SST 10-K & 10-Q changes, risk factors and insider trading
System1, Inc. (also SSTPW) · NYSE · Services-Computer Programming, Data Processing, Etc. · CIK 1805833 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We have a significant amount of debt maturing in the near term that may not be refinanced or repaid, which could materially and adversely affect our financial condition and liquidity.”
New heading “There is substantial doubt about our ability to continue as a going concern, which may adversely affect our business, financial condition and results of operations.”
New heading “The transfer of assets in connection with our business restructuring is subject to legal challenge by certain creditors, including claims of fraudulent transfer or conveyance, which could result in significant liabilities.”
New heading “We may pursue new business lines which could disrupt and adversely affect our operating results.”
New heading “Our failure to satisfy the NYSE continued listing standards could result in the delisting of our common stock, which could adversely affect the market for our common stock and our ability to access capital.”
Removed heading “There can be no assurance that we will be able to comply with the continued listing standards of the NYSE, which could result in the delisting of our securities, limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.”
Removed heading “If securities analysts do not publish research or reports about us, or if they issue unfavorable commentary about us or our industry or downgrade our common stock or Warrants, the price of our common stock and Warrants could decline.”
Removed heading “We do not intend to pay dividends on our common stock for the foreseeable future.”
Largest changes
“Effective internal controls are necessary for companies to provide reliable and accurate financial reporting and financial statements for external purposes in accordance with generally accepted accounting principles. A failure to maintain effective internal control processes could lead to violations, unintentional or otherwise, of laws and regulations. In the past, we have determined that there were certain material weaknesses in our internal control over financial reporting, which have since been remediated. …”see in full comparison
see in full comparisonAs 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. Management has identified material weaknesses in our internal control over financial reporting. While the material weaknesses identified remain unremediated, or ifIf we identifyadditionalweaknesses or fail to timely and successfully implement new or improved controls, our ability to assure timely and accurate financial reporting may be adversely affected, and we could suffer a loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the trading price of our shares of common stock, result in lawsuits being filed against us by our stockholders, or otherwise harm our reputation. Ifadditionalmaterial weaknesses are identified in the future, it could be costly to remediate such material weaknesses, which may adversely affect our results ofoperations.operations and if we are unable to comply with the requirements of the Sarbanes-Oxley Act in a timely manner, then, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. Such failures could also subject us to investigations by New York Stock Exchange ("NYSE"), the stock exchange on which our securities are listed, the SEC or other regulatory authorities, and to litigation from stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business.
“If we are unable to improve our operating results, generate positive cash flows, or secure additional sources of liquidity, we may be required to take actions that could materially harm our business, including reducing headcount, limiting sales and marketing activities, renegotiating or defaulting on contractual obligations, selling assets, or pursuing restructuring or insolvency-related proceedings. Any of these outcomes could have a material adverse effect on our business, financial condition, results of operations, and the value of our securities.”see in full comparison
“There can be no assurance that we will be able to comply with the continued listing standards of the NYSE, which could result in the delisting of our securities, limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.”see in full comparison
“Our failure to satisfy the NYSE continued listing standards could result in the delisting of our common stock, which could adversely affect the market for our common stock and our ability to access capital.”see in full comparison
“In September 2025, certain lenders under our Credit Agreement (as defined below), filed a lawsuit in the Supreme Court of the State of New York alleging (i) breach of contract against certain named subsidiaries of the Company that are parties to the Credit Agreement related to the corporate reorganization transactions undertaken by us in August 2024 to better align its corporate entity structure with its reportable business segments (the "Corporate Reorg Transactions"), (ii) both intentional fraudulent transfer and constructive fraudulent transfer against certain named subsidiaries of the …”see in full comparison
Full comparison: every changed paragraph (100)
S1System1 HoldcoHoldings was formed in 2013 and, as a result, has only a limited operating history upon which our business and prospects may be evaluated. Although we have experienced substantial revenue growth induring a portion of our limited operating history, we mayhave not bebeen able to sustain this rate of growth orin recent years and there is no guarantee that we will be able to maintain our current revenue levels. We have encountered and will continue to encounter risks and challenges frequently experienced by growing companies in rapidly developing industries, including risks related to our ability to:
• develop, offer, maintain and continually improve a competitive customer acquisition marketing platform that meets the evolving needs of our consumers and platform customers;
• scale our business efficiently to keep pace with demand for services such as RAMPour platform and other digital media and advertising technology offerings;
Our revenue is tied to the effectiveness and performanceability ofto ouracquire Responsivetraffic Acquisitionin Marketinga Platform.cost-effective manner.
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 and operating results depend on our ability to generate revenue from advertisers and advertising networks by cost-effectively acquiring consumer Internet traffic and then directing these intent-driven consumers to our advertising partners. If we are unable to cost-effectively acquire users or provide value to our advertising partners based on their traffic acquisition costs, they may decline to utilize us to acquire and monetize users, which would harm our revenue and operating results.
We rely on large-scaleour acquisition marketing channels, such as Google, Meta, Outbrain,Marketing and TikTok, as well as our Network Partners,Partners for a significant portion of our consumer Internet traffic.
Consumer Internet traffic acquired and/or referred through acquisition marketing channels and Network Partners also providesprovide a significant amount of the first party data that improves the predictive power of RAMP,our platform, which we leverage to deliver relevant users to our advertisers. If we are unable to maintain these relationships with these acquisition marketing channels, our business, financial condition and results of operations could be adversely affected.
Traffic building and conversion initiatives involve considerable expenditures for online advertising and marketing. We have made, and expect to continue to make, significant expenditures for search engine marketing (primarily in the form of developing and maintaining a database of keywords and search terms, for which we purchase advertising primarily through Google and, to a lesser extent, Microsoft and Yahoo!), social media channels, online display advertising and native advertising in connection with these initiatives, which may not be successful or cost-effective. To continue to reach consumers and users, we will need to identify and devote more of our overall marketing expenditures to digital advertising channels (such as online video and other digital platforms), as well as reach consumers and users via these channels. Since these channels are constantly changing and evolving, it could be difficult to assess returns on related digital marketing investments. Historically, we have had to increase advertising and marketing expenditures over time in order to attract and convert consumers, retain users and sustain our growth.
