SST - Earnings call transcript Q1 2024

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Operator

Hello. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the System1 Q1 earnings call. [Operator Instructions] I would now like to turn the conference over to Kyle Ostgaard, Vice President of Finance.

You may begin.

Kyle Ostgaard

by, for to SystemX. standing XXXX First for Call Conference you and the welcome Quarter Thank

statements statements and Officer, Joining has and XX-K that this to Investor and from prospects. report Co-Founder Blend; factors risk well current Relations this financial our unknown in risks today conference results Chief me cause forward-looking call, to available in in this to after are and includes discuss March ended. I'd call are uncertainty will economy website could XX markets the remind the those CEO, and generally. and filed during call, on We recording long-term to shortly strategy, those be Kidambi. to also future performance A our take operating Tridivesh results our relating SystemX's as be overall business our global of compliance Form during particularly Financial included subject fiscal opportunity our as future we Michael projected the statements may known and unpredictability our annual differ uncertainties make like actual statements. call regarding this year making of certain XXXX our to described that the results you regulatory on will growth business, financial and This implied materially on or matters. These for in guidance, the the or business, and

beliefs as on any update forward-looking make and as law. this hereof, forward-looking events. obligation forward-looking we All on by assumptions on the disclaims You statements, future any SystemX date should based statements are not statements except to as of our of required predictions and rely call that management's

of a and our estimates comparable financial gross Our discussion as this our SystemX's financial considered regarding provided our Information Historical to performance reconciliation call most isolation exclude GAAP in and non-GAAP call measures addition include Total turn including to including non-GAAP future results measures and Chief adjusted measures, not for financial from Co-Founder today our substitute like or a results. from Investor Blend. should found Relations GAAP Executive EBITDA and now measures profit. These be in non-GAAP Security. adjusted will may Officer, conference be over the on to non-GAAP our financial would website. I to Michael measures, historical during

Michael Blend

Good Kyle. and everyone, for on QX afternoon, us our Thanks, thanks SystemX earnings joining call.

expected ended was QX. an $XX our million that was earlier progressed. on typical started a Owned into profit. right & get QX quarterly a our in increase. able to financial see approximately revenue of in improved as approximately and was Spread of weak to with Operated guidance. was continued and Operated remain sessions, in year-over-year $X.XX somewhat Let's SystemX Owned representing highlight, note. happy per & million was revenue Owned The year-over-year but pattern million, billion from was SystemX spend. We international a delivered and revenue deliver exceeded last revenue I'm by generated Adjusted of the revenue. a off and choppy, announce advertising to results $XXX,XXX. a down up overall from XXXX. Overall, which This EBITDA & International $XX revenue over quarter. XX% session. $XX X.X XX% bit advertising down This marketplace January was quarter-over-quarter XX% sequential gross we a XX% performance. This of match of in decline was positive quarter what XX% Operated to XX% increase driven XX% QX

the moved largest reminder, to minimal from Google pricing team pace Their typical, around volatility Google which, source. We introduced quarter. notice rapid during as our a features very significant and with was us. volatility our is at driven the a QX new product revenue Our relationship, for a advanced Google more SystemX. sell-side closely rapid-fire by improvements than saw is SystemX. In term, to stack, increased short good Google volatility changes almost with this tech bit Google term, their partner overall We always Longer revenues quite features Google to work ecosystem. lead and for product thing a of into however, in the the integrate our the caused new primarily

