered through the date of the Merger are included in the total consideration transferred. With regards to the remaining portion of the Replacement Awards, the Company continues to recognize compensation expense on a graded basis over the requisite service period for each award and recognizes forfeitures as they occur. For awards granted subsequent to the Merger, the Company’s fair value of the related restricted stock units was derived from the market price of its Class A common stock, which is traded on the NYSE. As these awards are subject only to time-based service conditions, the Company recognizes compensation expense for these awards on a straight-line basis over the requisite service period for each award and recognizes forfeitures as they occur. Liability Awards In connection with the Merger and acquisition of Protected.net described in Note 3—MERGER , the Company effected an incentive plan for eligible recipients which is payable in a fixed value of fully-vested shares of the Company’s Class A common stock upon the satisfaction of certain performance and service conditions (the “ Protected.net Incentive Plan ” ). In connection with the acquisition of CouponFollow described in Note 4—ACQUISITIONS the Company effected an incentive plan for eligible recipients, which, at the Company’s option, is payable in cash or fully-vested shares of the Company’s Class A common stock upon the satisfaction of certain performance and service conditions (the “ CouponFollow Incentive Plan ” ). The Company recognizes compensation cost for these liability awards with performance and service conditions if and when it is deemed probable that the performance condition will be achieved. The probability of vesting is evaluated at each reporting period taking into consideration actual results to-date and forecasts and compensation cost adjusted to reflect the completed portion of the service period with a graded vesting attribution . Refer to Note 18—SHARE-BASED COMPENSATION for additional information . |
Selling, General, and Administrative | Selling, General, and Administrative Selling, general, and administrative expenses consist of fees for professional services, occupancy costs, travel and entertainment. These costs are expensed as incurred. |
Depreciation and Amortization | Depreciation and Amortization Depreciation and amortization expenses are primarily attributable to the Company’s capital investments and consist of fixed asset depreciation and amortization of intangible assets with finite lives. |
Income Taxes | Income Taxes The Company is the sole managing member of S1 Holdco and, as a result, consolidates the financial results of S1 Holdco. S1 Holdco is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, S1 Holdco is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by S1 Holdco is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of S1 Holdco, as well as any stand-alone income or loss generated by the Company. Various subsidiaries of the Company are subject to income tax in the United States and in other countries. The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities (“DTAs” and “DTLs”, as applicable) for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine DTAs and DTLs on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date. We recognize DTAs to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of operations. If the Company determines that it would not be able to realize its DTAs in the future in excess of their net recorded amount, it would make an adjustment to the DTA valuation allowance, which would increase the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740, Income Taxes, |
Non-Controlling Interest | Non-Controlling Interest The Company reports a non-controlling interest representing the economic interest in S1 Holdco held by certain individuals and entities other than the Company. The non-controlling interest is comprised of certain selling equity holders of S1 Holdco that retained an economic interest in S1 Holdco through their ownership of Class B units in S1 Holdco as of the closing of the Merger, along with the same number of corresponding shares of Class C common stock in the Company. The non-controlling interest holders may, from time to time, require the Company to redeem all or a portion of their economic interest via a redemption of their Class B units in S1 Holdco together with surrendering their corresponding shares of Class C common stock in the Company in exchange for shares of Class A common stock on a one-for-one basis. As future redemptions occur, this will result in a change in ownership and reduce the amount recorded as non-controlling interest and a corresponding increase in additional paid-in capital. As additional shares of Class A common stock are issued at the Company level, Class A units in S1 Holdco are issued to the Company to maintain a one-to-one ratio of Class A common stock outstanding to the Company's Class A units in S1 Holdco. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Schedule of Table Illustrates the Level of Concentration as a Percentage of Total Revenues | The following table illustrates the level of concentration as a percentage of total revenues for its key Advertising Partners: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Google 67 % 84 % 70 % 88 % 84 % Microsoft 3 % 5 % 3 % 4 % 5 % |
Schedule of Estimated Useful Lives of Property and Equipment | The estimated useful lives of the Company’s property and equipment for purposes of computing depreciation are as follows: Useful Life (Years) Computer equipment 3 Office equipment 3 Software 4 Furniture, fixtures and equipment 3 - 7 Motor vehicles 4 Leasehold improvements Shorter of the remaining lease term or estimated useful life for leasehold improvements. Property and equipment, net consisted of the following: Successor Predecessor September 30, 2022 December 31, 2021 Computer equipment $ 793 $ 415 Motor vehicles 234 — Furniture and equipment 1,112 475 Leasehold improvements 2,715 976 Property and equipment—gross 4,854 1,866 Less accumulated depreciation (505) (1,036) Property and equipment—net $ 4,349 $ 830 Total depreciation expense on property and equipment was as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Depreciation expense $ 252 $ 73 $ 520 $ 16 $ 243 |
Schedule of Finite-Lived Intangible Assets | The estimated useful lives of the Company’s intangible assets are as follows: Useful Life (Years) Developed technology 4 Customer relationships 3 - 5 Trademarks and trade names 10 Other intangibles 4 Internal-use software development costs and intangible assets consisted of the following: September 30, 2022 (Successor) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Total internal-use software development costs $ 15,591 $ (2,992) $ 12,599 Intangibles: Developed technology $ 198,127 $ (33,399) $ 164,728 Trademarks and trade names 272,953 (18,112) 254,841 Software 3,900 (562) 3,338 Customer relationships 116,600 (33,489) 83,111 Total intangible costs $ 591,580 $ (85,562) $ 506,018 December 31, 2021 (Predecessor) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Total internal-use software development costs $ 21,274 $ (10,061) $ 11,213 Intangibles: Developed technology $ 8,398 $ (7,242) $ 1,156 Trademarks and trade names 69,007 (21,375) 47,632 Professional service agreement 3,100 (2,359) 741 Customer relationships 1,500 (661) 839 Total intangible costs $ 82,005 $ (31,637) $ 50,368 Amortization expense for internal-use software development costs and intangible assets were as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Amortization expense for internal-use software development $ 1,145 $ 1,300 $ 4,045 $ 355 $ 3,545 Amortization expense for intangible assets $ 32,023 $ 2,086 $ 85,563 $ 629 $ 6,472 |
Schedule of Ownership Interest by Other Entities | The following tables summarizes the ownership interest in S1 Holdco as of September 30, 2022 (Successor). Units Ownership % Class A units of S1 Holdco 91,490 80.8 % Class B units of S1 Holdco 21,747 19.2 % |
MERGER (Tables)
MERGER (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Fair Value of the Assets Acquired and Liabilities Assumed | The purchase consideration was allocated to the following assets and liabilities. Amount Tangible assets acquired and liabilities assumed: Cash and marketable securities $ 68,748 Accounts receivable 79,086 Prepaid expenses 10,804 Property, plant & equipment, net 1,551 Internal-use software development costs, net 11,316 Other assets 6,946 Accounts payable (9,798) Deferred revenue (60,768) Accrued expenses and other current liabilities (99,726) Notes payable (172,038) VAT tax liability (12,280) Deferred tax liabilities (142,806) Other liabilities (8,474) Total tangible assets acquired and liabilities assumed (327,439) Intangible assets 555,500 Goodwill 833,845 Net assets acquired $ 1,061,906 Consideration: Cash $ 442,168 Equity 421,047 Total consideration 863,215 Noncontrolling interest 198,691 Total $ 1,061,906 |
