SST - Earnings call transcript Q3 2024

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Kyle Ostgaard

Thank you for standing by, and welcome to the Third Quarter 2024 Conference Call for System1.

Joining me today to discuss System1's business and financial results are our Co-Founder and Chief Executive Officer, Michael Blend; and our Chief Financial Officer, Tridivesh Kidambi.

A recording of this conference call will be available on our Investor Relations website shortly after this call has ended. I'd like to take this opportunity to remind you that during the call, we will be making certain forward-looking statements. This includes statements relating to the operating performance of our business, future financial results and guidance, strategy, long-term growth, and overall future prospects.

statements or make matters. also may regarding compliance regulatory We generally. those unknown to uncertainties results These our during risk from described subject particular, and call, to or risks fiscal our the in well factors this materially actual current as our statements for are in uncertainty on business, on and filed and Form our report in known XXXX and those economy March implied in cause the the that global markets included XX-K differ projected could unpredictability annual year XX, as

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

non-GAAP a include financial profit. our in including from comparable this will website. and provided our as results not These today or results. future our Historical measures performance GAAP EBITDA gross addition should non-GAAP discussion financial be Security. considered to Information in isolation substitute financial and non-GAAP and adjusted estimates from measures may of on measures, exclude financial found our measures, Investor measures Our reconciliation call our regarding for GAAP including to during historical be a non-GAAP Total most adjusted Relations

Executive and like now Michael Chief Co-Founder would to I Officer, SystemX's call turn conference to Blend. the over

Michael Blend

million by revenue profit. delivered million continuation of of EBITDA driven marketplace, a us quarter of in were call. our trends a million. respect including Despite positives, to overall These EBITDA. Kyle. with everyone, Thanks, almost high on for came we last strong the the XXXX SystemX QX mixed Good discussed afternoon, delivered earnings quarter. and guidance $XX.X of at SystemX gross many thanks the advertising we end results on Adjusted with exceeding and quarter joining $XX $XX the

continue the products up revenue XX% to perform well operated sequentially owned from quarter. second Our and with

which our As on users, owned their a and they reminder, and SystemX businesses not growth. dollars reliant products are spending marketing for are have organic our operated heavily

Our and competes and Startpage, private Maps our our CouponFollow. products Google that with mapping MapQuest, and owned solution Apple largest search operated are engine,

Our consumers ] they shop. deals website that code [ get great promo to enables while

Now effects in contrast of the products, with see our lines our to to largest the growth choppiness business which partner, these significant in advertising Google. continue is marketing-driven

business Google rest network, partnered we is is area Now search the of doing the translated we tied which growth partner to Google while business to line of underperformance return within tied has Google Google optimistic has said, with, underperformed marketing-driven business. the this go advertising partner that the search I'll their Google's are in overall closely Because our network, businesses. into businesses into XXXX. this our specific at fine, That we later, called choppiness on to are and will

On we side, the our RAMP. from continued we as in continue deeply RAMP platform our into see returns integrate to investment AI technology

and efficiently, X% and having we're engineering continues, We And marketing positive faster ever. product OpEx our campaigns teams with a on side, focus than OpEx impact expense more All able and our faster to create moving new and are our were right. decreasing reducing launch and on sequentially.

up X% down and our into details, million, businesses. owned X% some but year-over-year, from and with starting owned the $XX operated revenue business quarter. Adjusted last was get Let's operated of profit revenue profit and caused year-over-year gross gross million. down declines last decrease million, spend advertising and approximately from XX% quarter. The up $X.X was in by sequential a $XX were of X% Total

it year-over-year and from and trend the decreased $X the up O&O CPS XXX% properties our quarter, last quarter. over billion, making second both on sessions declined, spend advertising X% from third RPS up consecutive Although were rates This towards driven the lower metrics. States monetization declines rates is markets, have U.S. mix as international a lower of shift also the in cost-per-click in well which by these United as in quarter

