10q10k10q10k.net

What changed in System1, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of System1, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+323 added−353 removedSource: 10-K (2025-03-10) vs 10-K (2024-03-15)

Top changes in System1, Inc.'s 2024 10-K

323 paragraphs added · 353 removed · 263 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

57 edited+8 added−5 removed89 unchanged
Biggest changeFollowing the consummation of the Merger, the combined company was organized via an “Up-C” structure, in which substantially all of the assets and business operations of System1 are held by S1 Holdco, and our combined business continues to operate through the domestic and foreign subsidiaries of S1 Holdco.
Biggest changeOn January 26, 2022 ("Closing Date"), we consummated the business combination ("Merger") pursuant to the Business 4 Combination Agreement. Following the consummation of the Merger, the combined company was organized via an "Up-C" structure, in which substantially all of the assets and business operations of System1 are held by S1 Holdco.
We are able to combine this iterative dataset with historical information on ad spend across advertising categories, content and ad-creative automation, which is used to optimize monetization performance in order to provide a closed-loop view of the customer and advertising ecosystem.
We are able to combine this iterative dataset with historical information on advertising spend across advertising categories, content and ad-creative automation, which is used to optimize monetization performance in order to provide a closed-loop view of the customer and advertising ecosystem.
We believe that we are differentiated from our competitors in the following areas: • we are an independent technology company focused on serving advertisers on the buy-side of our industry; • our network partner and advertising relationships are primarily based on the quality of our traffic, where our long-term success is determined by the quality and performance of our users for our advertising partners relative to our competition; • our platform provides comprehensive access to a wide range of inventory types across multiple advertising verticals; and • our platform allows clients to build proprietary advantages by integrating custom features and interfaces for their own use through our application programming interfaces, or APIs.
We believe that we are differentiated from our competitors in the following areas: • we are an independent technology company focused on serving advertisers on the buy-side of our industry; • our Network Partner and advertising relationships are primarily based on the quality of our traffic, where our long-term success is determined by the quality and performance of our users for our Advertising Partners relative to our competition; 11 • our platform provides comprehensive access to a wide range of inventory types across multiple advertising verticals; and • our platform allows clients to build proprietary advantages by integrating custom features and interfaces for their own use through our application programming interfaces, or APIs.
Media consumption is becoming more individualized and fragmented, as the audience spends more time on an increasing number of personal devices while deciding what media to consume and when they consume it, including what products and services they may be searching information for, rather than having those choices made for them in on large legacy platform (i.e. linear television, radio, print media) to a single large audience.
Media consumption is becoming more individualized and fragmented, as the audience spends more time on an increasing number of personal devices while deciding what media to consume and when they consume it, including what products and services they may be searching information for, rather than having those choices made for them on large legacy platform (i.e. linear television, radio, print media) to a single large audience.
We do not use this data to discover the identity of individuals, and we currently prohibit partners, data providers and inventory suppliers from importing data onto our ad buying platform that directly identifies individuals, though we do allow partners to share some directly 14 identifying information, such as phone number and email addresses, with us for purposes of transforming that information into pseudonymous identifiers to use on our platform.
We do not use this data to discover the identity of individuals, and we currently prohibit partners, data providers and inventory suppliers from importing data onto our ad buying platform that directly identifies individuals, though we do allow partners to share some directly identifying information, such as phone number and email addresses, with us for purposes of transforming that information into pseudonymous identifiers to use on our platform.
CouponFollow is one of the largest coupon destinations for online shoppers. Our Human Capital We believe that our values of support, teamwork, individuality, ownership, impact and improvement have been an important factor of our overall success. Behind all our innovations are the talented people around the world who bring them to life.
CouponFollow is one of the largest coupon destinations for online shoppers. 9 Our Human Capital We believe that our values of support, teamwork, individuality, ownership, impact and improvement have been an important factor of our overall success. Behind all our innovations are the talented people around the world who bring them to life.
You may access and read our filings without charge through the SEC’s website at www.sec.gov or through our website at https://ir.system1.com/, as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act.
You may access and read 14 our filings without charge through the SEC’s website at www.sec.gov or through our website at https://ir.system1.com/, as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act.
Pursuant to the Share Purchase Agreement, the purchasing parties acquired all of the outstanding preference and ordinary shares of Protected (“Protected Disposition”) for total consideration comprised of: (a) $240.0 million in cash, subject to certain adjustments, (b) the return and subsequent cancellation of approximately 29.1 million shares of our Class A common stock, par value $0.0001 per share, owned by JDI and other entities and individuals affiliated with the purchasing parties and (c) confirmation from JDI, Protected and the Protected CEO that the financial performance benchmarks related to certain contingent earnout payments based on the future performance of Protected’s business in an aggregate amount of up to $60.0 million included in the Business Combination Agreement, will, as a result of the Protected Disposition, no longer be achievable.
Pursuant to the Share Purchase Agreement, the purchasing parties acquired all of the outstanding preference and ordinary shares of Protected ("Protected Disposition") for total consideration comprised of: (a) $240.0 million in cash, subject to certain adjustments, (b) the return and subsequent cancellation of approximately 29.1 million shares of our Class A common stock, par value $0.0001 per share, owned by JDI and other entities and individuals affiliated with the purchasing parties and (c) confirmation from JDI, Protected and the Protected CEO that the financial performance benchmarks related to certain contingent earnout payments based on the future performance of Protected’s business in an aggregate amount of up to $60.0 million included in the Business Combination Agreement, will, as a result of the Protected Disposition, no longer be achievable.
These trends include the rapid diversification of digital platforms, changing consumption behaviors, ever-evolving and more sophisticated advertising networks and ad exchange platforms, increasing audience fragmentation, shorter attention spans, rapidly changing technology infrastructure and a greater regulatory and audience focus on consumer and data privacy considerations by regulators and consumers.
These trends include the rapid diversification of digital platforms, changing consumption behaviors, ever-evolving and more 5 sophisticated advertising networks and ad exchange platforms, increasing audience fragmentation, shorter attention spans, rapidly changing technology infrastructure and a greater regulatory and audience focus on consumer and data privacy considerations by regulators and consumers.
Intellectual Property 13 The protection of our technology and intellectual property is an important driver of our success. We rely on intellectual property laws, including trade secret, copyright, patent and trademark laws in the U.S. and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property.
Intellectual Property The protection of our technology and intellectual property is an important driver of our success. We rely on intellectual property laws, including trade secret, copyright, patent and trademark laws in the U.S. and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property.
Both digital audiences and consumer focused regulatory bodies and agencies are becoming increasingly focused on consumer and data privacy, including the collection, processing, tracking and/or sharing of users' personal data or [consumer behavior/consumption habits] as advertisers, marketing partners and publishers place a premium on high-quality consumer intent data.
Both digital audiences and consumer focused regulatory bodies and agencies are becoming increasingly focused on consumer and data privacy, 6 including the collection, processing, tracking and/or sharing of users' personal data or consumer behavior/consumption habits as advertisers, marketing partners and publishers place a premium on high-quality consumer intent data.
Governing bodies throughout the United States (including state and local governments), the European Union and other jurisdictions continue to respond to these growing consumer concerns by proposing and enacting new laws and regulations that are reshaping industry standards 9 regarding consumer privacy, data protection and information security.
Governing bodies throughout the United States (including state and local governments), the European Union and other jurisdictions continue to respond to these growing consumer concerns by proposing and enacting new laws and regulations that are reshaping industry standards regarding consumer privacy, data protection and information security.
We have historically evaluated acquisition opportunities along several key criteria, including building strong brands in a broad group of 11 advertising verticals, diversifying monetization capabilities, developing and augmenting new user acquisition channels, accelerating international growth and opportunities for expansion of our owned and operated properties.
We have historically evaluated acquisition opportunities along several key criteria, including building strong brands in a broad group of advertising verticals, diversifying monetization capabilities, developing and augmenting new user acquisition channels, accelerating international growth and opportunities for expansion of our owned and operated properties.
Website addresses referred to in this Annual Report on Form 10-K are not intended to function as hyperlinks, and the information contained on our website is not incorporated into, and does not form a part of this Annual Report on Form 10-K or any other report or documents we file with or furnish to the SEC. 17
Website addresses referred to in this Annual Report on Form 10-K are not intended to function as hyperlinks, and the information contained on our website is not incorporated into, and does not form a part of this Annual Report on Form 10-K or any other report or documents we file with or furnish to the SEC.
Other EU mechanisms for adequate data transfer, such as the standard contractual clauses, were also questioned by the Court of Justice and, as a result, whether and how standard contractual clauses can be used to transfer personal data to the United States is in question.
Other EU mechanisms for adequate data 13 transfer, such as the standard contractual clauses, were also questioned by the Court of Justice and, as a result, whether and how standard contractual clauses can be used to transfer personal data to the United States is in question.
Our owned and operated search engines and publishing websites are able to provide valuable anonymized and aggregated proprietary first party data related to search intent data that is properly collected and processed, and then leveraged an optimized through RAMP.
Our owned and operated search engines and publishing websites are able to provide valuable anonymized and aggregated proprietary first party data related to search intent data that is properly collected and processed, and then leveraged and optimized through RAMP.
This aggregated and anonymized data is leveraged within our platform, so that it can be analyzed and iteratively enriched as consumers return to our websites and continue to interact with rendered advertisements.
This aggregated and 8 anonymized data is leveraged within our platform, so that it can be analyzed and iteratively enriched as consumers return to our websites and continue to interact with rendered advertisements.
Our platform analyzes various user interactions, develops a comprehensive view of the 10 customer’s intent in real time and enables advertisers to maximize return on their spend.
Our platform analyzes various user interactions, develops a comprehensive view of the customer’s intent in real time and enables advertisers to maximize return on their spend.
As a result, advertisers continue to struggle to efficiently 8 identify and market to high quality audiences that drive strong and consistent return on advertising spend.
As a result, advertisers continue to struggle to efficiently identify and market to high quality audiences that drive strong and consistent return on advertising spend.
Today, we own and operate approximately 40 websites, including leading search engines like info.com and Startpage.com, and publishing digital media sites and utilities such as HowStuffWorks, MapQuest, CouponFollow and ActiveBeat. Our primary operations are in the United States, and we also have operations in Canada and the Netherlands.
Today, we own and operate approximately 40 websites, including leading search engines like info.com and Startpage.com , and digital media publishing websites and internet utilities such as HowStuffWorks , MapQuest , CouponFollow and ActiveBeat . Our primary operations are in the United States, and we also have operations in Canada and the Netherlands.
In the United States, both federal and state legislation govern activities such as the collection and use of personal data, and privacy matters impacting the advertising technology industry has frequently been subject to review by the Federal Trade Commission (the “FTC”), U.S. Congress, and individual state governments.
In the United States, both federal and state legislation govern activities such as the collection and use of personal data, and privacy matters impacting the advertising technology industry has frequently been subject to review by the Federal Trade Commission (the "FTC"), U.S. Congress, and individual state governments.
The shift to digital performance-based advertising models can be explained by mounting pressure on bands and advertisers (and their agencies) to demonstrate tangible results against their advertising efforts, and the corresponding shift of advertising budgets to distribution channels that facilitate the ability to better monitor results in real time.
The shift to digital performance-based advertising models can be explained by mounting pressure on brands and advertisers (and their agencies) to demonstrate tangible results against their advertising efforts, and the corresponding shift of advertising budgets to distribution channels that facilitate the ability to better monitor results in real time.
We have significantly expanded the scope of our platform through organic growth, strategic acquisitions and the continuous development and integration of RAMP into our service offerings, which enables us to control user acquisition, consumer experience and monetization across all traffic sources of our platform.
We have significantly expanded the scope of our platform through organic growth, strategic acquisitions and the continuous development and integration of RAMP into our service offerings, which enables us to optimize user acquisition, consumer experience and monetization across all traffic sources of our platform.
In the United Kingdom and the European Union (including the European Economic Area (the “EEA”) and the countries of Iceland, Liechtenstein and Norway), or EU, separate laws and regulations (and member states’ implementations thereof) govern the processing of personal data, and these laws and regulations continue to impact us.
In the United Kingdom and the European Union (including the European Economic Area (the "EEA") and the countries of Iceland, Liechtenstein and Norway), or EU, separate laws and regulations (and member states’ implementations thereof) govern the processing of personal data, and these laws and regulations continue to impact us.
The CCPA created individual data privacy rights for consumers in the State of California (including rights to deletion of and access to, as well as rights to opt-out of the collection of, personal information), special rules on the collection of consumer data from minors, new notice obligations and new limits on, and rules regarding the collection, processing and “sale” of personal information (interpreted by many to include common digital advertising practices).
The CCPA created individual data privacy rights for consumers in the State of California (including rights to deletion of and access to, as well as rights to opt-out of the collection of, personal information), special rules on the collection of consumer data from minors, new notice obligations and new limits on, and rules regarding the collection, processing and "sale" of personal information (interpreted by many to include common digital advertising 12 practices).
If a universally accepted “Do Not Track,” “Do Not Sell,” or similar control is adopted by many Internet users, or if a “Do Not Track” or similar standard is imposed by additional states or by federal or foreign legislation, or is agreed upon by industry standard setting groups, we may have to change our business practices, our clients may reduce their use of our platform, and our business, financial condition, and results of operations could be adversely affected.
If a universally accepted "Do Not Track," "Do Not Sell," or similar control is adopted by many Internet users, or if a "Do Not Track" or similar standard is imposed by additional states or by federal or foreign legislation, or is agreed upon by industry standard setting groups, we may have to change our business practices, our clients may reduce their use of our platform, and our business, financial condition, and results of operations could be adversely affected.
The IAB Europe previously collaborated with the digital 15 advertising industry to create a user-facing framework (the Transparency and Control Framework, or “TCF”) for establishing and managing legal bases under the GDPR and other U.K. and EU privacy laws including the ePrivacy Directive (discussed below).
The IAB Europe previously collaborated with the digital advertising industry to create a user-facing framework (the Transparency and Control Framework, or "TCF") for establishing and managing legal bases under the GDPR and other U.K. and EU privacy laws including the ePrivacy Directive (discussed below).
For example, as the collection and use of data for digital advertising has increasingly received negative media attention over the past several years, some government regulators, such as the FTC, and privacy advocates have suggested creating a universally accepted “Do Not Track” standard that would allow Internet users to express a preference, independent of cookie settings in their browser, not 16 to have their online browsing activities tracked and shared across websites or devices.
For example, as the collection and use of data for digital advertising has increasingly received negative media attention over the past several years, some government regulators, such as the FTC, and privacy advocates have suggested creating a universally accepted "Do Not Track" standard that would allow Internet users to express a preference, independent of cookie settings in their browser, not to have their online browsing activities tracked and shared across websites or devices.
Our leaders review the survey feedback and work with their teams to take action based on survey results. We demonstrate this commitment through a comprehensive strategy that combines education, celebration, matching donations to the community, diversifying our talent, and creating forums for internal dialogue and listening. Our global leadership team is approximately 67% male and 33% female.
Our leaders review the survey feedback and work with their teams to take action based on survey results. We demonstrate this commitment through a comprehensive strategy that combines education, celebration, matching donations to the community, diversifying our talent, and creating forums for internal dialogue and listening. Our global leadership team is approximately 83% male and 17% female.
Sale of Protected On September 6, 2023, we announced that we had received a non-binding indication of intent from Just Develop It Limited (“JDI”), one of our significant shareholders, which is principally owned and managed by certain members of the Protected management team, related to the potential acquisition of Protected, which operates our subscription business.
Sale of Protected On September 6, 2023, we announced that we had received a non-binding indication of intent from Just Develop It Limited ("JDI"), one of our significant shareholders, which is principally owned and managed by certain members of the Protected management team, related to the potential acquisition of Protected, which operated our subscription business.