Schedule of Acquired Finite-Lived Intangible Assets by Major Class | The intangible assets as of the closing date of the acquisition included: Amount Weighted Average Useful Life (in Years) Trademarks $ 243,200 10 Customer relationships 115,300 4 Technology 197,000 4 Total $ 555,500 |
Schedule of Pro Forma Net Revenue and Net Income | The following table provides unaudited pro forma information as if the Merger occurred as of January 1, 2021. The unaudited pro forma information reflects adjustments for additional amortization resulting from the fair value adjustments to assets acquired and liabilities assumed, adjustments for alignment of accounting policies, and transaction expenses as if the Merger and acquisitions of Answers, CouponFollow and RoadWarrior (each as defined in Note 4—ACQUISITIONS) occurred January 1, 2021. The pro forma results do not include any anticipated cost synergies or other effects of the combined company. Accordingly, pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on the dates indicated, nor is it indicative of the future operating results of the combined company. Three months ended Nine months ended September 30, 2021 September 30, 2022 September 30, 2021 Pro forma revenue $ 218,590 $ 657,186 $ 630,822 Pro forma net (loss) $ (22,362) $ (95,189) $ (141,058) |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Business Acquisition [Line Items] | |
Schedule of Fair Value of the Assets Acquired and Liabilities Assumed | The purchase consideration was allocated to the following assets and liabilities. Amount Tangible assets acquired and liabilities assumed: Cash and marketable securities $ 68,748 Accounts receivable 79,086 Prepaid expenses 10,804 Property, plant & equipment, net 1,551 Internal-use software development costs, net 11,316 Other assets 6,946 Accounts payable (9,798) Deferred revenue (60,768) Accrued expenses and other current liabilities (99,726) Notes payable (172,038) VAT tax liability (12,280) Deferred tax liabilities (142,806) Other liabilities (8,474) Total tangible assets acquired and liabilities assumed (327,439) Intangible assets 555,500 Goodwill 833,845 Net assets acquired $ 1,061,906 Consideration: Cash $ 442,168 Equity 421,047 Total consideration 863,215 Noncontrolling interest 198,691 Total $ 1,061,906 |
Answers Holdings, Inc. | |
Business Acquisition [Line Items] | |
Schedule of Fair Value of the Assets Acquired and Liabilities Assumed | The purchase consideration was allocated to the following assets and liabilities: Amount Assets acquired and liabilities assumed: Working capital $ 32 Trademark - 10 years weighted average useful life 1,100 Goodwill 3,500 Net assets acquired $ 4,632 Total consideration: Cash $ 4,632 |
NextGen Shopping, Inc | |
Business Acquisition [Line Items] | |
Schedule of Fair Value of the Assets Acquired and Liabilities Assumed | The purchase consideration was allocated to the following assets and liabilities: Amount Cash and cash equivalents $ 21,232 Accounts receivable 5,860 Other current assets 446 Accounts payable (116) Accrued expenses and other current liabilities (955) Deferred tax liabilities (8,094) Assets acquired and liabilities assumed 18,373 Intangible assets 30,300 Goodwill 51,914 Net assets acquired $ 100,587 Consideration: Cash $ 75,087 Equity 25,500 Total consideration $ 100,587 |
Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination | Following are the details of the purchase price allocated to the intangible assets for the CouponFollow acquisition: Amount Weighted Average Useful Life (in Years) Trademark $ 26,400 10 Software 3,900 4 Total $ 30,300 |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Equipment, Net | The estimated useful lives of the Company’s property and equipment for purposes of computing depreciation are as follows: Useful Life (Years) Computer equipment 3 Office equipment 3 Software 4 Furniture, fixtures and equipment 3 - 7 Motor vehicles 4 Leasehold improvements Shorter of the remaining lease term or estimated useful life for leasehold improvements. Property and equipment, net consisted of the following: Successor Predecessor September 30, 2022 December 31, 2021 Computer equipment $ 793 $ 415 Motor vehicles 234 — Furniture and equipment 1,112 475 Leasehold improvements 2,715 976 Property and equipment—gross 4,854 1,866 Less accumulated depreciation (505) (1,036) Property and equipment—net $ 4,349 $ 830 Total depreciation expense on property and equipment was as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Depreciation expense $ 252 $ 73 $ 520 $ 16 $ 243 |
GOODWILL, INTERNAL-USE SOFTWA_2
GOODWILL, INTERNAL-USE SOFTWARE DEVELOPMENT COSTS, NET, AND INTANGIBLE ASSETS, NET (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The goodwill additions and balances since the Merger, by reportable segments, were as follows: Owned and Operated Partner Network Subscription Total Goodwill additions and balances at September 30, 2022 (Successor) $ 479,606 $ 28,553 $ 396,081 $ 904,240 Owned and Operated Partner Network Total Goodwill at December 31, 2021 (Predecessor) $ 24,403 $ 20,417 $ 44,820 |
Schedule of Finite-Lived Intangible Assets | The estimated useful lives of the Company’s intangible assets are as follows: Useful Life (Years) Developed technology 4 Customer relationships 3 - 5 Trademarks and trade names 10 Other intangibles 4 Internal-use software development costs and intangible assets consisted of the following: September 30, 2022 (Successor) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Total internal-use software development costs $ 15,591 $ (2,992) $ 12,599 Intangibles: Developed technology $ 198,127 $ (33,399) $ 164,728 Trademarks and trade names 272,953 (18,112) 254,841 Software 3,900 (562) 3,338 Customer relationships 116,600 (33,489) 83,111 Total intangible costs $ 591,580 $ (85,562) $ 506,018 December 31, 2021 (Predecessor) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Total internal-use software development costs $ 21,274 $ (10,061) $ 11,213 Intangibles: Developed technology $ 8,398 $ (7,242) $ 1,156 Trademarks and trade names 69,007 (21,375) 47,632 Professional service agreement 3,100 (2,359) 741 Customer relationships 1,500 (661) 839 Total intangible costs $ 82,005 $ (31,637) $ 50,368 Amortization expense for internal-use software development costs and intangible assets were as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Amortization expense for internal-use software development $ 1,145 $ 1,300 $ 4,045 $ 355 $ 3,545 Amortization expense for intangible assets $ 32,023 $ 2,086 $ 85,563 $ 629 $ 6,472 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | As of September 30, 2022 (Successor), the expected amortization expense associated with the Company’s intangible assets and internal-use software development costs was as follows: Amortization Expense Remainder of 2022 $ 33,698 2023 109,983 2024 103,467 2025 91,807 2026 40,405 Thereafter 139,257 Total amortization expense $ 518,617 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Leases [Abstract] | |
Schedule of Components of Lease Expense | The components of lease expense were as follows: Successor Predecessor Three Months Ended September 30, 2022 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Operating lease expense $ 404 $ 1,386 $ 142 Short-term lease expense 216 611 12 Variable lease expense 111 235 — Total lease expense $ 731 $ 2,232 $ 154 |
Schedue of Supplemental Balance Sheet Information | Supplemental information related to leases was as follows: Successor As of September 30, 2022 Weighted average remaining lease terms (in years): 7.1 Weighted average discount rate 5.2% |
Schedule of Maturities of Facility Lease Liabilities | Maturities of lease liabilities by fiscal year for the Company's operating leases are as follows as of September 30, 2022 (Successor) : Successor As of September 30, 2022 Operating leases: Remainder of 2022 $ 617 2023 2,508 2024 2,579 2025 2,235 2026 268 Thereafter 1,489 Total lease payments $ 9,696 Less: Imputed interest (1,188) Present value of operating lease liabilities $ 8,508 |
Schedule of Future Operating Lease Obligation Under ASC 840 | As of December 31, 2021 (Predecessor), the expected future operating lease obligation were as follows: Predecessor As of December 31, 2021 Year ending 2022 $ 1,957 2023 $ 1,950 2024 $ 1,950 2025 $ 1,663 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses and Other Liabilities | Successor Predecessor September 30, 2022 December 31, 2021 Payable to employees $ 13,142 $ 10,091 Accrued marketing expenses 42,315 144 Accrued professional fees 1,728 6,242 VAT tax liability 4,718 — Accrued tax liability 1,176 361 Holdback liability 6,819 — Accrued revenue share 1 10,973 — Contingent consideration — 1,682 Former CEO profit interest — 11,132 Other liabilities 9,394 1,632 Accrued expenses and other current liabilities $ 90,265 $ 31,284 1 Accrued revenue share of $9,475 was included in Accounts payable in the condensed consolidated balance sheet as of December 31, 2021. |