In XX% I But compared a QX in to XX% new every of decline marketing-driven to XX% off quite and QX. from spread international our QX, this $X.XX greatly quarter and QX, launch The with to of year. a this was we year. XXXX. and RPS CPS pleased in The bit. over revenue enabling in domestic businesses. and was owned our XX,XXX we to scale been launched offset $X.XX increase between or campaign QX in compared marketing QX international operated represented are revenue in ] unfortunately, us XX% by that XX% of or our [ In this able increase am efforts Overall, throughput paying campaigns investments increasing RAMP over launches have

approximately mentioned, As O&O products really perform well generated of XX% XX% I O&O of in profit. our continue total to our and O&O gross and QX, revenue

started website, year year-over-year. that and experienced updates May execute that a users Startpage, user our of private with continues Google engine, than the increase of sites strong technology. code sessions CouponFollow best of code and the organic following XXX% search couponing XX% in promo year-over-year browser well our has extension QX, search CouponFollow more to In doubled. XX% sequential sessions a and to benefited its has to series number grew continued in and promo the a and have algorithm

our recently launching QX. the we rolled we by Android in rollout joins which In out the of our private addition, iOS app version, version completed browser

user recently in growth XXXX. our and than highest mapping usage acquired across So since service the sessions engagement of year-over-year MapQuest, downloads business the and on seen far, Android downloads have MapQuest seen XXX,XXX saw we iOS. And have we with significant and in more we XX%

When acquired life. And brand is XX-year-old add to little perspective Internet, a unusual on from XXXX, Verizon decline. it to and accomplishment. difficult and it this back in highly we should the brand I MapQuest resuscitate a it very in serious was bring to a

out new choppy thought I such by several recent the in products new into volatility about business. we've products as organic as useful significant a amounts life our At been we traffic highest that factors: back this quarters, and the usage side. with get detail injected it of advertisers marketing-driven MapQuest, X only new businesses for the we traffic more to are innovative and sell be record not our app. seeing business level, has Overall, seen private would causes. last receive our driven hedge Because so team side the the monetizing to on into buying O&O buy over marketing-driven MapQuest are us the cost on against our has are Our rolling our give Maps days our

or as our at display like overall in sources X the Google, overall quarters -- as the our relatively rebounds. so, cases, increasing Meta, networks For been costs buy-side advertising market some marketing the and last have stable traffic programmatic and

our Our work integration the of really we and buy launches side, AI into buy-side our campaign on our to to our has scale algorithms become enabled RAMP all I'm increasingly scale us have sophisticated. have done efforts. bidding platform the with pleased

largely the important contrast, out YouTube partner business-related the System a has earnings. sell non-Google-owned specifically Google Meta in see remained and network, side and that at traffic in is do, it's you other the Search ad you has the issues. comprised segment that rest that calls SPN. websites derived advertisers it's from and and the SPN sure specifically show engines our will in generated as search SPN X sending much our look that Google which its is all of And is Google.com I'm very or financial results, much The to those our via climbed. of Now if the been of SPN and issues, Google the Google is like sell-side the flat has I you distinct revenue Google's the large marketing by via understand our Google SPN. marketing almost publishing remember root To participant properties. Google of of business refer to or advertising of many networks SPN revenue to advertising on of purchasing while from network,

pays fluctuations in for to we what SPN Google have issue core is we that related the to traffic seen Our the us large SPN. send

are for there to one efforts These improved been on significant SPN. changes, the Now the reasons is that several conversions advertise policy important but this, who most include making for advertisers efforts improve product has traffic that screening the The ecosystem efforts quality, convert flows has critical improvements. of are network. and significant for the to because through advertise to of the on traffic SPN who health maintaining the Google advertisers

efforts While and makes regularly have ramped ensure traffic changes adjustments past in its quality, considerably year. up the to Google high product pricing

to improve impacts Unfortunately, Google's immediate rolls System with And including been Google overall applauds of quality effect quality, efforts. of out network as SPN. largest the volatility to the the SystemX. improve that and partners, Now Google's all Google one designed working forefront is have updates X product as we at of partners, the the highest-quality

increased, for been has Now as adjust. the challenging keep partners quality cadence of the updates has it the and even SystemX pace like to higher product

fortunately, these increase paid efforts will of Now term. advertisers which which advertising having desired by the more, traffic turn means be will long that to advertisers appear in in increasing of effect quality, ultimately all benefit the rates