Much of the federal oversight on digital advertising in the United States currently comes from the FTC, which has primarily relied upon Section 5 of the Federal Trade Commission Act, which prohibits companies from engaging in “unfair” or “deceptive” trade practices, including alleged violations of representations concerning privacy protections and acts that allegedly violate individuals’ privacy interests.
Much of the federal oversight on digital advertising in the United States currently comes from the FTC, which has primarily relied upon Section 5 of the Federal Trade Commission Act, which prohibits companies from engaging in "unfair" or "deceptive" trade practices, including alleged violations of representations concerning privacy protections and acts that allegedly violate individuals’ privacy interests.
Regionally, North America and the rest of the world make up approximately 99% and 1% of our workforce, respectively. Diversity and Inclusion We are committed to fostering a culture of diversity, inclusion and belonging in which all employees are empowered to bring their whole, authentic selves to work every day.
Regionally, North America and the rest of the world make up approximately 98% and 2% of our workforce, respectively. Diversity and Inclusion We are committed to fostering a culture of diversity, inclusion and belonging in which all employees are empowered to bring their whole, authentic selves to work every day.
Subsequently, on November 30, 2023, we completed the sale of Protected, pursuant to the terms of a share purchase agreement (“Share Purchase Agreement”).
Subsequently, on November 30, 2023, we completed the sale of Protected, pursuant to the terms of a share purchase agreement ("Share Purchase Agreement").
Operating seamlessly across major advertising networks and advertising category verticals to acquire end-users, RAMP allows us to monetize these acquired users through our relationships with third party advertisers and advertising networks (“Advertising Partners”).
Operating seamlessly across major advertising networks and advertising category verticals to acquire end-users, RAMP allows us to monetize these acquired users through our relationships with third party advertisers and advertising networks ("Advertising Partners").
For example, the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect January 1, 2020, defines “personal information” broadly enough to include online identifiers provided by individuals’ devices, applications and protocols (such as IP addresses, mobile application identifiers and unique cookie identifiers) and individuals’ location data, if there is potential that individuals can be identified by such data.
For example, the California Consumer Privacy Act of 2018 (the "CCPA"), which went into effect January 1, 2020, defines "personal information" broadly enough to include online identifiers provided by individuals’ devices, applications and protocols (such as IP addresses, mobile application identifiers and unique cookie identifiers) and individuals’ location data, if there is potential that individuals can be identified by such data.
The General Data Protection Regulation (“GDPR”), which applies to us, came into effect on May 25, 2018. Like the CCPA, the GDPR defines “personal data” broadly, and it enhances data protection obligations for controllers of such data and for service providers processing the data.
The General Data Protection Regulation ("GDPR"), which applies to us, came into effect on May 25, 2018. Like the CCPA, the GDPR defines "personal data" broadly, and it enhances data protection obligations for controllers of such data and for service providers processing the data.
The Trebia Merger 7 On June 28, 2021, we entered into a Business Combination Agreement (as amended on November 30, 2021, January 10, 2022 and January 25, 2022), (“Business Combination Agreement”) by and among us, S1 Holdco and Total Security Limited, formerly known as Protected.net Group Limited (“Protected”) .
The Trebia Merger On June 28, 2021, we entered into a Business Combination Agreement (as amended on November 30, 2021, January 10, 2022 and January 25, 2022), ("Business Combination Agreement") by and among us, S1 Holdco, LLC ("S1 Holdco") and Total Security Limited, formerly known as Protected.net Group Limited ("Protected") .
We have built a robust and valuable asset consisting of proprietary first party data that is continuously enhanced based on more than 570 million distinct search queries that run through RAMP each a month.
We have built a robust and valuable asset consisting of proprietary first party data that is continuously enhanced based on more than 1.0 billion distinct search queries that run through RAMP each a month.
Marketing Partner Integrations —RAMP is seamlessly integrated with leading acquisition marketing channels, such as Google, Facebook, Zemanta, Taboola, and TikTok. This technical integration allows us to continuously optimize our advertising campaigns and bids on a real-time basis, where RAMP processes over 187 million campaign optimizations per day.
Marketing Partner Integrations —RAMP is seamlessly integrated with leading acquisition marketing channels, such as Google, Meta, Outbrain, and TikTok. This technical integration allows us to continuously optimize our advertising campaigns and bids on a real-time basis, where RAMP processes over 4 million campaign optimizations per day.
Additionally, spending on global digital advertising accounted for approximately 67% of total global advertising spend in 2022, a percentage that is expected to grow to almost 72% in 2026, continuing a steady trend of supplanting traditional advertising models to support bands and advertisers’ customer acquisition efforts. Digital marketing has become an increasingly complex ecosystem due to several trends.
Additionally, spending on global digital advertising accounted for approximately 69% of total global advertising spend in 2024, a percentage that is expected to grow to almost 74% in 2027, continuing a steady trend of supplanting traditional advertising models to support bands and advertisers’ customer acquisition efforts. Digital marketing has become an increasingly complex ecosystem due to several trends.
RAMP operates across our network of owned and operated websites, allowing us to monetize user traffic that we source from various acquisition marketing channels, including Google, Facebook, Zemanta, Taboola, and TikTok.
RAMP operates across our network of owned and operated websites, allowing us to monetize user traffic that we source from various acquisition marketing channels, including Google, Meta, Outbrain, and TikTok.
Monetizing User Traffic for Our Network Partners —We also monetize user traffic on behalf of our more than 200 network partners, which include Yahoo!, WebMD and Publisher’s Clearing House. These network partners direct their acquired traffic through RAMP in exchange for a share of advertising revenue generated through the platform. In 2023, we processed over 2.7 billion network partner sessions.
Monetizing User Traffic for Our Network Partners —We also monetize user traffic on behalf of our more than 300 Network Partners, which include Yahoo!, WebMD and Publisher’s Clearing House. These Network Partners direct their acquired traffic through RAMP in exchange for a share of advertising revenue generated through the platform.
We believe that our RAMP platform adds significant value across the entire digital marketing landscape. Substantial First-Party Data Consumer Information —In 2023, we processed over 6.6 billion total sessions.
We believe that our RAMP platform adds significant value across the entire digital marketing landscape. Substantial First-Party Data Consumer Information —In 2024, we processed approximately 15.0 billion total sessions.
Additionally, following the Merger, Trebia’s ordinary shares and Public Warrants ceased trading on the New York Stock Exchange (“NYSE”), and System1 Inc.s Class A common stock, $0.0001 par value per share (“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.
Following the Merger, Trebia’s ordinary shares and Public Warrants ceased trading on the New York Stock Exchange ("NYSE"), and System1, Inc.'s Class A common stock, $0.0001 par value per share ("Class A common stock") and the Public Warrants ("Warrants") began trading on the NYSE on January 28, 2022 under the symbols "SST" and "SST.WS," respectively.
Since launching, we have expanded to support additional advertising formats across numerous advertising platforms, and have acquired several leading websites, enabling us to control user acquisition and experience, and monetize user traffic on our behalf via our network of owned and operated websites.
Since launching, we have expanded to monetizing traffic we acquire directly from various marketing channels, expanding to support additional advertising formats across multiple advertising platforms, and have acquired several leading websites, enabling us to control user acquisition and experience, and monetize user traffic on our behalf via our network of owned and operated websites.
Compensation and Benefits We provide compensation and benefits programs to help meet the needs of our employees and reward their efforts and contributions. We seek fairness in total compensation with reference to external comparisons, internal comparisons and the relationship between management and non-management compensation. In addition to salaries, we provide competitive compensation programs commensurate with our industry peers.
We seek fairness in total compensation with reference to external comparisons, internal comparisons and the relationship between management and non-management compensation. In addition to salaries, we provide competitive compensation programs commensurate with our industry peers.
In response to the COVID-19 pandemic, we implemented significant changes, such as implementing and facilitating teleworking, that we determined were in the best interests of our employees, as well as the communities in which we operate, and which comply with applicable government regulations. We continue to evolve our programs to meet our employees’ health and wellness needs.
We continue to implement changes that we determined are in the best interests of our employees, as well as the communities in which we operate, and which comply with applicable government regulations. We continue to evolve our programs to meet our employees’ health and wellness needs.
Spending on global digital advertising has grown rapidly, reaching an estimated $555 billion in 2022, and is projected to grow to an estimated $744 billion in 2026.
Spending on global digital advertising has grown rapidly, reaching an estimated $668 billion in 2024, and is projected to grow to an estimated $871 billion in 2027.
We encourage everyone to create individual development plans leveraging competency frameworks tied into their chosen career path, outlining a specific plan and actions to increase proficiency or learn new skills. We seek to provide a wide range of learning and development opportunities in both individual and group settings with formal, social and experiential learning.
We encourage everyone to create individual development plans leveraging competency frameworks tied into their chosen career path, outlining a specific plan and actions to increase proficiency or learn new skills.
To ensure we live our values, and our culture stays unique and strong, our board of directors (the "Board" or the "Board of Directors") and executive team have put significant focus on our human capital resources. 12 As of December 31, 2023, we had approximately 300 full-time employees in 3 countries.
To ensure we live our values, and our culture stays unique and strong, our board of directors (the "Board" or the "Board of Directors") and executive team have put significant focus on our human capital resources.
Legacy mediums, including print, television and radio, represent a smaller and shrinking portion of total media consumption than they have historically, as digital media formats, in particular those best served by mobile devices, have proliferated.
Our Industry Today, brands and advertisers seeking to effectively reach their target consumers or target audience are confronted by significant operational and systemic challenges. Legacy mediums, including print, television and radio, represent a smaller and shrinking portion of total media consumption than they have historically, as digital media formats, in particular those best served by mobile devices, have proliferated.
Our business was originally founded in 2013 with a focus on monetizing user traffic acquired by our Network Partners.
Our Company started with a focus on monetizing user traffic acquired by our Network Partners.
Our Proprietary Assets At the core of our business is our proprietary Responsive Acquisition Marketing Platform, or RAMP.
In 2024, we processed over 7.7 billion Network Partner sessions. 7 Our Proprietary Assets At the core of our business is our proprietary Responsive Acquisition Marketing Platform, or RAMP.
Operations outside the United States are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws, data privacy laws, possible limitations on foreign investment and income repatriation, government foreign exchange controls and exposure to currency exchange fluctuations.
Among the risks are changes in existing tax laws, changes in the regulatory framework in foreign jurisdictions, data privacy laws, possible limitations on foreign investment and income repatriation, government foreign exchange controls, exposure to currency exchange fluctuations and employment laws impacting foreign employees.
RAMP also allows third party advertising platforms and publishers (“Network Partners”) to send user traffic to, and monetize user traffic on, our owned and operated websites or through our monetization agreements.
RAMP also allows third party advertising platforms and publishers ("Network Partners") to send user traffic to, and monetize user traffic on, our owned and operated websites or through our monetization agreements. Through RAMP, we process daily advertising campaign optimizations and ingest over 12 billion rows of data daily across approximately 40 advertising vertical categories as of December 31, 2024.
References to “Notes” are notes included in our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. Overview We operate an omnichannel customer acquisition platform, delivering high-intent customers to brands, advertisers and publishers . We provide our omnichannel customer acquisition platform services through our proprietary responsive acquisition marketing platform (“RAMP”).
Item 1. Business. Overview Throughout this report, the "Company," "System1," "we," "us," "our" and other similar terms refer to System1, Inc. and its subsidiaries. We operate an omnichannel customer acquisition platform, delivering high-intent customers to brands, advertisers and publishers . We provide our omnichannel customer acquisition platform services through our proprietary responsive acquisition marketing platform ("RAMP").
Refer to Note 3, Merger and Note 19, Discontinued Operations of our consolidated financial statements included in this Annual Report on Form 10-K for additional information. Our Industry Today, brands and advertisers seeking to effectively reach their target consumers or target audience are confronted by significant operational and systemic challenges.
See Part II, Item 8 "Financial Statements and supplementary data — Note 17, Discontinued Operations" of our consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Removed
Item 1. Business Unless otherwise indicated or the context otherwise requires, references in this Annual Report on Form 10-K to the “Company,” “System1,” “we,” “us,” “our” and other similar terms refer to System1, Inc. and its subsidiaries and references to “Trebia” refer to the Company, formerly known as Trebia Acquisition Corp., prior to the Merger (as defined below).
Added
Operations outside the United States are subject to risks inherent in operating under different legal systems and various political and economic environments.
Removed
Through RAMP, we process approximately 187 million daily advertising campaign optimizations and ingest over 7 billion rows of data daily across approximately 40 advertising vertical categories as of December 31, 2023.
Added
As a result of the current uncertainty in economic activity, including geopolitical developments and other macroeconomic factors such as rising interest rates, inflation and the impact of earlier supply chain disruptions, we are unable to predict the size and duration of the impact on our revenue and our results of operations.
Removed
On January 26, 2022 (“Closing Date”), we consummated the business combination (“Merger”) pursuant to the Business Combination Agreement.
Added
Reorganization On August 1, 2024, we undertook a corporate reorganization, the result of which was that all of the assets and business operations of the Company are now held by System1 Holdings, LLC ("System1 Holdings"), a newly formed intermediate holding company of which we maintain the controlling interest and in which the non-controlling interest is owned by the holders of our Class C common stock.
Removed
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, Class C common stock, $0.0001 par value per share ("Class C common stock") and, with respect to unvested equity S1 Holdco equity awards of the Closing Date, a combination of restricted stock units in System1 and cash awards.
Added
Following the corporate reorganization, (a) System1 Holdings now owns 100% of S1 Holdco, the previous intermediate holding company with the non-controlling interests, and 100% of S1 Media, LLC (“S1 Media”), another new subsidiary formed in connection with the corporate reorganization, (b) S1 Media holds the assets and business operations associated with our owned and operated products businesses, which include NextGen Shopping, Inc.
Removed
The aggregate consideration under the Business Combination Agreement was $440.2 million of cash and $411.5 million of equity of System1. 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 with an estimated value of $198.7 million.
Added
("CouponFollow"), Startpage and Mapquest, and (c) S1 Holdco holds our remaining assets and business operations associated with our digital advertising businesses, including our proprietary RAMP platform. S1 Holdco and its subsidiaries remain obligors and guarantors under our Term Loan and 2022 Revolving Facility, and System1 Holdings and S1 Media are not parties thereto.
Added
We draw from the largest pools of talent to help find the best people for our company and seek to hire and retain a highly qualified workforce in compliance with applicable federal and other laws and regulations. As of December 31, 2024, we had approximately 300 full-time employees in three countries.
Added
We seek to provide a wide range of learning and development opportunities in both individual and group settings with formal, social and experiential learning. 10 Compensation and Benefits We provide compensation and benefits programs to help meet the needs of our employees and reward their efforts and contributions.
