Sign in

You're signed outSign in or to get full access.

SI

System1, Inc. (SST)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $61.6M, down 31% YoY, with Adjusted Gross Profit of $36.1M (-4% YoY) and Adjusted EBITDA of $9.9M (-4% YoY), reflecting Google’s effective sunset of AdSense for Domains and a pivot to Google’s RSOC product .
  • Versus S&P Global consensus, revenue materially missed ($61.6M vs $74.5M*), EPS beat (-$2.07 vs -$2.78*), and EBITDA (S&P methodology) missed ($3.2M vs $11.3M*). Management did not provide Q4 guidance, citing marketplace uncertainty . Values retrieved from S&P Global*.
  • Margin profile improved: Adjusted Gross Profit margin rose to 59% (from 42% YoY), with Products becoming the majority of segment profit (56%) amid the marketing transition .
  • Liquidity remained adequate with $54.6M cash, $265M term loan outstanding, net consolidated leverage ~4.1x, and $50M of undrawn revolver; focus remains on cost control and AI-driven operational efficiencies .
  • Stock-relevant catalysts: the large revenue miss vs consensus*, withheld Q4 guidance, and progress on RSOC transition alongside AI product and platform execution . Values retrieved from S&P Global*.

What Went Well and What Went Wrong

What Went Well

  • Products segment continued to grow YoY: Q3 Products revenue $22.5M (+8% YoY) and Adjusted Gross Profit $21.2M (+6% YoY); sessions +23% YoY and +12% QoQ, aided by feature launches across Startpage, MapQuest, and CouponFollow .
  • Adjusted Gross Profit margin expanded to 59% (from 42% YoY), with Products now comprising 56% of segment profit, evidencing mix shift toward higher-margin assets .
  • Management emphasized AI integration and agentic coding driving faster development and efficiency; CEO: “Integrating AI across our business continues to drive meaningful gains…” .

What Went Wrong

  • Marketing segment decline: Q3 marketing revenue $39.1M (-43% YoY; -28% QoQ); Adjusted Gross Profit $16.6M (-14% YoY; -15% QoQ), driven by Google’s AFD wind-down and lower TAC volumes .
  • Monetization pressure in Products: RPS fell to $0.04 (-12% YoY, -16% QoQ), with advertisers pulling back (tariff uncertainty most acute at CouponFollow) .
  • Guidance withheld for Q4 2025 due to marketplace uncertainty; continued legal dispute over invalid traffic from an advertising partner, adding execution and legal overhang .

Financial Results

Consolidated Metrics

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M)$74.5 $78.1 $61.6
Gross Profit ($M)$28.4 $27.9 $22.8
Adjusted Gross Profit ($M)$41.5 $41.0 $36.1
Adjusted Gross Profit Margin (%)55.7% (calc from 41.5/74.5) 52.5% (calc from 41.0/78.1) 59%
Net Loss ($M)$(19.9) $(21.5) $(22.0)
Adjusted EBITDA ($M)$12.1 $11.7 $9.9
Primary EPS (S&P)* ($)-$1.90*-$1.95*-$2.07*
Values retrieved from S&P Global*.

Q3 2025 Actuals vs S&P Global Consensus

MetricConsensus*Actual
Revenue ($M)$74.5*$61.6
Primary EPS* ($)-$2.78*-$2.07*
EBITDA (S&P methodology)* ($M)$11.3*$3.2*
Values retrieved from S&P Global*. Note: Company-reported Adjusted EBITDA was $9.9M ; S&P EBITDA reflects a standard methodology and is not comparable to Adjusted EBITDA .

Segment Breakdown (Q3 2025)

SegmentRevenue ($M)Adjusted Gross Profit ($M)
Products$22.5 $21.2
Marketing$39.1 $16.6

KPIs (Q3 2025)

KPIQ3 2025
Sessions YoY / QoQ+23% YoY; +12% QoQ
RPS ($)$0.04; -12% YoY; -16% QoQ
RTAC (%)120% (vs 118% YoY)
Advertising Spend-54% YoY; -37% QoQ
Active Partners (Marketing)~180

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Revenue, EBITDA, EPSQ2 2025No guidance provided —Maintained (no guidance)
Consolidated Revenue, EBITDA, EPSQ3 2025No guidance provided —Maintained (no guidance)
Consolidated Revenue, EBITDA, EPSQ4 2025—No guidance provided Withheld due to marketplace uncertainty