We've SystemX As positioned for the to real-time learning and AI rebounds, in is RAMP, we partner traffic well invested believe machine network leveraging quality benefit. including detection. Google Search processes heavily

more trust the a we have are quality experience. sure closely advertisers, and maintaining always worked short, more benefit. that with will its consumers the our user partners maximize to focuses SystemX Google on efforts value addition, we network In In to advertiser make preserving while to

XX% network adjusted sequentially. year-over-year, on sequentially. domestic XX% year-over-year moving profit was billion, was that RPS Partner and same mix sessions business. million X% year-over-year and RPS $XX XXX% X% Partner profit year-over-year lower the Now business, was markets. O&O up gross shift Adjusted to were The network our to up marketing sessions decreased we driven Revenue and bigger lower X% network by saw X% were up $X.X revenues $XX higher million. in decreased declined international and our trends quarter-over-quarter. but sequentially. a and XX% Total gross pricing partner and

to X% Total At they had ramp. revenue when of We scaled second generating QX, from the QX, the at quarter. $XX,XXX versus a we partner partner of partners end per per XXX second are quarter. line scaled be partners. a In with active slightly partners XX decreased on customer average revenue increased in to QX quarter platform least approximately consider

I'm SPN that to quarter. pleased strength rebounds same business, Search network the Similar our marketing Overall, above. marketing on in dynamics therefore, partner is increases, as our Google expect we O&O our follow. partner of subject third really our to Now with I partner network the is and the in steadiness business, will and O&O dependent and like network pricing outlined the performance our growth the

the in executing been and growth expectations, once our Certain parts studies. areas has we remain our of challenged team that are SPN exceeding Our well. positioned well the are business for

are fewer and more well. product we doing on focused engineering Our executing remain teams controlling We're tightly with people, OpEx. and

may quarter. want possibility are very in And interests revisit at highlighted We we call, of guidance would to in my to time. volatility guidance marketplace yours. close light are things remind stability, for to as right yet the to that the the in our see offering group my later with and in that the QX the we comments, largest like aligned we decided In management of improvements moving provide is in direction. aren't shareholder always, in we've but where of I you I SystemX, the section the be, not ongoing If earlier this

you mode, growth off along have in into back excited to quarterly we're gets have discuss for results the our Tridi business now things ride. detail. to more our to I As

Tridi. lot, a Take Thanks it away.

Tridivesh Kidambi

of quarter-over-quarter the very our guidance end Thanks, for third Michael. we we key with high financial came growth X%. financial where of results, Overall, with our million pleased at our and in of year-over-year the EBITDA, growth representing all being highlight of our $XX.X of above adjusted or quarter are metrics, XX%

advertising to down on revenue high sequential sequentially. range QX in but was $XX.X guidance operated August. million, and our was results. increase $XXX,XXX Now the our and provided X% X% revenue end representing decline X% year-over-year, was we Owned that operating up QX $XX.X of revenue a above a of year-over-year million, Revenue X%.

sequentially. owned Our owned gross XX% Network primarily driven revenue, generated and operated million, X% by up $XX of above year-over-year our results sequentially. and million, spend guidance was was and profit $XX.X but XX% products X% was Revenue to revenue up our and $XX.X X% down declined XX% profit down by less of million. year-over-year, advertising gross which Adjusted $XX.X million segment $XXX,XXX. Adjusted X% were businesses, sequentially sequentially. advertising year-over-year the midpoint for operated up

XX% revenue XX% $XX and revenue businesses, year-over-year million, advertising and less $XX.X product less down million, up X% fees Specifically QX operated down and for sequentially. spend our from agency was XX% owned sequentially. Network was