DEFERRED REVENUE (Tables)
DEFERRED REVENUE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Deferred Revenue | Deferred revenue activities for the period January 1, 2021 through December 31, 2021 (Predecessor), January 1, 2022 through January 26, 2022 (Predecessor) and January 27, 2022 through September 30, 2022 (Successor) are as follows: Deferred Revenue January 1, 2021 (Predecessor) $ 1,889 Additions 5,116 Revenue recognized (5,034) December 31, 2021 (Predecessor) $ 1,971 Deferred Revenue January 1, 2022 (Predecessor) $ 1,971 Additions 620 Revenue recognized (309) January 26, 2022 (Predecessor) $ 2,282 Deferred Revenue January 27, 2022 (Successor) $ — Additions* 187,383 Revenue recognized (119,094) September 30, 2022 (Successor) $ 68,289 * Includes $61,156 from the 2022 acquisitions. |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax (Benefit) Provision and the Effective Income Tax Rate | The following table presents the Company’s Income tax (benefit) provision and the effective income tax rate: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Income tax (benefit) provision $ (19,228) $ 475 $ (32,480) $ (629) $ 703 Effective tax rate 34 % 4 % 23 % 2 % 2 % |
DEBT, NET (Tables)
DEBT, NET (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Future Minimum Principal Payments on Long-Term Debt | As of September 30, 2022, future minimum principal payments on long-term debt are as follows: Successor Remainder for 2022 $ 5,000 2023 20,000 2024 20,000 2025 20,000 2026 30,000 2027 344,000 Total future minimum principal payment $ 439,000 Less: current portion (20,000) Long-term portion $ 419,000 |
FAIR VALUE MEASUREMENT (Tables)
FAIR VALUE MEASUREMENT (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Schedule of Liabilities Measured at Fair Value on Recurring Basis | The following tables present the Company’s fair value hierarchy for liabilities measured at fair value on a recurring basis as of September 30, 2022 (Successor) and December 31, 2021 (Predecessor): September 30, 2022 (Successor) Level 1 Public warrants $ 18,158 December 31, 2021 (Predecessor) Level 3 Former CEO equity interest $ 11,132 Contingent consideration 1,682 Total $ 12,814 |
Schedule of Estimated Fair Value of Liabilities | Changes in estimated fair value of Level 1, 2 and 3 financial liabilities for the period from January 1, 2022 through January 26, 2022 (Predecessor), the period from January 27, 2022 through September 30, 2022 (Successor), and for the nine months ended September 30, 2021 (Predecessor), respectively, are as follows: Former CEO equity profits interest* Contingent consideration Warrant liability Fair value of liabilities at December 31, 2020 (Predecessor) $ 4,236 $ 8,240 Settlements — (6,715) Change in fair value 4,238 94 Fair value of liabilities at September 30, 2021 (Predecessor) $ 8,474 $ 1,619 Fair value of liabilities at December 31, 2021 (Predecessor) and January 26, 2022 (Predecessor) $ 11,132 $ 1,682 Fair value of liabilities at January 27, 2022 (Successor) $ 1,682 $ 27,012 Settlements (1,715) (22,965) Additions 28 — Change in fair value 5 14,111 September 30, 2022 (Successor) $ — $ 18,158 * Former CEO equity profits interest as further described in executive compensation Note 8—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES . |
NET INCOME (LOSS) PER SHARE (Ta
NET INCOME (LOSS) PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Net Income Per Share | Basic and diluted net income (loss) per share was calculated as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Basic and diluted net loss per share $ (0.35) n/a $ (1.02) n/a n/a Numerator: Net loss attributable to System1, Inc. (31,643) n/a (90,832) n/a n/a Denominator: Weighted-average common shares outstanding used in computing basic and diluted net loss per share (shares in thousands) 91,002 n/a 88,716 n/a n/a Basic and diluted net income (loss) per unit n/a $ 0.55 n/a $ (1.97) $ 1.46 Numerator: n/a Net income (loss) n/a 11,368 n/a (40,460) 29,883 Denominator: n/a Weighted-average membership units outstanding - basic n/a 20,488 n/a 20,488 20,488 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information | The following summarizes revenue by reportable segments: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Owned and Operated $ 146,880 $ 162,606 $ 440,844 $ 49,791 $ 462,848 Partner Network 10,015 8,840 31,314 2,921 25,738 Subscription 44,281 — 114,923 — — Total $ 201,176 $ 171,446 $ 587,081 $ 52,712 $ 488,586 The following summarizes adjusted gross margin by reportable segments: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Owned and Operated $ 40,540 $ 36,202 $ 115,885 $ 9,310 $ 105,902 Partner Network 10,015 8,840 31,314 2,921 25,738 Subscription 22,318 — 57,855 — — Adjusted gross margin $ 72,873 $ 45,042 $ 205,054 $ 12,231 $ 131,640 Other cost of revenues 9,378 2,481 28,343 1,279 8,891 Salaries, commissions and benefits 55,862 15,139 144,876 35,175 48,032 Selling, general and administrative 16,520 7,936 47,668 14,817 21,163 Depreciation and amortization 33,420 3,459 90,128 1,000 10,260 Interest expense 10,011 4,184 22,111 1,049 12,708 Change in fair value of warrant liabilities 4,489 — 14,111 — — Net income (loss) before income tax $ (56,807) $ 11,843 $ (142,183) $ (41,089) $ 30,586 |
Schedule of Revenues Disaggregated by Geographic Region | The following table summarizes revenue by geographic region: Three-Month Period Nine-Month Period Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 United States $ 156,726 $ 167,105 $ 459,206 $ 51,701 $ 474,735 United Kingdom 44,281 107 114,924 — 276 Other countries 169 4,234 12,951 1,011 13,575 Total $ 201,176 $ 171,446 $ 587,081 $ 52,712 $ 488,586 |
Schedule of Property and Equipment, Net and Operating Lease Right-of-use Assets by Geographic Region | The following table summarizes property and equipment, net and operating lease right-of-use assets by reportable segments: Successor Predecessor September 30, 2022 December 31, 2021 Owned and Operated $ 10,312 $ 830 Subscription 930 — Total $ 11,242 $ 830 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Total Share-Based Compensation Expense | The Company recorded the following total share-based compensation expense for the periods presented: Successor Predecessor Successor Predecessor Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Period from January 27, 2022 through September 30, 2022 Period from January 1, 2022 through January 26, 2022 Nine Months Ended September 30, 2021 Share-based compensation expense $ 30,583 $ 68 $ 79,802 $ 27,698 $ 334 Performance Period* Fixed Amount Tier 1 Amount** Tier 2 Amount** Tier 3 Amount** Total Maximum Payment per Performance Period Dec. 31, 2022 $ 3,333 $ 3,333 $ — $ — $ 6,666 Dec. 31, 2023 3,333 3,333 3,750 — 10,416 Dec. 31, 2024 3,334 3,334 3,750 7,500 17,918 $ 10,000 $ 10,000 $ 7,500 $ 7,500 $ 35,000 *Payments for each applicable Performance Period are paid within 60 calendar days of the end of the applicable Performance Period. **If the Tier 1 Amount is not achieved in the first Performance Period but is achieved in the second Performance Period, the Tier 1 Amount for the first Performance Period shall be paid out at the end of the second Performance Period and if achieved in the third Performance period the full amount will be paid at the end of the third Performance Period. If the Tier 2 Amount is not achieved in the second Performance Period but is achieved in the third Performance Period, the Tier 2 Amount will be paid at the end of the third Performance Period. If the Tier 2 Amount or the Tier 3 Amount is achieved in the first Performance Period, such Tier Amounts shall be paid as noted in the table above. |
Schedule of Assumptions Used To Determine Fair Value of RSUs and RSAs | The key assumptions used to determine the fair value of these market-based RSUs and RSAs were as follows: Inputs Risk-free interest rate 1.6% Expected stock price volatility 50.0% Cost of equity 23.6% Expected term (years) 5 Fair Value of Class A common stock $10.00 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ASC 842 Adoption (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jan. 01, 2022 | Dec. 31, 2021 |
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | $ 6,893 | $ 6,786 | $ 0 |
Total operating lease liability | $ 8,508 | 7,987 | |
Accounting Standards Update 2016-02 | |||
Lessee, Lease, Description [Line Items] | |||
Deferred rent reclassified | $ 1,201 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Table Illustrates the Level of Concentration as a Percentage of Total Revenues (Details) - Revenue Benchmark - Advertising Partner Risk | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Product Information [Line Items] | |||||
