10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from __________ to __________

Commission file number 001-39331

System1, Inc.

(Exact name of registrant as specified in its charter)

Delaware	92-3978051
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4235 Redwood Avenue Marina Del Rey, CA	90066
(Address of Principal Executive Offices)	(Zip Code)

(310) 924-6037

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	SST	The New York Stock Exchange
Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50 per share	SST.WS	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days: Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  ☐  No ☒

As of May 7, 2024, there were 68,901,898 shares of Class A common stock, $0.0001 par value per share, outstanding and 21,203,676 shares issued and outstanding of Class C common stock, $0.0001 par value per share.

Table of Contents

		Page
Part I. - Financial Information		1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Changes in Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
Part II - Other Information		36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	36
Signatures		38

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

1

System1, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except par value)

	March 31, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	69,920	$	135,343
Restricted cash, current	7,231		3,813
Accounts receivable, net	52,735		56,093
Prepaid expenses and other current assets	9,791		6,754
Total current assets	139,677		202,003
Restricted cash, non-current	533		4,294
Property and equipment, net	2,836		3,084
Internal-use software development costs, net	12,545		11,425
Intangible assets, net	278,336		297,001
Goodwill	82,407		82,407
Operating lease right-of-use assets	4,241		4,732
Other non-current assets	484		524
Total assets	521,059		605,470
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	7,055		9,499
Accrued expenses and other current liabilities	52,351		59,314
Operating lease liabilities, current	2,375		2,333
Debt, net	16,190		15,271
Total current liabilities	77,971		86,417
Operating lease liabilities, non-current	2,938		3,582
Long-term debt, net	268,597		334,232
Warrant liability	2,438		2,688
Deferred tax liability	7,649		8,307
Other liabilities	1,061		929
Total liabilities	$	360,654	$	436,155
Commitments and contingencies (Note 7)
Stockholders' equity:
Class A common stock - $0.0001 par value; 500,000 shares authorized, 68,632 and 65,855 Class A shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	$	7	$	7
Class C common stock - $0.0001 par value; 25,000 shares authorized, 21,204 and 21,513 Class C shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	2		2
Additional paid-in capital	850,202		843,112
Accumulated deficit	(718,199)		(707,662)
Accumulated other comprehensive loss	(271)		(181)
Total stockholders' equity attributable to System1, Inc.	131,741		135,278
Non-controlling interest	28,664		34,037
Total stockholders' equity	160,405		169,315
Total liabilities and stockholders' equity	$	521,059	$	605,470

See notes to condensed consolidated financial statements.

2

System1, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except for per share)

	Three Months Ended March 31,
	2024		2023
Revenue	$	84,917	$	121,118
Operating expenses:
Cost of revenue (excluding depreciation and amortization)	53,698		82,953
Salaries and benefits	24,483		28,147
Selling, general, and administrative	12,728		14,855
Depreciation and amortization	19,804		19,392
Total operating expenses	110,713		145,347
Operating loss	(25,796)		(24,229)
Other expense (income):
Interest expense, net	7,970		11,402
Gain from debt extinguishment	(19,676)		—
Change in fair value of warrant liabilities	(251)		(1,409)
Total other (income) expense, net	(11,957)		9,993
Loss before income tax	(13,839)		(34,222)
Income tax benefit	(48)		(3,829)
Net loss from continuing operations	(13,791)		(30,393)
Net loss from discontinued operations, net of tax	—		(12,533)
Net loss	(13,791)		(42,926)
Less: Net loss from continuing operations attributable to non-controlling interest	(3,254)		(6,757)
Less: Net loss from discontinued operations attributable to non-controlling interest	—		(2,367)
Net loss attributable to System1, Inc.	$	(10,537)	$	(33,802)
Amounts attributable to System1, Inc.:
Net loss from continuing operations	$	(10,537)	$	(23,636)
Net loss from discontinued operations	—		(10,166)
Net loss attributable to System1, Inc.	$	(10,537)	$	(33,802)
Basic and diluted net loss per share:
Continuing operations	$	(0.16)	$	(0.25)
Discontinued operations	—		(0.11)
Basic and diluted net loss per share	$	(0.16)	$	(0.36)
Weighted average number of shares outstanding - basic and diluted	67,781		92,771

See notes to condensed consolidated financial statements.

3

System1, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands)

	Three Months Ended March 31,
	2024		2023
Net loss	$	(13,791)	$	(42,926)
Other comprehensive income (loss)
Foreign currency translation income (loss)	(135)		(109)
Comprehensive loss	(13,926)		(43,035)
Comprehensive loss attributable to non-controlling interest	(3,299)		(9,170)
Comprehensive loss attributable to System1, Inc.	$	(10,627)	$	(33,865)

See notes to condensed consolidated financial statements.

4

System1, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(In thousands)

	Class A Common Stock			Class C Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In-Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Non-Controlling Interest		Total Stockholders’ Equity
Balance at December 31, 2023	65,855	$	7	21,513	$	2	$	843,112	$	(707,662)	$	(181)	$	34,037	$	169,315
Net loss	—	—		—	—		—		(10,537)		—		(3,254)		(13,791)
Issuance of common stock in connection with settlement of incentive plan	970	—		—	—		2,464		—		—		(757)		1,707
Conversion of Class C shares to Class A shares	309	—		(309)	—		241		—		—		(241)		—
Tax receivable agreement liability and deferred taxes arising from LLC interest ownership exchanges and the issuance of common stock from equity incentive plans	—	—		—	—		(110)		—		—		—		(110)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	1,498	—		—	—		178		—		—		(1,169)		(991)
Other comprehensive income	—	—		—	—		—		—		(90)		(45)		(135)
Stock-based compensation	—	—		—	—		4,317		—		—		88		4,405
Contributions from members, net of distributions	—	—		—	—		—		—		—		5		5
Balance at March 31, 2024	68,632	$	7	21,204	$	2	$	850,202	$	(718,199)	$	(271)	$	28,664	$	160,405

	Class A Common Stock			Class C Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In-Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Non-Controlling Interest		Total Stockholders’ Equity
Balance at December 31, 2022	91,674	$	9	21,747	$	2	$	831,566	$	(439,296)	$	(260)	$	78,650	$	470,671
Net loss	—	—		—	—		—		(33,802)		—		(9,124)		(42,926)
Cumulative-effect of adoption of ASU 2016-13	—	—		—	—		—		(326)		—		—		(326)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	832	—		—	—		(1,449)		—		—		(281)		(1,730)
Issuance of common stock in connection with settlement of incentive plan	407	—		—	—		1,819		—		—		(160)		1,659
Conversion of Class C shares to Class A shares	234	—		(234)	—		1,047		—		—		(1,047)		—
Increase in tax receivable agreement liability	—	—		—	—		(441)		—		—		—		(441)
Other comprehensive income (loss)	—	—		—	—		—		—		(62)		(47)		(109)
Stock-based compensation	—	—		—	—		6,203		—		—		958		7,161
Balance at March 31, 2023	93,147	$	9	21,513	$	2	$	838,745	$	(473,424)	$	(322)	$	68,949	$	433,959

5

See notes to condensed consolidated financial statements.