hope of by $XX couple well. same with in pricing, perform metrics business we Google. new joining Google and all and was But rollout expected, we expect was solid were and million. pricing have $XX along our compared at XX% on XX driven Moreover, to begun partners through existing RAMP business. The least our have At previously, advertising and the I there's scaled from gross favorable getting evidencing Revenue is the scaled constant RAMP. and accelerate as as things average for XXX by early trends due execution QX. choppiness in we up traffic growth typical through of per volatility to QX due $XX,XXX with the these that, us RPS they're believe partners QX the were million, from seasonality our 'XX, sequentially network. year-over-year our Fortunately, scaled as monitoring of Operated business partner growth in market is as as function to weeks marketplace narrowing continues to partners rate. mentioned partners consistent, and particularly QX in of our our more revenue a as be of O&O in shared our scale as this are X% active product QX, to partners sequentially continued platform, to more as generating & begin the stay their of in combination partner down consider well a they X% of stabilize is The were and and number year-over-year, of familiar platform. Key revenue XX partners with quality. We attractiveness Owned which Network impacted we of sessions. This strong, platform with that marketing-driven the X% a XXX% spreads notwithstanding the the last weeks when QX marketplace include: continued scaled business, more end the QX partner 'XX, lines when Remember, a to the Network partners growth improve, marketplace. our of sell-side of representing number If using platform traffic headwinds a what that partners year-over-year our of X X% well Partner was It evaluation join quarter-over-quarter, up decreased business. seasonality. sessions RPS and RAMP to we billion, quarter the over increased total XX% benefit. Partner increased of our profit by but partners; us. partners Partner our XX% to Network as sequentially Sessions the partner of to and had will XX% frame during headwinds revenue faced Network per total declined of time namely our grew in Partner increase our

good had businesses. fronts. to quarter Moving several organic on a They our

by hard changes continue improve to the these increase we experience CouponFollow and rankings in began traffic customer primarily through been the favorable March that Google the very hope on a in Search were First, improve. driven would and Google significant sites saw QX. our of should working MapQuest very in algorithms. We've increases These organic in --

Fortunately, paying drives that with corresponding our off, increased increases efforts revenue. have begun traffic in directly

dividends the paying that saw partnerships the as also we begin with business progresses. key We CouponFollow and launch expect several to properties of development our Startpage year

forward, few we focused key a Going are in areas.

RAMP who our primarily our AI to First, sell-side has buy-side and for use in us to to we up are partners to monetization. our open continuing buy-side ability materially our currently we improved platform. invest plan capabilities, scale

focusing Second, on-site launching keep our We'll new and additional and distribution experiences. be on apps organic be properties partnerships. will we'll integrating improved their

to rolling the to subscription planning start as more internally-developed product a RAMP in AI-driven again business our enhancements and pleased digital with been the have subscription exploring rational. Overall, are bit on we stabilize expanding on M&A execution especially by I'm focused get we started respect pricing market finally, markets And QX, back to with very to products. our Third, has automation. out more

ever. shipping than and are executing We faster we with are focus products

performance, back am in Our back an President and have much I'm execution Chuck driven capacity COO. co-founded as and capacity. official into show in SystemX, our of our to also last up SystemX is him are increasingly happy moving was year, and growth I the we mode. I He CEO. and confident happy our starting Chuck official Chuck an have in our to to Ursini has in and rejoin I'm execution original

long well with Management haul, shares. our much I mention of our hand is Tridi investors net quarterly in this away, want for we in Take every the our ride. I'll highly to management SystemX worth discuss for Tridi. We're who detail welcome has it shareholders. along longer-term to the aligned quarter, come now as and QX in off SystemX as our As guidance. to results things more

Tridivesh Kidambi

Thanks, Michael.

And the guidance X As range for above gross not Michael and results just remain bullish in quarter, for delivered early the but adjusted end were in challenges March profit EBITDA. expectations. above quarter, QX, in first that especially also there came we the the we mentioned, the given but market-related months of high above revenue, of

$X quarter. advertising haven't the QX gross continue to to year. And gross typically profit saw we quarter in demand in yet year, through our versus to year-over-year starting last in QX a contributed to a to of as first XXXX discuss a seasonally of Also, continuing QX. QX first X of I of and strong of comparisons results, million I market challenge last & quarters in As of $X half Operated business want in QX as XXXX advertising we highlight declines million through profit expect SEM levels macro still that compared Owned decline we of continued a sequential due approximately the rebounded last the the be

