Executive Summary

Q4 revenue declined 21% year over year to $75.6M while GAAP gross profit rose 28% to $31.8M; Adjusted Gross Profit grew 19% to $44.7M and Adjusted EBITDA surged 79% to $17.9M, reflecting mix shift toward higher-margin owned-and-operated (O&O) products and disciplined spend .
Sequentially, revenue fell 15% vs Q3 ($88.8M → $75.6M), but Adjusted EBITDA nearly doubled ($10.3M → $17.9M), evidencing strong operating leverage and AI-driven efficiency in RAMP despite Google Search Partner Network volatility .
Management issued Q1 2025 guidance calling for revenue of $69–71M, Adjusted Gross Profit of $38–40M, and Adjusted EBITDA of $9–11M; interest expense $7.0–7.5M, D&A $20.5–21.0M, and acquisition/restructuring costs $2.5–3.0M; no full-year guide due to ongoing Google ecosystem changes .
Strategic catalysts: (1) transition from Google AFD to RSOC where System1 is a leading partner, (2) continued O&O product momentum (CouponFollow, Startpage, MapQuest), and (3) AI automation (22k campaigns launched; goal 130k/quarter), all positioning for medium-term margin resilience and growth .

What Went Well and What Went Wrong

What Went Well
- O&O products outperformed: revenue +60% YoY and +30% QoQ to $27.1M; O&O Adjusted Gross Profit rose to $32M, up 20% YoY and 21% QoQ, powering margin expansion despite lower revenue .
- AI-driven scale in RAMP: >500% YoY increase in campaign launches; 22,000 campaigns in Q4 with a medium-term target of 130,000 per quarter; 3.8B sessions processed by RAMP in Q4 .
- Renewed both Google advertising arrangements (Oct-2024 and Feb-2025) running through 2027; CouponFollow organic sessions +129% YoY; Startpage and MapQuest user growth continuing .
- Quote: “Adjusted EBITDA came in at $17.9 million, which was a 79% year-over-year increase…primarily driven by our owned and operated products” – Michael Blend .
What Went Wrong
- Google Search Partner Network volatility pressured marketing-driven businesses: RPS down 55% YoY and CPS down 65% YoY; ad spend cut 26% sequentially to preserve profitability .
- Imminent Google AFD opt-outs create near-term disruption; System1 is shifting traffic to RSOC but expects short-term revenue pressure during the transition .
- Leverage remains elevated: ~$280M term loan outstanding; net consolidated leverage ~5.6x at year-end, above management’s comfort level (working toward optimization/refinance over 2.5 years) .

Financial Results

Metric	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Revenue ($M)	$96.1	$94.6	$88.8	$75.6
GAAP Gross Profit ($M)	$24.9	$26.1	$24.8	$31.8
Adjusted Gross Profit ($M)	$37.5	$38.8	$37.6	$44.7
Adjusted EBITDA ($M)	$10.0	$9.9	$10.3	$17.9
Operating Income (Loss) ($M)	$(19.1)	$(29.1)	$(21.8)	$(11.9)
Net Loss – Continuing Ops ($M)	$(25.4)	$(34.8)	$(30.6)	$(18.0)

Margin	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Gross Margin %	25.9%	27.6%	28.0%	42.1%
Adjusted Gross Profit Margin % (non-GAAP)	39.0%	41.1%	42.3%	59.1%
Adjusted EBITDA Margin % (non-GAAP)	10.4%	10.5%	11.6%	23.7%
EBIT Margin % (Operating Margin)	(19.9)%	(30.8)%	(24.6)%	(15.7)%

Notes: Management remarks referenced “$76M revenue and $45M gross profit,” which align with rounded revenue and Adjusted Gross Profit ($44.7M) rather than GAAP gross profit ($31.8M) .

Segment breakdown (Q4 2024):

O&O advertising revenue $64.7M (down 19% YoY; down 9% QoQ); O&O products revenue $27.1M (+60% YoY; +30% QoQ); O&O Adjusted Gross Profit $32M (+20% YoY; +21% QoQ) .
Partner Network reported revenue $10.9M (accounting adjustment), adjusted to $18.0M (+8% YoY); Adjusted Gross Profit $14M (+10% YoY and QoQ) .
Network revenue less agency fees $14.4M (+10% YoY and QoQ) .

Segment KPI (Q4 2024)	Value
O&O properties sessions	1.9B
RAMP total sessions processed	3.8B
O&O RPS	$0.030
O&O CPS	$0.017 (vs $0.021 in Q3)
RPS–CPS Spread / Margin	$0.017 / 98% (Q3: $0.013 / 59%)
International mix (O&O revenue)	36% (Q4’23: 26%)
Active partners (QoQ change)	+6% to >300
Scale partners (≥$50k/quarter)	65 (+12% QoQ)
Avg revenue per partner (QoQ)	−6% vs Q3

Balance sheet and liquidity highlights (Q4 2024):

Cash & equivalents $63.6M; Long-term debt, net $255.1M; current debt, net $16.4M .
“Outstanding balance of $280M term loan” and net leverage ~5.6x at quarter end (management commentary) .

Non-GAAP definitions and reconciliations are provided in the 8-K (Adjusted Gross Profit and Adjusted EBITDA) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q1 2025	N/A (no prior Q1 guide)	$69–71M	New
Gross Profit	Q1 2025	N/A	$25–27M	New
Adjusted Gross Profit	Q1 2025	N/A	$38–40M	New
Adjusted EBITDA	Q1 2025	N/A	$9–11M	New
Interest expense	Q1 2025	N/A	$7.0–7.5M	New
D&A	Q1 2025	N/A	$20.5–21.0M	New
Acquisition & restructuring costs	Q1 2025	N/A	$2.5–3.0M	New

Note: No full-year 2025 guidance due to Google product/policy volatility; management may revisit if conditions stabilize .