6

System1, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Three Months Ended March 31,
	2024		2023
Cash Flows from Operating Activities
Net loss	$	(13,791)	$	(42,926)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	19,804		29,374
Stock-based compensation	3,970		14,122
Amortization of debt issuance costs	1,030		—
Noncash lease expense	462		436
Change in fair value of warrant liabilities	(251)		(1,409)
Deferred tax benefits	(656)		(7,869)
Gain from debt extinguishment	(19,676)		—
Other	(517)		686
Changes in operating assets and liabilities
Accounts receivable	3,387		11,282
Prepaids and other assets	(2,999)		(159)
Accounts payable	(2,444)		(810)
Accrued expenses and other liabilities	(3,654)		(5,057)
Deferred revenue	(65)		6,182
Long-term earnout liabilities	—		(10,000)
Other long-term liabilities	(587)		347
Net cash used in operating activities	(15,987)		(5,801)
Cash Flows from Investing Activities
Purchases of property and equipment	—		(714)
Capitalized software development costs	(1,622)		(1,678)
Net cash used in investing activities	(1,622)		(2,392)
Cash Flows from Financing Activities
Repayment of Term Loan	(46,071)		(5,000)
Payment of acquisition holdback	—		(1,250)
Taxes paid related to net settlement of stock awards	(2,092)		(2,837)
Contributions from (distributions to) members	5		(45)
Net cash used in financing activities	(48,158)		(9,132)
Effect of exchange rate changes in cash, cash equivalent and restricted cash	1		(44)
Net decrease in cash, cash equivalents and restricted cash	(65,766)		(17,369)
Cash and cash equivalents and restricted cash, beginning of the period	143,450		39,075
Cash and cash equivalents and restricted cash, end of the period	$	77,684	$	21,706
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents	$	69,920	$	8,267
Restricted cash	7,764		13,439
Total cash, cash equivalents and restricted cash	$	77,684	$	21,706
Supplemental cash flow information:
Cash paid for income taxes	$	634	$	—
Cash paid for interest	$	8,230	$	—
Capitalized assets financed by accounts payable	$	—	$	702
Stock-based compensation included in capitalized software development costs	$	432	$	561
Settlement of incentive plan through issuance of common stock	$	1,707	$	1,658

See notes to condensed consolidated financial statements.

7

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Organization and Description of Business

System1, Inc. and subsidiaries (the “Company”, “we”, “our” or “us”) operates an omnichannel customer acquisition platform, delivering high-intent customers to brands, advertisers and publishers.

We provide our omnichannel customer acquisition platform services through our proprietary responsive acquisition marketing platform (“RAMP”). Operating seamlessly across major advertising networks and advertising category verticals to acquire high-intent end-users, RAMP allows us to monetize these acquired end users through our relationships with third party advertisers and advertising networks (“Advertising Partners”). RAMP operates across our network of owned and operated websites, allowing us to monetize end-user traffic that we source from various acquisition marketing channels, including Google, Facebook, Zemanta, Taboola, and TikTok. RAMP also allows third party advertising platforms and publishers (“Network Partners”) to send end-user traffic to, and monetize end user traffic on, our owned and operated websites or through our monetization agreements.

We have two reportable segments: Owned and Operated Advertising and Partner Network (see Note 10, Segment Reporting).

2.Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Our condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Our fiscal year ends on December 31. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) in March 2024.

In our opinion, the unaudited interim condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2024 or future operating periods.

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that have had a material impact on our condensed consolidated financial statements and related notes.

We completed the sale of Total Security Limited, formerly known as Protected.net Group Limited (“Protected”) on November 30, 2023. The results of operations of our Protected business prior to its sale are presented as net loss from discontinued operations in our condensed consolidated statements of operations in the periods applicable (see Note 12, Discontinued Operations).

Revision of Previously Issued Consolidated Financial Statements

During the fourth quarter of 2023, we identified certain errors related to our previously issued financial statements as of and for the three months ended March 31, 2023 as follows:

a.Accrued expenses and other current liabilities were understated by $0.9 million, additional paid-in capital was understated by $1.7 million and salaries and benefits expense was understated by $0.3 million as a result of our not accelerating expenses upon forfeiture of certain cash and equity Replacement Awards (as defined in Note 9, Net Loss Per Share) previously granted in 2022 that impacted the condensed consolidated balance sheet, condensed consolidated statements of operations, condensed consolidated statements of changes in stockholders' equity, and condensed consolidated statement of cash flows.

8

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

b.We did not appropriately account for changes in equity and earnings per share, specifically:

(i) the carrying amount of non-controlling interest was not updated as changes in ownership events occurred during each reporting period,

(ii) certain equity replacement awards granted during 2022 were not properly considered in the allocation of net income (loss) to controlling and non-controlling interest and earnings per share. These errors impact the condensed consolidated balance sheets, condensed consolidated statement of operations, condensed consolidated statements of changes in stockholders' equity, and condensed consolidated statement of cash flows.

c.We made additional corrections for other immaterial errors.

d.We adjusted for the tax impacts of the corrections related to such errors described above.

We concluded that the errors were not material, either individually or in the aggregate, to our previously issued condensed consolidated financial statements for the impacted period. To correct the immaterial errors, we have revised our previously issued condensed consolidated financial statements as of and for the period ended March 31, 2023.