Concentration risk, percentage | 88% | 67% | 84% | 70% | 84% |
Microsoft | |||||
Product Information [Line Items] | |||||
Concentration risk, percentage | 4% | 3% | 5% | 3% | 5% |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Capital Resources and Liquidity (Details) | 9 Months Ended | 12 Months Ended | |||
Jul. 01, 2022 | Aug. 01, 2021 | Mar. 01, 2021 | Sep. 30, 2022 contract agreement | Dec. 31, 2021 customer | |
Product Information [Line Items] | |||||
Number of contract | agreement | 3 | ||||
Number of customers | customer | 2 | ||||
Product Information [Line Items] | |||||
Number of contract | 2 | ||||
Number of contract, renewed | 1 | ||||
Contract, term | 2 years | 2 years | |||
Google | Accounts Receivable | Advertising Partner Risk | |||||
Product Information [Line Items] | |||||
Concentration risk, percentage | 64% | 72% | |||
Microsoft | |||||
Product Information [Line Items] | |||||
Number of contract | 1 | ||||
Contract, term | 3 years | ||||
Yahoo | Accounts Receivable | Advertising Partner Risk | |||||
Product Information [Line Items] | |||||
Concentration risk, percentage | 12% | 10% |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Accounts Receivable (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Accounting Policies [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 0 | $ 0 |
Accounts receivable, payment term | 30 days |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value of Financial Instruments (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Long-term debt, carrying value | $ 439,000 |
Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Long-term debt, carrying value | 368,228 |
Long-term debt, fair value | $ 374,400 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Restricted Cash (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Accounting Policies [Abstract] | ||
Restricted cash | $ 10,110 | $ 743 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Estimated Useful Lives of Property and Equipment (Details) | 9 Months Ended |
Sep. 30, 2022 | |
Computer equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
Office equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
Software | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 4 years |
Furniture, fixtures and equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
Furniture, fixtures and equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 7 years |
Motor vehicles | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 4 years |
Internal-use software development | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Estimated Useful Life of Intangible Assets (Details) | 9 Months Ended |
Sep. 30, 2022 | |
Developed technology | |
Finite-Lived Intangible Assets [Line Items] | |
Useful Life | 4 years |
Customer relationships | Minimum | |
Finite-Lived Intangible Assets [Line Items] | |
Useful Life | 3 years |
Customer relationships | Maximum | |
Finite-Lived Intangible Assets [Line Items] | |
Useful Life | 5 years |
Trademarks and trade names | |
Finite-Lived Intangible Assets [Line Items] | |
Useful Life | 10 years |
Other intangibles | |
Finite-Lived Intangible Assets [Line Items] | |
Useful Life | 4 years |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Information (Details) | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | ||
Jan. 26, 2022 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2022 | Sep. 30, 2021 USD ($) | |
Accounting Policies [Abstract] | ||||||
Impairment of long-lived asset | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | |
Goodwill impairment | $ 0 | $ 0 | $ 0 | |||
Stock conversion ratio | 1 |
SUMMARY OF SIGNIFICANT ACCOU_13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule Ownership Interests (Details) - Holdco, LLC shares in Thousands | Sep. 30, 2022 shares |
Class A units of S1 Holdco | Entity A | |
Property, Plant and Equipment [Line Items] | |
Shares/Units (in shares) | 91,490 |
Ownership percentage | 80.80% |
Class B units of S1 Holdco | Entity B | |
Property, Plant and Equipment [Line Items] | |
Shares/Units (in shares) | 21,747 |
Ownership percentage | 19.20% |
MERGER - Narrative (Details)
MERGER - Narrative (Details) - USD ($) $ / shares in Units, shares in Thousands | 2 Months Ended | ||||
Jan. 26, 2022 | Mar. 31, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | |
Business Acquisition [Line Items] | |||||
Issuance of common stock in connection with the acquisition of business | $ 25,500,000 | ||||
Fair value of non-controlling interest | 829,718,000 | $ 795,347,000 | $ 827,123,000 | $ (28,401,000) | |
Allocation and payment from the actual savings | 85% | ||||
Determined fair value of obligations under agreement | $ 0 | ||||
Non-Controlling Interest | |||||
Business Acquisition [Line Items] | |||||
Fair value of non-controlling interest | $ 190,370,000 | 178,170,000 | $ 184,304,000 | ||
Business Combination Agreement | |||||
Business Acquisition [Line Items] | |||||
Cash consideration | $ 442,168,000 | ||||
Equity | $ 421,047,000 | ||||
Expecting purchase accounting period (in year) | 1 year | ||||
Deferred tax liabilities | $ 142,806,000 | $ 2,468,000 | |||
Business Combination Agreement | Trebia Acquisition Corporation | Financial Standby Letter of Credit | |||||
Business Acquisition [Line Items] | |||||
Aggregate commitment redemption value | 7,031,000 | ||||
Business Combination Agreement | Cannae | Financial Standby Letter of Credit | |||||
Business Acquisition [Line Items] | |||||
Aggregate commitment redemption value | 246,484,000 | ||||
Business Combination Agreement | Non-Controlling Interest | |||||
Business Acquisition [Line Items] | |||||
Fair value of non-controlling interest | 198,691,000 | ||||
Business Combination Agreement | Class A Common Stock | |||||
Business Acquisition [Line Items] | |||||
Equity | $ 421,047,000 | ||||
Business acquisition, share price (in dollars per share) | $ 10 | ||||
Lock-up period, discount rate (in percent) | 10% | ||||
Business Combination Agreement | Class B Common Stock | |||||
Business Acquisition [Line Items] | |||||
Business acquisition, share price (in dollars per share) | $ 10 | ||||
Lock-up period, discount rate (in percent) | 10% | ||||
Issuance of common stock in connection with the acquisition of business (in shares) | 22,077 | ||||
Issuance of common stock in connection with the acquisition of business | $ 198,691,000 |
MERGER - Fair Value of the Asse
MERGER - Fair Value of the Assets Acquired and Liabilities Assumed (Details) - USD ($) | Jan. 26, 2022 | Sep. 30, 2022 | Dec. 31, 2021 |
Tangible assets acquired and liabilities assumed: | |||
Goodwill | $ 0 | $ 904,240,000 | $ 44,820,000 |
Business Combination Agreement | |||
Tangible assets acquired and liabilities assumed: | |||
Cash and marketable securities | 68,748,000 | ||
Accounts receivable | 79,086,000 | ||
Prepaid expenses | 10,804,000 | ||
Property, plant & equipment, net | 1,551,000 | ||
Internal-use software development costs, net | 11,316,000 | ||
Other assets | 6,946,000 | ||
Accounts payable | (9,798,000) | ||
Deferred revenue | (60,768,000) | ||
Accrued expenses and other current liabilities | (99,726,000) | ||
Notes payable | (172,038,000) | ||
VAT tax liability | (12,280,000) | ||
Deferred tax liabilities | (142,806,000) | $ (2,468,000) | |
Other liabilities | (8,474,000) | ||
Total tangible assets acquired and liabilities assumed | (327,439,000) | ||
Intangible assets | 555,500,000 | ||
Goodwill | 833,845,000 | ||
Net assets acquired | 1,061,906,000 | ||
Consideration: | |||
Cash | 442,168,000 | ||
Equity | 421,047,000 | ||
Total consideration | 863,215,000 | ||
Noncontrolling interest | $ 198,691,000 |
MERGER - Intangible Assets (Det
MERGER - Intangible Assets (Details) - Business Combination Agreement $ in Thousands | Jan. 26, 2022 USD ($) |
Business Acquisition [Line Items] | |
Amount | $ 555,500 |
Trademarks | |
Business Acquisition [Line Items] | |
Amount | $ 243,200 |
Weighted Average Useful Life (in Years) | 10 years |
Customer relationships | |
Business Acquisition [Line Items] | |
Amount | $ 115,300 |
Weighted Average Useful Life (in Years) | 4 years |
Developed technology | |
Business Acquisition [Line Items] | |
Amount | $ 197,000 |
Weighted Average Useful Life (in Years) | 4 years |
MERGER - Pro Forma Net Revenue
MERGER - Pro Forma Net Revenue and Net Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |||
Pro forma revenue | $ 218,590 | $ 657,186 | $ 630,822 |
Pro forma net (loss) | $ (22,362) | $ (95,189) | $ (141,058) |
ACQUISITIONS - Narrative (Detai
ACQUISITIONS - Narrative (Details) - USD ($) shares in Thousands | 1 Months Ended | 3 Months Ended | 5 Months Ended | 7 Months Ended | 8 Months Ended | ||||||
May 04, 2022 | Mar. 04, 2022 | Feb. 09, 2022 | Jan. 26, 2022 | Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2022 | |
Answers Holdings, Inc. | |||||||||||