Added
Copies of our Code of Ethics and Conduct Policy, Corporate Governance Guidelines and the charters for the Audit, Compensation, and Nominating and Corporate Governance Committees of our Board are also available on the “Governance - Governance Documents” subpage of the “Investors” section of our website. 15

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

104 edited+17 added−25 removed341 unchanged
Biggest changeOur remediation plan consists of the following: • Assessing the need of additional senior level accounting personnel with applicable technical accounting knowledge, training, and experience in accounting matters, and hiring the appropriately skilled resources, supplemented by third-party resources; • Designing and implementing controls to formalize roles and review responsibilities to align with our team’s skills and experience and designing and implementing controls ensuring segregation of duties; • Engaged an accounting advisory firm to assist with the documentation, evaluation, remediation and testing of our internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission; • Engaged third-party specialists to assist with the preparation of technical accounting analyses and valuations associated with business combinations, and ensuring adequate review by accounting personnel with applicable technical accounting knowledge, training, and experience in accounting for business combinations or dispositions; • Designing and implementing controls to address the financial reporting risks over the accounting for dispositions, acquisitions and other complex, non-routine transactions, including controls over the preparation and review of accounting memoranda addressing these matters, valuations and key assumptions utilized in the valuations, tax impacts, and ongoing recording of the financial statement results of the acquired businesses; • Designing and implementing formal accounting policies with periodic reviews, procedures and controls supporting our period-end financial reporting process, including controls over the preparation and review of account reconciliations and journal entries, business performance reviews, foreign exchange gains/losses for intercompany transactions, appropriate determination of asset groups for impairment consideration and classification and presentation of accounts and disclosures, including the statement of cash flows; • Designing and implementing controls to address the financial reporting risks over accrued liabilities, stock-based compensation and equity transactions, including accounting for non-controlling interest; 30 • Designing and implementing controls to address the financial reporting risks over the accounting for complex financial instruments, including the earnings per share impacts; • Designing and implementing controls to address the financial reporting risks over the accuracy and valuation of goodwill, including the allocation of goodwill to reporting units and the identification and measurement of goodwill impairment; • Designing and implementing IT general controls, including controls over change management, the review and update of user access rights and privileges, controls over batch jobs and data backups, and program development approvals and testing.
Biggest changeOur efforts include a number of actions: • Assessed the need of additional senior level accounting personnel with applicable technical accounting knowledge, training, and experience in accounting matters, and hired the appropriately skilled resources, continuing to assess the needs within the accounting department to ensure sufficient coverage for accounting and financial reporting; • Designing and implementing controls to formalize roles and review responsibilities to align with our team’s skills and experience and designing and implementing controls ensuring segregation of duties; • Engaged an accounting advisory firm to assist with the documentation, evaluation, remediation and testing of our internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission; • Designing and implementing controls to address the financial reporting risks over the accounting for dispositions, acquisitions and other complex, non-routine transactions, including controls over the preparation and review of accounting memoranda addressing these matters, valuations and key assumptions utilized in the valuations, allocation of goodwill to reporting units, tax impacts, and ongoing recording of the financial statement results of the acquired businesses; • Designing and implementing formal accounting policies with periodic reviews, procedures and controls supporting our period-end financial reporting process, including controls over the preparation and review of account reconciliations and journal entries, business performance reviews, foreign exchange gains/losses for intercompany transactions, appropriate determination of asset groups for impairment consideration and classification and presentation of accounts and disclosures, including the statement of cash flows; We believe the measures described above will facilitate the remediation of the material weaknesses we have identified and will strengthen our internal control over financial reporting.
Privacy and data protection laws to which we are subject may cause us to incur additional or unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change RAMP or business model, which may have a material adverse effect on our business.
Privacy and data protection laws to which we are subject may cause us to incur additional or unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change RAMP or our business model, which may have a material adverse effect on our business.
Today, digital advertising, including RAMP, makes significant use of cookies to store device identifiers for the advertising activities described above. When we utilize or deploy cookies and similar tracking or recording means, they are usually first-party cookies, which are cookies deployed by us on our own and operated websites or other domains which we operate through RAMP.
Today, digital advertising, including RAMP, makes significant use of first-party cookies to store device identifiers for the advertising activities described above. When we utilize or deploy cookies and similar tracking or recording means, they are usually first-party cookies, which are cookies deployed by us on our own and operated websites or other domains which we operate through RAMP.
To the extent we are unable to effectively engage with non-U.S. advertising agencies or companies or international divisions of U.S. agencies or companies due to our limited sales force capacity, or we are unable to secure quality non-U.S. ad inventory and data on reasonable terms due to our limited inventory and data team capacity, we may be unable to effectively grow in international markets. • Our international operations subject us to a variety of additional risks, including: • increased management, travel, infrastructure and legal compliance costs associated with having multiple international operations; • long payment cycles; • potential complications enforcing contracts and collections; • increased financial accounting and reporting burdens and complexities; • concerns regarding negative, unstable or changing economic conditions in the countries and regions where we operate; • increased administrative costs and risks associated with compliance with local laws and regulations, including relating to privacy and data security; • regulatory and legal compliance, including with privacy and cybersecurity laws, anti-bribery laws, import and export control laws, economic sanctions and other regulatory limitations or obligations on our operations; • heightened risks of unfair or corrupt business practices and of improper or fraudulent sales arrangements; • difficulties in invoicing and collecting in foreign currencies; 33 • foreign currency exposure risk; • difficulties in repatriating or transferring funds from or converting currencies; • administrative difficulties, costs and expenses related to various local languages, cultures and political nuances; • varied labor and employment laws, including those relating to termination of employees; • reduced protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; and • compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of different tax regimes.
To the extent we are unable to effectively engage with non-U.S. advertising agencies or companies or international divisions of U.S. agencies or companies due to our limited sales force capacity, or we are unable to secure quality non-U.S. ad inventory and data on reasonable terms due to our limited inventory and data team capacity, we may be unable to effectively grow in international markets. • Our international operations subject us to a variety of additional risks, including: • increased management, travel, infrastructure and legal compliance costs associated with having multiple international operations; • long payment cycles; • potential complications enforcing contracts and collections; • increased financial accounting and reporting burdens and complexities; • concerns regarding negative, unstable or changing economic conditions in the countries and regions where we operate; • increased administrative costs and risks associated with compliance with local laws and regulations, including relating to privacy and data security; • regulatory and legal compliance, including with privacy and cybersecurity laws, anti-bribery laws, import and export control laws, economic sanctions and other regulatory limitations or obligations on our operations; • heightened risks of unfair or corrupt business practices and of improper or fraudulent sales arrangements; • difficulties in invoicing and collecting in foreign currencies; • foreign currency exposure risk; • difficulties in repatriating or transferring funds from or converting currencies; • administrative difficulties, costs and expenses related to various local languages, cultures and political nuances; • varied labor and employment laws, including those relating to termination of employees; • reduced protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; and • compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of different tax regimes.
These changes could affect: • the liability of online service providers for actions by customers, including fraud, illegal content, spam, phishing, libel and defamation, hate speech, infringement of third-party intellectual property and other abusive conduct; • other claims based on the nature and content of Internet materials; • user data privacy and security issues; • consumer protection risks; • digital marketing aspects; • characteristics and quality of services; 37 • our ability to automatically renew the premium subscriptions of our users; • cross-border e-commerce issues; and • ease of access by our users to our product offerings, including RAMP.
These changes could affect: • the liability of online service providers for actions by customers, including fraud, illegal content, spam, phishing, libel and defamation, hate speech, infringement of third-party intellectual property and other abusive conduct; • other claims based on the nature and content of Internet materials • user data privacy and security issues; • consumer protection risks; • digital marketing aspects; • characteristics and quality of services; • our ability to automatically renew the premium subscriptions of our users; • cross-border e-commerce issues; and • ease of access by our users to our product offerings, including RAMP.
To the extent that our network partners, the applications we make available through the leading app marketplaces and the social media platforms upon which we rely for users and certain related first party data limit or increasingly limit, eliminate or otherwise impair our ability to access, collect, process and/or use data about or derived from our users or subscribers, including certain user-profile elements such as IP address, device or browser type, operating system or search query information, our business, financial condition and results of operations could be adversely affected.
To the extent that our Network Partners, the applications we make available through the leading app marketplaces and the social media platforms upon which we rely for users and certain related first party data limit or 38 increasingly limit, eliminate or otherwise impair our ability to access, collect, process and/or use data about or derived from our users or subscribers, including certain user-profile elements such as IP address, device or browser type, operating system or search query information, our business, financial condition and results of operations could be adversely affected.
Even if we identify an appropriate acquisition candidate, we may not be successful in negotiating the terms or obtaining the financing for the acquisition, and our due diligence may fail to identify all of the problems, risks, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or technology infrastructure and architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or client issues, and other issues including, but not limited to, the following: • regulatory requirements or delays; • anticipated benefits and synergies may not materialize; • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • retention of key employees from the acquired company; • cultural challenges associated with integrating employees from the acquired company into our organization; • integration of the acquired company’s products and technology; • integration of the acquired company’s accounting, management information, human resources and other administrative systems; • the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; • coordination of product development and sales and marketing functions; 34 • liability for activities of the acquired company before the acquisition, including relating to privacy and data security, patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and • litigation or other claims in connection with the acquired company, including claims from terminated employees, users, former stockholders or other third parties.
Even if we identify an appropriate acquisition candidate, we may not be successful in negotiating the terms or obtaining the financing for the acquisition, and our due diligence may fail to 29 identify all of the problems, risks, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or technology infrastructure and architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or client issues, and other issues including, but not limited to, the following: • regulatory requirements or delays; • anticipated benefits and synergies may not materialize; • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • retention of key employees from the acquired company; • cultural challenges associated with integrating employees from the acquired company into our organization; • integration of the acquired company’s products and technology; • integration of the acquired company’s accounting, management information, human resources and other administrative systems; • the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; • coordination of product development and sales and marketing functions; • liability for activities of the acquired company before the acquisition, including relating to privacy and data security, patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and • litigation or other claims in connection with the acquired company, including claims from terminated employees, users, former stockholders or other third parties.
Specifically, we did not design and maintain effective controls over the application of US GAAP to such transactions, and, as it relates to acquisitions, did not design and maintain effective controls over (i) the review of the inputs and assumptions used in the measurement of assets acquired and liabilities assumed, including discounted cash flow analysis to value acquired intangible assets at an appropriate level of precision, (ii) the tax impacts of acquisitions to the financial statements, and (iii) conforming of US GAAP and accounting policies of acquired entities to that of the Company.
Specifically, we did not design and maintain effective controls over the application of US GAAP to such transactions, and, as it relates to acquisitions, did not design and maintain effective controls over (i) the review of the inputs and assumptions used in the measurement of assets acquired and liabilities assumed, including discounted cash flow analysis to value 25 acquired intangible assets at an appropriate level of precision, (ii) the tax impacts of acquisitions to the financial statements, and (iii) conforming of US GAAP and accounting policies of acquired entities to that of the Company.
There are numerous federal, state and local laws in the United States and around the world regarding privacy and the collection, processing, storing, sharing, disclosing, using, cross-border transfer and protecting of personal information and other data, the scope of which are changing, subject to differing interpretations, and which 20 may be costly to comply with, may result in regulatory fines or penalties, and may be inconsistent between countries and jurisdictions or conflict with other current or pending rules.
There are numerous federal, state and local laws in the United States and around the world regarding privacy and the collection, processing, storing, sharing, disclosing, using, cross-border transfer and protecting of personal information and other data, the scope of which are changing, subject to differing interpretations, and which may be costly to comply with, may result in regulatory fines or penalties, and may be inconsistent between countries and jurisdictions or conflict with other current or pending rules.
For example, in November 2023, EU legislators reached a political agreement regarding a regulation to increase transparency in political advertising – under the proposed rules, political adverts will need to be clearly labelled as such and must indicate the election, referendum or regulatory process to which they relate, the identity of the person who paid for them and how much they paid, and whether such advertisements have been targeted.
For example, in November 2023, EU legislators reached a political agreement regarding a regulation to increase transparency in political advertising – under the proposed rules, political adverts will need to be clearly labelled as such and must indicate the election, referendum or regulatory 35 process to which they relate, the identity of the person who paid for them and how much they paid, and whether such advertisements have been targeted.
If we are alleged to have failed to comply with applicable laws and regulations, we may be subject to investigations, criminal penalties or civil remedies, including fines, injunctions, loss of an operating license or approval, increased scrutiny or oversight by regulatory authorities, the suspension of individual employees, limitations on engaging in a particular business or redress to customers.
If we are alleged to have failed to comply with applicable laws and regulations, we may be subject to investigations, criminal penalties or civil remedies, including fines, injunctions, loss of an operating license or 33 approval, increased scrutiny or oversight by regulatory authorities, the suspension of individual employees, limitations on engaging in a particular business or redress to customers.
We anticipate continued growth would require substantial financial and other resources to, among other things: • develop our existing websites, invest in RAMP and our other software products, including by investing in our engineering team, creating, acquiring or licensing new products or features, and improving the availability and security of our platform and product offerings; • create new products and services to meet consumer and partner demands; • continue to expand internationally by and spend through RAMP by adding inventory and data from countries our clients are seeking; • improve our technology infrastructure, including investing in internal technology development and acquiring or licensing outside technologies; 26 • cover general and administrative expenses, including legal, accounting, tax and other third party expenses necessary to support a larger organization; • cover sales and marketing expenses, including a significant expansion of our direct sales organization; • cover expenses related to data collection and consumer privacy compliance, including additional infrastructure, automation and personnel; and • explore strategic acquisitions.
We anticipate continued growth would require substantial financial and other resources to, among other things: • develop our existing websites, invest in RAMP and our other software products, including by investing in our engineering team, creating, acquiring or licensing new products or features, and improving the availability and security of our platform and product offerings; • create new products and services to meet consumer and partner demands; • continue to expand internationally by and spend through RAMP by adding inventory and data from countries our clients are seeking; • improve our technology infrastructure, including investing in internal technology development and acquiring or licensing outside technologies; • cover general and administrative expenses, including legal, accounting, tax and other third party expenses necessary to support a larger organization; • cover sales and marketing expenses, including a significant expansion of our direct sales organization; 23 • cover expenses related to data collection and consumer privacy compliance, including additional infrastructure, automation and personnel; and • explore strategic acquisitions.
We are currently subject to a variety of, and may in the future become subject to additional, international, 39 federal, state and local laws that are continuously evolving and developing, including laws regarding Internet-based businesses and other businesses that rely on advertising, as well as privacy and consumer protection laws, including the CAN-SPAM Act, the Digital Millennium Copyright Act and the Communications Decency Act.
We are currently subject to a variety of, and may in the future become subject to additional, international, federal, state and local laws that are continuously evolving and developing, including laws regarding Internet-based businesses and other businesses that rely on advertising, as well as privacy and consumer protection laws, including the CAN-SPAM Act, the Digital Millennium Copyright Act and the Communications Decency Act.
For example, perception that our practices involve an invasion of privacy, whether or not such practices are consistent with current or future laws, regulations, or industry practices, may subject us to public criticism, private class actions, reputational harm, or claims by regulators, which could disrupt our business and expose us to increased liability.
For example, perception that our practices involve an invasion of 39 privacy, whether or not such practices are consistent with current or future laws, regulations, or industry practices, may subject us to public criticism, private class actions, reputational harm, or claims by regulators, which could disrupt our business and expose us to increased liability.
Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with specified persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences.
Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other 34 enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with specified persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences.
As a result, it may be more difficult for us to attract and retain qualified people to serve on our Board of Directors, on our board committees or as executive officers. We do not intend to pay dividends on our common stock for the foreseeable future. We have never declared or paid any cash dividends on our capital stock.
As a result, it may be more difficult for us to attract and retain qualified people to serve on our Board of Directors, on our board committees or as executive officers. 46 We do not intend to pay dividends on our common stock for the foreseeable future. We have never declared or paid any cash dividends on our capital stock.
As laws and regulations, including FTC enforcement, rapidly evolve to govern the use of these communications and marketing platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations could adversely impact our business, financial condition and results of operations or subject us to fines or other penalties.
As laws and regulations, including FTC enforcement, 36 rapidly evolve to govern the use of these communications and marketing platforms, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations could adversely impact our business, financial condition and results of operations or subject us to fines or other penalties.
While we monitor our use of open source 44 software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, in part because open source license terms are often ambiguous.
While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, in part because open source license terms are often ambiguous.