We have revised the condensed consolidated balance sheet, condensed consolidated statement of operations, condensed consolidated statement of comprehensive income (loss), condensed consolidated statement of changes in stockholders' equity, and condensed consolidated statement of cash flows for the period ended March 31, 2023, as well as the associated Notes to the condensed consolidated financial statements to reflect the correction of these immaterial errors in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

The following table reflects the revisions and the impact of reporting Discontinued Operations related to the sale of Protected to the previously issued condensed consolidated balance sheet as of March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment		As Revised			Impact of Reclassification of Discontinued Operations		As Currently Reported
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses and other current liabilities	85,727		890		86,617		(a)	(14,620)		71,997
Total current liabilities	199,354		890		200,244			—		200,244
Deferred tax liability	35,995		830		36,825		(d)	(13,318)		23,507
Total liabilities	669,119		1,720		670,839			—		670,839
Stockholders’ Equity / Members’ Deficit
Additional paid-in capital	837,093		1,652		838,745		(a) (b)	—		838,745
Accumulated deficit	(479,579)		6,155		(473,424)		(a) (b) (d)	—		(473,424)
Accumulated other comprehensive loss	(479)		156		(323)		(d)	—		(323)
Total stockholders' equity attributable to System1, Inc.	357,046		7,963		365,009			—		365,009
Non-controlling interest	78,632		(9,683)		68,949		(b)	—		68,949
Total stockholders' equity	435,678		(1,720)		433,958			—		433,958
Total liabilities and stockholders' equity	$	1,104,797	$	—	$	1,104,797		$	—	$	1,104,797

9

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table reflects the revisions and the impact of reporting Discontinued Operations related to the sale of Protected to the previously issued condensed consolidated statement of operations, for the three months ended March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment			As Revised		Impact of Reclassification of Discontinued Operations		As Currently Reported
Salaries and benefits	38,398		296		(a)	38,694		(10,547)		28,147
Total operating expenses	205,346		296			205,642		(60,295)		145,347
Operating loss	(37,492)		(296)			(37,788)		13,559		(24,229)
Other expense (income):
Interest expense, net	11,451		—			11,451		(49)		11,402
Total other (income) expense, net	10,042		—			10,042		(49)		9,993
Loss before income tax	(47,534)		(296)			(47,830)		13,608		(34,222)
Income tax benefit	(4,408)		(496)		(d)	(4,904)		1,075		(3,829)
Net loss from continuing operations	(43,126)		200			(42,926)		12,533		(30,393)
Net loss from discontinued operations, net of tax	—		—			—		(12,533)		(12,533)
Net loss	(43,126)		200			(42,926)		—		(42,926)
Less: Net loss from continuing operations attributable to non-controlling interest	(9,174)		50		(b)	(9,124)		2,367		(6,757)
Less: Net loss from discontinued operations attributable to non-controlling interest	—		—			—		(2,367)		(2,367)
Net loss attributable to System1, Inc.	$	(33,952)	$	150		$	(33,802)	$	—	$	(33,802)
Amounts attributable to System1, Inc.:
Net loss from continuing operations	$	(33,952)	$	150	(b)	$	(33,802)	$	10,166	$	(23,636)
Net loss from discontinued operations	—		—			—		(10,166)		(10,166)
Net loss attributable to System1, Inc.	$	(33,952)	$	150		$	(33,802)	$	—	$	(33,802)
Basic and diluted net loss per share:
Continuing operations	$	(0.37)	$	0.01	(b)	$	(0.36)	$	0.11	$	(0.25)
Discontinued operations	—		—			—		(0.11)		(0.11)
Basic and diluted net loss per share	$	(0.37)	$	0.01		$	(0.36)	$	—	$	(0.36)
Weighted average number of shares outstanding - basic and diluted	92,460		311		(b)	92,771				92,771

The following table reflects the revisions related to the previously issued condensed consolidated statement of comprehensive loss for the three months ended March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment			As Currently Reported
Net loss	$	(43,126)	$	200	(a) (d)	$	(42,926)
Other comprehensive income (loss)
Foreign currency translation income (loss)	(108)					(108)
Comprehensive loss	(43,234)		200			(43,034)
Comprehensive loss attributable to non-controlling interest	(9,220)		50		(b)	(9,170)
Comprehensive loss attributable to System1, Inc.	$	(34,014)	$	150		$	(33,864)

The following tables reflect the revisions to the previously issued condensed consolidated statement of changes in stockholders' equity for the quarter ended March 31, 2023. Although the impact is pervasive throughout the condensed consolidated statement of changes in stockholders' equity as a result of the errors described above, the most significant impact is a reduction of net loss of $0.2 million, an increase of non-controlling interest of

10

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

$0.5 million, a reduction in accumulated deficit of $0.2 million and a reduction in additional paid-in-capital of $0.2 million.

	Class A Common Stock			Class C Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In-Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Non-Controlling Interest		Total Stockholders’ Equity
As Previously Reported
Balance at December 31, 2022	91,674	$	9	21,747	$	2	$	831,566	$	(439,296)	$	(260)	$	78,650	$	470,671
Net loss	—	—		—	—		—		(33,952)		—		(9,174)		(43,126)
Cumulative-effect of adoption of ASU 2016-13	—	—		—	—		—		(326)		—		—		(326)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	832	—		—	—		(1,730)		—		—		—		(1,730)
Issuance of common stock in connection with settlement of incentive plan	407	—		—	—		1,659		—		—		—		1,659
Conversion of Class C shares to Class A shares	234	—		(234)	—		955		—		—		(955)		—
Increase in tax receivable agreement liability	—	—		—	—		(441)		—		—		—		(441)
Other comprehensive income (loss)	—	—		—	—		—		—		(62)		(47)		(109)
Stock-based compensation	—	—		—	—		6,963		—		—		—		6,963
Balance at March 31, 2023	93,147	$	9	21,513	$	2	$	838,972	$	(473,574)	$	(322)	$	68,474	$	433,561
Revision Adjustments
Net loss	—	—		—	—		—		150		—		50		200		(a) (b) (d)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	—	—		—	—		281		—		—		(281)		—		(a) (b)
Issuance of common stock in connection with settlement of incentive plan	—	—		—	—		160		—		—		(160)		—		(b)
Conversion of Class C shares to Class A shares	—	—		—	—		92		—		—		(92)		—		(b)
Other comprehensive income (loss)	—	—		—	—		—		—		—		—		—		(c)
Stock-based compensation	—	—		—	—		(760)		—		—		958		198		(a) (b)
Balance at March 31, 2023	—	$	—	—	$	—	$	(227)	$	150	$	—	$	475	$	398
As Revised
Net loss	—	—		—	—		—		(33,802)		—		(9,124)		(42,926)