Business Acquisition, Contingent Consideration [Line Items] | |||||||||||
Consideration transferred | $ 4,632,000 | ||||||||||
Net revenue | $ 534,000 | $ 607,000 | |||||||||
Net income (loss) | (403,000) | (456,000) | |||||||||
Expecting purchase accounting period (in year) | 1 year | ||||||||||
Weighted-average useful lives in years | 15 years | ||||||||||
Cash consideration | $ 4,632,000 | ||||||||||
Net Income | (403,000) | $ (456,000) | |||||||||
NextGen Shopping, Inc | |||||||||||
Business Acquisition, Contingent Consideration [Line Items] | |||||||||||
Consideration transferred | $ 100,587,000 | ||||||||||
Net revenue | 5,342,000 | $ 12,658,000 | |||||||||
Net income (loss) | 22,000 | 1,882,000 | |||||||||
Expecting purchase accounting period (in year) | 1 year | ||||||||||
Cash consideration | $ 75,087,000 | $ 16,446,000 | $ 78,426,000 | ||||||||
Business acquisition, deferred | 16,446,000 | ||||||||||
Holdback liability | $ 5,600,000 | ||||||||||
Discount rate | 7.50% | ||||||||||
Transaction costs | $ 3,129,000 | ||||||||||
Committed to pay post combination compensation amount | 8,500,000 | ||||||||||
Future stock or cash consideration | 10,000,000 | ||||||||||
Contingent consideration | 25,000,000 | ||||||||||
Net Income | 22,000 | $ 1,882,000 | |||||||||
Cash consideration reduction amount | $ 3,339,000 | ||||||||||
Acquisition related costs | $ 0 | $ 73,000 | |||||||||
NextGen Shopping, Inc | Class A Common Stock | |||||||||||
Business Acquisition, Contingent Consideration [Line Items] | |||||||||||
Fair value | $ 25,500,000 | ||||||||||
Number of shares issued (in shares) | 2,000 | ||||||||||
RoadWarrior, LLC | |||||||||||
Business Acquisition, Contingent Consideration [Line Items] | |||||||||||
Consideration transferred | 20,317,000 | ||||||||||
Net revenue | 1,158,000 | $ 3,395,000 | |||||||||
Net income (loss) | 500,000 | 2,192,000 | |||||||||
Expecting purchase accounting period (in year) | 1 year | ||||||||||
Weighted-average useful lives in years | 15 years | ||||||||||
Cash consideration | $ 19,636,000 | ||||||||||
Contingent consideration | $ 681,000 | ||||||||||
Net Income | $ 500,000 | $ 2,192,000 | |||||||||
Acquisition related costs | $ 286,000 |
ACQUISITIONS - Fair Value of th
ACQUISITIONS - Fair Value of the Assets Acquired and Liabilities Assumed (Details) - USD ($) | 3 Months Ended | |||||||
May 04, 2022 | Mar. 04, 2022 | Feb. 09, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2022 | Jan. 26, 2022 | Dec. 31, 2021 | |
Assets acquired and liabilities assumed: | ||||||||
Goodwill | $ 904,240,000 | $ 0 | $ 44,820,000 | |||||
Answers Holdings, Inc. | ||||||||
Assets acquired and liabilities assumed: | ||||||||
Working capital | $ 32,000 | |||||||
Trademark - 10 years weighted average useful life | 1,100,000 | |||||||
Goodwill | 3,500,000 | |||||||
Net assets acquired | 4,632,000 | |||||||
Consideration: | ||||||||
Cash | 4,632,000 | |||||||
Total consideration | $ 4,632,000 | |||||||
Weighted-average useful lives in years | 15 years | |||||||
Answers Holdings, Inc. | Trademarks | ||||||||
Consideration: | ||||||||
Weighted-average useful lives in years | 10 years | |||||||
NextGen Shopping, Inc | ||||||||
Assets acquired and liabilities assumed: | ||||||||
Goodwill | $ 51,914,000 | |||||||
Cash and cash equivalents | 21,232,000 | |||||||
Accounts receivable | 5,860,000 | |||||||
Other current assets | 446,000 | |||||||
Accounts payable | (116,000) | |||||||
Accrued expenses and other current liabilities | (955,000) | |||||||
Deferred tax liabilities | (8,094,000) | |||||||
Assets acquired and liabilities assumed | 18,373,000 | |||||||
Intangible assets | 30,300,000 | |||||||
Net assets acquired | 100,587,000 | |||||||
Consideration: | ||||||||
Cash | 75,087,000 | $ 16,446,000 | $ 78,426,000 | |||||
Equity | 25,500,000 | |||||||
Total consideration | $ 100,587,000 | |||||||
NextGen Shopping, Inc | Trademarks | ||||||||
Consideration: | ||||||||
Weighted-average useful lives in years | 10 years | |||||||
RoadWarrior, LLC | ||||||||
Assets acquired and liabilities assumed: | ||||||||
Working capital | $ 155,000 | |||||||
Goodwill | 14,981,000 | |||||||
Intangible assets | 4,500,000 | |||||||
Net assets acquired | 19,636,000 | |||||||
Consideration: | ||||||||
Cash | $ 19,636,000 | |||||||
Total consideration | $ 20,317,000 | |||||||
Weighted-average useful lives in years | 15 years | |||||||
RoadWarrior, LLC | Trademarks | ||||||||
Consideration: | ||||||||
Weighted-average useful lives in years | 10 years |
ACQUISITIONS - Intangible Asset
ACQUISITIONS - Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 04, 2022 | Feb. 09, 2022 |
NextGen Shopping, Inc | ||
Business Acquisition [Line Items] | ||
Amount | $ 30,300 | |
NextGen Shopping, Inc | Trademark | ||
Business Acquisition [Line Items] | ||
Amount | $ 26,400 | |
Weighted Average Useful Life (in Years) | 10 years | |
NextGen Shopping, Inc | Software | ||
Business Acquisition [Line Items] | ||
Amount | $ 3,900 | |
Weighted Average Useful Life (in Years) | 4 years | |
RoadWarrior, LLC | ||
Business Acquisition [Line Items] | ||
Amount | $ 4,500 | |
Weighted Average Useful Life (in Years) | 15 years | |
RoadWarrior, LLC | Trademark | ||
Business Acquisition [Line Items] | ||
Amount | $ 2,200 | |
Weighted Average Useful Life (in Years) | 10 years | |
RoadWarrior, LLC | Software | ||
Business Acquisition [Line Items] | ||
Amount | $ 1,000 | |
Weighted Average Useful Life (in Years) | 4 years | |
RoadWarrior, LLC | Customer relationships | ||
Business Acquisition [Line Items] | ||
Amount | $ 1,300 | |
Weighted Average Useful Life (in Years) | 3 years |
PROPERTY AND EQUIPMENT, NET - S
PROPERTY AND EQUIPMENT, NET - Schedule Of Property And Equipment (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment—gross | $ 4,854 | $ 1,866 |
Less accumulated depreciation | (505) | (1,036) |
Property and equipment—net | 4,349 | 830 |
Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment—gross | 793 | 415 |
Motor vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment—gross | 234 | 0 |
Furniture and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment—gross | 1,112 | 475 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment—gross | $ 2,715 | $ 976 |
PROPERTY AND EQUIPMENT, NET -_2
PROPERTY AND EQUIPMENT, NET - Schedule of Total Depreciation Expense on Property and Equipment (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |||||
Depreciation expense | $ 16 | $ 252 | $ 73 | $ 520 | $ 243 |
GOODWILL, INTERNAL-USE SOFTWA_3
GOODWILL, INTERNAL-USE SOFTWARE DEVELOPMENT COSTS, NET, AND INTANGIBLE ASSETS, NET - Schedule of Goodwill (Details) - USD ($) | Sep. 30, 2022 | Jan. 26, 2022 | Dec. 31, 2021 |
Goodwill [Roll Forward] | |||
Goodwill and additions | $ 904,240,000 | $ 0 | $ 44,820,000 |
Owned and Operated | |||
Goodwill [Roll Forward] | |||
Goodwill and additions | 479,606,000 | 24,403,000 | |
Partner Network | |||
Goodwill [Roll Forward] | |||
Goodwill and additions | 28,553,000 | $ 20,417,000 | |
Subscription | |||
Goodwill [Roll Forward] | |||
Goodwill and additions | $ 396,081,000 |
GOODWILL, INTERNAL-USE SOFTWA_4
GOODWILL, INTERNAL-USE SOFTWARE DEVELOPMENT COSTS, NET, AND INTANGIBLE ASSETS, NET - Narrative (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |||
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Goodwill [Line Items] | |||||||
Goodwill | $ 0 | $ 904,240,000 | $ 904,240,000 | $ 904,240,000 | $ 44,820,000 | ||
Internal-use software development costs | 5,538,000 | 5,538,000 | $ 5,538,000 | $ 2,540,000 | |||
Impairment of intangible assets | 0 | 0 | $ 0 | 0 | $ 0 | ||
Computer software impairments | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||
Weighted Average | |||||||
Goodwill [Line Items] | |||||||
Weighted average amortization period | 7 years |
GOODWILL, INTERNAL-USE SOFTWA_5
GOODWILL, INTERNAL-USE SOFTWARE DEVELOPMENT COSTS, NET, AND INTANGIBLE ASSETS, NET - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 15,591 | $ 21,274 |
Accumulated Amortization | (2,992) | (10,061) |
Net Carrying Amount | 12,599 | 11,213 |
Gross Carrying Amount | 591,580 | 82,005 |
Accumulated Amortization | (85,562) | (31,637) |
Net Carrying Amount | 506,018 | 50,368 |
Developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 198,127 | 8,398 |
Accumulated Amortization | (33,399) | (7,242) |
Net Carrying Amount | 164,728 | 1,156 |
Trademarks and trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 272,953 | 69,007 |
Accumulated Amortization | (18,112) | (21,375) |
Net Carrying Amount | 254,841 | 47,632 |
Software | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 3,900 | |
Accumulated Amortization | (562) | |
Net Carrying Amount | 3,338 | |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 116,600 | 1,500 |
Accumulated Amortization | (33,489) | (661) |
Net Carrying Amount | $ 83,111 | 839 |