Our obligations under our credit facilities are collateralized by a pledge of substantiallyS1 allHoldco ofand its subsidiaries remain obligors and guarantors under our assets,Term Loan and Revolving Facility, including accounts receivable, deposit accounts, intellectual property, and investment property and equipment.equipment, and System1 Holdings and S1 Media are not parties thereto. The covenants in our credit facilities may limit our ability to take actions and, in the event that we breach one or more covenants (including the timely delivery of financial statements), our lenders may choose to declare an event of default and require that we immediately repay all amounts outstanding, terminate the commitment to extend further credit and foreclose on the collateral granted to them to collateralize such indebtedness, which includes our intellectual property. In addition, if we fail to meet the required covenants, we will not have access to further draw-downs under our credit facilities.
We have a significant amount of debt maturing in the near term that may not be refinanced or repaid, which could materially and adversely affect our financial condition and liquidity.
We have $255.1 million of outstanding indebtedness under our Term Loan that is scheduled to mature in July 2027. This maturity means that these long-term obligations will be reclassified as current liabilities on our balance sheet during fiscal 2026, which will significantly increase our short-term obligations.
Our ability to repay or refinance this debt when it becomes due will depend on our financial performance and our ability to generate sufficient cash flow from operations. This, in turn, is subject to prevailing economic, financial, business, and other factors, many of which are beyond our control. We cannot guarantee that we will be able to refinance these obligations on commercially reasonable terms, or at all.
If we are unable to successfully repay or refinance our maturing debt:
•We may be forced to seek alternative financing, sell assets, or pursue a debt restructuring on unfavorable terms.
•A default on our obligations could be triggered, which could, in turn, result in an acceleration of other outstanding debt.
There is substantial doubt about our ability to continue as a going concern, which may adversely affect our business, financial condition and results of operations.
We have incurred recurring operating losses and negative cash flows from operations as we continue to invest in the development and enhancement of our advertising technology platform, expand our sales and marketing efforts, and operate in a highly competitive and rapidly evolving digital advertising ecosystem. As a result, our liquidity position is limited, and we must carefully manage our capital resources to fund our operations and meet our obligations as they become due.
Our ability to continue as a going concern is dependent on our ability to increase advertiser demand on our platform, retain and expand relationships with publishers and advertisers, improve gross margins, and effectively control operating expenses. The digital advertising market is subject to significant volatility, including fluctuations in advertiser spending, increased competition from larger and better-capitalized competitors, changes in data privacy laws and platform policies, and broader macroeconomic uncertainty, any of which could materially and adversely affect our revenue and cash flows.
We expect that our existing cash and cash equivalents may not be sufficient to fund our operations and capital requirements beyond the near term, and we may need to obtain additional financing or pursue strategic alternatives to support our operations. There can be no assurance that additional capital will be available when needed, on acceptable terms, or at all. Market conditions, our financial performance, and other factors may limit our ability to access the capital markets or obtain financing from third parties.
If we are unable to improve our operating results, generate positive cash flows, or secure additional sources of liquidity, we may be required to take actions that could materially harm our business, including reducing headcount, limiting sales and marketing activities, renegotiating or defaulting on contractual obligations, selling assets, or pursuing restructuring or insolvency-related proceedings. Any of these outcomes could have a material adverse effect on our business, financial condition, results of operations, and the value of our securities.
The transfer of assets in connection with our business restructuring is subject to legal challenge by certain creditors, including claims of fraudulent transfer or conveyance, which could result in significant liabilities.
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. Following the corporate reorganization, (a) System1 Holdings now owns 100% of S1 Holdco, LLC ("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 Products businesses, which include CouponFollow, Startpage and MapQuest and (c) S1 Holdco holds our assets related to our Marketing businesses. System1 Holdings holds our remaining assets and business operations. S1 Holdco and its subsidiaries remain obligors and guarantors under our Term Loan and Revolving Facility, and System1 Holdings and S1 Media are not parties thereto.
While this was done to streamline operations, certain non-participating or dissenting debt holders may challenge these asset transfers. Creditors may allege that the transfers were intentional and constructional fraudulent conveyances and voidable transactions because they were made for less than "reasonably equivalent value" while we were in financial distress or that the transfer was intended to delay, hinder, or defraud creditors. If a court were to find these transfers to be fraudulent or voidable, we could be required to unwind the transaction and pay substantial damages.
Defending against these types of claims could be expensive, distract management, and divert significant company resources. A successful legal challenge could have a material adverse effect on our financial condition and a negative impact on our reputation and ability to secure financing in the future. We cannot predict with certainty whether such litigation will occur or what the outcome might be.
In September 2025, certain lenders under our Credit Agreement (as defined below), filed a lawsuit in the Supreme Court of the State of New York alleging (i) breach of contract against certain named subsidiaries of the Company that are parties to the Credit Agreement related to the corporate reorganization transactions undertaken by us in August 2024 to better align its corporate entity structure with its reportable business segments (the "Corporate Reorg Transactions"), (ii) both intentional fraudulent transfer and constructive fraudulent transfer against certain named subsidiaries of the Company, including certain subsidiaries that are parties to the Credit Agreement, related to certain steps that such defendants undertook in connection with certain transactions undertaken by the Company related to the sale of its Total Security business in November 2023 and (iii) both intentional fraudulent transfer and constructive fraudulent transfer against certain named subsidiaries of the Company, including certain subsidiaries that are parties to the Credit Agreement, related to certain steps that such defendants undertook in connection with the Corporate Reorg Transactions. For more information on this matter, See Part II, Item 8 "Financial Statements and Supplementary Data — Note 8, Commitments and Contingencies" in our consolidated financial statements included in this report.
We depend upon the sustained and uninterrupted performance of our platform to manage our inventory supply; bid on inventory for each campaign; collect, process and interpret first party data; and optimize campaign performance in real time and provide billing information to our financial systems. If RAMPour marketing platform cannot scale to meet demand, if there are errors in our execution of any of these functions on our platform, or if we experience outages, then our business may be harmed. We may also face material delays in introducing new services, products and enhancements. If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing proprietary technology and systems may become obsolete.
RAMP•Our platform is complex and multifaceted, and operational and performance issues could arise both from the platform itself and from outside factors. Errors, failures, vulnerabilities or bugs have been found in the past, and may in the future, be found. Our platform also relies on third-party technology and systems to perform properly, and our platform is often used in connection with computing environments utilizing different operating systems, system management software, equipment and networking configurations, which may cause errors in, or failures of, our platform or such other computing environments. Operational and performance issues with our platform could include the failure of our user interface, outages, errors during upgrades or patches, discrepancies in costs billed versus costs paid, unanticipated volume overwhelming our databases, server failure, or catastrophic events affecting one or more server farms. While we have built redundancies in our systems, full redundancies do not exist. 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.