Owned to and $X.XX per down session were respectively. and revenue both and cost $X.XX, session operated per sequentially

network business advertising businesses sessions quarter was in bulwark made choppiness processed recent apparent Most organic billion, year-over-year how general, strong this advertising total most RPS was X% are sequentially. the served our session. On business real importantly, quarter $X.XX up it products RAMP lines as the per the diversity and business, In $X.X to XXX% by paid the asset of the our markets. against of nature of a overall the as the a

to codes significant such our policy sell-side as the private mapping, from resulting us on can updates, which and volatility adjusted and businesses generate While platform product continue then we opportunity provide utilities for product marketing-driven have EBITDA core and to this coupons search promo company. seen our allows and profit volatility RAMP to the sidestep to we continue users gross that our also monetize, and attract

operating of down to operating $X.X and QX, expenses were EBITDA. million $XX.X and add-backs down million $X.X On In quarter-over-quarter expenses year-over-year. net million,

As drive last and year, throughout I have basis to on savings we quarterly in continue the million our $XXX,XXX. cost stated expect our sequential year. future. range same year, $XX.X for working this Adjusted came hard above Adjusted QX reduce to a high have over guidance operating of the million been the structure expense in we end the foreseeable versus to continuously last EBITDA was quarter QX by EBITDA in $X.X

$XXX slight term ability adjusted sequential despite unrestricted debt in with to on loan our quarter growth liquidity, we profit. balance in our generate EBITDA sheet of under balance sequential and an gross adjusted a $XX.X of cash proud respect extremely million decline ended the With million are credit We of of our agreement. to outstanding

quarter Our approximately end leverage was Xx. net at

the it not challenging the current marketplace, this earlier for to in provide have financial offer The quarter accurate an makes market decided to Per strong especially comments, at uncertainty in Michael's time. volatility during seasonally the given the outlook, guidance we conditions QX.

dynamics, should in pricing overall the issuing during However, observe we a the we later may and quarter. a at consider stabilization environment time market guidance

seize are term conditions on that remain ability success. our achieving While these operational we the in in to on remain our financial we focused to long-term demonstrate and confident navigating committed outcomes our short opportunities,

you for Thank joining us today.

Kyle Ostgaard

open We're the line some for Thank now you, to Tridi. going questions.

Maxim from Forte Tom is line the On Group.

Thomas Forte

Great.

on. things explaining did the amazing you a an of Michael, So job lot that going are

grow to So you let's you essentially the What gives that's start have done And basis? with resurrect on what enabled confidence brand? you MapQuest. you it go-forward that can continue to a

Michael Blend

and Tom, thanks joining. Thanks, Yes. for

us apps Verizon mapping took on So providers from to wasn't when X like. We the investing going. over the other or data switched got It just and we so of of ago as It consumer in years people to couple took coming, really well. are we've customers And also will people a God, of over, we nuts and really use. about added brand it decline. more features adding it been a technology. essentially lot tackling the started MapQuest, it bring wasn't through took direct thought was that a When We've it been it. years trying it. It that to must search finding more a we the have to to would the on are technology stack over in move board. features us to. to on lot kind people It's making has and more technology improving called then travel lot it X adding we our all Verizon, customers And more wasn't things blocking to engines that really bolts, keep it. basically took better. places in a adding points but been a lot of here. brand All users We've than descriptions to what over, it mobile we resulted sources need that the you more that interest, of

such addresses are showing is going brand MapQuest up such good typing experience. people and and a in a because So and well-known it's

a new we launched Tom, private mapping forward, just app. Going

now the things gather data, Apple and can of you products things Google that it's a lot you no Maps now and know drive using you're one off. where you MapQuest, want places we're will your like like paying So that -- when going. privacy all in start to Maps unlike subscription to can related to like and out going But rolling

acquired ago, since weeks from few a had ever Verizon. we've we day brand traffic quarter, This highest the our

when better. guess I to is the we which So to buy do just companies, just what products we're summarize, doing always make we

Thomas Forte

and you on does lot did of specific digital with the is explaining focus industry So question you're Google be election guidance it wonderful the withholding us should goods a thing? to and going that lack due of more you what's less on But essentially advertisers the is I is that to a next beneficial the essentially that a ad it candidates? on But itself, behind now a that services you and kind my market. emphasis product. in advertising there sort Then on job visibility of know market, less that help