$XX.X Operated was was the that $XX.X provided Now Owned million, by Operated sequentially. Operated per approximately guidance March. good operating was to top end revenue our a down our that representing & QX down less sequentially was XX% slightly to was XX% agency to revenue $X.XX, year-over-year sequentially, revenue $X.XX. of advertising for to revenue a guidance million million, above was of session advertising session That and X% $XXX,XXX up and a both $XX.X and Owned XX%. and profit cost XX% gross and spend advertising & X% year-over-year $X.X sequential XX%. Network respectively, $XX XX% Adjusted decline was representing year-over-year the million, above end in our sequential $X.XX on XX% segment less versus decline to decline advertising $XX.X million, the of revenue year-over-year million. declined high spread decline results. down Revenue range we $X.XX prior $XX.X revenue down were to XX% sequentially per the & quarter. down with million. Network and Owned for of QX fees

was XX% network year-over-year. Adjusted impacting advertising was importantly, X% of are processed in the per by business, expenses, revenue sequentially X.XX per $XX.X XX% billion, and year-over-year. session $X.XX total add-backs, the up million, session. sessions On most quarter which were net down recent RAMP EBITDA operating Most

million. reminder, by we costs. driven OpEx be $X.X QX QX balance $XXX came in the versus year, ended of last on sheet with a expect As end to cash a unrestricted term respect was audit our million. With we and FY quarter high by the range liquidity, a for watermark above Adjusted $X.X $XXX,XXX million million EBITDA of balance 'XX the $XX.X guidance which of loan high to

leverage all approximately of the ample delever including structure. X.XXx. liquidity, remain continuing continue and our We remain shareholders our equity the with business, was I at want call to our quarter we comfortable opportunistic on million medium-term from while availability to value respect my of reiterate that cushion maximizing provide remaining repurchases. current focused end for will and our earnings needs. We on revolver, liquidity to our comments short- capital be focused $XX on for highly debt on net Our last to

and will per XX. And success. we of $X.X drive million example, have execution additional record comments, $XXX,XXX we growth to term Most For execution investment continue where a for M&A, cash we on core importantly, to organic business. an of advertising continue to in explore accretive we'll Michael's of April extinguished our track debt prioritize and

we quite market first environment stability uncertainty recently operate, in in there's have several which the through about more delaying cookies. the we still news weeks of online evidenced the by Google QX, Although the recent of a bit advertising the of deprecation as in seen

growth say of this than So EBITDA revenue, that in second we to deliver and again, for be adjusted in providing year XXXX. other expect we to half will the full year-over-year guidance XXXX profit adjusted not at time gross

decline in an million, between to $X remain million the QX estimate long-term midpoint. to between estimating X% in QX adjusted representing adjusted this remain and we ability against We're and to at $XX both gross about midpoint. We extremely million, $X bullish $XX decline the revenue million a are estimating come EBITDA midpoint, year-over-year advertising million, at market between and to slightly $XX the near- million profit the XX% down We come and year $XX you. and representing come in execute digital stabilizing and cautiously year-over-year our about at opportunities. Thank optimistic

Kyle Ostgaard

Tridi. you, Thank

We line the going are now for open to questions. some

Operator

Dan from Your the of first Company. the line comes Instructions] question with [Operator Kurnos Benchmark

Daniel Kurnos

just spread just of are the maintain confines guys out there's of had about, guys. year, probably deprecation thinking ban looking year, pushing of as passed bunch around right level. Maybe, guess, Sandbox the to Great. house. Privacy of in a what to a consistent to of Google of until we'll I kind at just go think other you're talked Good ton a Wild changes in being through We've through partners the with of volatile start this we things, TikTok issues a your cookie Obviously, right that. And and Google seems help start also environment of now? Tridi about the It you like next West sort bunch period. how of kind kind high kind able making us the now. Can how

Michael Blend

for Thanks, thanks to Dan, joining. and hear Good from you. Yes.

advertising to away. highly as that the goes us. contextual So related pretty tailwind to effective to think a for deprecation, of of is bit happen be be of confident, some cookie to advertising we cookie-based going specifically when cookies that's going a more deprecated, actually going third-party What's is we're kind are