Earnings Call Themes & Trends

TopicQ1 2025 (Prior)Q2 2025 (Prior)Q3 2025 (Current)Trend
AI/Technology initiativesAgentic coding & gen AI integrated into RAMP; faster cycles Continued AI-driven product momentum (Startpage DAU +25% YoY, 1.org launch) AI across platform; agentic coding for rapid product dev; planning AI-focused consumer agents Improving
Google monetization transitionAFD risks noted; marketplace uncertainty Indicated rolling opt-out of AFD; volatility in online ads AFD effectively sunset; pivot to RSOC; market leader in RSOC; near completion of transition Deteriorating to Stabilizing
Product performance (Startpage, MapQuest, CouponFollow)CouponFollow organic sessions +162% YoY; MapQuest engagement initiatives Products revenue +34% YoY; Adjusted GP +32% YoY Products revenue +8% YoY; sessions +23% YoY; RPS down; multiple feature launches Mixed (engagement up, monetization down)
Tariffs/MacroMentioned evolving tariff policies and ad demand uncertainty Tariff and ad demand uncertainty persists Advertiser pullback (CouponFollow) due to tariff uncertainty; broader ad demand volatility Deteriorating
Traffic quality/regulatory/legal——Identified invalid/non-human traffic from partner; seeking reimbursement; potential legal action Emerging risk
Liquidity/leverageCash $43.9M; balance sheet detailed Cash $63.6M; balance sheet detailed Cash $54.6M; term loan $265M; leverage ~4.1x; $50M undrawn revolver Stable

Management Commentary

  • CEO (press release): “Integrating AI across our business continues to drive meaningful gains, as we saw a significant improvement in overall gross margin and a continued higher reduction in operating expenses.”
  • CEO (call): “We are the market leader in RSOC and believe it represents a much larger and more durable opportunity than our legacy Google business.”
  • CFO (press release): “Our ongoing investments in AI-driven automation and decision-making are already delivering operational efficiencies…”
  • CFO (call): “We ended the quarter with $54.6 million of unrestricted cash… outstanding balance of $265 million of term-loan… net consolidated leverage… ~4.1x… $50 million of availability under our revolver… We are not providing Q4 2025 guidance at this time.”

Q&A Highlights

  • Bing monetization: Management works with Bing/Yahoo and has shifted more effort as monetization improved; primary marketing focus remains Google RSOC .
  • AI partnerships/products: Launch of Startpage’s Vanish mobile app (private AI chat using ChatGPT, Claude, Perplexity); plan to roll out consumer-focused agents leveraging AI over next year .
  • Closing tone: Management expressed confidence in medium/long-term prospects and alignment with shareholders .

Estimates Context

  • Q3 2025: Revenue missed consensus ($61.6M vs $74.5M*), EPS beat (-$2.07 vs -$2.78*), EBITDA (S&P methodology) missed ($3.2M vs $11.3M*) . Values retrieved from S&P Global*.
  • Forward quarter (Q4 2025) consensus: Revenue $53.0M*, EPS -$2.02*, EBITDA $8.1M*; management withheld Q4 guidance, citing marketplace uncertainty . Values retrieved from S&P Global*.
  • Potential estimate revisions: Expect downward adjustments to marketing-revenue expectations until RSOC transition stabilizes; Products segment trajectory and margin mix may temper consolidated margin assumptions .

Key Takeaways for Investors

  • The quarter’s narrative is dominated by Google AFD sunset and transition to RSOC; expect near-term volatility but improving stability into 2026 per management .
  • Products segment is now majority of segment profit and shows durable engagement growth; monetization pressures (RPS) and tariff-driven advertiser pullbacks warrant monitoring .
  • Large revenue miss vs consensus* and lack of Q4 guidance are likely principal stock catalysts; watch for RSOC normalization and any new monetization channels (Bing/Yahoo, non-Google) . Values retrieved from S&P Global*.
  • AI integration and agentic coding are central to execution efficiency and faster product cycles, with new AI consumer agents planned over the next year .
  • Liquidity and capital structure: $54.6M cash, leverage ~4.1x, $50M revolver availability provide flexibility to execute cost controls and product investments; debt level remains a constraint to valuation multiple expansion .
  • Legal overhang: pursuit of reimbursement for invalid traffic could yield recovery but introduces execution/legal risk and distracts resources .
  • Near-term positioning: Focus on Products growth, RSOC scaling, and advertiser mix diversification; medium-term thesis hinges on margin expansion from mix shift and stabilization of marketing monetization .

Notes on non-GAAP: Adjusted Gross Profit and Adjusted EBITDA are non-GAAP measures; see definitions and reconciliations in the company’s release .

Values retrieved from S&P Global*: Primary EPS Consensus Mean, Revenue Consensus Mean, EBITDA Consensus Mean, Target Price Consensus Mean, and associated actuals where shown.