In addition, we cannot predict or estimate the amount of additional costs we may 50 incur to comply with these requirements. We anticipate that these costs will materially increase our general and administrative expenses. These rules and regulations result in our incurring legal and financial compliance costs and will make some activities more time-consuming and costly.
In addition, we cannot predict or estimate the amount of additional costs we may incur to comply with these requirements. We anticipate that these costs will materially increase our general and administrative expenses. These rules and regulations result in our incurring legal and financial compliance costs and will make some activities more time-consuming and costly.
Certain of these metrics are subject to inherent challenges in 22 measurement, and real or perceived inaccuracies in such metrics may harm our reputation and adversely affect our business. In addition, the metrics we provide may differ from estimates published by third parties or from similar metrics of our competitors due to differences in methodology.
Certain of these metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and adversely affect our business. In addition, the metrics we provide may differ from estimates published by third parties or from similar metrics of our competitors due to differences in methodology.
In addition, third parties, including operating systems and Internet browser companies, may take steps to further limit the interoperability of our solutions with their own products and services, in some cases to promote their own offerings. This could delay the development of 27 our solutions or our solutions may be unable to operate effectively.
In addition, third parties, including operating systems and Internet browser companies, may take steps to further limit the interoperability of our solutions with their own products and services, in some cases to promote their own offerings. This could delay the development of our solutions or our solutions may be unable to operate effectively.
Such cyber and ransomware attacks could include denial-of-service attacks impacting service availability (including the ability to deliver ads) and reliability, social engineering/phishing or the introduction of computer viruses or malware (including ransomware) into our IT Systems with a view to steal confidential or proprietary data or personal information.
Such cyber and ransomware attacks could include denial-of-service attacks impacting service availability (including the 27 ability to deliver ads) and reliability, social engineering/phishing or the introduction of computer viruses or malware (including ransomware) into our IT Systems with a view to steal confidential or proprietary data or personal information.
We currently have account management, inventory, and other personnel in countries within North America, Europe and Asia, and we anticipate expanding our international operations in the future. Some of the countries into which we are, or potentially may, expand score unfavorably on the Corruption Perceptions Index, or CPI, of Transparency International.
We currently have account management, inventory, and other personnel in countries within North America, Europe and Asia, and we anticipate expanding our international operations in the future. Some of the countries into 28 which we are, or potentially may, expand score unfavorably on the Corruption Perceptions Index, or CPI, of Transparency International.
Some failures will shut our platform down completely, others only partially. Partial failures, which we have experienced in the past, could result in unauthorized bidding, cessation of our ability to bid or deliver impressions or deletion of our reporting, in each case resulting in unanticipated financial obligations or impact.
Some failures could shut our platform down completely, others only partially. Partial failures, which we have experienced in the past, could result in unauthorized bidding, cessation of our ability to bid or deliver impressions or deletion of our reporting, in each case resulting in unanticipated financial obligations or impact.
Security breaches could expose us to a risk of loss or exposure of this information, which could result in potential liability, litigation (including class action litigation) and remediation costs, as well as reputational harm, all of which could materially adversely affect our business and financial results.
Security breaches could expose us to a risk of loss or exposure of this information, which could result in potential liability, litigation (including class action litigation) and remediation costs, as well as reputational harm, all of which could materially adversely affect our business and 17 financial results.
If any of the foregoing occurs, our revenue could decline or our operating costs may increase. Our failure to meet content and inventory standards and provide services that our advertisers and inventory suppliers trust could harm our brand and reputation and negatively impact our business, financial condition and operating results.
If any of the foregoing occurs, our revenue could decline or our operating costs may increase. 31 Our failure to meet content and inventory standards and provide services that our advertisers and inventory suppliers trust could harm our brand and reputation and negatively impact our business, financial condition and operating results.
We are subject to the terms of our privacy policies and privacy-related obligations to third parties. Although we endeavor to ensure that our public statements are complete, accurate and fully implemented, we may fail to do so, or it may be alleged that we have failed to do so.
We are subject to the terms of our privacy policies and privacy-related obligations to third parties. Although we endeavor to ensure that our public statements are complete, accurate and fully implemented, we may fail to do 18 so, or it may be alleged that we have failed to do so.
If we raise additional funds through future issuances 23 of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
Our revenue is tied to the effectiveness and performance of our Responsive Acquisition Marketing Platform. 18 If RAMP does not acquire users with the relevant commercial intent to our websites via acquisition marketing channels, we may not be able to profitability monetize users.
Our revenue is tied to the effectiveness and performance of our Responsive Acquisition Marketing Platform. If RAMP does not acquire users with the relevant commercial intent to our websites via acquisition marketing channels, we may not be able to profitability monetize users.
We may experience outages and disruptions on RAMP, our websites and other software products if we fail to maintain adequate security and supporting infrastructure as we scale RAMP, websites and other software 31 products, which may harm our reputation and negatively impact our business, financial condition and operating results.
We may experience outages and disruptions on RAMP, our websites and other software products if we fail to maintain adequate security and supporting infrastructure as we scale RAMP, websites and other software products, which may harm our reputation and negatively impact our business, financial condition and operating results.
Blend, our CEO and Co-Founder, or our inability to attract and retain highly skilled employees, could have an adverse effect on our business, financial condition and operating results. We may need to change our pricing models to compete successfully.
Blend, our CEO and Co-Founder, or our inability to attract and retain highly skilled employees, could have an adverse effect on our business, financial condition and operating results. 30 We may need to change our pricing models to compete successfully.
If some investors find the securities less attractive as a result of reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a 48 less active trading market for our securities and the trading prices of our securities may be more volatile.
If some investors find the securities less attractive as a result of reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Digital advertising mostly relies on the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and 42 measuring the effectiveness of ads.
Digital advertising mostly relies on the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and measuring the effectiveness of ads.
We are also vulnerable to human or technological error, malicious code embedded in open-source software, misconfigurations, “bugs” or other vulnerabilities in our IT Systems or in commercial software that is integrated into our (or our suppliers’ or service providers’) IT Systems, products or services and unintentional errors or malicious actions by persons with authorized access to our IT Systems that exceed the scope of their access rights, distribute data erroneously, or, unintentionally or intentionally, interfere with the intended operations of our platform, websites and other software products.
We are also vulnerable to human or technological error, malicious code embedded in open-source software, misconfigurations, "bugs" or other vulnerabilities in our IT Systems or in commercial software that is integrated into our (or our suppliers’ or service providers’) IT Systems, products or services and unintentional errors or malicious actions by persons with authorized access to our IT Systems that exceed the scope of their access rights, distribute data erroneously, or, unintentionally or intentionally, interfere with the intended operations of our platform, websites and other software products.
In addition, in the absence of sufficient cash flows from operations, we might be unable to meet our obligations under our credit facility, and we may therefore be at risk of default thereunder.
In addition, in 20 the absence of sufficient cash flows from operations, we might be unable to meet our obligations under our credit facility, and we may therefore be at risk of default thereunder.
This shift from enabling user opt-out to an opt-in 43 requirement is likely to have a substantial impact on the mobile advertising ecosystem and could harm our growth in this channel.
This shift from enabling user opt-out to an opt-in requirement is likely to have a substantial impact on the mobile advertising ecosystem and could harm our growth in this channel.
Our ability to attract and retain advertisers, and to generate advertising revenue from them, depends on a number of factors, including: • the ability of our advertisers to earn an attractive return on investment from their spending with us; • our ability to increase the number of consumers using our websites; • our ability to increase return on investment for advertisers that place advertisements on our platform; 25 • our ability to provide a seamless, user-friendly advertising platform for our advertisers; • our ability to compete effectively with other media for advertising spending; and • our ability to keep pace with changes in technology and the practices and offerings of our competitors.
Our ability to attract and retain advertisers, and to generate advertising revenue from them, depends on a number of factors, including: • the ability of our advertisers to earn an attractive return on investment from their spending with us; • our ability to increase the number of consumers using our websites; • our ability to increase return on investment for advertisers that place advertisements on our platform; 22 • our ability to provide a seamless, user-friendly advertising platform for our advertisers; • our ability to compete effectively with other media for advertising spending; and • our ability to keep pace with changes in technology and the practices and offerings of our competitors.
Our failure to prevent outages or security breaches resulting from API use could result in government enforcement actions against us, claims for damages by consumers and other affected individuals, costs associated with investigation and remediation damage to our reputation and loss of goodwill, any of which could harm our business, financial condition and operating results. 24 We operate in a highly competitive environment.
Our failure to prevent outages or security breaches resulting from API use could result in government enforcement actions against us, claims for damages by consumers and other affected individuals, costs associated with investigation and remediation damage to our reputation and loss of goodwill, any of which could harm our business, financial condition and operating results. 21 We operate in a highly competitive environment.
Preferred stock, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock.
Preferred stock, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to 43 pay dividends to the holders of our common stock.
Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder of Public Warrants if holders of at least 65% of the then outstanding Public Warrants approve of such amendment.
Accordingly, we may amend the terms of the Warrants in a manner adverse to a holder of Warrants if holders of at least 65% of the then outstanding Warrants approve of such amendment.
In June 2021, the European Commission published revised standard contractual clauses, and shortly thereafter the European Data Protection Board promulgated guidance on implementation of the new clauses. In October 2022, the White House released an executive order implementing a new EU-U.S. data transfer mechanism, the Trans-Atlantic Data Privacy Framework (“DPF”).
In June 2021, the European Commission published revised standard contractual clauses, and shortly thereafter the European Data Protection Board promulgated guidance on implementation of the new clauses. In October 2022, the White House released an executive order implementing a new EU-U.S. data transfer mechanism, the Trans-Atlantic Data Privacy Framework ("DPF").
You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in this section and the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our products; • future announcements concerning our business, our customers’ businesses or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations that adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel; 49 • issuances, exchanges or sales, or expected issuances, exchanges or sales, of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; and • changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in this section and the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our products; • future announcements concerning our business, our customers’ businesses or our competitors’ businesses; 44 • the public’s reaction to our press releases, other public announcements and filings with the SEC; • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations that adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel; • issuances, exchanges, sales, repurchases or expected issuances, of our capital stock; • changes in our dividend policy; • failure to adhere to NYSE stock exchange listing standards; • adverse resolution of new or pending litigation against us; and • changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
If a “Do Not Track,” “Do Not Sell,” or similar control is adopted by many Internet users or if a “Do Not Track” standard is imposed by state, federal, or foreign legislation (such as the proposed ePrivacy Regulation or CCPA regulations), or is agreed upon by standard setting groups, we may have to change our business practices, our clients may reduce their use of RAMP, and our business, financial condition, and results of operations could be adversely affected.
If a "Do Not Track," “Do Not Sell," or similar control is adopted by many Internet users or if a “Do Not Track" standard is imposed by state, federal, or foreign legislation (such as the proposed ePrivacy Regulation or CCPA regulations), or is agreed upon by standard setting groups, we may have to change our business practices, our clients may reduce their use of RAMP, and our business, financial condition, and results of operations could be adversely affected.
Failure to comply with current or future laws and regulations relating to AI could adversely affect our business, operations, and financial condition. Our data-driven platform may also be subject to laws and evolving regulations regarding the use of artificial intelligence and machine learning (“AI Tools”).
Failure to comply with current or future laws and regulations relating to AI could adversely affect our business, operations, and financial condition. Our data-driven platform may also be subject to laws and evolving regulations regarding the use of artificial intelligence and machine learning (“AI Tools").
District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our Warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such Warrant holder in any such enforcement action by service upon such Warrant holder’s counsel in the foreign action as agent for such Warrant holder.
District Court for the Southern District of New York (a "foreign action") in the name of any holder of our Warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an "enforcement action"), and (y) having service of process made upon such Warrant holder in any such enforcement action by service upon such Warrant holder’s counsel in the foreign action as agent for such Warrant holder.
The Warrant Agreement provides that in the following circumstances holders of Warrants who seek to exercise their Warrants will not be permitted to do so for cash and will, instead, be required to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act: (i) if the shares of common stock issuable upon exercise of the Warrants are not registered under the Securities Act in accordance with the terms of the Warrant Agreement; (ii) if we have so elected and the shares of common stock are at the time of any exercise of a Warrant not listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section 18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the Public Warrants for redemption.
The Warrant Agreement provides that in the following circumstances holders of Warrants who seek to exercise their Warrants will not be permitted to do so for cash and will, instead, be required to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act: (i) if the shares of common stock issuable upon exercise of the Warrants are not registered under the Securities Act in accordance with the terms of the Warrant Agreement; (ii) if we have so elected and the shares of common stock are at the time of any exercise of a Warrant not listed on a national securities exchange such that they satisfy the definition of "covered securities" under Section 18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the Warrants for redemption.
In addition to settlement costs, we may be responsible for our own litigation costs, which can be expensive. We may face risks associated with our use of certain AI Tools. We use AI Tools in our the business, and are making significant investments to continuously improve our use of such technologies.
In addition to settlement costs, we may be responsible for our own litigation costs, which can be expensive. We may face risks associated with our use of certain AI Tools. We use AI Tools and are making significant investments to continuously improve our use of such technologies.
Redemption of the outstanding Warrants could force you to (i) exercise your Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) sell your Warrants at the then-current market price when you might otherwise wish to hold your Warrants or (iii) accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, is likely to be substantially less than the market value of your Warrants.
Redemption of the outstanding Warrants could force you to (i) exercise your Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) sell your Warrants at the then-current market price when you might otherwise wish to hold your Warrants or (iii) accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, is likely to be substantially less than the market value of your Warrants. 48 Item 1B.
If you exercise your Public Warrants on a cashless basis, you would pay the Warrant exercise price by surrendering the Warrants for that number of shares of common stock equal to (A) the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Warrants, multiplied by the excess of the “Fair Market Value” (as defined in the next sentence) over the exercise price of the Warrants by (y) the Fair Market Value.
If you exercise your Warrants on a cashless basis, you would pay the Warrant exercise price by surrendering the Warrants for that number of shares of common stock equal to (A) the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Warrants, multiplied by the excess of the "Fair Market Value" (as defined in the next sentence) over the exercise price of the Warrants by (y) the Fair Market Value.
The CCPA defines “personal information” broadly enough to include online identifiers provided by individuals’ devices, applications, and protocols (such as IP addresses, mobile application identifiers and unique cookie identifiers) and individuals’ location data, if there is potential that individuals can be identified by such data and provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
The CCPA defines "personal information" broadly enough to include online identifiers provided by individuals’ devices, applications, and protocols (such as IP addresses, mobile application identifiers and unique cookie identifiers) and individuals’ location data, if there is potential that individuals can be identified by such data and provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
Risks Related to Intellectual Property Our use of “open source” software could adversely affect our ability to protect our proprietary software and subject us to possible litigation. We use open source software in connection with our software development.
Risks Related to Intellectual Property Our use of "open source" software could adversely affect our ability to protect our proprietary software and subject us to possible litigation. We use open source software in connection with our software development.
As a result, holders of our common stock and Warrants bear the risk that our future offerings may reduce the market price of our common stock and Warrants and dilute their percentage ownership. We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock and Warrants less attractive to investors.
As a result, holders of our common stock and Warrants bear the risk that our future offerings may reduce the market price of our common stock and Warrants and dilute their percentage ownership. We are an "emerging growth company" and the reduced disclosure requirements applicable to emerging growth companies may make our common stock and Warrants less attractive to investors.
As the collection and use of data for digital advertising has received media attention over the past several years, some government regulators, such as the FTC, and privacy advocates have suggested creating a “Do Not Track” standard that would allow Internet users to express a preference, independent of cookie settings in their browser, not to have their online browsing activities tracked.
