Executive Summary

Q2 2025 revenue was $78.1M, up sequentially and above Wall Street consensus ($73.3M)*; Adjusted EBITDA rose 18% YoY to $11.7M, while GAAP net loss improved to $(21.5)M .
Gross profit increased 7% YoY to $27.9M and Adjusted Gross Profit reached $41.0M; Products segment strength (Startpage, MapQuest, CouponFollow) offset Marketing weakness amid advertising volatility .
Management withheld Q3 2025 guidance due to uncertainty at a key advertising partner and broader demand/tariff volatility, maintaining a cautious stance despite operational improvements .
Structural/operational updates: 1-for-10 reverse split (effective June 12), segment realignment to Marketing and Products, ongoing material weaknesses with a remediation plan; liquidity remained solid with $63.6M cash and $50M revolver availability .

What Went Well and What Went Wrong

What Went Well

Products-led outperformance: Products revenue +34% YoY to $24.0M and Products adjusted gross profit +32% YoY to $22.7M driven by Startpage, MapQuest, and CouponFollow momentum .
CEO highlighted AI-driven turnaround and margin expansion in organic products; “continued turnaround driven by AI adoption across our entire company” (Michael Blend) .
Cost discipline: Salaries/benefits and SG&A down YoY; operating loss improved to $(15.9)M vs $(29.1)M, reflecting expense reductions and mix shift to higher-margin Products .

What Went Wrong

Top-line decline: Revenue fell 17% YoY on Marketing softness; RTAC eased to 117% from 120%, and TAC decreased to $114.9M from $120.2M as advertising demand remained volatile .
No forward guidance: Company did not provide Q3 guidance due to uncertainty at a key partner and tariff policy risk, limiting visibility and potentially pressuring sentiment .
Ongoing controls issues: Material weaknesses in ICFR persisted; remediation is underway but not yet effective, a governance overhang for investors .

Financial Results

Consolidated P&L and Margins (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($M)	$75.6	$74.5	$78.1
Gross Profit ($M)	$31.8	$28.4	$27.9
Adjusted Gross Profit ($M)	$44.7	$41.5	$41.0
Net Loss Attributable ($M)	$(14.2)	$(15.9)	$(17.5)
Adjusted EBITDA ($M)	$17.9	$12.1	$11.7
Diluted EPS (GAAP)	N/A	$(2.07) approx (derived)	$(2.23)
Gross Margin (%)	42.1% (31.8/75.6)	38.1% (28.4/74.5)	35.7% (27.9/78.1)
Adjusted EBITDA Margin (%)	23.7% (17.9/75.6)	16.2% (12.1/74.5)	15.0% (11.7/78.1)
Net Income Margin (%)	(18.7)% (−14.2/75.6)	(21.3)% (−15.9/74.5)	(22.4)% (−17.5/78.1)

Note: Q1 diluted EPS row is approximate if computed from available net loss/shares; the definitive diluted EPS for Q1 was not disclosed in press materials. Q2 diluted EPS (GAAP) per 10-Q is $(2.23) .

Segment Breakdown (Q2 2025 vs Q2 2024)

Segment	Q2 2024 Revenue ($M)	Q2 2025 Revenue ($M)	YoY	Q2 2024 Segment Adj. Gross Profit ($M)	Q2 2025 Segment Adj. Gross Profit ($M)	YoY
Marketing	$76.7	$54.1	(29)%	$23.6	$19.6	(17)%
Products	$17.9	$24.0	+34%	$17.2	$22.7	+32%
Total	$94.6	$78.1	(17)%	$40.9	$42.3	+3%

KPIs (Q2 2025 vs Q2 2024)

KPI	Q2 2024	Q2 2025	Commentary
Products Sessions (Millions)	464.9	522.5	+57.6M YoY; Startpage DAUs +25% in June
Products RPS ($/Session)	$0.04	$0.05	+$0.01 YoY
Marketing TAC ($M)	$120.2	$114.9	Spend reduction amid demand volatility
Marketing RTAC (%)	120%	117%	Slight efficiency decline
US Revenue ($M)	$91.2	$75.2	Mix remained US-heavy

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q3 2025	None	No guidance provided due to partner marketplace uncertainty/tariffs	Maintained no guidance
Gross Profit	Q3 2025	None	No guidance	Maintained no guidance
Adjusted Gross Profit	Q3 2025	None	No guidance	Maintained no guidance
Adjusted EBITDA	Q3 2025	None	No guidance	Maintained no guidance
Revenue	Q1 2025	$69–$71M	Actual: $74.5M	Raised vs guidance (beat)
Gross Profit	Q1 2025	$25–$27M	Actual: $28.4M	Raised vs guidance (beat)
Adjusted Gross Profit	Q1 2025	$38–$40M	Actual: $41.5M	Raised vs guidance (beat)
Adjusted EBITDA	Q1 2025	$9–$11M	Actual: $12.1M	Raised vs guidance (beat)