We operate in intensely competitive markets that experience frequent technological developments, changes in industry and regulatory standards, changes in customer requirements and preferences, and frequent new product introductions and improvements by our competitors. Our future success also depends on our ability to effectively respond to evolving threats to consumers, as well as competitive technological developments and industry changes, by developing or introducing new and enhanced solutions on a timely basis. We must constantly innovate and make investment decisions regarding offerings and technology to meet client demand and evolving industry standards. If we are unable to anticipate or react to these continually evolving conditions, or if we make bad decisions regarding investments, we could lose market share and experience a decline in our revenue that could adversely affect our business and operating results. Additionally, if new or existing competitors have more attractive offerings, we may lose customers or customers may decrease their use of RAMPour platform and other software products and services that we provide.
We have expended significant resources to grow our business in recent years by investing in the scope and breadth of RAMP,our platform and service offerings, spending to acquire or develop software products and websites, growing our number of employees and expanding internationally. We anticipate continued growth would require substantial financial and other resources to, among other things:
• develop our existing websites, invest in RAMPour technology platform 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;
• continue to expand internationally by and spend through RAMPour platform by adding inventory and data from countries our clients are seeking;
Our advertising business is dependent on advertisers buying mobile, display and video advertising. A decrease in the use of these advertising channels would harm our business, growth prospects, financial condition and results of operations. Historically, our clients have predominantly used our advertising platform to purchase mobile, display and video advertising inventory. We expect that these will continue to be significant channels used by our clients for digital advertising. Should our clients lose confidence in the value or effectiveness of mobile, display and video advertising, the demand for RAMPour services could decline. We have been, and are continuing to, enhance our social, native, audio and CTV offerings. We refer to the ability to provide offerings across multiple advertising channels as omnichannel. We may not be able to maintain or grow advertising inventory for some of our omnichannels and some of our omnichannel offerings may not gain market acceptance. A decrease in the use of mobile, display and video advertising, or our inability to further penetrate these and other advertising channels, would harm our growth prospects, financial condition and results of operations.
Our business, financial condition or results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of our control, such as the impact of ongoing health and safety concerns from a public health crisis. For example, the recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets, and, in recent months, the global economy has been impacted by increasing interest rates and inflation. Likewise, the capital and credit markets may be adversely affected by fears of war, such as the war between Russia and Ukraine, and the conflict in the Middle East involving Israel and Hamas and the possibility of a wider European or global conflict, and global sanctions imposed in response thereto. A severe or prolonged economic downturn could result in a variety of risks to our business, including diminished liquidity, weakened demand for our software products, RAMPour platform and related products and services or delays in advertiser payments. A weak or declining economy could also strain our media supply channels and reduce the demand for or rates paid for advertising by brands and marketers. Any of the foregoing could harm our business and we cannot anticipate all the ways in which the current global economic crisis and financial market conditions could adversely impact our business.
We identified material weaknesses in our internal control over financial reporting. If we are unable to remediate the material weaknesses, or if other material weaknesses are identified, we may not be able to report our financial results accurately, prevent or detect material misstatements due to fraud or error, or file our periodic reports as a public company in a timely manner.
Effective internal controls are necessary for companies to provide reliable and accurate financial reporting and financial statements for external purposes in accordance with generally accepted accounting principles. A failure to maintain effective internal control processes could lead to violations, unintentional or otherwise, of laws and regulations. In the past, we have determined that there were certain material weaknesses in our internal control over financial reporting, which have since been remediated. If the additional controls and procedures that we have implemented to remediate the material weaknesses prove to be insufficient or if we identify other control deficiencies that individually or together constitute significant deficiencies or material weaknesses, Our ability to record, process, and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected. Litigation, government investigations, or regulatory enforcement actions arising out of any such failure or alleged failure could subject System1 to civil and criminal penalties that could materially and adversely affect our reputation, financial condition, and operating results. Similarly, the control deficiency, remediation efforts, and any related litigation, government investigations, or regulatory enforcement actions will require management attention and resources, cause us to incur unanticipated costs, and negatively affect investor confidence in our financial statements, cause us reputational harm, and raise other risks to its operations.
We have identified material weaknesses in our internal control over financial reporting as of December 31, 2024. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified were as follows:
•We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately. Additionally, the limited personnel resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in our finance and accounting functions.
•We did not design and maintain effective controls in response to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement to financial reporting.
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. 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. In addition, we did not design and maintain effective controls relating to the oversight and ongoing recording of the financial statement results of the acquired businesses.
•We did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over (i) the preparation and review of business performance reviews, account reconciliations journal entries, and identification of asset groups and (ii) maintaining appropriate segregation of duties. Additionally, we did not design and maintain controls over the classification and presentation of accounts and disclosures in the consolidated financial statements, including the statement of cash flows.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm due to a transition period established by SEC rules and regulations for newly public companies. We are not required to have, or to engage our independent registered public accounting firm to perform, an audit of the effectiveness of our internal controls over financial reporting for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act.
We are in the process of, and we are focused on, designing and implementing effective measures to improve our internal control over financial reporting and remediate the material weaknesses. Our remediation efforts to address the identified material weaknesses are ongoing. Our 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. We are committed to continuing to improve our internal control over financial reporting and will continue to review, optimize and enhance our processes, procedures and controls. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify, or in appropriate circumstances not complete, certain of the remediation measures described above. 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, 2024.
If we continue to fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations. If our internal control over financial reporting continues tois not be effective, it may adversely affect investor confidence in us and the price of our common stock.
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 that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on our internal control over financial reporting. This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm due to the SEC rules and regulations for certain public companies. We are not required to have, or to engage our independent registered public accounting firm to perform, an audit of the effectiveness of our internal controls over financial reporting for as long as we are "smaller reporting company" pursuant to the provisions of Regulation S-K.
Our platform system applications are complex, multi-faceted and include applications that are highly customized in order to serve and support our clients, advertising inventory and data suppliers, as well as support our financial reporting obligations. We regularly make improvements to our platform to maintain and enhance our competitive position. In the future, we may implement new offerings and engage in business transactions, such as acquisitions, reorganizations or implementation of new information systems. These factors require us to develop and maintain our internal controls, processes and reporting systems, and we expect to incur ongoing costs in this effort. We may not be successful in developing and maintaining effective internal controls, and any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.