Professional service agreement | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 3,100 | |
Accumulated Amortization | (2,359) | |
Net Carrying Amount | $ 741 |
GOODWILL, INTERNAL-USE SOFTWA_6
GOODWILL, INTERNAL-USE SOFTWARE DEVELOPMENT COSTS, NET, AND INTANGIBLE ASSETS, NET - Amortization Expense for Internal-Use Software Development Costs and Intangible Assets (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Amortization expense for internal-use software development | $ 355 | $ 1,145 | $ 1,300 | $ 4,045 | $ 3,545 |
Amortization expense for intangible assets | $ 629 | $ 32,023 | $ 2,086 | $ 85,563 | $ 6,472 |
GOODWILL, INTERNAL-USE SOFTWA_7
GOODWILL, INTERNAL-USE SOFTWARE DEVELOPMENT COSTS, NET, AND INTANGIBLE ASSETS, NET - Schedule of Future Amortization Expense (Details) - Intangible Assets and Internal Use Software Development Costs $ in Thousands | Sep. 30, 2022 USD ($) |
Finite-Lived Intangible Assets [Line Items] | |
Remainder of 2022 | $ 33,698 |
2023 | 109,983 |
2024 | 103,467 |
2025 | 91,807 |
2026 | 40,405 |
Thereafter | 139,257 |
Total amortization expense | $ 518,617 |
LEASES - Components of Lease Ex
LEASES - Components of Lease Expense (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2022 | |
Leases [Abstract] | |||
Operating lease expense | $ 142 | $ 404 | $ 1,386 |
Short-term lease expense | 12 | 216 | 611 |
Variable lease expense | 0 | 111 | 235 |
Total lease expense | $ 154 | $ 731 | $ 2,232 |
LEASES - Schedule of Supplement
LEASES - Schedule of Supplemental Balance Sheet Information (Details) | Sep. 30, 2022 |
Leases [Abstract] | |
Weighted average remaining lease terms (in years): | 7 years 1 month 6 days |
Weighted average discount rate | 5.20% |
LEASES - Schedule of Maturities
LEASES - Schedule of Maturities of Facility Lease Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jan. 01, 2022 |
Operating leases: | ||
Remainder of 2022 | $ 617 | |
2023 | 2,508 | |
2024 | 2,579 | |
2025 | 2,235 | |
2026 | 268 | |
Thereafter | 1,489 | |
Total lease payments | 9,696 | |
Less: Imputed interest | (1,188) | |
Present value of operating lease liabilities | $ 8,508 | $ 7,987 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2021 | Sep. 30, 2021 | |
Leases [Abstract] | ||
Rent expense | $ 581 | $ 1,643 |
LEASES - Expected Future Operat
LEASES - Expected Future Operating Lease (Details) $ in Thousands | Dec. 31, 2021 USD ($) |
Leases [Abstract] | |
2022 | $ 1,957 |
2023 | 1,950 |
2024 | 1,950 |
2025 | $ 1,663 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Payables and Accruals [Line Items] | ||
Payable to employees | $ 13,142 | $ 10,091 |
Accrued marketing expenses | 42,315 | 144 |
Accrued professional fees | 1,728 | 6,242 |
VAT tax liability | 4,718 | 0 |
Accrued tax liability | 1,176 | 361 |
Holdback liability | 6,819 | 0 |
Accrued revenue share | 10,973 | 0 |
Contingent consideration | 0 | 1,682 |
Former CEO profit interest | 0 | 11,132 |
Other liabilities | 9,394 | 1,632 |
Accrued expenses and other current liabilities | $ 90,265 | 31,284 |
Accounts Payable | ||
Payables and Accruals [Line Items] | ||
Accrued revenue share | $ 9,475 |
ACCRUED EXPENSES AND OTHER CU_4
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES - Narrative (Details) - USD ($) | Apr. 10, 2019 | Dec. 31, 2021 | Feb. 28, 2021 |
Executive Compensation | |||
Other Commitments [Line Items] | |||
Percentage of profit cash settled | 5% | ||
Participation threshold | $ 300,000,000 | ||
Loss contingency, vesting term | 4 years | ||
Loss contingency accrual | $ 11,132,000 | ||
Separation Agreement | |||
Other Commitments [Line Items] | |||
Percentage of profit cash settled | 5% | ||
Percentage of profit cash settled, deemed vested | 3.75% | ||
Percentage of profit cash settled, forfeited | 1.25% | ||
Percentage of profit cash settled, increase | 2.50% |
DEFERRED REVENUE (Details)
DEFERRED REVENUE (Details) - USD ($) $ in Thousands | 1 Months Ended | 8 Months Ended | 12 Months Ended |
Jan. 26, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Contract With Customer, Liability [Roll Forward] | |||
Beginning balance | $ 1,971 | $ 2,282 | $ 1,889 |
Additions | 620 | 187,383 | 5,116 |
Revenue recognized | (309) | (119,094) | (5,034) |
Ending balance | $ 2,282 | 68,289 | $ 1,971 |
Additional amounts deferred attributable to the acquisitions | $ 61,156 |
DEFERRED REVENUE - Narrative (D
DEFERRED REVENUE - Narrative (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jan. 27, 2022 | Jan. 26, 2022 | Jan. 01, 2022 | Dec. 31, 2021 | Jan. 01, 2021 | Dec. 31, 2020 |
Revenue Recognition and Deferred Revenue [Abstract] | |||||||
Contract with customer, liability | $ 68,289 | $ 0 | $ 2,282 | $ 1,971 | $ 1,889 | ||
Deferred revenue | $ 309 | $ 1,889 |
INCOME TAXES - Income Tax (Bene
INCOME TAXES - Income Tax (Benefit) Provision and the Effective Income Tax Rate (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | |||||
Income tax (benefit) provision | $ (629) | $ (19,228) | $ 475 | $ (32,480) | $ 703 |
Effective tax rate | 2% | 34% | 4% | 23% | 2% |
INCOME TAXES - Narrative (Detai
INCOME TAXES - Narrative (Details) - USD ($) shares in Thousands, $ in Thousands | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Jan. 27, 2022 | |
Income Tax Examination [Line Items] | |||
Unrecognized tax benefits | $ 99 | ||
Tax effect on contribution | $ 6,112 | ||
S1 Holdco, LLC | |||
Income Tax Examination [Line Items] | |||
Percentage of aggregate tax benefit expected to realized | 85% | 85% | |
Percent of expected tax benefit | 15% | ||
Number of shares issued (in shares) | 330 | ||
Additional liability amount | $ 1,041,000 | ||
TRA payment including interest amount | 0 | $ 0 | |
TRA payments due | $ 1,041,000 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Service Agreements (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2021 |
Commitments and Contingencies Disclosure [Abstract] | ||
Obligated to pay, year one | $ 8,000 | |
Obligated to pay, year two | $ 8,000 | |
Remaining contractual obligated to be pay | $ 5,933 |
DEBT, NET - Additional Informat
DEBT, NET - Additional Information (Details) - USD ($) | 9 Months Ended | 12 Months Ended | 42 Months Ended | ||||
Jan. 27, 2022 | Dec. 31, 2026 | Sep. 30, 2022 | Dec. 31, 2021 | Dec. 31, 2025 | Oct. 31, 2022 | Mar. 31, 2022 | |
Debt Instrument [Line Items] | |||||||
Long-term debt | $ 439,000,000 | ||||||
Percentage of excess free cash flow payment | 50% | ||||||
Loan fees | $ 1,129,000 | ||||||
London Interbank Offered Rate (LIBOR) | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument, basis spread on variable rate | 7% | ||||||
LIBOR Floor Rate | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument, basis spread on variable rate | 1% | ||||||
Revolving Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Revolving line of credit facility | $ 49,000,000 | ||||||
Term of loan | 5 years | ||||||
Long-term line of credit | $ 50,000,000 | ||||||
Amount drawn | $ 49,000,000 | ||||||
Debt Instrument covenant percentage | 35% | ||||||
Credit agreement, lonversion ratio | 5.40 | ||||||
Revolving Credit Facility | Forecast | |||||||
Debt Instrument [Line Items] | |||||||
Amortization quarterly payment | $ 7,500,000 | $ 5,000,000 | |||||
Revolving Credit Facility | Subsequent Event | |||||||
Debt Instrument [Line Items] | |||||||
Remaining borrowing capacity | $ 1,000,000 | ||||||
Revolving Credit Facility | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument, basis spread on variable rate | 2.50% | ||||||
Revolving Credit Facility | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate Floor | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument, basis spread on variable rate | 0% | ||||||
Line of Credit | Revolving Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Revolving line of credit facility | $ 20,000,000 | ||||||
Outstanding revolving line of credit | 0 | ||||||
Term Loan | Secured Debt | |||||||
Debt Instrument [Line Items] | |||||||
Long-term debt | $ 172,038,000 | 172,038,000 | |||||
Periodic payment | $ 1,750,000 | ||||||
Term of loan | 5 years 6 months | ||||||
Principle amount | $ 400,000,000 | ||||||
Proceeds from term loan | $ 376,000,000 | ||||||
Term Loan and Revolving Facility | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument, basis spread on variable rate | 4.75% |
DEBT, NET - Future Minimum Prin
DEBT, NET - Future Minimum Principal Payments on Long-Term Debt (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Debt Disclosure [Abstract] | |
Remainder for 2022 | $ 5,000 |
2023 | 20,000 |
2024 | 20,000 |
2025 | 20,000 |
2026 | 30,000 |
2027 | 344,000 |
Total future minimum principal payment | 439,000 |
Less: current portion | (20,000) |
Long-term portion | $ 419,000 |
WARRANTS (Details)
WARRANTS (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 8 Months Ended | 9 Months Ended | ||||