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024 and Q1 2025)	Current Period (Q2 2025)	Trend
AI/Technology Initiatives	Automation and AI drove 500%+ YoY campaign launches in Q4; agentic coding and generative AI integrated into RAMP in Q1	“Turnaround driven by AI adoption across our entire company” (CEO)	Sustained emphasis; scaling to products and platform
Advertising Partner/Market Volatility	Renewed Google agreements to 2027; cautious outlook; no Q2 guidance in Q1 due to uncertainty	No Q3 guidance given partner marketplace uncertainty and tariff risks	Persistent macro/partner risk
Segment Strategy	Transition to Marketing and Products operating segments	Products strength (Startpage/MapQuest/CouponFollow) vs Marketing softness	Mix shift toward Products
Governance/Controls	Material weaknesses previously disclosed (via 10-K context)	Material weaknesses persist with active remediation plan	Remediation underway, not complete
Capital Structure	Debt repurchases in 2024; leverage focus	1-for-10 reverse split effective June 12, 2025	Share consolidation; neutral to ops

Note: Q2 2025 call transcript content was unavailable due to a retrieval error; themes reflect press release and 10‑Q narrative .

Management Commentary

“Our strong performance this quarter reflects System1's continued turnaround driven by AI adoption across our entire company.” — Michael Blend, CEO .
“We are pleased with our second quarter financial results, specifically our 6% and 18% year‑over‑year increase in adjusted gross profit and adjusted EBITDA, respectively.” — Tridivesh Kidambi, CFO .
Product highlights: Startpage DAUs +25% YoY (June), MapQuest white‑label solution launch, CouponFollow organic sessions +44% YoY .

Q&A Highlights

Q2 2025 earnings call transcript could not be retrieved due to a database inconsistency; therefore, Q&A specifics and any intra‑quarter guidance clarifications were not accessible via primary sources [12:—].
Narrative clarifications are drawn from the 8‑K/press release and 10‑Q, including the decision to withhold Q3 guidance and segment performance drivers .

Estimates Context

How results compared to Wall Street consensus (S&P Global):

Metric	Q4 2024 Estimate	Q4 2024 Actual	Q1 2025 Estimate	Q1 2025 Actual	Q2 2025 Estimate	Q2 2025 Actual
Revenue ($M)	91.3*	75.6	69.9*	74.5	73.3*	78.1
Primary EPS ($)	(2.30)*	N/A	(3.50)*	N/A	(2.60)*	N/A

Notes: Primary EPS actuals from S&P Global were −1.469 (Q4 2024), −1.900 (Q1 2025), and −1.947 (Q2 2025)*; GAAP diluted EPS per 10‑Q for Q2 2025 was −$2.23 . Values with asterisks were retrieved from S&P Global (Capital IQ).
Implication: Company beat revenue estimates in Q1 and Q2; EPS losses were less negative vs consensus in S&P Global terms, but GAAP diluted EPS in 10‑Q for Q2 was −$2.23, reflecting share count and classification effects .

Key Takeaways for Investors

Products segment is structurally improving and driving margin expansion; adjusted gross profit growth (+6% YoY) despite lower consolidated revenue underscores mix shift benefits .
Marketing remains exposed to partner marketplace dynamics; RTAC drift and TAC reduction signal prudent spend management amid volatile demand .
With no Q3 guidance, near‑term visibility is limited; monitor partner developments (Google/Microsoft) and tariff policy impacts referenced by management .
Liquidity/credit: $63.6M cash and $50M revolver availability support operations; term loan outstanding ~$270.1M principal with fair value ~$139.1M implies discounted trading and refinancing optionality .
Governance: Material weaknesses persist; remediation plan is active—progress here is key for valuation multiple and institutional sponsorship .
Corporate actions: 1-for-10 reverse split effected; all per‑share metrics retro‑adjusted—use post‑split shares for modeling .
Operational catalysts: Startpage DAUs, MapQuest white‑label launch, CouponFollow session growth underpin Products revenue durability; continued AI adoption is central to management’s turnaround narrative .

S&P Global disclaimer: All consensus estimate values marked with an asterisk (*) were retrieved from S&P Global (Capital IQ).

System1, Inc. (SST)·Q2 2025 Earnings Summary