11

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Cumulative-effect of adoption of ASU 2016-13	—	—		—	—		—		(326)		—		—		(326)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	832	—		—	—		(1,449)		—		—		(281)		(1,730)
Issuance of common stock in connection with settlement of incentive plan	407	—		—	—		1,819		—		—		(160)		1,659
Conversion of Class C shares to Class A shares	234	—		(234)	—		1,047		—		—		(1,047)		—
Increase in tax receivable agreement liability	—	—		—	—		(441)		—		—		—		(441)
Other comprehensive income (loss)	—	—		—	—		—		—		(62)		(47)		(109)
Stock-based compensation	—	—		—	—		6,203		—		—		958		7,161
Balance at March 31, 2023	93,147	$	9	21,513	$	2	$	838,745	$	(473,424)	$	(322)	$	68,949	$	433,959

The following table reflects the revisions to the previously issued condensed consolidated statement of cash flows for the three months ended March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment			As Currently Reported
Cash Flows from Operating Activities
Net loss	$	(43,126)	$	200	(a) (d)	$	(42,926)
Stock-based compensation	13,925		197		(a)	14,122
Deferred tax benefits	(7,373)		(496)		(d)	(7,869)
Changes in operating assets and liabilities
Accrued expenses and other liabilities	(4,660)		(397)		(a)	(5,057)
Other long-term liabilities	(149)		496		(d)	347
Net cash used in operating activities	$	(5,801)	$	—		$	(5,801)

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Management’s estimates are based on historical information available as of the date of the condensed consolidated financial statements and various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from those estimates.

Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, valuation of goodwill, acquired intangible assets, assets held for sale and long-lived assets, valuation and recognition of stock-based compensation awards, income taxes, contingent consideration and determination of the fair value of the warrant liabilities. On an ongoing basis, management evaluates our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.

Risks and Concentrations

12

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

We are subject to certain business and operational risks, including competition from alternative technologies, as well as dependence on key Advertising Partners, key employees, key contracts, and growth to achieve our business and operational objectives.

Concentrations

The concentration as a percentage of total revenue for our key advertising partner Google is 83% and 89%, for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had (i) two paid search advertising partnership agreements with Google, and (ii) one paid search advertising partnership agreement with Microsoft. The Google agreements are in effect through February 28, 2025, and May 31, 2024, respectively. The agreement with Microsoft (our next largest Advertising Partner by revenue) is in effect through June 30, 2025. Under certain circumstances, each of these agreements may be terminated by either us or the respective Advertising Partner immediately, or with minimal notice.

Accounts receivable are primarily derived from Advertising Partners located within the United States. As of March 31, 2024, Google and Yahoo, represented 68% and 5%, respectively, of our accounts receivables balance. As of December 31, 2023, these two Advertising Partners represented 69% and 6%, respectively, of our accounts receivables balance.

3.Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net

Goodwill

Goodwill was $82.4 million as of March 31, 2024 and December 31, 2023, all attributable to the Partner Network reportable segment. No impairment of goodwill was identified for any of the periods presented.

Internal-use software development costs, net and intangible assets, net

Internal-use software development costs and intangible assets consisted of the following (in thousands):

	March 31, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Internal-use software development costs	$	15,842	$	(3,297)	$	12,545
Intangible assets:
Developed technology	$	196,128	$	(106,613)	$	89,515
Trademarks and trade names	236,053		(50,950)		185,103
Software	5,100		(2,659)		2,441
Customer relationships	2,900		(1,623)		1,277
Total	$	440,181	$	(161,845)	$	278,336

13

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

	December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Internal-use software development costs	$	13,788	$	(2,363)	$	11,425
Intangible assets:
Developed technology	$	196,128	$	(94,354)	$	101,774
Trademarks and trade names	236,053		(45,050)		191,003
Software	5,100		(2,341)		2,759
Customer relationships	2,900		(1,435)		1,465
Total	$	440,181	$	(143,180)	$	297,001

The internal-use software development costs includes construction in progress which is not being amortized of $4.2 million and $3.5 million as of March 31, 2024 and December 31, 2023, respectively.

Amortization expense for internal-use software development costs and intangible assets were as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
Amortization expense for internal-use software development	$	934	$	557
Amortization expense for intangible assets	$	18,665	$	18,665

No impairment of internal-use software development cost or intangible assets was identified for any of the periods presented.

As of March 31, 2024, the weighted average amortization period for all intangible assets was 7 years.

4.Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following items as of the periods presented (in thousands):

	March 31, 2024		December 31, 2023
Accrued revenue share	$	17,905	$	16,365
Accrued marketing expenses	15,073		19,737
Accrued payroll and related benefits	8,205		13,751
Accrued professional fees	2,611		1,455
Deferred revenue	1,693		1,757
Accrued tax liability	1,352		1,233
Other liabilities	5,512		5,016
Accrued expenses and other current liabilities	$	52,351	$	59,314

5.Debt, Net

We entered into a term loan (“Term Loan”) and revolving facility (“2022 Revolving Facility”) with Bank of America, N.A., on January 27, 2022, providing for a 5.5 year term loan with a principal balance of $400.0 million and with the net proceeds of $376.0 million. The 2022 Revolving Facility provided for borrowing availability of up

14

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

to $50.0 million. As of March 31, 2024, there was no balance outstanding on the 2022 Revolving Facility and principal of $296.3 million was outstanding on the Term Loan. Through December 31, 2025, the outstanding Term Loan is subject to quarterly amortization payments of $5.0 million. From March 31, 2026, the Term Loan is subject to quarterly amortization payments of $7.5 million. The Term Loan matures in 2027.