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. Management has identified material weaknesses in our internal control over financial reporting. While the material weaknesses identified remain unremediated, or ifIf we identify additional weaknesses or fail to timely and successfully implement new or improved controls, our ability to assure timely and accurate financial reporting may be adversely affected, and we could suffer a loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the trading price of our shares of common stock, result in lawsuits being filed against us by our stockholders, or otherwise harm our reputation. If additional material weaknesses are identified in the future, it could be costly to remediate such material weaknesses, which may adversely affect our results of operations.operations and if we are unable to comply with the requirements of the Sarbanes-Oxley Act in a timely manner, then, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. Such failures could also subject us to investigations by New York Stock Exchange ("NYSE"), the stock exchange on which our securities are listed, the SEC or other regulatory authorities, and to litigation from stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business.
A significant portion of our assets consists of goodwill and other intangible assets, the value of which may be reduced if we determine that those assets are impaired.
As of December 31, 2024,2025, the net carrying value of goodwill and other intangible assets represented $304.7$230.5 million, or 66%57% 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$148.1 million are amortized up to 10 years. Based on our annual goodwill impairment test in the fourth quarter of 2024,2025, we determined our intangible assets were not impaired.
If future operating performance were to fall below current projections or if there are material changes to management’s assumptions, we could be required to recognize additional non-cash charges to operating earnings for goodwill and other intangible asset impairment, which could be significant.
We may experience outages and disruptions on RAMP,our platform, our websites and other software products if we fail to maintain adequate security and supporting infrastructure as we scale RAMP,our platform, websites and other software products, which may harm our reputation and negatively impact our business, financial condition and operating results.
Our future success depends upon our ability to create and maintain brand recognition and a reputation for delivering easy, efficient and personal technology solutions. A failure by us to build our brands and maintain consumer expectations of our brands could harm our reputation and damage our ability to attract and retain consumers, which could adversely affect our business. If consumers do not perceive our portfolio websites or our software products offer a better user experience or offer good value for the services, or if advertisers do not perceive RAMPour service offering as a more effective platform, our reputation and the strength of our brand may be adversely affected.
We may pursue new business lines which could disrupt and adversely affect our operating results.
Management's Discussion & Analysis (MD&A)
New heading “How We Assess the Performance of Our Business”
New heading “Non-GAAP Financial Measures”
New heading “Adjusted Gross Profit”
New heading “Adjusted EBITDA”
New heading “Revolving Facility”
Removed heading “The Trebia Merger”
Removed heading “Sale of Protected”
Removed heading “Income tax benefit”
Removed heading “Owned and Operated Advertising”
Removed heading “Partner Network”
Removed heading “Cost of revenue (excluding depreciation and amortization)”
Removed heading “Salaries and benefits”
Removed heading “Selling, general, and administrative”
Removed heading “Depreciation and amortization”
Removed heading “Gain on extinguishment of debt”
Removed heading “Loss on extinguishment of related-party debt”
Removed heading “Change in fair value of warrant liabilities”
Removed heading “Income tax benefit”
Removed heading “Net loss from discontinued operations, net of tax”
Removed heading “2023 Revolving Note”
Removed heading “Senior Unsecured Promissory Note”
Removed heading “Secured Facility”
Largest changes
“The Promissory Note accrues interest at SOFR plus 3.15%. Under the terms of the agreement, the Promissory Note became due and payable immediately upon sale of Protected. …”see in full comparison
“We have experienced declining cash flows and financial performance primarily as a result of reductions in Advertising Partner and overall consumer demand for our marketing services. As of December 31, 2025, we had unrestricted cash and cash equivalents of $86.9 million, total net working capital, which we define as current assets less current liabilities, of $3.0 million. We had an aggregate principal amount outstanding of $50.0 million under our revolving facility with a maturity date of January 27, 2027, and $260.1 million of term debt outstanding on our term loan which matures in July 2027. …”see in full comparison
“Adjusted EBITDA is defined as net income (loss) before interest expense, income taxes, depreciation and amortization expense, stock-based compensation expense, and other cash and non-cash based income or expenses that we do not consider indicative of our core operating performance, including, but not limited to deferred compensation, gain (loss) on extinguishment of debt, non-cash revaluation of warrant liability and acquisition and restructuring costs. …”see in full comparison
“In conjunction with our fourth quarter assessment of goodwill, our valuation techniques did not indicate any impairment as of December 31, 2025. All reporting units with goodwill passed the first step of the goodwill evaluation, with the fair value of our Partner Network reporting unit exceeding its respective carrying values by 11.9% and, accordingly, we were not required to perform the second step of the goodwill evaluation. There is $82.4 million of goodwill residing in our Partner Network reporting unit. …”see in full comparison
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. 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 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. 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 The fair values of our reporting units aresee in full comparisoncomputeddeterminedthroughby weighting a discounted cash flow model and a reference transaction model which include inputs developed using both internal and market-based data. The key assumptions in a discounted cash flow model include, but are not limited to, the weighted average cost of capital, revenue growth rates (including long-term growth rates), and operating margins. The weighted average cost of capital reflects the increases in market interest rates. The reference transaction model derives indications of value based on mergers and acquisition transactions in the digital advertising industry. Key assumptions in these models include, but are not limited to, the selection of comparable transactions, revenue and "EBITDA" is defined as net income orloss before results from discontinued operations,loss, interest, income tax expense or benefit, and depreciation and amortization multiples and EBITDA margins from those transactions. Unanticipated events or circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results.
“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. 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. …”see in full comparison
Full comparison: every changed paragraph (140)
We operate several flagship brands across multiple consumer verticals, including shopping, travel and search, and a best-in-class customer acquisition and marketing platform powered by Artificial Intelligence ("AI") and machine learning. Our platform is omnichannel and omnivertical, delivering high-intent customers to our advertising partners to maximize their reach and effectiveness.
We operate an omnichannel customer acquisition platform, delivering high-intent customers to brands, advertisers and publishers.
WeOur provideplatform operates across our omnichannelnetwork customerof acquisitionflagship platformowned servicesand throughoperated ourwebsites proprietary("Products"), responsiveallowing us to monetize user traffic that we source from various acquisition marketing channels. Our marketing platform ("RAMP").allows Operatingus to operate seamlessly across major advertising networks and advertising category verticals to acquire end-users, RAMP allows us toand monetize these acquired end usersend-users through our relationships with third party advertisers and advertising networks ("Advertising Partners"). RAMPThe 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. RAMPplatform 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 websitesProducts 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. We are able to efficiently monetize user intent by linking data on consumer engagement, such as first party search data like traffic sources, device type and search queries, with data on monetization rates and advertising spend. 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.