Oct. 31, 2022 USD ($) shares | Jan. 26, 2022 USD ($) | Sep. 30, 2022 USD ($) shares | Sep. 30, 2022 USD ($) business_day installment $ / shares shares | Sep. 30, 2021 USD ($) | Aug. 31, 2022 USD ($) | Apr. 20, 2022 shares | |
Derivative [Line Items] | |||||||
Warrants and rights outstanding, term | 5 years | 5 years | |||||
Multiplier used in calculating warrant exercise price | 0.361 | 0.361 | |||||
Number of trading days on which fair market value of shares is reported | business_day | 10 | ||||||
Threshold period for not to transfer, assign or sell any of their shares or warrants after the completion of the initial business combination | 30 days | ||||||
Proceeds from warrant exercises | $ | $ 0 | $ 5,027 | $ 5,027 | $ 0 | |||
2022 Share Repurchase Program | Subsequent Event | |||||||
Derivative [Line Items] | |||||||
Stock repurchased (in shares) | 190,000 | ||||||
Stock repurchased | $ | $ 1,122 | ||||||
Class A Common Stock | 2022 Share Repurchase Program | |||||||
Derivative [Line Items] | |||||||
Stock repurchase, authorized amount | $ | $ 25,000 | ||||||
Private warrants | |||||||
Derivative [Line Items] | |||||||
Warrant outstanding (in shares) | 0 | 0 | |||||
Private warrants | Class A Common Stock | |||||||
Derivative [Line Items] | |||||||
Warrants exercised (in shares) | 3,532,000 | ||||||
Public warrants | |||||||
Derivative [Line Items] | |||||||
Warrant outstanding (in shares) | 16,813,000 | 16,813,000 | |||||
Warrants exercised (in shares) | 437,000 | 437,000 | |||||
Public warrants | 2022 Share Repurchase Program | |||||||
Derivative [Line Items] | |||||||
Stock repurchase, authorized amount | $ | $ 25,000 | ||||||
Redemption of Warrants When the Price per Class A Ordinary Share Equals or Exceeds $18.00 | |||||||
Derivative [Line Items] | |||||||
Stock price trigger for redemption of public warrants (in dollars per share) | $ / shares | $ 18 | ||||||
Redemption price per public warrant (in dollars per share) | $ / shares | $ 0.01 | ||||||
Minimum threshold written notice period for redemption of public warrants | 30 days | ||||||
Threshold trading days for redemption of public warrants | business_day | 20 | ||||||
Threshold consecutive trading days for redemption of public warrants | installment | 30 | ||||||
Redemption period | 30 days | ||||||
Redemption of Warrants When the Price per Class A Ordinary Share Equals or Exceeds $10.00 | |||||||
Derivative [Line Items] | |||||||
Stock price trigger for redemption of public warrants (in dollars per share) | $ / shares | $ 10 | ||||||
Redemption price per public warrant (in dollars per share) | $ / shares | $ 0.10 | ||||||
Minimum threshold written notice period for redemption of public warrants | 30 days |
FAIR VALUE MEASUREMENT - Schedu
FAIR VALUE MEASUREMENT - Schedule of Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Former CEO equity interest | $ 178,170 | $ 0 |
Level 3 | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 1,682 | |
Total | 12,814 | |
Level 3 | Recurring | Former CEO | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Former CEO equity interest | $ 11,132 | |
Public warrants | Level 1 | Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Public warrants | $ 18,158 |
FAIR VALUE MEASUREMENT - Sche_2
FAIR VALUE MEASUREMENT - Schedule of Estimated Fair Value of Liabilities (Details) - USD ($) $ in Thousands | 8 Months Ended | 9 Months Ended |
Sep. 30, 2022 | Sep. 30, 2021 | |
Former CEO Equity Profits Interests | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning balance | $ 11,132 | $ 4,236 |
Settlements | 0 | |
Change in fair value | 4,238 | |
Ending balance | 8,474 | |
Contingent consideration | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning balance | 1,682 | 8,240 |
Settlements | (1,715) | (6,715) |
Additions | 28 | |
Change in fair value | 5 | 94 |
Ending balance | 0 | $ 1,619 |
Warrant liability | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Settlements | (22,965) | |
Additions | 0 | |
Change in fair value | 14,111 | |
Ending balance | $ 18,158 |
NET INCOME (LOSS) PER SHARE - B
NET INCOME (LOSS) PER SHARE - Basic And Diluted Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Earnings Per Share [Abstract] | |||||
Basic net (loss) per share (in dollars per share) | $ (0.35) | $ (1.02) | |||
Diluted net (loss) per share (in dollars per share) | $ (0.35) | $ (1.02) | |||
Numerator: | |||||
Net loss attributable to System1, Inc. | $ (40,460) | $ (31,643) | $ 11,368 | $ (90,832) | $ 29,883 |
Denominator: | |||||
Weighted-average common shares outstanding used in computing basic net loss per share (in shares) | 91,002 | 88,716 | |||
Weighted-average common shares outstanding used in computing diluted net loss per share (in shares) | 91,002 | 88,716 | |||
Basic net income (loss) per unit (in dollars per share) | $ (1.97) | $ 0.55 | $ 1.46 | ||
Diluted net income (loss) per unit (in dollars per share) | $ (1.97) | $ 0.55 | $ 1.46 | ||
Weighted-average membership units outstanding - basic (in shares) | 20,488 | 20,488 | 20,488 | ||
Weighted-average membership units outstanding - diluted (in shares) | 20,488 | 20,488 | 20,488 |
NET INCOME (LOSS) PER SHARE - A
NET INCOME (LOSS) PER SHARE - Additional Information (Details) shares in Millions | 8 Months Ended |
Sep. 30, 2022 shares | |
Public warrants | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Total antidilutive shares (in shares) | 16,813 |
Class C Common Stock | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Total antidilutive shares (in shares) | 21,747 |
SEGMENT REPORTING - Narrative (
SEGMENT REPORTING - Narrative (Details) | 9 Months Ended |
Sep. 30, 2022 segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 4 |
Combined number of segments | 1 |
Reportable segments | 3 |
SEGMENT REPORTING - Schedule of
SEGMENT REPORTING - Schedule of Segment Reporting Information (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Segment Reporting Information [Line Items] | |||||
Total | $ 52,712 | $ 201,176 | $ 171,446 | $ 587,081 | $ 488,586 |
Adjusted gross margin | 12,231 | 72,873 | 45,042 | 205,054 | 131,640 |
Other cost of revenues | 1,279 | 9,378 | 2,481 | 28,343 | 8,891 |
Salaries, commissions, and benefits | 35,175 | 55,862 | 15,139 | 144,876 | 48,032 |
Selling, general, and administrative | 14,817 | 16,520 | 7,936 | 47,668 | 21,163 |
Depreciation and amortization | 1,000 | 33,420 | 3,459 | 90,128 | 10,260 |
Interest expense, net | 1,049 | 10,011 | 4,184 | 22,111 | 12,708 |
Change in fair value of warrant liabilities | 0 | 4,489 | 0 | 14,111 | 0 |
Income (loss) before income tax | (41,089) | (56,807) | 11,843 | (142,183) | 30,586 |
Owned and Operated | |||||
Segment Reporting Information [Line Items] | |||||
Total | 49,791 | 146,880 | 162,606 | 440,844 | 462,848 |
Adjusted gross margin | 9,310 | 40,540 | 36,202 | 115,885 | 105,902 |
Partner Network | |||||
Segment Reporting Information [Line Items] | |||||
Total | 2,921 | 10,015 | 8,840 | 31,314 | 25,738 |
Adjusted gross margin | 2,921 | 10,015 | 8,840 | 31,314 | 25,738 |
Subscription | |||||
Segment Reporting Information [Line Items] | |||||
Total | 0 | 44,281 | 0 | 114,923 | 0 |
Adjusted gross margin | $ 0 | $ 22,318 | $ 0 | $ 57,855 | $ 0 |
SEGMENT REPORTING - Schedule _2
SEGMENT REPORTING - Schedule of Revenues Disaggregated by Geographic Region (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Total | $ 52,712 | $ 201,176 | $ 171,446 | $ 587,081 | $ 488,586 |
United States | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Total | 51,701 | 156,726 | 167,105 | 459,206 | 474,735 |
United Kingdom | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Total | 0 | 44,281 | 107 | 114,924 | 276 |
Other countries | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Total | $ 1,011 | $ 169 | $ 4,234 | $ 12,951 | $ 13,575 |
SEGMENT REPORTING - Schedule _3
SEGMENT REPORTING - Schedule of Property and Equipment, Net and Operating Lease Right-of-use Assets by Geographic Region (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net and operating lease right-of-use assets | $ 11,242 | $ 830 |
Owned and Operated | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net and operating lease right-of-use assets | 10,312 | 830 |
Subscription | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net and operating lease right-of-use assets | $ 930 | $ 0 |
RELATED-PARTY TRANSACTIONS (Det
RELATED-PARTY TRANSACTIONS (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 9 Months Ended | ||||
Aug. 30, 2022 USD ($) installment $ / shares shares | Oct. 16, 2018 USD ($) | Sep. 30, 2022 GBP (£) | Sep. 30, 2022 USD ($) $ / shares | Dec. 31, 2021 USD ($) | |
Related Party Transaction [Line Items] | |||||
Fair market value of stock (in dollars per share) | $ / shares | $ 10 | ||||
SS Protected Limited | Lone Investment Holdings | |||||
Related Party Transaction [Line Items] | |||||
Noncontrolling interest, ownership Percentage | 7.70% | ||||
SS Protected Limited | |||||
Related Party Transaction [Line Items] | |||||