For every interest period, the interest rate on the Term Loan is the adjusted Secured Overnight Financing Rate (“SOFR”) plus 4.75%. The Term Loan is amortized in quarterly installments on each scheduled payment date. The Term Loan comes with a leverage covenant, which goes into effect only if the utilization on the 2022 Revolving Facility exceeds 35% of the $50.0 million 2022 Revolving Facility at each quarter-end starting the second quarter 2022, such that the first lien leverage ratio (as defined in the credit agreement) should not exceed 5.40. The facility has certain financial and nonfinancial covenants, including a leverage ratio. The facility also requires that we deliver our audited consolidated financial statements to our lender within 120 days of our fiscal year end, December 31. Should we fail to distribute the financial statements to our lender within 120 days, we are allowed an additional 30 days to cure. We were in compliance with our financial covenants as of March 31, 2024.

On January 17, 2024, we completed the repurchase of $63.7 million in principal amount of our Term Loan for an aggregate purchase price of $40.9 million (at discount of 64.2% of its par value) pursuant to a Dutch auction tender offer. Following the repurchase, the outstanding principal amount of the Term Loan was $301.3 million. We used available cash on hand to fund the repurchase. Our gain on the repurchase was $19.7 million before fees and expenses incurred.

The interest rate on the 2022 Revolving Facility is the adjusted SOFR plus 2.5% with an adjusted SOFR floor of 0%. As of March 31, 2024 we had $50.0 million available on the 2022 Revolving Facility.

The carrying values of our debt, net of discounts, deferred financing and debt issuance costs were as follows (in thousands):

	March 31, 2024		December 31, 2023
Term Loan1,2	$	284,787	$	349,503
Total Debt, net	$	284,787	$	349,503
_______________
1 Includes unamortized discount of $11.5 million and $14.7 million, and unamortized loan fees of $0.6 million and $0.8 million, as of March 31, 2024, and December 31, 2023, respectively, recorded as a reduction of the carrying amount of the debt and amortized to interest expense using the effective interest method.
2 Estimated fair value of the Term Loan was $180.7 million and $222.7 million as of March 31, 2024 and December 31, 2023, respectively.

6.Income Taxes

We are the sole managing member of S1 Holdco, LLC ("S1 Holdco") and, as a result, consolidate the financial results of S1 Holdco. S1 Holdco is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, S1 Holdco is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by S1 Holdco is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We are 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.

We recorded an immaterial benefit for income taxes for the three months ended March 31, 2024 and a benefit from income taxes of $3.8 million for the three months ended March 31, 2023. The effective tax rate for the three months ended March 31, 2024 and 2023 was 0.4% and 11.2%, respectively. The provision for income taxes differs from the amount of income tax computed by applying the U.S. statutory federal tax rate of 21% to the loss before income taxes due to the exclusion of non-controlling loss, state taxes, foreign rate differential, non-deductible

15

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

expenses, increase to the valuation allowance related to unrealizable deferred tax assets, and outside basis adjustments. As of March 31, 2024, we had a full valuation allowance on our U.S. federal and state net deferred tax assets as it was more likely than not that those deferred tax assets would not be realized.

During the three months ended March 31, 2024, and 2023, inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement. The total amount of Tax Receivable Agreement Payments due under the Tax Receivable Agreement was $0.9 million and $0.8 million as of March 31, 2024 and December 31, 2023, respectively.

7.Commitments and Contingencies

In June 2023, we entered into a multi-year agreement with a service provider whereby we are contractually obligated to spend $5.0 million in each annual period between July 2023 and June 2026. As of March 31, 2024, we remain contractually obligated to spend $10.0 million towards this commitment.

As of March 31, 2024, we had various non-cancelable operating lease commitments for office space which have been recorded as Operating lease liabilities.

Litigation

We are subject to various legal proceedings and claims that arise in the ordinary course of business. We believe the ultimate liability, if any, with respect to these actions will not materially affect the consolidated financial position, results of operations, or cash flows reflected in the condensed consolidated financial statements. There can be no assurance, however, that the ultimate resolution of such actions will not materially or adversely affect our consolidated financial position, results of operations, or cash flows. We accrued for losses when the loss is deemed probable and the liability can reasonably be estimated.

In October 2023, a putative California class action complaint (the “Complaint”) was filed against us and our Protected business regarding alleged violations of California’s Auto Renewal Law requirements related to the marketing and sale of its subscription service offerings for anti-virus and ad-blocking software (the “Protected Software”) to consumers. The Complaint alleges claims under California’s false advertising and unfair competition laws and primarily alleges that the marketing and sales checkout flows for the Protected Software did not clearly and conspicuously disclose that the named plaintiffs set forth in the Complaint were purchasing the Protected Software for a promotional period which would auto-renew after the applicable promotional period. We dispute the claims alleged, and intend to defend ourselves vigorously in this matter.

Indemnifications

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments we could be required to make under these indemnification provisions may not be subject to claims related to these indemnifications. As a result, we believe the estimated fair value of these agreements was immaterial. Accordingly, we have no liabilities recorded for these agreements as of March 31, 2024.

8.Fair Value Measurement

Financial Liabilities Measured at Fair Value on a Recurring Basis

The following tables present our fair value hierarchy for liabilities measured at fair value on a recurring basis (in thousands):

16

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

	March 31, 2024		December 31, 2023
	Level 1
Public Warrants	$	2,438	$	2,688

The fair value of the Public Warrants has been estimated using the Public Warrants’ quoted market price. There were no transfers in or out of levels during the periods presented.

Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis

For further information on the fair value assessment of goodwill refer to Note 3, Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net.

9.Net Loss Per Share

Basic net loss per share was calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Basic and diluted net loss per share was calculated as follows (in thousands, except per share):

	Three Months Ended March 31,
	2024		2023
Basic and diluted net loss per share
Net loss from continuing operations attributable to System1, Inc.	$	(0.16)	$	(0.25)
Net loss from discontinued operations, net of tax attributable to System1, Inc.	—		(0.11)
Basic and Diluted net loss per share	$	(0.16)	$	(0.36)
Numerator:
Net loss from continuing operations attributable to System1, Inc.	$	(10,537)	$	(23,636)
Net loss from discontinued operations, net of tax attributable to System1, Inc.	—		(10,166)
Net loss attributable to System1, Inc.	$	(10,537)	$	(33,802)
Denominator:
Weighted-average common shares outstanding used in computing basic and diluted net loss per share	67,781		92,771

For the periods presented in the table above, a total of 16.8 million Public Warrants were excluded from the computation of net loss per share as the impact was anti-dilutive.