We focus on monetizingmonetize user traffic acquiredwe byacquire ourdirectly Networkfrom Partners.various Sincemarketing launching, it has expanded to support additional advertising formatschannels, across multiple advertising platforms, and hashave acquired several leading websites, enabling itus to control the entire flow of the user acquisition and experience, whileand monetizingmonetize user traffic throughon our behalf via our network of ownedproducts. and operated websites. As of December 31, 2024,Today, we own and operate approximately 40 websites, including leading search engines like info.comStartpage.com and Startpage.com,info.com, and digital media publishing websites and internet utilities, such as HowStuffWorks,CouponFollow, MapQuest, CouponFollowHowStuffWorks and ActiveBeat.
Our primary operations are in the United States, and we also have operations in Canada and the Netherlands.
Our primary operations are in the United States, and we also have operations in Canada and the Netherlands. Operations outside the United States are subject to risks inherent in operating under different legal systems as well as various political and economic environments. 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. We do not engage in hedging activities to mitigate our exposure to fluctuations in foreign currency exchange rates.
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.
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"). 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.
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.
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. Subsequently, on November 30, 2023, we completed the sale of Protected, pursuant to the terms of a share purchase agreement ("Share Purchase Agreement"). 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.
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. 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").
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. Following the corporate reorganization, (a) System1 Holdings now owns 100% of S1 Holdco, LLC ("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 productsProducts businesses, which include NextGen Shopping, Inc. ("CouponFollow"),CouponFollow, Startpage and Mapquest,MapQuest and (c) S1 Holdco holds our assets related to our Marketing businesses. System1 Holdings holds our remaining assets and business operations associated with our digital advertising businesses, including our proprietary RAMP platform.operations. 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.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of the business is Gross profit. To help assess performance with this key indicator, revenue metrics we use are return on traffic acquisition cost ("RTAC"), Products sessions and Products revenue-per-session ("Products RPS"), In addition we also use Adjusted Gross Profit and Adjusted EBITDA as non-GAAP financial measures. We believe these non-GAAP measures provide useful supplemental information to investors to be able to better evaluate ongoing business performance. This measure is not, and should not be viewed as, a substitute for accounting principles generally accepted in the United States of America ("GAAP") financial measures. Refer to the "Revenue Metrics", "Adjusted Gross Profit" and "Adjusted EBITDA" sections below.
Revenue
We earn revenue by directly acquiring traffic to our owned and operated websites and utilizing our RAMP platform and additional services to monetize 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. We have determined that we are the principal since we direct the use of our owned and operating websites, and as such have a risk of loss on the user-traffic that we are acquiring for monetization with our Advertising Partners. Additionally, 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.
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 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. 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.
•Marketing; and
•Products
•Owned and Operated Advertising ("O&O"); and
•Partner Network
To conform to the current period’s presentation, depreciation and amortization expense was reclassified to cost of revenue and selling, general, and administrative in the prior period consolidated statements of operations. We classify our operating expenses into the following categories:
We classify our operating expenses into the following categories:
Cost of revenue (excluding depreciation and amortization).revenue. 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 andcosts, licensing costs to provide mapping services to Mapquest.com.Mapquest.com and amortization related to our platform. We do not pre-pay any traffic acquisition costs, and therefore, such costs are expensed as incurred. Amortization related to our platform is recognized over the estimated useful life of the intangible asset.
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.
DepreciationSelling, general, and amortization.administrative. Selling, general, and administrative expenses consist of depreciation, general intangibles amortization, fees for software services, professional services, occupancy costs and travel and entertainment. Depreciation and general intangibles amortization expensesexpense are primarily attributable to our capital investment(s) and consist of property and equipment depreciation and amortization of intangible assets with finite lives.lives .
Other Expenses or Incomes:
Other expenses or incomes 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. Interest income consists of interest earned on our cash deposits.
Gain on extinguishment of tax receivable agreement liability. The recognition of the reversal of amounts recognized under the tax receivable agreement.
Loss on extinguishment of related-party debt. 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.
Income tax benefit
During 20232024 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. As a partnership, S1 Holdco iswas not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by S1 Holdco iswas passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We arewere subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of S1 Holdco, as well as any stand-alone income or loss generated by us.
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 totalreturn advertisingon spend,traffic acquisition cost ("RTAC"), the number of Owned & Operated AdvertisingProducts sessions ("O&Oand sessions"), number of Partner Network sessions ("Network sessions"), Owned & Operated AdvertisingProducts revenue-per-session ("O&OProducts RPS"), Owned & Operated Advertising cost-per-session ("O&O CPS") and Partner Network revenue-per-session ("Network RPS") to track our operations..
We define RTAC as platform revenue divided by traffic acquisition cost. Platform revenue is Revenue plus Network Partner revenue share. Traffic Acquisition Cost ("TAC") is defined as the sum of total advertising spend, agency fees and Network Partner revenue share. Advertising spend asis the amount of advertising that is spent by us to acquire traffic. Agency fees are the amount of costs for agencies acquiring traffic to our ownedOwned and operatedOperated websites. We believe total advertising spendRTAC is a relevant measure to gaugeevaluate theour effectiveness ofand ourefficiency Companyin to deploydeploying capital to acquire monetizable traffic to our Owned & Operated websites, which is a key driver of our Owned & Operated reportableMarketing segment.
We define Products sessions as the total number of monetizable user visits to our Products websites. Monetizable visits exclude those visits identified as spam, bot, or other invalid traffic. We define Products RPS as Products revenue divided by Products sessions. We believe Product sessions and RPS are relevant measures to evaluate our effectiveness and efficiency in converting monetizable traffic into revenue, which are key drivers of our Products reportable segment.
We define O&O sessions as the total number of monetizable user visits to our Owned & Operated Advertising websites. 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. We believe both O&O RPS and Network RPS are key measures to evaluate our effectiveness in converting monetizable traffic into revenue.
We define O&O CPS as advertising spend divided by O&O sessions. We believe O&O CPS is a relevant measure to gauge the efficiency of operations and processes in deploying advertising spend, especially when evaluated in combination with total advertising spend.
Revenue
Marketing revenue decreased by $90.5 million, or -34% for the year ended December 31, 2025 as compared to 2024, primarily due to a decrease in TAC. For the year ended December 31, 2025, compared to 2024, TAC decreased by approximately $85.8 million to $351.5 million from $437.3 million, primarily due to a decrease in advertising spend. The decrease in advertising spend was due to constrained availability of consumer traffic at cost-effective pricing. RTAC increased by approximately 1% to 120% from 119%.