Amounts of transaction | $ 55,000 | ||||
Lone Investment Holdings | |||||
Related Party Transaction [Line Items] | |||||
Due to related parties | 10,500 | ||||
Paysafe | |||||
Related Party Transaction [Line Items] | |||||
Receivable from related parties | $ 1,585 | ||||
Just Develop It Limited | |||||
Related Party Transaction [Line Items] | |||||
Due to related parties | $ 117 | ||||
Monthly payment for desk occupancy | £ | £ 42 | ||||
Proceeds From Sale | Lone Investment Holdings | |||||
Related Party Transaction [Line Items] | |||||
Proceeds from issuance or sale of equity | $ 1,158 | ||||
Extended Loans | Former CEO | Former CEO | |||||
Related Party Transaction [Line Items] | |||||
Due from related parties | $ 1,500 | ||||
Waiver | Just Develop It Limited | |||||
Related Party Transaction [Line Items] | |||||
Cash consideration | $ 40,000 | ||||
Number of quarterly instalments | installment | 4 | ||||
Quarterly payments | $ 10,000 | ||||
Anniversary period | 3 months | ||||
Waiver | Just Develop It Limited | Class A Common Stock | |||||
Related Party Transaction [Line Items] | |||||
Number of shares in waiver agreement (in shares) | shares | 50,000 | ||||
JDIL Lockup | Just Develop It Limited | |||||
Related Party Transaction [Line Items] | |||||
Contract term | 1 year | ||||
Lockup agreement, lockup period | 1 year | ||||
Fair market value of stock (in dollars per share) | $ / shares | $ 11 | ||||
Protected.net Group Ltd | Purchased Interest | SS Protected Limited | |||||
Related Party Transaction [Line Items] | |||||
Ownership percentage | 50.10% |
SHARE-BASED COMPENSATION - Narr
SHARE-BASED COMPENSATION - Narrative (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | ||||||
Aug. 30, 2022 USD ($) | May 10, 2022 shares | Mar. 04, 2022 USD ($) shares | Jan. 31, 2022 shares | Jan. 26, 2022 USD ($) | Sep. 30, 2022 USD ($) $ / shares | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) $ / shares | Sep. 30, 2022 USD ($) d $ / shares | Sep. 30, 2021 USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Share based expense | $ 27,698 | $ 30,583 | $ 68 | $ 79,802 | $ 334 | |||||
Fair market value of stock (in dollars per share) | $ / shares | $ 10 | $ 10 | $ 10 | |||||||
Change in fair value of contingent consideration | (9) | $ 0 | $ 4,363 | |||||||
Recognized fixed amount | $ 2,013 | $ 2,321 | ||||||||
CouponFollow Incentive Plan | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Incentive plan for eligible recipients total | $ 35,000 | |||||||||
Cash EBITDA | $ 10,000 | |||||||||
Threshold trading days | 60 days | |||||||||
CouponFollow Incentive Plan | Tier 1 Target | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Cash EBITDA | $ 10,000 | |||||||||
CouponFollow Incentive Plan | Tier 2 Target | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Cash EBITDA | 7,500 | |||||||||
CouponFollow Incentive Plan | Tier 3 Target | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Cash EBITDA | 7,500 | |||||||||
CouponFollow Incentive Plan | Class A Common Stock | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Incentive plan for eligible recipients total | 35,000 | |||||||||
Cash EBITDA | $ 10,000 | |||||||||
Threshold trading days | 30 days | |||||||||
Change in fair value of contingent consideration | $ 25,000 | |||||||||
Capped shares (in shares) | shares | 4,667,000 | |||||||||
Restricted Stock Units | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Share based expense | $ 27,698 | |||||||||
Amount of cost not yet recognized | 11,177 | $ 11,177 | 11,177 | |||||||
Weighted average period | 1 year | |||||||||
Unrecognized stock-based compensation expense | $ 4,552 | $ 4,552 | $ 4,552 | |||||||
Restricted Stock Units | Award Plan | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Shares authorized (in shares) | shares | 1,900,000 | |||||||||
Additional shares authorized (in shares) | shares | 4,900,000 | |||||||||
RSUs and Restricted Stock Awards (RSAs) | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Share based expense | $ 25,491 | |||||||||
Shares issued (in shares) | shares | 2,900,000 | |||||||||
Fair market value of stock (in dollars per share) | $ / shares | $ 12.50 | $ 12.50 | $ 12.50 | |||||||
20 Trading days | 20 days | |||||||||
30 Trading days | 30 days | |||||||||
2023 Award and 2024 Award | Protected Incentive Plan | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Threshold trading days | 5 days | |||||||||
Threshold consecutive trading days | d | 20 | |||||||||
2023 Award and 2024 Award | Protected Incentive Plan | Class A Common Stock | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Incentive plan for eligible recipients total | $ 100,000 | |||||||||
2023 Award | Protected Incentive Plan | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Cash EBITDA | $ 55,000 | |||||||||
Threshold trading days | 30 days | |||||||||
2023 Award | Protected Incentive Plan | Class A Common Stock | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Incentive plan for eligible recipients total | $ 50,000 | |||||||||
2024 Award | Protected Incentive Plan | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Cash EBITDA | $ 65,000 | |||||||||
Threshold trading days | 30 days | |||||||||
2024 Award | Protected Incentive Plan | Class A Common Stock | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Incentive plan for eligible recipients total | $ 50,000 | $ 50,000 | ||||||||
2023 Award Modification | Protected Incentive Plan | Class A Common Stock | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Incentive plan for eligible recipients total | $ 18,313 | $ 29,266 | ||||||||
Reduced award amount | $ 40,000 |
SHARE-BASED COMPENSATION - Tota
SHARE-BASED COMPENSATION - Total Share-Based Compensation Expense (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Jan. 26, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |||||
Share-based compensation expense | $ 27,698 | $ 30,583 | $ 68 | $ 79,802 | $ 334 |
SHARE-BASED COMPENSATION - Equi
SHARE-BASED COMPENSATION - Equity Awards Valuation Assumptions (Details) | 9 Months Ended |
Sep. 30, 2022 $ / shares | |
Share-based Payment Arrangement [Abstract] | |
Risk-free interest rate | 1.60% |
Expected stock price volatility | 50% |
Cost of equity | 23.60% |
Expected term (years) | 5 years |
Fair Value of Class A common stock (in dollars per share) | $ 10 |
SHARE-BASED COMPENSATION - Perf
SHARE-BASED COMPENSATION - Performance Period (Details) - CouponFollow Incentive Plan $ in Thousands | Mar. 04, 2022 USD ($) |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | $ 10,000 |
Total Maximum Payment per Performance Period | $ 35,000 |
Threshold trading days | 60 days |
Tier 1 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | $ 10,000 |
Tier 2 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 7,500 |
Tier 3 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 7,500 |
Tranche One | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 3,333 |
Total Maximum Payment per Performance Period | 6,666 |
Tranche One | Tier 1 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 3,333 |
Tranche One | Tier 2 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 0 |
Tranche One | Tier 3 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 0 |
Tranche Two | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 3,333 |
Total Maximum Payment per Performance Period | 10,416 |
Tranche Two | Tier 1 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 3,333 |
Tranche Two | Tier 2 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 3,750 |
Tranche Two | Tier 3 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 0 |
Tranche Three | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 3,334 |
Total Maximum Payment per Performance Period | 17,918 |
Tranche Three | Tier 1 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 3,334 |
Tranche Three | Tier 2 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | 3,750 |
Tranche Three | Tier 3 Target | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Cash EBITDA | $ 7,500 |
Uncategorized Items - sst-20220
Label | Element | Value |
Warrant Liability [Member] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability Value | us-gaap_FairValueMeasurementWithUnobservableInputsReconciliationsRecurringBasisLiabilityValue | $ (27,012,000) |
Contingent Consideration [Member] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability Value | us-gaap_FairValueMeasurementWithUnobservableInputsReconciliationsRecurringBasisLiabilityValue | (1,682,000) |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability Value | us-gaap_FairValueMeasurementWithUnobservableInputsReconciliationsRecurringBasisLiabilityValue | (1,682,000) |
Former CEO Equity Interest [Member] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability Value | us-gaap_FairValueMeasurementWithUnobservableInputsReconciliationsRecurringBasisLiabilityValue | $ (11,132,000) |