Pursuant to the Merger, we were required to replace certain profits interests awards, the value creation units and Class F units, with a combination of a restricted stock unit in our shares and a cash award (collectively, "Replacement Awards”). We do not consider unvested Class A common stock related to the Replacement Awards as outstanding for accounting purposes as they are subject to continued service requirements or contingencies. These shares are not included in the denominator of the net loss per share calculation until the employee provides the requisite service resulting in the vesting of the award or the contingency is removed, or upon termination of an employee at which point the common stock underlying the award becomes issuable to the previous investors. Shares associated with the vested or forfeited Replacement Awards are deemed to be issued and outstanding for accounting purposes on the day of vest or forfeiture.

10.Segment Reporting

17

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

We have two operating segments and reportable segments: Owned and Operated Advertising and Partner Network. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”), in deciding how to allocate resources and assess performance. Our Chief Executive Officer, who is considered to be our CODM, reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance.

The CODM measures and evaluates reportable segments based on segment operating revenue as well as adjusted gross profit. The tables below include the following operating expenses that are not allocated to the reporting segments presented to our CODM: depreciation and amortization of property, equipment and leasehold improvements, amortization of intangible assets and, at times, certain other transactions or adjustments. The CODM does not consider these expenses for the purposes of making decisions to allocate resources among segments or to assess segment performance, however these costs are included in reported condensed consolidated net loss from continuing operations before income tax and are included in the reconciliation that follows.

The following table summarizes revenue by reportable segments (in thousands):

	Three Months Ended March 31,
	2024		2023
Owned and Operated Advertising	$	69,030	$	106,025
Partner Network	15,887		15,093
Total revenue	$	84,917	$	121,118

The following table summarizes adjusted gross profit by reportable segments (in thousands):

	Three Months Ended March 31,
	2024		2023
Owned and Operated Advertising	$	22,462	$	29,839
Partner Network	10,919		10,217
Adjusted gross profit	33,381		40,056
Other cost of revenue	2,162		1,891
Salaries and benefits	24,483		28,147
Selling, general, and administrative	12,728		14,855
Depreciation and amortization	19,804		19,392
Interest expense, net	7,970		11,402
Gain from debt extinguishment	(19,676)		—
Change in fair value of warrant liabilities	(251)		(1,409)
Loss before income tax	$	(13,839)	$	(34,222)

The following table summarizes revenue by geographic region (in thousands):

	Three Months Ended March 31,
	2024		2023
United States	$	81,682	$	117,199
Other countries	3,235		3,919
Total revenue	$	84,917	$	121,118

11.Stock-Based Compensation

18

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

We recorded the following total stock-based compensation expense (in thousands):

	Three Months Ended March 31,
	2024		2023
Stock-based compensation expense	$	3,970	$	5,832

CouponFollow Incentive Plan

As of March 31, 2024, we have determined that it was not probable that the CouponFollow business would achieve any of the contingent earnout targets during the Performance Periods, and accordingly, we did not record a liability for any of the Tier amounts set forth in the CouponFollow Incentive Plan. In the quarter ended March 31, 2024 we issued 1.0 million Class A Common Stock with an aggregate fair value of $1.7 million, net of shares withheld for taxes, on the date of the settlement to settle the second $3.3 million Fixed Amount. We recognized a gain of $0.5 million, being the difference between the fair value of the Class A common stock issued and the carrying value of the liability. During the quarter ended March 31, 2024, we recognized $0.8 million for the third Fixed Amount within salaries and benefits expenses on the condensed consolidated statements of operations. Our March 31, 2024 short-term restricted cash included $2.8 million for which the restriction was released related to the amount we paid during the quarter ended March 31, 2024 for continued services from certain individuals of CouponFollow. The amount was released from escrow in April 2024.

12.Discontinued Operations

Sale of Protected

On November 30, 2023, we completed the sale of Protected, our subscription reporting unit. 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 the financial benchmarks included in the Protected Incentive Plan, will, as a result of the Protected sale, no longer be achievable.

The financial results of Protected are presented as a loss from discontinued operations, net of taxes in the condensed consolidated statements of operations. The following table presents the summarized discontinued operations condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31, 2023
Revenue	$	46,736
Operating expenses:
Cost of revenue (excluding depreciation and amortization)	37,449
Salaries and benefits	10,547
Selling, general, and administrative	2,317
Depreciation and amortization	9,982
Total operating expenses	60,295
Operating loss	(13,559)
Other expense, net	49
Loss from discontinued operations before income taxes	(13,608)
Income tax benefit	(1,075)
Net loss from discontinued operations	$	(12,533)

19

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents the significant non-cash items and capital expenditures for the discontinued operations with respect to the subscription business that are included in the condensed consolidated statements of cash flows (in thousands):

	Three Months Ended March 31, 2023
Depreciation and amortization	$	9,982
Stock-based compensation	$	8,290
Capital expenditures	$	496

Transition Service Agreement

In connection with a transition service agreement, we agreed to provide certain services for which full reimbursement of cost will be provided.

Discontinued Operations Related-Party Transactions

Payment Processing Agreement

Protected utilizes multiple credit card payment processors, including Paysafe Financial Services Limited (“Paysafe”). In March 2021, Paysafe completed a merger with Foley Trasimene Acquisition Corp. II (“Foley Trasimene”), a special purpose acquisition company sponsored by entities affiliated with a sponsor of Trebia who was also a member of our Board of Directors. We incurred credit card processing fees related to Paysafe for the three months ended March 31, 2023 of $1.1 million.

Office Facilities

Protected had an agreement with JDI Property Holdings Limited (“JDIP”), an entity controlled by one of our directors, which allowed Protected to use space at their property in exchange for GBP 0.1 million per year.

Protected Incentive Plan Installment Payments

In 2022 in connection with the acquisition of Protected, we effected an incentive plan for eligible recipients, providing up to $100 million payable in fully-vested shares of our Class A common stock contingent upon the achievement of the future performance of Protected’s business. The incentive plan originally was to be paid out in two tranches based on performance of the business for 2023 and 2024. The first award (2023), consisting of $50.0 million of Class A common stock payable in January 2024, was modified to a cash award resulting in $20 million of payments in 2022 and 2023 with an additional final $10.0 million, payable upon the achievement of certain performance thresholds around marketing spend and operating contribution of Protected are achieved on or before December 31, 2024. On November 30, 2023, none of the performance thresholds were met, and therefore, none of the additional cash bonus payments have been paid.