We cookie about confident And We're, we're Everything highly form into so rather of we're up some cookie been specifically, is TikTok course We that on to us. on the do a that fact, effective at Google still little of the we exposure our exposure, kind from ended all be international. for don't pushing have deprecation. they're reversing out. disappointed XXXX. there. though, It's about hearing they not bit concerned in of Most deprecation. TikTok, delay much that talking advertise pretty their going that's remain than is to network. coming

stability we starting the market, particularly always We're like their growth now the that's seen us. -- So anything to of you've the and see problems don't kind half, to people in advertising to we back say, in continue advertise people see, international looks stable. there. I mean, be the don't would U.S. able alarming really of reporting relatively see QXs, macro we're expect to via to that will the kind on the domestic so overall the in from TikTok call level, we're to market, the we reluctant starting this a right call but any really overall, I and anticipate things don't

Daniel Kurnos

since helpful. international, coming. you That's you like feel this ask it. brought I coming, like and of it's up really Michael, sort call it's I And every Got

it especially as in O&O here. curious QX, of set flagged you're kind highlight, in seeing sort and You just of further opportunity what from a

Michael Blend

I to but under-indexed. mean talk remain starting kind tick up. the we is about can definitely of International specifically, sure, numbers you

we where of are kind there, to talk about want You Tridi?

Tridivesh Kidambi

a XX% the percentage we Operated QX, was Yes, that in from I to mentioned of think up & XX% close prepared revenue international in remarks in Owned as our QX. XX%,

around job efforts, we're for XX%. on in think again, that a should I where which getting think worldwide be is so to good against we and basis, marching our a closer doing And internal

think we making there And good so progress overall. we're

Michael Blend

and the in in bit out at of under-indexed pace in had a a has regulation -- varying privacy-related the things, they're We're rolling EU, particular, the EU, kind privacy-related EU. rapid pretty

& our Owned was is Network EU. EU, also in our but the well So in Operated under-indexed Partner the as under-indexed

opportunity lot of a So we see there.

South kind the not say and share would be I our the going is to where money well. think although in there's pretty continue U.K. real there, be EU, of money internationally. is is. overall opportunity The But growing we'll to we real -- doing Asia. we're international Asia, really America, that's going

Daniel Kurnos

can or giving had it there internal plenty us with and developments be you anything year? And away that how else to additive before. Without to doing the certainly on your is balance relates of share and the you the CouponFollow the things of you're map, to as commentary the subscription Michael, road you sure hear now either with about Startpage have internally-developed interesting given I'm history. some might products, experience

that you're get TAM how as So thinking attacking on just love about to color some well.

Michael Blend

answer kind think, I'll Dan. I of Yes. those sequentially,

mentioned in algorithm started in March, from the on updates, CouponFollow QX had their Google we that and update. of core they kind -- rolled algorithm thing specifically, we side one one and So benefited MapQuest out of

achieved lot Google the So requires in MapQuest and CouponFollow some basically, of work. both hard better rankings. Doing positioning, that a

You some months the and off and that to takes the XX pay Google for customer improving spend experience you time X it time on spend the long in sites, can rankings. your customer on to experience, a

we're that so of in So the pleased to really benefit got out see rolled And to out benefit. in and see that some March, March. us we roll and

we that the I the continuing rest through March. cases, accrue because to saw in benefit at it's some in continue remained year, rankings. think in the level of we'll really And improve seeing we're that that

side. making going but together progress we we're apps MapQuest, good interesting think really right Startpage on some ready been putting been the and in are to not be to then related the pretty now, have some CouponFollow -- both have We announce on making anything we what

back we're going likely We business. or of some we both of -- still to for build reminder, via but advertising operating, also advertising Dan, of how how we the do stack, slippage QX We X X are in Dan, a be sold getting our out, on large kind to also that our lot we and going be QX. a -- subscription as business subscription monetizing via smaller in do of have expertise we've last into them. could most see those are them. And market and rolling anticipate a both mix, year. subscription we a in-house those into we tech typical getting to intend so to business And And just think got subscription products those

we're across additional So that expertise to products. leverage going

Operator

comes Maxim Group. Thomas Your the of Forte from line with next question

Thomas Forte

Great.