Michael Blend

Yes.

the the being where specifically side. us should help is on election So over buy

advertising ads on more the when comes that advertiser election-focused there. So pulls advertising of places it's back, look it marketplace. buying like every out normal more kind spend Facebook, competing competition. board, on And will When with just like more a that we're we're

little pricing. we pay so And lower a bit would expect to

day at haven't haven't the or We data last I looked the in seen it. so.

weeks. X for So we'll from pricing I X suspect the burst I little bit tell see kind would a normalize the of to that but you can't last sure, over

would volatility overall X side But things of X up. happen. are why specifically, next to weeks you couple not withholding buy reason to the see will go The in advertising really market. really guidance a where the expect we're specific The is

I that don't Because we expect. volatile, there's holiday on increased our confidence costs what we'll with Google. And related sell network been side. Typically, the we'll my buy that on traffic we're the the offset increase confident remarks, -- people then better burst So partner side on selling advertising should on is not has in cost sell buying search we to as season. XXX% the pretty Google pricing pretty because up happen the have so go activity that we're a we're -- when that see would see to would increased some we'll of side, outlined

looks weeks So because important, were would everything kind the any not good far, be but going we a thought okay, of pretty it so next numbers to had X are idea to be. more they we promise prudent where until

Thomas Forte

All right.

last off then Dan. going it for one then So I'm me, to and hand to

amazing technology. an is RAMP So

last You were intelligence. made today year. curious was early you it if adjustments RAMP any maybe that in I quarter was more or make leveraging last it to artificial than effective

Michael Blend

the the talking improvements a to that pace RAMP past years. of for buzzword companies know have been So lot product making the about I remarkable. It's is AI. year, of really we're pretty X.X been

the cases use As early for really, been AI really been the have that advertising I early the in mentioned, of some -- have space. effective

create editors and We're we're authentic. So over to create able being what with lot have we results looking to able to that content our do. publishing truthful using we content AI, sure a using which is been making the about and it talk better

ability dramatically and couple terms up creative side, click ads to those, ease at the producing people engaging our that being But end magnitude. it's by magnitude of the of going gone an on entertaining, to order think a in of least of side up on orders I has advertising of on produce then will

every continual your since we've And see year the quarter, platform. in next I making dramatic to or over going answer to yes, expect quarter yes, last the we're improvements X, So improvement. question, been

platform is more our much So scalable. more much better, automated, much

in not yet remarks. the numbers outlined our You're in primarily of because seeing reasons the I earlier

Kyle Ostgaard

the Company. Kurnos is next from question The Dan from Benchmark

Daniel Kurnos

can Obviously, hear crazy me. I tonight. hope night guys you

follow over Michael, on up not I going to try, go one ask Tom's of already actually and you've to something here a wanted couple to But my I'm of So questions. best said. hopefully things.

in a, Google change there that you haven't administration, in if you I'm think have might an on yet for tech opinion I mean the kind curious Just know curious and of been I'm what given the the but -- trial, ecosystem. remedies ad

a the I secondarily, think know, there's view And well. change be, consumer end call I then in given lower of reinvigorated administration there might a that the let's recent as it, don't

into so what might ad either couponing that period? And spend for kind and/or of the mean head for holiday we as

Michael Blend

there, few a okay, So questions Dan. in

thanks all, joining. it. of you. Always to First good Appreciate talk for with

I've to knows don't can't on of would don't will hard really going what's consumer spending. could down. to really happen happen what think happen to what up I in the there. potential speculation or So interest speculate -- lot change speak administration. with I happen It's want don't seen rates of But going anybody to kind a to I what know. anything tell. I

expert related could lot as the are not there's Specifically the I well. to area. trials see pretty on potentially, Google the administration lot of to and on I'm But in of the ongoing some less kind change is which effect groups the some a as large an technology that of of been understanding -- antitrust antitrust. that this trials, big a focus going speculation have know my that other on you're against companies antitrust that. in a a broad

to I that to As far behind the as the going scenes. a anybody I understanding don't has don't little what's new was Google. bit know guess I again, Google really antagonistic my it specifically, does. been administration on relates think

get for So of on relief you drop I all plans won't cases there against could be side, know, Google. lot might expect a flip that to the there. even But Google