Earnings Call Themes & Trends

Topic	Q2 2024 (Q-2)	Q3 2024 (Q-1)	Q4 2024 (Current)	Trend
AI/automation & RAMP	“Strong execution…continued investment in RAMP”; O&O product momentum	Deep AI integration; scaled campaign launches (+50% vs Q1)	22k campaigns; 500%+ YoY launch growth; aiming for 130k/quarter	Accelerating
Google ecosystem	Monetization relationship renewed (one primary)	SPN volatility depressing sell-side monetization; withheld Q4 guide	AFD opt-outs → shift to RSOC; System1 positioned as leading RSOC partner	Near-term disruption; medium-term positive
O&O products (CouponFollow, Startpage, MapQuest)	CouponFollow +36% YoY organic visitors; Startpage browser launch; MapQuest organic growth	O&O products ~29% of O&O revenue and 75% of O&O GP; strong engagement	CouponFollow +129% YoY organic sessions; Startpage sessions +20% YoY; MapQuest sessions +45% YoY	Strengthening
International mix	Not emphasized	O&O international 35% (vs 24% prior year)	O&O international 36% (vs 26% prior year)	Rising
OpEx discipline/leverage	Operating expense reduction initiatives	OpEx down sequentially; focus on leverage	High flow-through expected from gross profit to EBITDA	Improving flow-through
Capital structure	—	Net leverage ~7x (Q3)	Net leverage ~5.6x (Q4); 2.5 years to refinance	Improving but still elevated

Management Commentary

Strategic focus: “Our investment in AI…increasing efficiency and scale across all of our marketing operations…strengthening our focus on AI integrations across all facets of RAMP in 2025” – Michael Blend .
Google transition: “Google…plan to automatically opt out advertisers…from…AFD…AFD monetization is likely to materially decline…we are rapidly shifting…to RSOC…we believe System1 is among the best positioned in the market” – Michael Blend .
O&O strength: “Our products like Startpage, MapQuest and CouponFollow saw higher engagement…O&O products…revenue increasing 30% sequentially…60% compared to Q4 last year” – Michael Blend .
Profitability/OpEx: “We are pleased with Q4…$17.9M of adjusted EBITDA…We continue to focus on reducing OpEx to create operating leverage” – Tridivesh Kidambi .
Capital structure: “Net leverage…5.6x…higher than we’d like…we still have about 2.5 years left on the term…we believe we’ll be in a strong position to refinance” – Tridivesh Kidambi .

Q&A Highlights

AI cost/efficiency: Management highlighted rapidly falling AI tool costs and 2–4x productivity gains across engineering/product; business teams also building products using code-assist tools .
Capital structure and leverage: Net leverage 5.6x remains above targets; refinancing expected when term loan matures in ~2.5 years .
Political advertising: Q4 political cycle pressured buy-side pricing; post-election normalization should lower buy-side costs for System1 .
RSOC readiness: System1 invested early and is a market leader in RSOC; expects short-term disruption but medium-term benefits as AFD sunsets .
Margin outlook: Expect high flow-through of gross profit to EBITDA and expanding margins as OpEx stays disciplined and AI improves efficiency .

Estimates Context

S&P Global consensus estimates for Q4 2024 (EPS/Revenue/EBITDA) were unavailable at time of analysis due to data access limits; therefore, we cannot formally classify beat/miss versus Wall Street consensus at this time. Values retrieved from S&P Global.*

Key Takeaways for Investors

Mix-quality improving: Despite revenue pressure from Google SPN volatility, O&O products are scaling, lifting gross and EBITDA margins materially (Adjusted EBITDA margin ~24% in Q4) .
Near-term headwind, medium-term tailwind: AFD opt-outs likely to weigh near term, but System1’s early RSOC investment could position it for share/margin gains as RSOC scales .
AI is a tangible driver: Massive uplift in campaign throughput and organization-wide productivity should sustain operating leverage and faster experimentation .
Watch leverage and cash: Cash $63.6M vs. net term debt ~$280M; deleveraging depends on sustained AGP/EBITDA growth and stabilization in Google monetization .
Q1 guide signals resilience: Despite guiding revenue down YoY, management expects AGP up ~25% YoY and EBITDA up meaningfully, implying improving unit economics/execution .
Trading setup: Stock likely reacts to signs of stabilization in Google partner monetization, RSOC ramp metrics, and continued O&O KPI strength (CouponFollow, Startpage, MapQuest) .

Appendices

Additional Cross-Checks and Notes

Revenue and profit figures reconcile across the 8-K and press release exhibits; management’s “$45M gross profit” comment corresponds to Adjusted Gross Profit ($44.7M) rather than GAAP gross profit ($31.8M) .
Google agreements renewed with termination in 2027 provide contractual visibility even as product transitions occur .
Q2 and Q3 prior-period context: Q2 revenue $94.6M, Adj. EBITDA $9.9M; Q3 revenue $88.8M, Adj. EBITDA $10.3M, with Q4 stepping up to $17.9M Adjusted EBITDA .

Sources: Q4 2024 8-K 2.02 press release and exhibits ; Q4 2024 earnings call transcript ; Q4-related press releases ; Q3 2024 8-K ; Q3 2024 call ; Q2 2024 8-K .

System1, Inc. (SST)·Q4 2024 Earnings Summary