first congrats quarter. So Michael and Tridi, off, the on

You hear. business, to is follow-up. sound very optimistic your encouraging on one which question One and

today. So now then I about competency, think connecting discretionary Michael, mirror efforts if the intent. The environment additional with core those it's challenges, right you're is so the environment, I'm or and consumer and ramped is your when consumer pretty to focused challenging, your travel categories in some navigating how advertisers you've wondering spending where consumers spending perhaps

Michael Blend

Yes, that on mean, moving several as of demand Tom. quarters, or down, kind consumer talked we've I generally over the buy-side. is is so does affects pricing up about as what

is our the the chasing change because really to we're of able talk consumers the the around, that to to because we looking movement you are pricing are across exposure it, kind economy really that -- about of seeing as we entire some have effectively effects for. do we -- verticals verticals economy I in, demand. What we're kind we can So of shifting seen we have while see follow consumer is

a is that and the stayed what So the really been overall health in long for matches category, pretty U.S. health steady economy. time, seeing we've probably

like That's the spend, automotive a Interestingly, seeing we're starting of that. where bit. in which a see to XX% consistency places we're pick around to the we're just category, advertising. of in is XX% something overall So little advertiser up lot health

up. seeing start the within finance, going seeing dealerships for is scale interest And so on we're to flip us. of side, any the to areas to space. But pretty vertical rates is some and a We're a up and the mortgage, we're particularly more well. And in again, as are the like automotive on get spending as come Mortgage, money be for It's very which going focused good now that that to finance obviously, be such refinancing or back picking us. used on higher going related finance big of be areas right completely broad to dried category. certain then difficult up in

kind getting higher So things a starting money off to where to of of things interest ability interest make up Those some accounts. perk banking, consumers the seeing rate pop of their lot to higher related up. savings rates, are we're to

the we're general, of just you that not to So of we decline. on I'd kind we're not we see some kind to to not say were definitely call weakness. starting say I to the the not relative early XXXX. weak feeling seeing call return in haven't we're a consumer side. we're we're stability -- normal, while, And pointed again, would -- in, a ready consumer say seeing would it, I way

Thomas Forte

but hoping then And you that was level Great. giving full I a not the you're outlook, know I year following. just high could

that So year, there'll being has challenges? presented that, expectation an a How going election and of be navigated a digital situation you historically, advertising with opportunities large that that historically? have this portion toward presidential

Michael Blend

seen haven't We like the cycle we've guess been either this at that so presidential past, be fourth third through will SystemX. or I in -- the

I of video activity really, changes heavily of as fair suspect want side, last We anything, you'll the kind hit play kind haven't of tailwinds Tridi, the not a don't of so projecting certainly or for see around. lot be the follow-up of we amount. We will the of you elections marketplaces the come burst to XXXX? we're -- headwinds on kind related where in looking relating the months any a from we're that of on market that couple to in what a year. that like seen in play video

Tridivesh Kidambi

mean seeing, for we half kind back not thinking our of we markets. but about do some around of our stability growth We point, XXXX. guide half just in do second the we to expect see uncertainty highlighted think, current that year, Michael versus I given of trends, full we're to are to that the chose obviously the ad I think the Yes. how

bit But be kind we growth our QX, little You see a X key delivering think to that start and QX, specifically QX of guidance, the financial to around all I of guiding in across EBITDA. expect metrics. to

Michael Blend

of we the We're declines kind some past. had burn going Yes. off in to

Tridi forward the to And think cookie deprecation, would historically think pricing towards growth going through we've when certainly change the have effect an into that we from the say up, just testing would and we I looking programmatic so move of end said, display a overall, as similar I iOS. in that had say, comes Safari, mode. year, to expect, pretty for back display that the would of looking market. also and a the to seen would in substantial us about, digital bigger say bigger I the for kind Tom, also effects follow and to market. We that's came substantial in pretty back do When

see comes when be So winners a cookie -- if towards bigger related be what's to We've overall and we winner. losers there's than future the I would say, the -- indication you're to lever to presidential be election. would would looking we deprecation ad for us, be the that would be least, in a Chrome going going the much market, happen to and anything at going suspect that, that some will about. every that's But --