The I -- little thing to seem does say doesn't administration, a antitrust that is wildly happens pretty the X, the it my on on understanding bad in trial views is a change I that clear, on bit believe would with like curious months. up like ban within area have becomes Google should it's talked think a TikTok here you is effect. one coming that conflicting front, about, more I speculate. to tough the little And at take side. seem see new there's I X So that which administration, for least until the the in what some that I'm it and whether

I a correctly, recall Now that if that's law was passed.

if be But dramatic So to law wildly really see because on We But ton can on have I'll don't of pretty the TikTok ignored. curious business a dramatic our be business. goes what really overall do with the know I not effect don't changes. happens or would the to actually pretty -- in domestically. marketplace, advertising some TikTok on out, a to if TikTok see stays either going you're that

Daniel Kurnos

of mean I it bring seems just know you to guys level, I -- but Yes. like marketplaces. disrupted -- I it in tend higher thrive of just I because sort up kind

abroad. do, that anticipate stuff? TikTok to Michael, gave on always do you but me every continue a we it's you it of And do to very or Do kind And the to it of political question guys or to if And like I you has what extent true, well any spend to a don't -- mean, we are internationally. much get because ask you ready into how how segue just and call, the a having sudden, I'm idea capitalize a I spend recovery vacuum so domestically, all which is kind up frankly, and ecosystem, of you on we good if to kind to there's December just of changes hear we're you post end nobody the disruption?

there so that's the what and And just business. seeing impacting curious you're how

Michael Blend

Yes.

first where absolutely, So there's to thrive. we question, disruption in markets, that's your when

-- and that the if will so And of advertising disruption. -- welcome we spend sure, We'd from of step advantage for in happens. it rest advertiser would advertisers pullback welcome the take pullback

On enough with at the impressed from bespoke need with us, to TikTok working We're working have and with at meetings cases, in side continued some the that point with where for strength all-day there. us, been the internationally great we we quite this we're advertisers on some work they've TikTok been -- that. large team side, them. seeing big team with doing we They've no, technology them, responsive and built we'll product do been

internationally strength there, seeing TikTok. don't we're change So to continued that via and expect I

Tridivesh Kidambi

And bright as Nice Yes. a International Dan, is us well. for to to spot this you. remains Tridi talk again.

remarks, mentioned versus XX% owned So QX his Michael last in XX% or of operated in and XX% year. revenue

at your growth to internationally of kind just again, of versus area us, given point, a So an rates domestic. lower albeit RPSs real for

Michael Blend

Yes. And closely mentioned codes season Yes, is domestic. as CouponFollow see you burst we for shopping to expect promo strength holiday a and I activity pretty think, CouponFollow. of sure, every domestically, year, is our Dan, one do We, would on that couponing. be a see that for we strong going mirrors trends where

Daniel Kurnos

We're and Yes. e-com hearing about year. shift forward pull to a a this

you I'll it guys probably going But P&L. the don't contribute answer would launches think get since and think product new I have that ask you would see I guide, to an out. this So don't QX to point. benefit we'll guys. what I'll to love much leave about probably there. plays they're I guess at how that I we I of guess

and for job good it. luck, QX. good guys, on I all So color the and appreciate Thanks

Michael Blend

Appreciate for with to Always talk joining. good it. you. Thanks

Kyle Ostgaard

to it for going are to back We closing now Blend remarks. turn Michael

Michael Blend

look quarter Thanks, next all for out everybody, with Kyle. investors for Thanks, fulfill had we joining. that Happy Okay. forward the and us, again. for we in we speaking there. Thanks of Thanks a to quarter. our following which could guidance you

System1 (SST) 7 Nov 242024 Q3 Earnings call transcript