Products revenue increased $12.7 million, or 16%, for the year ended December 31, 2025 as compared to 2024, primarily due to an increase in product sessions. For the year ended December 31, 2025, compared to 2024, Products sessions increased by approximately 278.9 million to 2.2 billion from 1.9 billion while Products RPS remained flat at $0.04.
Cost of revenue decreased $76.9 million, or -32%, for the year ended December 31, 2025 as compared to 2024 primarily due to a decrease in advertising spend and agency fees which is correlated with the decrease in revenue.
Owned and Operated Advertising
Owned and Operated Advertising revenue decreased by $47.0 million, or 14% compared to the prior comparative period, primarily due to a decreased supply of consumer sessions available to be acquired on certain marketing channels. 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.
Partner Network
Partner Network revenue decreased $11.0 million, or 15%, compared to the prior comparative period impacted by instability experienced in the Advertising Partner ecosystem generally starting in the fourth quarter of 2023. 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.
Cost of revenue (excluding depreciation and amortization)
Cost of revenue (excluding depreciation and amortization) decreased $57.2 million, or 23%, primarily due to a decrease of $47.5 million in our Owned & Operated reportable segment, which was directionally consistent with the decrease in revenue. 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. 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 following table presents our adjusted gross profit by reportable segment (in thousands):
See the Revenue and Cost of revenue (excluding depreciation and amortization) discussions above.
Salaries and benefits
Salaries and benefits expense increased $7.0 million, or 7% compared to the prior comparative period. The increase was primarily due to $17.8 million in CouponFollow share-based compensation expense and $0.9 million in Stock Appreciation Rights ("SARs") Tranche I awards. This was partially offset by a $7.8 million decrease in stock-based compensation due to Replacement Awards fully vesting and a $3.5 million decrease in payroll-related expenses due to a reduction in workforce between the comparative periods.
Selling, general, and administrative
What changed in the latest 10-Q
Risk Factors
There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K Part I, Item "1A. Risk Factors" for the year ended December 31, 2025 filed with the SEC on March 11, 2026.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
New heading “Impairment of Long-Lived Assets”
Removed heading “Reverse Stock Split”
Removed heading “Service Agreements”
Largest changes
“Our critical accounting policies and estimates are described in our Annual Report on Form 10-K filed with the SEC on March 11, 2026. During the first half of 2026, we identified triggering events that required us to evaluate long-lived assets for impairment. As a result, we determined that impairment of long-lived assets should be included as a critical accounting estimate. …”see in full comparison
“We assess the recoverability of our long-lived assets when events or changes in circumstances indicate that their carrying amount may not be recoverable. …”see in full comparison
“Management determined, as a result of this evaluation, that our current cash and cash equivalents and net working capital position raise substantial doubt about our ability to continue as a going concern for the twelve month period following the date of this filing. Management has initiated cost-reduction programs consisting of reduction in force and reducing activities for businesses, which immediately reduced our cash burn rate. Management cannot conclude as of the date of this filing that its plans are probable of mitigating the conditions and events that raise substantial doubt. …”see in full comparison
“For the six months ended June 30, 2026, the $2.8 million decrease is primarily driven by a $2.1 million reduction in depreciation and amortization expense resulting from to long-lived assets impairment in the first quarter of 2026 or reaching the end of their estimated useful life since the prior period, a $1.5 million reduction in professional services and consulting fees and a $0.2 million reduction in rent expense. This was offset by a $1.0 million increase in software and subscription services.”see in full comparison
“For the three months ended June 30, 2026, the $3.0 million decrease is primarily driven by a $1.8 million reduction in amortization expense resulting from long-lived assets impairment in the first quarter of 2026 or reaching the end of their estimated useful life since the prior period, a $0.4 million reduction in professional services and consulting fees, a $0.2 million reduction in software and subscription services and a $0.6 million net decrease of other immaterial expense items.”see in full comparison
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We operate flagship internet utilities including CouponFollow, MapQuest, and Startpage.com,Startpage, and a best-in-class marketing platform powered by artificial intelligence, enabling third party publishers ("Network Partners") to monetize and maximize the value of user traffic across a wide range of advertising category verticals.
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. Following the corporate reorganization, (a) System1 Holdings now owns 100% of S1 Holdco, LLC ("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 Products businesses, which include CouponFollow, Startpage and MapQuest, and our acquisition marketing platform and (c) S1 Holdco holds our assets related to our Marketing businesses. System1 Holdings holds our remaining assets and business operations. S1 Holdco and its subsidiaries remain obligors and guarantors under our Term Loan and Revolving Facility, and System1 Holdings and S1 Media are not parties thereto.
Reverse Stock Split
On June 10, 2025, we filed a certificate of amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to effect a 1-for-10 reverse stock split of Class A and Class C common stock. All share data and per share data amounts included in this Form 10-Q have been retrospectively adjusted to reflect the effect of the reverse stock split.
In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of the business is Gross profit. To help assess performance with this key indicator, the revenue metrics we use are returnActive onMarketing traffic acquisition costPartners ("RTACAMP"), Revenue per AMP, Products sessions and Products revenue-per-session ("Products RPS"). In addition, we also use Adjusted Gross Profit and Adjusted EBITDA as non-GAAP financial measures. We believe these non-GAAP measures provide useful supplemental information to investors to better evaluate ongoing business performance. These measures are not, and should not be viewed as, a substitute for accounting principles generally accepted in the United States of America ("GAAP") financial measures. Refer to the "Revenue Metrics", "Adjusted Gross Profit" and "Adjusted EBITDA" sections below.
We define Active Marketing Partners ("AMP") as partners who monetize user traffic on our platform and generate revenue above a predetermined minimum per quarter. We define Revenue per AMP as GAAP Revenue from Marketing Partners divided by AMP. We believe Revenue per AMP is a relevant measure to evaluate our effectiveness and efficiency in deploying capital to acquire monetizable traffic to our Marketing segment.
Marketing revenue decreased by $33.9 million, or 65% for the three and six months ended MarchJune 31,30, 2026 compared to the prior period,periods, primarily due to the termination for convenience of our Adsense for Domains monetization arrangement with Google and the significant reduction in marketing activities for search monetization in our publishing business.business For the three months ended March 31, 2026, compared to the prior period, AMP decreased by approximately 93 to 56 from 149, primarily due toand the termination for convenience of our Adsense for Domains monetization arrangement with Google. For the three months ended June 30, 2026, compared to the prior period, AMP decreased by 74 to 59 from 133. Revenue per AMP increased by approximately $0.1$0.03 million to $0.2$0.16 million from $0.1$0.13 million.million, or 16%. Similarly, for the six months ended June 30, 2026, compared to the prior period, AMP decreased by 91 to 65 from 156. Revenue per AMP increased by $0.10 million to $0.32 million from $0.22 million, or 45%.