Operator

Your next Kurnos. follow-up Dan is from question a

Daniel Kurnos

sneak in, Michael. I thought one I'd more just

from a sense get Just side, the just on to RAMP you. and want scaling buy I

in of it things. about You a few the but kind past, talked

formats, the invest thinking moving open that about the theoretically other self-service, of additional feels up or you to things, how opportunity, to towards theory. video it it you're can with a response, have you it's on side. Obviously, much help but a that's last degree, on and opportunity also in like, the touched how in Just whether lot

how might kind curious So opportunity for just the I'm what at P&L. mean of that it you're looking and

Michael Blend

sure. Yes,

-- would a So we we launch the AI. of with break I say caught generative caught kind of

advertising you about it's a -- across a advertising for all us somebody marketplace. cards in our about, think up talk of formats, that we're almost many both the and units do unique to an your with SystemX, One on at to straightforward advertiser kind typical contrast "get going someone going copy advertising for of different different ad what your we you advertising pretty advertiser that's to credit come like what like. permutations When advertising, mortgages. And better or what of we're it's advertising your us, so video ad There's do card." and credit going for only so And in be with When if so look -- a Capital hundreds I can have you verticals. to you're

so advertising tones formats all with better. up an different colors come to all a permutations, automated across quickly different to hand changes advertisement permutation pull consumers of recreate the It's advertising actually way, expanding ad in XXX the if you've all quite and got you're And to those different and the different verticals, of formats. XX,XXX XXX by sudden, pretty into different you difficult make can

along automate And those to so allowed of a and us lot AI came processes.

And to the machine bid we're that, so addition learning using handle AI pricing. in to

but a different of complex from to the you've all gets any all the advertising to not bunch so everywhere money, you ad advertise, about spend only entire we think pretty to TikTok can the sudden, a of system all in you the different pretty when permutations, places quickly. So channels. Multiply Google and Facebook verticals place that times got number we're of

got ability quickly we've AI our we scale So more are our a into we very automated manner the incorporated now platform. have advertising as much to where is in

the point. advertisers doing the we're one biggest of when world we what so -- this at And that, in

And really our before. And done is it's to we want our to doing haven't people so what be to using buy-side people think use platform, going that give the opening have which the forward of going develop in we we're up dovetail on advantage those ourselves. engineering capabilities And going capabilities. really partner that average we've they go with the ours, marketplace a an the built XXX-person don't can to all you about if they buy-side platform think capabilities team because really these to

might from Our employees. X anywhere to XX average be partner

& into RAMP Owned Operated think the that buy-side of a get business opening have by scale, think more the scale, it's turn that, to sticky. lot we and not the seeing to we And and offering is so we're we're to DSP-type the going software-type to much help going buy-side, that up going think product, our by platform, really we And effects already be a almost more only more we that up of lot people a on product. a ability

Tridivesh Kidambi

And Dan, is this Tridi.

hop to of P&L impact. on the in Just kind

think development of and product and Our base we last said, of about kind against initiatives potentially of our really, OpEx syndicated these out. that think as we specific end-to-end end the it's a that -- and create gets goals. And Michael's use can already we kind year, about internally, you recalibrated at platform how then to point, reorganized and how

And medium-term of I'd the here we say, for, have least so at at to kind team the that out the should be initiatives. XX we months, -- sufficient have load the kind OpEx and next these least of build OpEx that

short us [indiscernible]... on is answer So no increase for the P&L

Michael Blend

of a into Yes. a I don't incremental of this. cost -- lot costs going expect lot

of had allowing is the benefit of same do us to a more is the our lot automation So on people. another that's number we've platform with

Operator

the turn This remarks. closing I the Michael to session. will Blend concludes for call question-and-answer

Michael Blend

for joining everybody, Yes. Well, us thanks, today.

see that But down you feels trajectory at closely, at speaking SystemX few with been us. look like it's heads starting here quarters getting for Thanks much. increasingly the us company, and to choppy been If earnings know and for our very to I'd so at team work you all about of we're hard has all it you paying a been optimistic Thank call. QX really following you've the we joining. off. forward say our we're executing,

Operator

conference. for Thank joining. you today's concludes This

lines. your disconnect now may You

System1 (SST) 9 May 242024 Q1 Earnings call transcript