As the collection and use of data for digital advertising has received media attention over the past several years, some government regulators, such as the FTC, and privacy advocates have suggested creating a "Do Not Track" standard that would allow Internet users to express a preference, independent of cookie settings in their browser, not to have their online browsing activities tracked.
These material weaknesses contributed to the following additional material weaknesses: • We did not design and maintain effective controls to timely analyze and record the financial statement effects from complex, non-routine transactions, including acquisitions, dispositions, and post- 28 combination compensation arrangements.
These material weaknesses contributed to the following additional material weaknesses: • We did not design and maintain effective controls to timely analyze and record the financial statement effects from complex, non-routine transactions, including acquisitions, dispositions, equity commitments and post-combination compensation arrangements.
In connection with a previous dispute regarding the use of the “SYSTEM1” trade name, we entered into a Settlement and Co-Existence Agreement regarding our continued use of the “SYSTEM1” trade name in the businesses in which we operate utilizing such trade name. 46 Our success also depends on the continual development of RAMP.
In connection with a previous dispute regarding the use of the "SYSTEM1" trade name, we entered into a Settlement and Co-Existence Agreement regarding our continued use of the "SYSTEM1" trade name in the businesses in which we operate utilizing such trade name. Our success also depends on the continual development of RAMP.
The DPF aims to address the concerns raised by the court in Schrems II relating to perceived risks of transferring personal data to the United States by putting in place a new set of “commercial principles” similar to the old Privacy Shield Framework together with new rules governing U.S. intelligence authorities and redress for EU individuals.
The DPF aims to address the concerns raised by the court in Schrems II relating to perceived risks of transferring personal data to the United States by putting in place a new set of "commercial principles" similar to the old Privacy Shield Framework together with new rules governing U.S. intelligence authorities and redress for EU individuals.
Increased transparency into the collection and use of data for digital advertising introduced both through features in browsers and devices and regulatory requirements, such as the GDPR, the CCPA, “Do Not Track”, and ePrivacy, as well as compliance with such requirements, may create operational burdens to implement and may lead more users to choose to block the collection and use of data about them.
Increased transparency into the collection and use of data for digital advertising introduced both through features in browsers and devices and regulatory requirements, such as the GDPR, the CCPA, "Do Not Track", and ePrivacy, as well as compliance with such requirements, may create operational burdens to implement and may lead more users to choose to block the collection and use of data about them.
The Privacy Shield Framework, however, was struck down in July 2020 by the EU Court of Justice (a decision referred to as “Schrems II”) as an adequate mechanism by which EU companies may pass personal data to the United States, and other EU 40 mechanisms for adequate data transfer, such as the standard contractual clauses, were questioned by the Court of Justice and whether and how standard contractual clauses can be used to transfer personal data to the United States is in question.
The Privacy Shield Framework, however, was struck down in July 2020 by the EU Court of Justice (a decision referred to as "Schrems II") as an adequate mechanism by which EU companies may pass personal data to the United States, and other EU mechanisms for adequate data transfer, such as the standard contractual clauses, were questioned by the Court of Justice and whether and how standard contractual clauses can be used to transfer personal data to the United States is in question.
Information relating to individuals and their devices (sometimes called “personal information” or “personal data”) is regulated under a wide variety of local, state, national, and international laws and regulations that apply to the collection, use, retention, protection, disclosure, transfer (including transfer across national boundaries) and other processing of such data.
Information relating to individuals and their devices (sometimes called "personal information" or "personal data") is regulated under a wide variety of local, state, national, and international laws and regulations that apply to the collection, use, retention, protection, disclosure, transfer (including transfer across national boundaries) and other processing of such data.
Our communications with consumers are also subject to certain laws and regulations, including the Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act of 2003 and analogous state laws, that could expose us to significant damages awards, fines and other penalties that could materially impact our business.
Our communications with consumers are also subject to certain laws and regulations, including the Controlling the Assault of Non-Solicited Pornography and Marketing ("CAN-SPAM") Act of 2003 and analogous state laws, that could expose us to significant damages awards, fines and other penalties that could materially impact our business.
We rely on our own and third-party computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”).
We rely on our own and third-party computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, "IT Systems").
In exchange for making our search traffic available to Google, we receive a share of the revenue generated by the paid listings supplied to us, as well as other search related services. For the year ended December 31, 2023, 85% of our total revenue was attributable to our agreements with Google.
In exchange for making our search traffic available to Google, we receive a share of the revenue generated by the paid listings supplied to us, as well as other search related services. For the year ended December 31, 2024, 78% of our total revenue was attributable to our agreements with Google.
Regulatory investigations and enforcement actions could also impact us. In the U.S., the Federal Trade Commission, or FTC, uses its enforcement powers under Section 5 of the Federal Trade Commission Act (which prohibits “unfair” and “deceptive” trade practices) to investigate companies engaging in online tracking.
Regulatory investigations and enforcement actions could also impact us. In the U.S., the Federal Trade Commission, or FTC, uses its enforcement powers under Section 5 of the Federal Trade Commission Act (which prohibits “unfair" and "deceptive" trade practices) to investigate companies engaging in online tracking.
The “Fair Market Value” is the average closing price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the Warrant agent or on which the notice of redemption is sent to the holders of Warrants, as applicable.
The "Fair Market Value" is the average closing price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the Warrant agent or on which the notice of redemption is sent to the holders of Warrants, as applicable.
We have identified material weaknesses in our internal control over financial reporting as of December 31, 2023.
We have identified material weaknesses in our internal control over financial reporting as of December 31, 2024.
You may only be able to exercise the Public Warrants on a “cashless basis” under certain circumstances, and if you do so, you will receive fewer shares of common stock from such exercise than if you were to exercise such Warrants for cash.
You may only be able to exercise the Warrants on a "cashless basis" under certain circumstances, and if you do so, you will receive fewer shares of common stock from such exercise than if you were to exercise such Warrants for cash.
New laws may be passed, courts may issue decisions affecting the Internet, existing but previously inapplicable or unenforced laws may be deemed to apply to the Internet or regulatory agencies may begin to rigorously enforce such formerly unenforced laws, or existing legal safe harbors may be narrowed, both by U.S. federal or state governments and by governments of foreign jurisdictions.
The legal and regulatory environment pertaining to the Internet, however, is uncertain and may change. 32 New laws may be passed, courts may issue decisions affecting the Internet, existing but previously inapplicable or unenforced laws may be deemed to apply to the Internet or regulatory agencies may begin to rigorously enforce such formerly unenforced laws, or existing legal safe harbors may be narrowed, both by U.S. federal or state governments and by governments of foreign jurisdictions.
We currently have “MapQuest”, “info.com”, “HowStuffWorks”, “Infospace”, and variants and other marks registered as trademarks or pending registrations in the U.S. and certain foreign countries. We also rely on copyright laws to protect computer programs related to RAMP and our proprietary technologies, although to date we have not registered for statutory copyright protection.
We currently have "MapQuest", “info.com", "HowStuffWorks", "Infospace", and variants and other marks registered as trademarks or pending registrations in the U.S. and certain foreign countries. We also rely on copyright laws to protect computer programs related to RAMP and our proprietary technologies, although to date we have not registered for statutory copyright protection.
We rely on large-scale acquisition marketing channels, such as Google, Facebook, Zemanta, Taboola, and TikTok, as well as our network partners, for a significant portion of our consumer Internet traffic.
We rely on large-scale acquisition marketing channels, such as Google, Meta, Outbrain, and TikTok, as well as our Network Partners, for a significant portion of our consumer Internet traffic.
“Do Not Track” has seen renewed emphasis from proponents of the CCPA, and the final proposed regulations (currently pending review and acceptance by the Office of Administrative Law) contemplate browser-based or similar “do not sell” signals.
"Do Not Track" has seen renewed emphasis from proponents of the CCPA, and the final proposed regulations (currently pending review and acceptance by the Office of Administrative Law) contemplate browser-based or similar "do not sell" signals.
With respect to search results in particular, even when search engines announce the details of their methodologies, their parameters may change from time to time, be poorly defined or be inconsistently interpreted.
With respect to search results in particular, even when search engines announce the details of their methodologies, their parameters may change from time to time, be poorly defined or be inconsistently interpreted. 19 Our marketing efforts may not be successful.
Although our ability to amend the terms of the Public Warrants with the consent of at least 65% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, convert the Warrants into cash or shares, shorten the exercise period or decrease the number of shares of common stock purchasable upon exercise of a Warrant.
Although our ability to amend the terms of the Warrants with the consent of at least 65% of the then outstanding Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, convert the Warrants into cash or shares, shorten the exercise period or decrease the number of shares of common stock purchasable upon exercise of a Warrant. 47 Our Warrant Agreement designates the courts of the State of New York or the U.S.
These material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Therefore, these material weaknesses have not been remediated as of December 31, 2023.
These material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
We have the ability to redeem outstanding Warrants at any time after they become exercisable and prior to their expiration, (a) at a price of $0.01 per Warrant, provided that (i) the last reported sales price of the Class A ordinary shares for any twenty (20) trading days within the thirty (30) trading-day period ending on the third trading day prior to the date on which notice of the redemption is given (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) and (ii) there is an effective registration statement covering the issuance of the Class A ordinary shares issuable upon exercise of the Warrants, and a current prospectus relating thereto, available throughout the 30-day Redemption Period (as defined in the Warrant Agreement), or (b) provided that the Reference Value equals or exceeds $10.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like). 52 If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
We have the ability to redeem outstanding Warrants at any time after they become exercisable and prior to their expiration, (a) at a price of $0.01 per Warrant, provided that (i) the last reported sales price of the Class A ordinary shares for any twenty (20) trading days within the thirty (30) trading-day period ending on the third trading day prior to the date on which notice of the redemption is given (the "Reference Value") equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) and (ii) there is an effective registration statement covering the issuance of the Class A ordinary shares issuable upon exercise of the Warrants, and a current prospectus relating thereto, available throughout the 30-day Redemption Period (as defined in the Warrant Agreement), or (b) provided that the Reference Value equals or exceeds $10.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like).
We qualify as an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act.
We qualify as an "emerging growth company" within the meaning of the Securities Act, as modified by the JOBS Act.
As of December 31, 2023, the net carrying value of other intangible assets represented $379.4 million, or 63% of our total assets. Indefinite-lived intangible assets, such as goodwill, are evaluated for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Finite-lived intangible assets totaling $297.0 million are amortized up to 10 years.
As of December 31, 2024, the net carrying value of other intangible assets represented $304.7 million, or 66% of our total assets. Indefinite-lived intangible assets, such as goodwill, are evaluated for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Finite-lived intangible assets totaling $222.3 million are amortized up to 10 years.
If we are unable to protect our proprietary rights (including in particular, the proprietary aspects of RAMP) we may find ourselves at a competitive disadvantage to others who have not incurred the same level of expense, time and effort to create and protect their intellectual property.
If we are unable to protect our proprietary rights (including in particular, the proprietary aspects of RAMP) we may find ourselves at a competitive disadvantage to others who have not incurred the same level of expense, time and effort to create and protect their intellectual property. 40 Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of the terms “MapQuest”, “info.com”, “HowStuffWorks”, “Infospace” or any of the other trademarks that we own. We currently operate primarily in the United States.
In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of the terms "MapQuest", "info.com", "HowStuffWorks", "Infospace" or any of the other trademarks that we own. 41 We currently operate primarily in the United States.
As a public company, we are subject to the reporting obligations under the U.S. securities laws. The SEC, as required under Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring certain public companies to include a report of management on the effectiveness of such company’s internal control over financial reporting in its annual report.
The SEC, as required under Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring certain public companies to include a report of management on the effectiveness of such company’s internal control over financial reporting in its annual report. Management has identified material weaknesses in our internal control over financial reporting.
Furthermore, the adoption of laws or regulations that adversely affect the growth, popularity or use of the Internet and mobile networks, including laws impacting Internet neutrality, could decrease the demand for our products or offerings, increase our operating costs, require us to alter the manner in which we conduct our business and/or otherwise adversely affect our business.
This could also result in decreased demand for our solutions, decreased revenue, and harm to our reputation, and adversely affect our business, financial condition, results of operations, and cash flows. 24 Furthermore, the adoption of laws or regulations that adversely affect the growth, popularity or use of the Internet and mobile networks, including laws impacting Internet neutrality, could decrease the demand for our products or offerings, increase our operating costs, require us to alter the manner in which we conduct our business and/or otherwise adversely affect our business.

… 66 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+0 added−0 removed10 unchanged
Biggest changeCybersecurity Governance Our Board of Directors (the “Board) considers evaluating and proactively addressing cybersecurity risk as part of its risk oversight function and has delegated to the Board's Nominating and Corporate Governance Committee (the “Committee”) oversight of cybersecurity and other information technology risks facing us and our businesses. The Committee oversees management’s implementation of our cybersecurity risk management program.
Biggest changeSee Item 1A, "Risk Factors". 49 Cybersecurity Governance Our Board of Directors (the "Board) considers evaluating and proactively addressing cybersecurity risk as part of its risk oversight function and has delegated to the Board's Nominating and Corporate Governance Committee (the "Committee") oversight of cybersecurity and other information technology risks facing us and our businesses.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the I.T. environment. 54
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the I.T. environment.
First, we have designed and assess our cybersecurity risk management program based on the National Institute of Standards and Technology Cybersecurity Framework ("NIST CSF").
First, we have designed and assessed our cybersecurity risk management program based on the National Institute of Standards and Technology Cybersecurity Framework ("NIST CSF").
We face risks from cybersecurity threats that, if 53 realized and material, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. See Item 1A – Risk Factors.
We face risks from cybersecurity threats that, if realized and material, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
The Committee receives regular reports from management on the cybersecurity risks that we evaluate and which we may face in the future. In addition, management updates the Committee as necessary regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential.
The Committee oversees management’s implementation of our cybersecurity risk management program. The Committee receives regular reports from management on the cybersecurity risks that we evaluate and which we may face in the future. In addition, management updates the Committee as necessary regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties We maintain our principal offices in Marina Del Rey, California. We also maintain office and data center space in various cities within the United States, Netherlands and Canada.
Biggest changeItem 2. Properties. We maintain our principal offices in Los Angeles, California. We also maintain office and data center space in various cities within the United States, Netherlands and Canada.
We believe that our facilities are adequate to meet our needs for the immediate future and that, should it be needed, we will be able to secure additional space to accommodate expansion of our operations. 55
We believe that our facilities are adequate to meet our needs for the immediate future and that, should it be needed, we will be able to secure additional space to accommodate expansion of our operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeInformation in response to this Item is included in “Part II — Item 8. — Note 10, Commitments and Contingencies and is incorporated by reference into Part I of this Annual Report on Form 10-K. 56
Biggest changeInformation in response to this Item is included in "Part II, Item 8 "Financial Statements and supplementary data — Note 8, Commitments and Contingencies" and is incorporated by reference into Part I of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. 50 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+1 added−1 removed1 unchanged
Biggest changeDividend Policy We have never declared or paid any dividends on our Class A or Class C common stock, and we do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain any earnings to finance the operation and expansion of our business.
Biggest changeThis number of holders does not include stockholders whose shares may be held in trust by other entities. Dividend Policy We have never declared or paid any dividends on our Class A or Class C common stock, and we do not anticipate paying any cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities None Repurchase of Equity Securities 2022 Repurchase Program In August 2022, our Board of Directors authorized up to $25 million for the repurchase of our Class A common stock and Public Warrants (the “ 2022 Repurchase Program ” ).
Recent Sales of Unregistered Securities None Repurchase of Equity Securities 2022 Repurchase Program In August 2022, our Board of Directors authorized up to $25 million for the repurchase of our Class A common stock and Warrants (the " 2022 Repurchase Program " ).
Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon then-existing conditions, including our earnings, capital requirements, results of operations, financial condition, business prospects and other factors that our Board of Directors considers relevant. Refer to “Item 7.
Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon then-existing conditions, including our earnings, capital requirements, results of operations, financial condition, business prospects and other factors that our Board of Directors considers relevant.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information regarding our financial condition. In addition, our credit facility contains restrictions on our ability to pay dividends.
See "Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for additional information regarding our financial condition. In addition, our credit facility contains restrictions on our ability to pay dividends.
During the fourth quarter of 2023 there were no repurchases under the 2022 Repurchase Program and, as of December 31, 2023, we had a remaining balance of approximately $24 million under the 2022 Repurchase Program. Item 6. Reserved 58
During fiscal year 2024 there were no repurchases under the 2022 Repurchase Program and, as of December 31, 2024, we had a remaining balance of approximately $24 million under the 2022 Repurchase Program. Item 6. [Reserved] 51
Securities Authorized for Issuance Under Equity Compensation Plans Our equity compensation plan information required by this item is incorporated by reference to the information in Part III, Item 12 of this Annual Report on Form 10-K.
Securities Authorized for Issuance Under Equity Compensation Plans Our equity compensation plan information required by this item is incorporated by reference to the information in Part III, Item 12 — "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" of this Annual Report on Form 10-K.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Class A common stock and Warrants are listed on NYSE under the symbols “SST” and “SST.WS,” respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our Class A common stock and Warrants are listed on NYSE under the symbols "SST" and "SST.WS," respectively. There is no public trading market for our Class C common stock.
Holders of Record As of March 8, 2024, there were approximately 396 holders of record of our Class A common stock, 67 holders of record of our Class C common stock and 2 holders of record of our Warrants.
Holders of Record As of February 28, 2025, there were approxima tely 366 holders of record of our Class A common stock, 67 holders of record of our Class C common stock and 2 holders of record of our Warrants.
Removed
Prior to the consummation of the Merger, the Trebia Class A common stock, units and Warrants were listed on NYSE under the symbols “TREB”, “TREB.U” and “TREB.WS,” respectively. There is no public trading market for our Class C common stock.
Added
We currently intend to retain any earnings to finance the operation and expansion of our business.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

79 edited+33 added−59 removed38 unchanged
Biggest changeResults of Operations The following tables set forth our consolidated results of operations and our consolidated results of operations as a percentage of revenue for the periods presented (in thousands). 62 Successor Predecessor Year Ended December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022 Revenue $ 401,971 $ 612,229 $ 52,712 Operating expenses: Cost of revenue (excluding depreciation and amortization) 248,745 438,839 41,507 Salaries and benefits 106,505 138,045 31,181 Selling, general, and administrative 54,307 50,831 15,665 Depreciation and amortization 78,403 69,469 1,000 Impairment of goodwill — 372,728 — Total operating expenses 487,960 1,069,912 89,353 Operating loss (85,989) (457,683) (36,641) Other expense (income): Interest expense, net 48,745 31,609 1,049 Loss on extinguishment of related-party debt 2,004 — — Change in fair value of Warrant liabilities (5,109) 3,751 — Total other expense 45,640 35,360 1,049 Loss before income tax (131,629) (493,043) (37,690) Income tax benefit (20,371) (108,680) (629) Net loss from continuing operations (111,258) (384,363) (37,061) Net loss from discontinued operations, net of tax (174,327) (56,959) — Net loss (285,585) (441,322) (37,061) Less: Net loss from continuing operations attributable to non-controlling interest (25,531) (99,841) — Less: Net loss from discontinued operations attributable to non-controlling interest (32,833) (11,089) — Net loss attributable to System1, Inc. $ (227,221) $ (330,392) $ (37,061) 63 Successor Predecessor Year Ended December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022 Revenue 100 % 100 % 100 % Operating expenses: Cost of revenue (excluding depreciation and amortization) 62 % 72 % 79 % Salaries and benefits 26 % 23 % 59 % Selling, general, and administrative 14 % 8 % 30 % Depreciation and amortization 20 % 11 % 2 % Impairment of goodwill — % 61 % — % Total operating expenses 121 % 175 % 170 % Operating loss (21) % (75) % (70) % Other expense (income): Interest expense, net 12 % 5 % 2 % Loss on extinguishment of related-party debt — % — % — % Change in fair value of Warrant liabilities (1) % 1 % — % Total other expense 11 % 6 % 2 % Loss before income tax (33) % (81) % (72) % Income tax benefit (5) % (18) % (1) % Net loss from continuing operations (28) % (63) % (70) % Net loss from discontinued operations, net of tax (43) % (9) % — % Net loss (71) % (72) % (70) % Less: Net loss from continuing operations attributable to non-controlling interest (6) % (16) % — % Less: Net loss from discontinued operations attributable to non-controlling interest (8) % (2) % — % Net loss attributable to System1, Inc.
Biggest changeDecember 31, 2024 Percentage of Revenue December 31, 2023 Percentage of Revenue Revenue $ 343,925 100% $ 401,971 100% Operating expenses: Cost of revenue (excluding depreciation and amortization) 191,561 56% 248,745 62% Salaries and benefits 113,512 33% 106,505 26% Selling, general, and administrative 47,346 14% 54,307 14% Depreciation and amortization 80,107 23% 78,403 20% Total operating expenses 432,526 126% 487,960 121% Operating loss (88,601) (26)% (85,989) (21)% Other expense (income): Interest expense, net 31,562 9% 48,745 12% Gain on extinguishment of debt (20,109) (6)% — —% Loss on extinguishment of related-party debt — —% 2,004 —% Change in fair value of warrant liabilities (2,386) (1)% (5,109) (1)% Total other expense, net 9,067 3% 45,640 11% Loss before income tax (97,668) (28)% (131,629) (33)% Income tax benefit (370) —% (20,371) (5)% Net loss from continuing operations (97,298) (28)% (111,258) (28)% Net loss from discontinued operations, net of tax — —% (174,327) (43)% Net loss (97,298) (28)% (285,585) (71)% Less: Net loss from continuing operations attributable to non-controlling interest (22,625) (7)% (25,531) (6)% Less: Net loss from discontinued operations attributable to non-controlling interest — —% (32,833) (8)% Net loss attributable to System1, Inc. $ (74,673) (22)% $ (227,221) (57)% * Percentages may not sum due to rounding Revenue and Cost Metrics The key non-financial performance metrics we use to evaluate our business, track the effectiveness of our operations and measure our performance are total advertising spend, number of Owned & Operated Advertising sessions ("O&O sessions"), number of Partner Network sessions ("Network sessions"), Owned & Operated Advertising revenue-per-session ("O&O RPS"), Owned & Operated Advertising cost-per-session ("O&O CPS") and Partner Network revenue-per-session ("Network RPS") to track our operations.
If, however, the fair value of the reporting unit is less than carrying amount, an impairment loss is recognized in an amount equal to the excess, not to exceed the carrying amount of goodwill.
If, however, the fair value of the reporting unit is less than the carrying amount, an impairment loss is recognized in an amount equal to the excess, not to exceed the carrying amount of goodwill.
Per the terms of the note we (i) must prepay the Loan under certain circumstances, which include consummation of a strategic transaction, the refinancing of the existing credit agreement, the incurrence by us of any indebtedness exceeding $2.5 million, or the sale of any of our assets in excess of $2.5 million; (ii) may prepay the Loan at any time without penalty or interest; and (iii) must make four substantially equal amortization payments on April 1, 2024, May 1, 2024, June 1, 2024, and July 1, 2024, unless there is an event of default, including a continuing event of default on the Credit Agreement, at which 69 point the holder may declare all amounts due immediately.
Per the terms of the note we (i) must prepay the Loan under certain circumstances, which include consummation of a strategic transaction, the refinancing of the existing credit agreement, the incurrence by us of any indebtedness exceeding $2.5 million, or the sale of any of our assets in excess of $2.5 million; (ii) may prepay the Loan at any time without penalty or interest; and (iii) must make four substantially equal amortization payments on April 1, 2024, May 1, 2024, June 1, 2024, and July 1, 2024, unless there is an event of default, including a continuing event of default on the Credit Agreement, at which point the holder may declare all amounts due immediately.
The Term Loan comes with a leverage ratio covenant, which goes into effect only if the utilization on the 2022 Revolving Facility exceeds 35% of the total availability under the 2022 Revolving Facility 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 68 defined in the credit agreement) should not exceed 5.40.
The Term Loan comes with a leverage ratio covenant, which goes into effect only if the utilization on the 2022 Revolving Facility exceeds 35% of the total availability under the 2022 Revolving Facility 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.
The Lenders are also entitled to (i) an unused commitment fee equal to 1.0% per annum of the actual daily amount of total unfunded commitments under the 2023 Revolving Note during the period from the closing date to the maturity date, payable quarterly in arrears and (ii) a closing loan fee equal to 12.0% of each Lender's commitment under the 2023 Revolving Note, or $2.4 million in total.
The Lenders are also entitled to (i) an unused commitment fee equal to 1.0% per annum of the actual daily amount of total unfunded commitments under the 2023 Revolving Note during the period from the closing date to the maturity date, payable quarterly in arrears and (ii) a closing loan fee equal to 12.0% of each Lender's commitment under the 60 2023 Revolving Note, or $2.4 million in total.
Pursuant to the Share Purchase Agreement, the Purchasing Parties acquired all of the outstanding preference and ordinary shares of Protected (“Protected Disposition”) for total consideration comprised of: (a) $240.0 million in cash, subject to certain adjustments, (b) the return and subsequent cancellation of approximately 29.1 million shares of our Class A common stock, par value 60 $0.0001 per share, owned by JDI and other entities and individuals affiliated with the Purchasing Parties and (c) confirmation from JDI, Protected and the Protected CEO that the financial performance benchmarks related to certain contingent earnout payments based on the future performance of Protected’s business in an aggregate amount of up to $60.0 million included in the Business Combination Agreement will, as a result of the Protected Disposition, no longer be achievable.
Pursuant to the Share Purchase Agreement, the Purchasing Parties acquired all of the outstanding preference and ordinary shares of Protected ("Protected Disposition") for total consideration comprised of: (a) $240.0 million in cash, subject to certain adjustments, (b) the return and subsequent cancellation of approximately 29.1 million shares of our Class A common stock, par value $0.0001 per share, owned by JDI and other entities and individuals affiliated with the Purchasing Parties and (c) confirmation from JDI, Protected and the Protected CEO that the financial performance benchmarks related to certain contingent earnout payments based on the future performance of Protected’s business in an aggregate amount of up to $60.0 million included in the Business Combination Agreement will, as a result of the Protected Disposition, no longer be achievable.
Unanticipated events or circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results. Stock-Based Compensation 73 Compensation cost related to stock-based payments is measured based on the fair value of the units issued and recognized in salaries and benefits expenses on our consolidated statement of operations.
Unanticipated events or circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results. Stock-Based Compensation Compensation cost related to stock-based payments is measured based on the fair value of the units issued and recognized in salaries and benefits expenses on our consolidated statement of operations.
The remaining cost of revenue consists of non-advertising expenses such as set-up costs, royalties and fees. We exclude the following items from segment adjusted gross profit: depreciation and amortization of property, equipment and leasehold improvements, amortization of intangible assets and, at times, certain other transactions or adjustments.
The remaining cost of revenue consists of non-advertising expenses such as set-up costs, royalties and fees. We exclude the following items from segment adjusted gross profit: depreciation and 57 amortization of property, equipment and leasehold improvements, amortization of intangible assets and, at times, certain other transactions or adjustments.
The maturity date under the 2023 Revolving Note is July 10, 2024 ( “ Maturity Date ” ) with automatic three-month extensions, unless we or any Lender provides written notice of our election not to extend the 2023 Revolving Note, unless there is an event of default that is then continuing as the time of such extension .
The maturity date under the 2023 Revolving Note is July 10, 2024 ( " Maturity Date " ) with automatic three-month extensions, unless we or any Lender provides written notice of our election not to extend the 2023 Revolving Note, unless there is an event of default that is then continuing as the time of such extension .
Key assumptions in these models include, but are not limited to, the selection of comparable transactions, revenue and “EBITDA” is defined as net income or loss before results from discontinued operations, interest, income tax expense or benefit, and depreciation and amortization multiples and EBITDA margins from those transactions.
Key assumptions in these models include, but are not limited to, the selection of comparable transactions, revenue and "EBITDA" is defined as net income or loss before results from discontinued operations, interest, income tax expense or benefit, and depreciation and amortization multiples and EBITDA margins from those transactions.
The amounts outstanding under the Secured Facility accrue interest at the rate of 8.5% per annum. The amounts outstanding under the Secured Facility are due upon the earlier of (i) October 6, 2024 or (ii) the date on which Protected undergoes a Change of Control.
The amounts outstanding under the Secured Facility accrue interest at the rate of 8.5% per annum. The amounts outstanding under the Secured Facility are due upon the earlier of (i) October 6, 2024 or (ii) the date on 61 which Protected undergoes a Change of Control.
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.
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 64 rates in effect for the year in which the differences are expected to reverse.
Critical Accounting Policies and Estimates 72 The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America.
Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America.
If we determine that we would not be able to realize our DTAs in the future in excess of their net recorded amount, we would make an adjustment to the DTA valuation allowance, which would increase the provision for income taxes.
If we determine that we would not be able to realize our DTAs in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which would increase the provision for income taxes.
Secured Facility On October 6, 2023, Protected, our indirect wholly-owned subsidiary at the time, entered into a Secured Facility Agreement providing for a $10.0 million term loan (“Secured Facility”) with a subsidiary of JDI ("Secured Lender") , one of our significant shareholders, which is principally owned and managed by certain members of the Protected management team .
Secured Facility On October 6, 2023, Protected, our indirect wholly-owned subsidiary at the time, entered into a Secured Facility Agreement providing for a $10.0 million term loan ("Secured Facility") with a subsidiary of JDI ("Secured Lender") , one of our significant shareholders, which is principally owned and managed by certain members of the Protected management team .
Income tax benefit 66 The difference between the effective tax rates for the periods presented above and the federal statutory tax rate of 21% was primarily due to the exclusion of non-controlling income (loss), effects of predecessor flow through income allocations, changes in unrecognized tax benefits, valuation allowance and outside basis adjustments.
Income tax benefit The difference between the effective tax rates for the periods presented and the federal statutory tax rate of 21% was primarily due to the exclusion of non-controlling income (loss), effects of predecessor flow through income allocations, changes in unrecognized tax benefits, valuation allowance and outside basis adjustments.
We have 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 our carrying amount or (ii) to perform the quantitative impairment test.
We have 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 following discussion and analysis of the financial condition and results of operations of System1 should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K or SEC.
The following discussion and analysis of the financial condition and results of operations of System1 should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
The quantitative impairment test involves comparing the estimated fair value of a reporting unit with our respective carrying amount, including goodwill. If the estimated fair value exceeds carrying amount, goodwill is considered not to be impaired.
The quantitative impairment test involves comparing the estimated fair value of a reporting unit with its respective carrying amount, including goodwill. If the estimated fair value exceeds the carrying amount, goodwill is considered not to be impaired.
Company Overview We operate an omnichannel customer acquisition platform, delivering high-intent customers to brands, advertisers and publishers . We provide our omnichannel customer acquisition platform services through our proprietary responsive acquisition marketing platform (“RAMP”).
Company Overview We operate an omnichannel customer acquisition platform, delivering high-intent customers to brands, advertisers and publishers . We provide our omnichannel customer acquisition platform services through our proprietary responsive acquisition marketing platform ("RAMP").