20

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 

SYSTEM1 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated or the context otherwise requires, references in this section to “the Company,” “System1,” “we,” “us,” “our” and other similar terms refer to System1, Inc and its subsidiaries.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ending December 31, 2023. In addition to historical information, the following discussion and analysis contains forward-looking statements. Our actual results may differ significantly from those projected in such forward-looking statements. Factors that might cause future results to differ materially from those projected in such forward-looking statements include, but are not limited to, those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

References to “Notes” are notes included in our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. The condensed consolidated financial statements as of and for the quarter ended March 31, 2023 have been revised to correct prior period errors as discussed in Note 2, Summary of Significant Accounting Policies. Accordingly, this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations reflects the impact of those revisions.

Company Overview

We operate an omnichannel customer acquisition platform, delivering high-intent customers to brands, advertisers and publishers.

We provide our omnichannel customer acquisition platform services through our proprietary responsive acquisition marketing platform (“RAMP”). Operating seamlessly across major advertising networks and advertising category verticals to acquire high-intent end-users, RAMP allows us to monetize these acquired end users through our relationships with third party advertisers and advertising networks (“Advertising Partners”). RAMP operates across our network of owned and operated websites, allowing us to monetize end-user traffic that we source from various acquisition marketing channels, including Google, Facebook, Zemanta, Taboola, and TikTok. RAMP also allows third party advertising platforms and publishers (“Network Partners”) to send end-user traffic to, and monetize end user traffic on, our owned and operated websites or through our monetization agreements.

Through RAMP, we process approximately 244 million daily advertising campaign optimizations and ingest over 10 billion rows of data daily across approximately 40 advertising vertical categories as of March 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 monetizing user traffic acquired by our Network Partners. Since launching, it has expanded to support additional advertising formats across multiple advertising platforms, and has acquired several leading websites, enabling it to control the entire flow of the user acquisition experience, by monetizing user traffic through our network of owned and operated websites. As of March 31, 2024, we own and operates approximately 40 websites, including leading search engines like info.com and Startpage.com, and digital media publishing websites and internet utilities, such as HowStuffWorks, MapQuest, CouponFollow and ActiveBeat.

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,

21

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, and our combined business continues to operate through the domestic and foreign subsidiaries of S1 Holdco.

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.

Sale of Protected

We completed the sale of Protected on November 30, 2023. The results of operations of our Protected business prior to its sale are presented as net loss from discontinued operations in our condensed consolidated statements of operations for all periods 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 Note 12, Discontinued Operations).

Components of Our Results of Operations

Revenue

We earn revenue by deploying components of our Responsive Acquisition Marketing Platform (RAMP) to our owned and operated websites to acquire and monetize end-users via advertising offerings from 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 our Advertising Partners. Additionally, revenue is earned from revenue-sharing arrangements with our Network Partners, whereby our Network Partners acquire end-users and use RAMP to monetize those end-users via our relationships with Advertising Partners. We have determined that we are the agent in these transactions and therefore report revenue on a net basis, based on the difference between amounts received by us from our Advertising Partners, less amounts remitted to our Network Partners based on the underlying revenue-sharing agreements.

We recognize revenue upon delivering user-traffic to our Advertising Partners based on a cost-per-click or cost-per-thousand impression basis. The payment terms with our Advertising Partners is typically 30 days.

Revenue may fluctuate from period to period due to a number of factors including seasonality and the shift in mix of user acquisition sources from Advertising Partners.

We have two reportable segments:

•Owned and Operated Advertising ("O&O"); and

•Partner Network.

Operating Expenses

    We classify our operating expenses into the following categories:

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Cost of revenue (excluding depreciation and amortization). Cost of revenue (excluding depreciation and amortization) primarily consists of traffic acquisition costs, which are the costs to place advertisements to acquire customers to our websites and services, as well as domain name registration costs and licensing costs to provide mapping services to Mapquest.com. We do not pre-pay any traffic acquisition costs, and therefore, such costs are expensed as incurred.

Salaries and benefits. Salaries and benefits expenses include salaries, bonuses, stock-based compensation, and employee benefits costs.

Selling, general, and administrative. Selling, general, and administrative expenses consist of fees for professional services, occupancy costs and travel and entertainment. These costs are expensed as incurred.

Depreciation and amortization. Depreciation and amortization expenses are primarily attributable to our capital investment(s) and consist of property and equipment depreciation and amortization of intangible assets with finite lives.

Other Expenses

Other expenses consist of the following:

Interest expense, net. Interest expense consists of interest on our debt and the amortization of deferred financing costs and debt discount.

Gain from debt extinguishment Gain from the repurchase of a portion of our Term Loan indebtedness at a discount.

Change in fair value of warrant liabilities. The mark to market of our liability-classified Public Warrants.

Income tax benefit

We are the sole managing member of S1 Holdco and, as a result, consolidate the financial results of S1 Holdco. S1 Holdco is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, S1 Holdco is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by S1 Holdco is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We are 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.