Products revenue decreased by $3.4 million, or 15%, for the three and six months ended MarchJune 31,30, 2026 compared to the prior period,periods, primarily due to a change in mix shift from higher RPS sessions to lower RPS sessions. For the three months ended MarchJune 31,30, 2026, compared to the prior period, Products sessions increased by approximately 178.0164.4 million to 653.7686.9 million from 475.7522.5 million while Products RPS decreased by approximately$0.02 to $0.03 from $0.05. Similarly, for the six months ended June 30, 2026, compared to the prior period, Products sessions increased by 342.3 million to 1.3 billion from 998.2 million while Products RPS decreased by $0.02 to $0.03 from $0.05.
Cost of revenue decreased $32.2 million, or 70%, for the three and six months ended MarchJune 31,30, 2026 compared to the prior periodperiods primarily due to a decrease in advertising spend and agency fees which is correlated with the decrease in revenue. This was primarily related to the termination for convenience of our Adsense for Domains monetization arrangement with Google and a related significant reduction in marketing activities for search monetization in our publishing business.
Amortization expense for our platform recorded in cost of revenue decreased $8.1$11.9 million orand 62%$20.0 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the prior periodperiods primarily due to our developed technology reaching the end of its estimated useful life.
Salaries and benefits expense decreased for the three and six months ended June 30, 2026 compared to the prior periods.
For the three months ended June 30, 2026, the $9.2 million decrease is primarily driven by a $5.0 million reduction in payroll, bonus, severance, and employment benefits expenses due to our reduction in workforce, a $3.2 million reduction in stock-based compensation resulting from no stock appreciation rights expense, a $0.7 million reduction in CouponFollow share-based liability expense due to the liability being fully accrued as of December 31, 2025, and a $0.3 million net reduction of other immaterial expense items.
Salaries and benefits expense decreased $4.2 million, or 17% forFor the threesix months ended MarchJune 31,30, 2026 compared to2026, the prior$13.4 period. Themillion decrease wasis primarily driven by a $2.4$6.2 million reduction in payrollpayroll, bonus, severance, and bonusemployment benefits expenses due to lowerour headcount,reduction in workforce, a $1.3$4.6 million declinereduction in stock-based compensation resulting from less restricted stock unitunits outstanding and no stock appreciation rights expense, and a $1.2$1.3 million increase in capitalized internally developed software costs.costs and a $1.4 million reduction in CouponFollow share-based liability expense due to the liability being fully accrued as of December 31, 2025. This was offset by ana $0.1 million net increase of $1.5other millionimmaterial inexpense severance related expenses due to our reduction in workforce.items.
Selling, general, and administrative expense increased $0.2 million, or 1%decreased for the three and six months ended MarchJune 31,30, 2026 compared to the prior period. The increase was primarily driven by a $0.9 million increase in software and subscription services, offset by a decrease of $0.7 million in professional services and consulting fees.periods.
For the three months ended June 30, 2026, the $3.0 million decrease is primarily driven by a $1.8 million reduction in amortization expense resulting from long-lived assets impairment in the first quarter of 2026 or reaching the end of their estimated useful life since the prior period, a $0.4 million reduction in professional services and consulting fees, a $0.2 million reduction in software and subscription services and a $0.6 million net decrease of other immaterial expense items.
For the six months ended June 30, 2026, the $2.8 million decrease is primarily driven by a $2.1 million reduction in depreciation and amortization expense resulting from to long-lived assets impairment in the first quarter of 2026 or reaching the end of their estimated useful life since the prior period, a $1.5 million reduction in professional services and consulting fees and a $0.2 million reduction in rent expense. This was offset by a $1.0 million increase in software and subscription services.
Impairment of long-lived assets increased $36.8$0.9 million and $37.7 million for the three and six months ended MarchJune 31,30, 20262026, compared to the prior periodperiods due to the recognition of long-lived assetassets impairment expense at our Marketing asset group.group during the first and second quarter of 2026. There was no impairment of long-lived assets during 2025.
Other expense:
Interest expense, net decreasedwas $0.5 million, or 6%,flat for the three months ended MarchJune 31,30, 2026 and decreased $0.5 million for the six months ended June 30, 2026 compared to the prior periodperiods primarily due to lower average interest rates in 2026 compared to 2025, offset by a higher loan balance primarily due to the drawdown of our Revolving Credit Facility at the end of 2025.
Change in fair value of warrant liabilities was flat for the three and six months ended MarchJune 31,30, 2026 compared to the prior periodperiods due to the fair value remeasurement of our Warrants which have been delisted from the New York Stock Exchange.
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 loss, state taxes, foreign rate differential, non-deductible expenses, increases to the valuation allowance activity related to unrealizable deferred tax assets and outside basis adjustments.
The decrease in adjusted gross profit for the three months ended MarchJune 31,30, 20262026, compared to the prior period is primarily related to our decrease in revenue.revenue, offset by less amortization as our developed technology reached the end of its estimated useful life. See "Management's Discussion and Analysis of Financial Condition and Results of Operations, — Revenue Metrics" forand additional"Cost informationof revenue" for explanationsdiscussion of ourthe changes in our revenue and cost of revenue.
We have experienced declining cash flows and financial performance primarily as a result of reductions in Advertising Partner and overall consumer demand for our marketing services. As of MarchJune 31,30, 2026, we had unrestricted cash and cash equivalents of $51.5$40.5 million, negative net working capital, which we define as current assets less current liabilities, of $14.1$27.4 million. We hadhave an aggregate principal amount outstanding of $50.0 million under our revolving facility with a maturity date of January 27, 2027, and $252.6$245.1 million of term debt outstanding on our term loan which matures in July 2027. ManagementAt determined,our asannual a resultmeeting of thisstockholders evaluation,held thaton July 22, 2026, the stockholders approved an exchange agreement with all lenders under our currentExisting cashCredit andAgreement, cashsatisfying equivalents,settlement net working capital position, andof the upcomingoutstanding maturitybalance date ofon our revolving facility raisewhich substantialwas doubtdue aboutJanuary 2027, and reducing the principle and extending the maturity date on our abilityTerm toLoan. continueFor asinformation aSee goingItem concern1, for"Financial theStatements twelve-month— periodNote following5, theDebt, date of this filing.Net".