Term Note On October 6, 2023, we entered into a $2.5 million Term Loan Note (“Term Note”) with Openmail2, LLC (“Term Lender”), which is principally owned and managed by trusts established for the benefit of our co-founders. The amounts outstanding under the Term Note accrue interest at the rate per annum equal to the SOFR plus 5.75%.
Term Note On October 6, 2023, we entered into a $2.5 million Term Loan Note ("Term Note") with Openmail2, LLC ("Term Lender"), which is principally owned and managed by trusts established for the benefit of our co-founders. The amounts outstanding under the Term Note accrue interest at the rate per annum equal to the SOFR plus 5.75%.
We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of S1 Holdco, as well as any stand-alone income or loss generated by us. Various of our subsidiaries are subject to income tax in the United States and in other countries.
We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of System1 Holdings, as well as any stand-alone income or loss generated by us. Various of our subsidiaries are subject to income tax in the United States and in other countries.
We used available cash on hand to fund the repurchase. 2023 Revolving Note On April 10, 2023, we entered into a $20.0 million Revolving Note (“2023 Revolving Note”) with trusts established for the benefit of our co-founders (“Lenders”). Each Lender provided a $10.0 million commitment for an aggregate principal of $20.0 million under the 2023 Revolving Note.
We used available cash on hand to fund the repurchase. 2023 Revolving Note On April 10, 2023, we entered into a $20.0 million Revolving Note ("2023 Revolving Note") with trusts established for the benefit of our co-founders ("Lenders"). Each Lender provided a $10.0 million commitment for an aggregate principal of $20.0 million under the 2023 Revolving Note.
The Trebia Merger On June 28, 2021, we entered into a Business Combination Agreement (as amended on November 30, 2021, January 10, 2022 and January 25, 2022), (“Business Combination Agreement”) by and among us, S1 Holdco and Total Security Limited, formerly known as Protected.net Group Limited (“Protected”) .
The Trebia Merger On June 28, 2021, we entered into a Business Combination Agreement (as amended on November 30, 2021, January 10, 2022 and January 25, 2022), ("Business Combination Agreement") by and among us, S1 Holdco, LLC ("S1 Holdco") and Total Security Limited, formerly known as Protected.net Group Limited ("Protected") .
Subsequently, on November 30, 2023, we completed the sale of Protected, pursuant to the terms of a share purchase agreement (“Share Purchase Agreement”).
Subsequently, on November 30, 2023, we completed the sale of Protected, pursuant to the terms of a share purchase agreement ("Share Purchase Agreement").
Contractual Obligations and Known Future Cash Requirements Service Agreements In June 2021, we entered into a multi-year agreement with a service provider whereby we are contractually obligated to spend $5.0 million annually between July 2023 and June 2026 . As of December 31, 2023, we remain contractually obligated to spend a remaining $11.1 million towards this commitment.
Contractual Obligations and Known Future Cash Requirements Service Agreements In June 2021, we entered into a multi-year agreement with a service provider whereby we are contractually obligated to spend $5.0 million annually between July 2023 and June 2026 . As of December 31, 2024, we remain contractually obligated to spend a remaining $6.2 million towards this commitment.
Operating seamlessly across major advertising networks and advertising category verticals to acquire end-users, RAMP allows us to monetize these acquired end users through our relationships with third party advertisers and advertising networks (“Advertising Partners”).
Operating seamlessly across major advertising networks and advertising category verticals to acquire end-users, RAMP allows us to monetize these acquired end users through our relationships with third party advertisers and advertising networks ("Advertising Partners").
Income Taxes We are the sole managing member of S1 Holdco and, as a result, consolidate 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.
Income Taxes We are the sole managing member of System1 Holdings and, as a result, consolidate the financial results of System1 Holdings. System1 Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, System1 Holdings is not subject to U.S. federal and certain state and local income taxes.
We account 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.
We account 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.
Components of Our Results of Operations Revenue Revenue is earned from revenue-sharing arrangements with our Network Partners related to the use of our RAMP platform and additional services provided to them in order to direct advertising by our Advertising Partners to their digital online inventory.
Revenue is also earned from revenue-sharing arrangements with our Network Partners related to the use of our RAMP platform and additional services provided to them in order to direct advertising by our Advertising Partners to their digital online inventory.
We define Network sessions as the number of monetizable user visits delivered by our Network Partners to RAMP. Monetizable visits exclude those visits identified by our Advertising Partners as spam, bot, or other invalid traffic. We define CPS as advertising spend 64 divided by O&O sessions. We define O&O RPS as O&O Revenue divided by O&O sessions.
We define Network sessions as the number of monetizable user visits delivered by our Network Partners to RAMP. Monetizable visits exclude those visits identified by our Advertising Partners as spam, bot, or other invalid traffic. We define O&O RPS as O&O revenue divided by O&O sessions. We define Network RPS as Network Partner revenue divided by Network sessions.
Since launching, it has expanded to support additional advertising formats across multiple advertising platforms, and has acquired several leading websites, enabling it to control the entire flow of the user acquisition experience, while monetizing user traffic through our network of owned and operated websites.
We focus on monetizing user traffic acquired by our Network Partners. Since launching, it has expanded to support additional advertising formats across multiple advertising platforms, and has acquired several leading websites, enabling it to control the entire flow of the user acquisition experience, while monetizing user traffic through our network of owned and operated websites.
Sale of Protected On September 6, 2023, we announced that it had received a non-binding indication of intent from Just Develop It Limited (“JDI”), one of our significant shareholders, which is principally owned and managed by certain members of Protected management team, related to the potential acquisition of Protected, which operates our subscription business.
Sale of Protected On September 6, 2023, we announced that we had received a non-binding indication of intent from Just Develop It Limited ("JDI"), one of our significant shareholders, which is principally owned and managed by certain members of Protected's management team ("Purchasing Parties"), related to the potential acquisition of Protected, which operated our subscription business.
Any taxable income or loss generated by S1 Holdco is passed through to and included in the taxable income or loss of our members, including us, on a pro rata basis.
Any taxable income or loss generated by System1 Holdings is passed through to and included in the taxable income or loss of our members, including us, on a pro rata basis.
RAMP operates across our network of owned and operated websites, allowing us to monetize user traffic that we source from various acquisition marketing channels, including Google, Facebook, Zemanta, Taboola, and TikTok.
RAMP operates across our network of owned and operated websites, allowing us to monetize user traffic that we source from various acquisition marketing channels, including Google, Meta, Outbrain, and TikTok.
In the year ended December 31, 2023 (Successor), cash used in financing activities of $74.1 million resulted primarily from repayment of the 2022 Revolving Facility of $50.0 million and repayment of the 2023 Revolving Note of $20.0 million.
In the year ended December 31, 2023, cash used in financing activities of $74.1 million resulted primarily from repayment of the 2022 Revolving Facility of $50.0 million and repayment of our Term Loan of $20.0 million.
Additionally, following the Merger, Trebia’s ordinary shares and Public Warrants ceased trading on the New York Stock Exchange (“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.
Following the Merger, Trebia’s ordinary shares and Public Warrants ("Warrants") ceased trading on the New York Stock Exchange ("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.
As of December 31, 2023, S1 Holdco owns and operates approximately 40 websites, including leading search engines like info.com and Startpage.com, and digital media publishing websites and internet utilities, such as HowStuffWorks, MapQuest, CouponFollow and ActiveBeat. Our primary operations are in the United States; and we also have operations in Canada and the Netherlands.
As of December 31, 2024, we own and operate approximately 40 websites, including leading search engines like info.com and Startpage.com , and digital media publishing websites and internet utilities, such as HowStuffWorks , MapQuest , CouponFollow and ActiveBeat . Our primary operations are in the United States, and we also have operations in Canada and the Netherlands.
In the year ended December 31, 2023 (Successor), cash used in operating activities of $24.7 million resulted primarily from a net loss of $285.6 million, a payment long-term earnout liabilities of $20.0 million, a decrease in accrued expenses and other current liabilities of $19.4 million and a noncash tax benefit of $22.3 million.
Net cash used for working capital was $2.9 million In the year ended December 31, 2023, cash provided by operating activities of $24.7 million resulted primarily from a net loss of $285.6 million, payment of long term earnout liabilities of $20.0 million, a decrease in accrued expenses and other current liabilities of $19.4 million and a noncash tax benefit of $22.3 million.
For the year ended December 31, 2023, compared to prior year, our CPS decreased $0.05 to $0.06 from $0.11. Our chief operating decision maker measures and evaluates reportable segments based on segment operating revenue as well as adjusted gross profit and other measures. We define and calculate adjusted gross profit as revenue less advertising expense incurred to acquire users.
For the year ended December 31, 2024, compared to prior year, our O&O CPS decreased $0.04 to $0.02 from $0.06. Our chief operating decision maker measures and evaluates reportable segments based on segment operating revenue and adjusted gross profit. We define and calculate adjusted gross profit as revenue less advertising expense incurred to acquire users.
We define total advertising spend as the amount of advertising that is spent by us to acquire traffic to our owned and operated websites. We define O&O sessions as the total number of monetizable user visits to our Owned & Operated Advertising websites.
We define total advertising spend as the amount of advertising that is spent by us to acquire traffic to our owned and operated websites.
We recognize both accrued interest and penalties, when appropriate, in the provision for income taxes on the accompanying consolidated statements of operations. Recently Issued Accounting Pronouncements For information regarding recent accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies . 74
We recognize both accrued interest and penalties, when appropriate, in the provision for income taxes on the accompanying consolidated statements of operations. Recently Issued Accounting Pronouncements For information regarding recent accounting pronouncements, see Item 8, "Financial Statements and Supplementary Data — Note 2, Summary of Significant Accounting Policies" .
Unless otherwise noted, the information contained in this Management Discussion and Analysis relates solely to our continuing operations and does not include the operations of our Protected business (see Note 19, Discontinued Operations).
Unless otherwise noted, the information contained in this Management Discussion and Analysis relates solely to our continuing operations and does not include the operations of our Protected business (see Item 8, "Financial Statements and Supplementary Data — Note 17, Discontinued Operations").
Cost of revenue (excluding depreciation and amortization) primarily consists of traffic acquisition costs, which are the costs to place advertisements to acquire customers to our websites and services, as well as domain name registration costs and licensing costs to provide mapping services to Mapquest.com.
Cost of revenue (excluding depreciation and amortization) primarily consists of traffic acquisition costs, which are the costs to place advertisements to acquire customers to our websites and services, as well as domain name registration costs and licensing costs to provide mapping services to Mapquest.com. We do not pre-pay any traffic acquisition costs, and therefore, such costs are expensed as incurred.
As a result of the current uncertainty in economic activity, including geopolitical developments and other macroeconomic factors such as rising interest rates, inflation and the impact of earlier supply chain disruptions, we are unable to predict the size and duration of the impact on our revenue and our results of operations.
We do not engage in hedging activities to mitigate our exposure to fluctuations in foreign currency exchange rates. 52 As a result of the current uncertainty in economic activity, including geopolitical developments and other macroeconomic factors such as rising interest rates, inflation and the impact of earlier supply chain disruptions, we are unable to predict the size and duration of the impact on our revenue and our results of operations.
This context-enriched data, combined with our proprietary and data science driven algorithms, creates a closed-loop system that is not reliant on personally identifiable information or information obtained through third-party cookies, but which allows RAMP to efficiently match consumer demand with the appropriate advertiser or advertising experience across advertising category verticals. 59 S1 Holdco, LLC ("S1 Holdco") was founded in 2013 with a focus on monetizing user traffic acquired by our Network Partners.
This context-enriched data, combined with our proprietary and data science driven algorithms, creates a closed-loop system that is not reliant on personally identifiable information or information obtained through third-party cookies, but which allows RAMP to efficiently match consumer demand with the appropriate advertiser or advertising experience across advertising category verticals.
Promissory Note On September 6, 2023, we entered into a $5.2 million Senior Unsecured Promissory Note (the “Promissory Note”) with the Lender, in order to convert the amount held back and owed to him as a result of the acquisition of CouponFollow (see Note 4, Acquisitions) into a loan to us (the “Loan”).
Senior Unsecured Promissory Note On September 6, 2023, we entered into a $5.2 million Senior Unsecured Promissory Note (the "Promissory Note") with the CouponFollow seller and an employee of ours ("Lender"), in order to convert the amount owed to him as a result of the acquisition of CouponFollow into a loan to us (the "Loan").
We report the revenue generated under our revenue-sharing arrangements on a net basis, based on the difference between amounts received by us from our Advertising Partners, less amounts remitted to the Network Partners based on the underlying revenue-sharing agreements.
We report the revenue generated under our revenue-sharing arrangements on a net basis, based on the difference between amounts received by us from our Advertising Partners, less amounts remitted to the Network Partners based on the underlying revenue-sharing agreements. We recognize revenue as we deliver user-traffic to our Advertising Partners based on a cost-per-click, cost-per-action or cost-per-thousand impression basis.
The net loss from discontinued operations, net of tax only includes direct operating expenses incurred that (1) are clearly identifiable as costs being disposed of upon completion of the sale and (2) will not be continued by us on an ongoing basis.
Net loss from discontinued operations, net of tax Net loss from discontinued operations, net of tax is comprised of the net loss from discontinued operations, net of tax and only includes direct operating expenses incurred that: (1) are clearly identifiable as costs being disposed of upon completion of the sale, and (2) will not be continued by us on an ongoing basis, goodwill impairment charge, final loss on sale and the results of operations of our subscription business segment, which was sold on November 30, 2023.
Loss on extinguishment of related-party debt Loss on extinguishment of related-party debt increased $2.0 million due to t he recognition of the unamortized portion of the loan fees upon settlement of our related party loans, and a portion of the cash consideration held back in connection with our prior CouponFollow acquisition which was converted into a Promissory Note.
Loss on extinguishment of related-party debt Loss on extinguishment of related-party debt decreased $2.0 million compared to the prior comparative period due to the recognition of the unamortized portion of the loan fees upon settlement of our related party debt and restructuring of a portion of the cash consideration held back in connection with our CouponFollow acquisition which was converted into a Promissory Note, in the prior period. 58 Change in fair value of warrant liabilities Change in fair value of warrant liabilities decreased $2.7 million, or 53% compared to the prior comparative period.
In the year ended December 31, 2023 (Successor), cash provided by investing activities of $203.2 million resulted primarily from proceeds from sale of our Protected business segment.
Investing Activities In the year ended December 31, 2024 , cash used in investing activities of $6.3 million resulted primarily from capitalization of software development costs. In the year ended December 31, 2023, cash provided by investing activities of $203.2 million resulted primarily from proceeds from the sale of our Protected business segment on November 30, 2023.
From March 31, 2026, $7.5 million of the Term Loan is payable quarterly. The Term Loan matures in 2027. For every interest period, the interest rate on the Term Loan is the adjusted Secured Overnight Financing Rate (“SOFR”) plus 4.75%. The Term Loan is amortized in quarterly installments on each scheduled payment date.
For every interest period, the interest rate on the Term Loan is the adjusted Secured Overnight Financing Rate ("SOFR") plus 4.75%. The Term Loan is amortized in quarterly installments on each scheduled payment date.
Factors that might cause future results to differ materially from those projected in such forward-looking statements include, but are not limited to, those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” References to “Notes” are notes included in our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Factors that might cause future results to differ materially from those projected in such forward-looking statements include, but are not limited to, those discussed in the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." in Part I of this Annual Report on Form 10-K.
We recognize revenue upon delivering user-traffic to our Advertising Partners based on a cost-per-click or cost-per-thousand impression basis. The payment terms with our Advertising Partners is typically 30 days. Revenue may fluctuate from period to period due to a number of factors including seasonality and the shift in mix of user acquisition sources from Advertising Partners.
The payment terms with our Advertising Partners are typically 30 days. Revenue may fluctuate from period to period due to a number of factors including seasonality and the shift in mix of user acquisition sources from Advertising Partners.
We do not pre-pay any traffic acquisition costs, and therefore, such costs are expensed as incurred. 61 Salaries and benefits. Salaries and benefits expenses include salaries, bonuses, stock-based compensation, and employee benefits costs. Selling, general, and administrative . Selling, general, and administrative expenses consist of fees for professional services, occupancy costs and travel and entertainment.
Salaries and benefits . Salaries and benefits expenses include salaries, bonuses, stock-based compensation, and employee benefits costs. Selling, general, and administrative . Selling, general, and administrative expenses consist of fees for software services, professional services, occupancy costs and travel and entertainment. These costs are expensed as incurred. Depreciation and amortization .
To date, our available liquidity and operations have been financed through cash received in the Merger, indebtedness available under our credit facilities, other indebtedness, sale of our Protected business segment, and cash flows from operations.
Our principal sources of liquidity have historically been from cash received in the Merger, indebtedness available under our credit facilities, other indebtedness, sale of our Protected business segment, and cash flows from operations. Our principal sources of liquidity are expected to be from cash on hand and cash flows from operating and financing activities.
The recognition of the unamortized portion of the loan fees upon settlement of our related party debt and restructuring of a portion of the cash consideration held back in connection with our CouponFollow acquisition which was converted into a Promissory Note. Refer to Note 4, Acquisitions and Note 12, Related-Party Transactions for a dditional information.
The recognition of the unamortized portion of the loan fees upon settlement of our related party debt and restructuring of a portion of the cash consideration held back in connection with our CouponFollow acquisition which was converted into a Promissory Note. Change in fair value of warrant liabilities . The mark to market of our liability-classified Warrants.
Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): 70 Successor Predecessor December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022 Net cash provided by (used in) operating activities $ (24,742) $ 3,317 $ (10,603) Net cash provided by (used in) investing activities $ 203,179 $ (454,009) $ (441) Net cash used in financing activities $ (74,072) $ (27,729) $ — Operating Activities Our cash flows from operating activities are primarily impacted by growth in our operations, timing of collections from our partner and related payments to our suppliers for advertising inventory and data.
Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): December 31, 2024 December 31, 2023 Net cash used in operating activities $ (5,255) $ (24,742) Net cash (used in) provided by investing activities $ (6,255) $ 203,179 Net cash used in financing activities $ (63,961) $ (74,072) Operating Activities Our cash flows from operating activities are primarily impacted by growth in our operations, timing of collections from our partners and related payments to our suppliers for advertising inventory and data.
In December 2023, we repaid the full $50 million that was outstanding, therefore, as of December 31, 2023, there was no outstanding balance. We have been able to and expect to be able to continue to make the required payments of principal and interest on the Credit Agreement (as and when due) on a timely basis.
We have been able to and expect to be able to continue to make the required payments of principal and interest on the Credit Agreement (as and when due) on a timely basis.
On January 17, 2024, we completed the repurchase of $63.7 million in principal amount of our Term Loan for an aggregate purchase price of $40.9 million (at discount of 64.2% of its par value) pursuant to a Dutch auction tender offer. Following the repurchase, the outstanding principal amount of the Term Loan was $301.3 million.
During 2024, we completed the repurchase of $64.9 million in principal amount of our Term Loan for an aggregate purchase price of $41.6 million (at discount of 64.1% of its par value). Following the repurchases on January 17, 2024 and April 30, 2024, the outstanding principal amount of the Term Loan was $301.3 million and $295.0 million, respectively.
The 2022 Revolving Facility provided borrowing availability of up to $50.0 million. As of December 31, 2023, there was no balance outstanding on the 2022 Revolving Facility and principal of $365.0 million was outstanding on the Term Loan. Through December 31, 2025, $5.0 million of the Term Loan is payable quarterly.
As of December 31, 2024, there was no balance outstanding on the 2022 Revolving Facility and principal of $280.1 million was outstanding on the Term Loan. Through December 31, 2025, $5.0 million of the Term Loan is payable quarterly. From March 31, 2026, $7.5 million of the Term Loan is payable quarterly. The Term Loan matures in 2027.
Cost of revenue (excluding depreciation and amortization) Cost of revenue (excluding depreciation and amortization) decreased $231.6 million, or 48%, was primarily due to a d ecrease of $237 million in our O&O reportable segment, which was directionally consistent with the decrease in revenue.
Cost of revenue (excluding depreciation and amortization) Cost of revenue (excluding depreciation and amortization) decreased $57.2 million, or 23%, pri marily due to a decrease of $47.5 million in our Owned & Operated reportable segment, which was directionally consistent with the decrease in revenue.
Management's Discussion and Analysis of Financial Condition and Results of Operations SYSTEM1 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless otherwise indicated or the context otherwise requires, references in this section to “the Company,” “System1,” “we,” “us,” “our” and other similar terms refer to System1, Inc and its subsidiaries and references to “Trebia” refer to the Company, formerly known as Trebia Acquisition Corp., prior to the Merger (as defined below).
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Unless otherwise indicated or the context otherwise requires, references in this section to "the Company," "System1," "we," "us," "our" and other similar terms refer to System1, Inc and its subsidiaries.
In addition to historical information, the following discussion and analysis contains forward-looking statements. Our actual results may differ significantly from those projected in such forward-looking statements.
The following discussion and analysis should also be read together with the section entitled "Organization and description of business" in Part II as of December 31, 2024. In addition to historical information, the following discussion and analysis contains forward-looking statements. Our actual results may differ significantly from those projected in such forward-looking statements.
Change in fair value of Warrant liabilities. The mark to market of our liability-classified Public and Private Warrants. Income tax benefit We are the sole managing member of S1 Holdco and, as a result, consolidate 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.
Income tax benefit During 2023 and through July 31, 2024, we were the sole managing member of S1 Holdco and, as a result, consolidate 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.
Following the consummation of the Merger, the combined company was organized via an “Up-C” structure, in which substantially all of the assets and business operations of System1 are held by S1 Holdco, and our combined business continues to operate through the domestic and foreign subsidiaries of S1 Holdco.
On January 26, 2022 ("Closing Date"), we consummated the business combination ("Merger") pursuant to the Business Combination Agreement. Following the consummation of the Merger, the combined company was organized via an "Up-C" structure, in which substantially all of the assets and business operations of System1 are held by S1 Holdco.
The results of operations of our Protected business are presented as net loss from discontinued operations in our consolidated statements of operations for all periods presented, and the assets and liabilities for our Protected business have been classified as held for sale from discontinued operations and segregated for all periods presented in the consolidated balance sheets.
The results of operations of our Protected business are presented as net loss from discontinued operations in our consolidated statements of operations for the comparative period presented.
We also earn revenue by directly acquiring traffic to our owned and operated websites and utilizing our RAMP platform and additional services to generate end-users for our Advertising Partners. For this revenue stream, we are the principal in the transaction and report revenue on a gross basis for the amounts received from Advertising Partners.
For this revenue stream, we are the principal in the transaction and report revenue on a gross basis for the amounts received from Advertising Partners.
The following table presents our adjusted gross profit by reportable segment (in thousands). 65 Successor Predecessor Year Ended December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022 2023 vs. 2022 change (%) Owned and Operated Advertising $ 107,696 $ 138,560 $ 8,768 (27)% Partner Network 53,420 42,291 3,012 18% Total adjusted gross profit $ 161,116 $ 180,851 $ 11,780 (16)% Refer to the Revenue and Cost of revenue (excluding depreciation and amortization) discussions above.
The following table presents our adjusted gross profit by reportable segment (in thousands): For The Year Ended December 31, Change 2024 2023 ($) (%) Owned and Operated Advertising $ 108,209 $ 107,696 $ 513 —% Partner Network 51,859 53,420 (1,561) (3)% Total adjusted gross profit $ 160,068 $ 161,116 $ (1,048) (1)% See the Revenue and Cost of revenue (excluding depreciation and amortization) discussions above.
Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Goodwill We perform annual impairment testing on goodwill in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below our carrying value.
However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the consolidated financial statements. 63 Goodwill We perform annual impairment testing on goodwill in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying amount.
For this revenue, we have determined that we are the principal since we have a risk of loss on the user-traffic that we are acquiring for monetization with our Advertising Partners, and, in the case of our owned and operated websites, we maintain the website, provide the content and bear the cost and risk of loss associated with the digital online inventory available on our website.
We have determined that we are the principal since we direct the use of our owned and operating websites, and as such have risk of loss on the user-traffic that we are acquiring for monetization with our Advertising Partners.
We record an accrual for a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We do not currently believe the resolution of any such contingencies will have a material adverse effect upon our consolidated financial statements.
Contingencies From time to time, we are subject to contingencies that arise in the ordinary course of business. We record an accrual for a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
Credit Facilities Term Loan In connection with the Merger, we entered into a new loan (“Term Loan”) and revolving facility (“2022 Revolving Facility” and, together with the Term Loan "Credit Agreement") with Bank of America, N.A. as administrative agent, on January 27, 2022, providing for a 5.5 year Term Loan with an initial principal balance of $400.0 million and with the net proceeds of $376.0 million , of which a portion of the proceeds were used by us, to settle the outstanding debt of $172.0 million with Cerberus Business Finance, LLC.
See our concentration with customers discussion at Item 8 "Financi al Statements and supplementary data — Note 14, Segment Reporting" for additional information. 59 Credit Facilities Term Loan In connection with the Merger, we entered into a new loan ("Term Loan") and revolving facility ("2022 Revolving Facility" and, together with the Term Loan "Credit Agreement") with Bank of America, N.A. as administrative agent, on January 27, 2022, providing for a 5.5 year Term Loan with an initial principal balance of $400.0 million.
RAMP also allows third party advertising platforms and publishers (“Network Partners”) to send user traffic to, and monetize end user traffic on, our owned and operated websites or through our monetization agreements.
RAMP also allows third party advertising platforms and publishers ("Network Partners") to send user traffic to, and monetize end user traffic on, our owned and operated websites or through our monetization agreements. Through RAMP, we process daily advertising campaign optimizations and ingest over 12 billion rows of data daily across approximately 40 advertising vertical categories as of December 31, 2024.
Other Expenses Other expenses consist of the following: Interest expense, net. Interest expense consists of interest on our debt and the amortization of deferred financing costs and debt discount. Loss on extinguishment of related-party debt.
Depreciation and amortization expenses are primarily attributable to our capital investment(s) and consist of property and equipment depreciation and amortization of intangible assets with finite lives. 54 Other Expenses Other expenses consist of the following: Interest expense, net . Interest expense consists of interest on our debt and the amortization of deferred financing costs and debt discount.
Financing Activities Our financing activities consisted primarily of borrowings and repayments of our indebtedness under our credit facilities and redemptions of our Class A common stock.
Financing Activities Our financing activities consisted primarily of borrowings and repayments of our indebtedness under our credit facilities and redemptions of our Class A common stock. 62 In the year ended December 31, 2024 , cash used in financing activities of $64.0 million resulted primarily from repayment of principal and interest on the Term Loan.
For the year ended December 31, 2023, compared to prior year, sessions increased 1,636 million to 2,776 million from 1,140 million, and Network RPS decreased by approximately $0.01 to $0.03 from $0.04.
For the year ended December 31, 2024, compared to prior year, sessions increased 4,487 million to 7,777 million from 3,290 million, and Network RPS decreased by approximately $0.01 to $0.01 from $0.02. The declines in Network RPS are primarily due to a mix shift to lower RPS traffic.
For the year ended December 31, 2023, compared to prior year, sessions decreased 281 million to 3,828 million from 4,109 million, with a corresponding decrease in O&O RPS of approximately $0.06 to $0.09 from $0.15.
For the year ended December 31, 2024, compared to the prior comparative period, O&O sessions increased 3,355 million to 7,183 million from 3,828 million and O&O RPS decreased by approximately $0.05 from $0.09 to $0.04. The declines in O&O RPS were primarily related to a mix shift to lower revenue per share ("RPS") traffic.
We have determined that we are the agent in these transactions and therefore report revenue on a net basis, because (a) we do not control the underlying digital online inventory, (b) we do not acquire the corresponding user-traffic and do not have risk of loss in connection therewith, and (c) the pricing is in the form of a substantively fixed-percentage revenue-sharing arrangement.
We have determined that we are the agent in these transactions and therefore report revenue on a net basis, because our network partner runs the campaign to acquire user-traffic including managing traffic acquisition cost.
Removed
The following discussion and analysis should also be read together with the section entitled “Organization and description of business” as of December 31, 2023 (Successor), and for the periods from January 1, 2022 through January 26, 2022 (Predecessor) and from January 27, 2022 through December 31, 2022 (Successor).

… 91 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−0 removed1 unchanged
Biggest changeTherefore, increases or decreases in the value of the U.S. dollar against other currencies will affect our statements of operations and the value of balance sheet items denominated in foreign currencies.
Biggest changeTherefore, increases or decreases in the value of the U.S. dollar against other currencies will affect our balance sheet, statements of operations and statement of cash flows. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive loss within stockholders' equity.
Foreign Currency Exchange Rate Risk The majority of our revenue is denominated in U.S. dollars; however, we do earn revenue, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar, primarily the Euro and Canadian dollar.
Foreign Currency Exchange Rate Risk The majority of our revenue is denominated in U.S. dollars; however, we do own assets, incur liabilities, earn revenue and pay expenses, in countries using currencies other than the U.S. dollar, primarily the Canadian dollar and Euro.
Because our consolidated financial statements are presented in U.S. dollars, we must translate revenue, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period.
Because our consolidated financial statements are presented in U.S. dollars, we must translate assets and liabilities as well as revenue, income and expenses, into U.S. dollars at exchange rates in effect during or at the end of each reporting period.
Interest Rate Risk We are exposed to market risk from changes in interest rates on our Term Loan and our 2022 Revolving Facility, both of which accrue interest at a variable rate. The interest rate on our Term Loan is the adjusted Secured Overnight Financing Rate (“SOFR”) plus 4.75%.
Interest Rate Risk We are exposed to market risk from changes in interest rates on our Term Loan and 2022 Revolving Facility, both of which accrue interest at a variable rate. The interest rate on our Term Loan is the adjusted Secured Overnight Financing Rate ("SOFR") plus 4.75%.
We generally do not mitigate the risks associated with fluctuating exchange rates because we typically incur expenses and generate revenue in these currencies and the cumulative impact of these foreign exchange fluctuations are not deemed material to our financial performance. 75
We generally do not mitigate the risks associated with fluctuating exchange rates because we typically incur expenses and generate revenue in these currencies and the cumulative impact of these foreign exchange fluctuations are not deemed material to our financial performance. 65
As of December 31, 2023, a hypothetical one percentage point increase or decrease in the variable interest rate of our Term Loan and our 2022 Revolving Facility would result in a corresponding increase or decrease in interest expense of approximately $3.7 million annually.
As of December 31, 2024, a hypothetical one percentage point increase or decrease in the variable interest rate of our Term Loan and our 2022 Revolving Facility would result in a corresponding increase or decrease in interest expense of approximately $2.8 million annually.
As of December 31, 2023, $365.0 million was outstanding on our Term Loan. We have not used any derivative financial instruments to manage our interest rate risk exposure with respect to our Term Loan.
As of December 31, 2024, $280.1 million was outstanding on our Term Loan. We have not used any derivative financial instruments to manage our interest rate risk exposure with respect to our Term Loan.
Added
The interest rate on the 2022 Revolving Facility is the adjusted SOFR plus 2.5% with an adjusted SOFR floor of 0%. As of December 31, 2024, we had $50.0 million available on the 2022 Revolving Facility.

Other SST 10-K year-over-year comparisons