Our plan is to continue exploring options of refinancing all of our debt obligations. Management cannot conclude as of the date of this filing that its plans are probable of being successfully implemented. There can be no assurance that we will be able to obtain financing that will provide us with sufficient liquidity to satisfy our revolving facility in January 2027 or our term loan in July 2027.
Management determined, as a result of this evaluation, that our current cash and cash equivalents and net working capital position raise substantial doubt about our ability to continue as a going concern for the twelve month period following the date of this filing. Management has initiated cost-reduction programs consisting of reduction in force and reducing activities for businesses, which immediately reduced our cash burn rate. Management cannot conclude as of the date of this filing that its plans are probable of mitigating the conditions and events that raise substantial doubt. As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern.
Our main focus is executing on our operational strategy, which includes continued focus on expanding the number of advertising partners that are utilizing or integrated with our platform by continuing to attract and monetize users with commercial intent on our owned and operated web propertiesProducts and on behalf of our Network Partners as well as optimizing bids and driving higher returns on advertising spend. Additionally, we are focused on our current cost structure by reducing our cash operating expenses and debt service obligations.expenses. Adverse macroeconomic conditions have affected, and may in the future affect, the demand for advertising, resulting in fluctuations in the amounts our advertisers spend on advertising, which could have a negative impact on our financial condition and operating results.
See Item 1, "Financial Statements -— Note 5, Debt, Net" of this Quarterly Report on Form 10-Q.
In the threesix months ended MarchJune 31,30, 2026, cash used in operating activities of $26.1$28.2 million resulted primarily from favorableunfavorable changes in net income, excluding the impact of non-cash items offset by unfavorable changes in working capital balances. The unfavorable changes in working capital balances included $13.0 million in outflows related to the payment of an earnout obligation for the CouponFollow acquisition offset by an decrease in account receivable balances.
In the threesix months ended MarchJune 31,30, 2025, cash usedprovided inby operating activities of $15.9$8.5 million resulted primarily from $13.2the milliontiming inof outflowsrevenue relatedshare payments to the payment of earnout obligations for the CouponFollow acquisition and $4.3 million in net interest paid on our Term Loan.partners.
In the threesix months ended MarchJune 31,30, 2026 and 2025, cash used in investing activities of $2.2$3.5 million and $1.5$3.1 million resulted primarily from capitalization of software development costs.
In the threesix months ended MarchJune 31,30, 2026, cash used in financing activities of $7.7$15.2 million resulted primarily from $7.5$15.0 million repayment of principal and interest on our Term Loan which increased by $2.5 million on March 31, 2026, andoffset $0.2by millionother ofimmaterial share repurchases.items.
In the threesix months ended MarchJune 31,30, 2025, cash used in financing activities of $5.3$8.1 million resulted primarily from a $10.0 million repayment of principal and interest on our Term Loan.Loan, offset by $2.3 million of cash received from the private placement with our founders family foundation.
Commitments
Service Agreements
In June 2023, we entered into a multi-year agreement with a data cloud platform service provider whereby we are contractually obligated to spend $5.0 million annuallyin each annual period between July 2023 and June 2026. As of MarchJune 31,30, 2026, we have fulfilled our contractual obligation towards this commitment. A new agreement was signed with the same service provider with obligated spend of $5.0 million in each annual period through June 2029.
Our critical accounting policies and estimates are described in our Annual Report on Form 10-K filed with the SEC on March 11, 2026. During the first half of 2026, we identified triggering events that required us to evaluate long-lived assets for impairment. As a result, we determined that impairment of long-lived assets should be included as a critical accounting estimate. Accordingly, we believe the estimates, assumptions, and judgments associated with our most critical accounting policies are those relating to valuation of goodwill, intangible assets, impairment of long-lived assets, stock-based compensation and income taxes. The impairment of long-lived assets policy is described as follows:
Impairment of Long-Lived Assets
We assess the recoverability of our long-lived assets when events or changes in circumstances indicate that their carrying amount may not be recoverable. Such events or changes in circumstances may include a significant adverse change in the extent or manner in which a long-lived asset is being used; significant adverse changes in legal factors or in the business climate that could affect the value of a long-lived asset; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset; current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset; or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of our previously estimated useful life. We perform impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. We assess recoverability of our long-lived assets by determining whether the carrying amount of the asset group can be recovered through projected undiscounted cash flows over their remaining useful lives inclusive of an estimated residual value. If the carrying amount of the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized and measured as the amount by which the carrying amount exceeds the estimated fair value. An impairment loss is recognized in the statement of operations in the period in which management determines such impairment has occurred.
The critical accounting estimates, assumptions, and judgments that we believe to have the most significant impact on our condensed consolidated financial statements are valuation of goodwill, intangible assets, stock-based compensation and income taxes.
There have been no material changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K filed with the SEC on March 11, 2026.
For information regarding recent accounting pronouncements, see Item 1, "Financial Statements -— Note 2, Summary of Significant Accounting Policies."
SST insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 26,910 shares, about $80.7K) and open-market sales in 0 filings. Net open-market shares: 26,910 (purchases minus sales); net value about $80.7K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-07-15 | Sestanovich Elizabeth |
Shares withheld for tax | 7,058 | $2.60 | $18.4K |
| 2026-07-15 | Coppola Brian |
Shares withheld for tax | 6,124 | $2.60 | $15.9K |
| 2026-07-15 | Kidambi Tridivesh |
Shares withheld for tax | 6,022 | $2.60 | $15.7K |
| 2026-07-15 | Weinrot Daniel J |
Shares withheld for tax | 9,156 | $2.60 | $23.8K |
| 2026-05-29 | Kidambi Tridivesh |
Grant/award | 35,300 | — | — |
| 2026-04-15 | Kidambi Tridivesh |
Open-market purchase | 26,910 | $3.00 | $80.7K |
| 2026-04-15 | Kidambi Tridivesh |
Shares withheld for tax | 301 | $2.26 | $680 |
| 2026-04-15 | Sestanovich Elizabeth |
Shares withheld for tax | 341 | $2.26 | $771 |
| 2026-04-15 | Coppola Brian |
Shares withheld for tax | 331 | $2.26 | $748 |
| 2026-04-15 | Weinrot Daniel J |
Shares withheld for tax | 341 | $2.26 | $771 |
Well-known investors holding SST (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 32,619 | $98.5K | — | Sold out |
| Renaissance Technologies | 2026-06-30 | 18,320 | $55.3K | — | Sold out |