Results of Operations

Comparisons of the Three Months Ended March 31, 2024 and 2023

The following table summarizes key components of our results of operations for the periods indicated (in thousands):

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	Three Months Ended March 31,				2024 vs. 2023 Change
	2024		2023		($)		(%)
Revenue	$	84,917	$	121,118	$	(36,201)	(30)	%
Operating expenses:
Cost of revenue (excluding depreciation and amortization)	53,698		82,953		(29,255)		(35)	%
Salaries and benefits	24,483		28,147		(3,664)		(13)	%
Selling, general, and administrative	12,728		14,855		(2,127)		(14)	%
Depreciation and amortization	19,804		19,392		412		2	%
Total operating expenses	110,713		145,347		(34,634)		(24)	%
Operating loss	(25,796)		(24,229)		(1,567)		6	%
Other expense (income):
Interest expense, net	7,970		11,402		(3,432)		(30)	%
Gain from debt extinguishment	(19,676)		—		(19,676)		—	%
Change in fair value of warrant liabilities	(251)		(1,409)		1,158		(82)	%
Total other (income) expense, net	(11,957)		9,993		(21,950)		(220)	%
Loss before income tax	(13,839)		(34,222)		20,383		(60)	%
Income tax benefit	(48)		(3,829)		3,781		(99)	%
Net loss from continuing operations	(13,791)		(30,393)		16,602		(55)	%
Net loss from discontinued operations, net of tax	—		(12,533)		12,533		(100)	%
Net loss	(13,791)		(42,926)		29,135		(68)	%
Less: Net loss from continuing operations attributable to non-controlling interest	(3,254)		(6,757)		3,503		(52)	%
Less: Net loss from discontinued operations attributable to non-controlling interest	—		(2,367)		2,367		(100)	%
Net loss attributable to System1, Inc.	$	(10,537)	$	(33,802)	$	23,265	(69)	%

The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of total revenue for the periods indicated:

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	Three Months Ended March 31,
	2024		2023
Revenue	100	%	100	%
Operating expenses:
Cost of revenue (excluding depreciation and amortization)	63	%	68	%
Salaries and benefits	29	%	23	%
Selling, general, and administrative	15	%	12	%
Depreciation and amortization	23	%	16	%
Total operating expenses	130	%	120	%
Operating loss	(30)	%	(20)	%
Other expense (income):
Interest expense, net	9	%	9	%
Gain from debt extinguishment	(23)	%	—	%
Change in fair value of warrant liabilities	—	%	(1)	%
Total other (income) expense, net	(14)	%	8	%
Loss before income tax	(16)	%	(28)	%
Income tax benefit	—	%	(3)	%
Net loss from continuing operations	(16)	%	(25)	%
Net loss from discontinued operations, net of tax	—	%	(10)	%
Net loss	(16)	%	(35)	%
Less: Net loss from continuing operations attributable to non-controlling interest	(4)	%	(6)	%
Less: Net loss from discontinued operations attributable to non-controlling interest	—	%	(2)	%
Net loss attributable to System1, Inc.	(12)	%	(28)	%
* Percentages may not sum due to rounding

Revenue and Cost Metrics

We use total advertising spend, number of Owned & Operated Advertising sessions (“O&O sessions”), number of Partner Network sessions (“Network sessions”), Owned & Operated Advertising cost-per-session (“O&O CPS”), Owned & Operated Advertising revenue-per-session (“O&O RPS”) and Partner Network revenue-per-session (“Network RPS”) to track our operations. We define total advertising spend as the amount of advertising that is spent by us to acquire traffic to our owned and operated websites. We define O&O sessions as the total number of monetizable user visits to our Owned & Operated Advertising websites. We define 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 CPS as advertising spend divided by O&O sessions. 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.

Revenue

The following table presents our revenue by reportable segment (in thousands).

	Three Months Ended March 31,				2024 vs. 2023 Change
	2024		2023		($)		(%)
Owned and Operated Advertising	$	69,030	$	106,025	$	(36,995)	(35)%
Partner Network	15,887		15,093		794		5%
Total revenue	$	84,917	$	121,118	$	(36,201)	(30)%

Owned and Operated Advertising

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Owned and Operated Advertising revenue decreased for the three months ended March 31, 2024 as compared to the prior year comparative period, primarily due to softening domestic advertiser spend. For the quarter ended March 31, 2024 compared to the prior quarter comparative period, sessions increased 183 million to 1,209 million from 1,026 million. RPS for O&O decreased by $0.04 to $0.06 from $0.10.

Partner Network

Partner Network revenue increased for the three months ended March 31, 2024 as compared to the prior year comparative period, due to our continued investment in this business and growth from newer partners that continue to generate more traffic to our platform. This was partially offset by softening advertiser spend, leading to a reduction in RPS. For the quarter ended March 31, 2024, compared to prior quarter comparative period, sessions increased 600 million to 1,048 million from 448 million, and Network RPS decreased by approximately $0.01 to $0.02 from $0.03.

Cost of revenue (excluding depreciation and amortization)    

Cost of revenue (excluding depreciation and amortization) decreased in line with a decrease in O&O's revenue. For the three months ended March 31, 2024, compared to prior year comparative period, our CPS decreased $0.03 to $0.04 from $0.07.

Our chief operating decision maker measures and evaluates reportable segments based on segment operating revenue as well as adjusted gross profit and other measures. We define and calculate adjusted gross profit as revenue less advertising expense incurred to acquire users. 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).

	Three Months Ended March 31,				2024 vs. 2023 Change
	2024		2023		($)		(%)
Owned and Operated Advertising	$	22,462	$	29,839	$	(7,377)	(25)	%
Partner Network	10,919		10,217		702		7	%
Total adjusted gross profit	$	33,381	$	40,056	$	(6,675)	(17)	%

Refer to the Revenue and Cost of revenue (excluding depreciation and amortization) discussions above.

Salaries and benefits

Salaries and benefits decreased for the three months ended March 31, 2024 as compared to the prior year comparative period, primarily due to a $1.9 million decrease in stock-based compensation and a $1.8 million reduction in salary expense due to lower headcount.

Selling, general, and administrative

Selling, general, and administrative expense decreased for the three months ended March 31, 2024 as compared to the prior year comparative period, primarily due to a $1.7 million decrease in advisory, consulting, and legal fees, and to a lesser extent insurance costs.

Depreciation and amortization

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Depreciation and amortization expense increased for the three months ended March 31, 2024 as compared to the prior year comparative period, primarily increased amortization related to our continued investment in internally developed software.

Gain from debt extinguishment

Gain from debt extinguishment increased for the three months ended March 31, 2024 as compared to the prior year comparative period, due to the gain recognized as a result of our repurchase of debt through the Dutch auction that occurred in January of 2024.

Interest expense, net

Interest expense, net decreased for the three months ended March 31, 2024 as compared to the prior year comparative period, primarily due to a lower debt outstanding balance in the current year.

Change in fair value of warrant liabilities

The increase in fair value of our warrant liability for the three months ended March 31, 2024, as compared to the prior year comparative period was due to the remeasurement of warrant liability to its fair value at March 31, 2023 where the fluctuations are driven by the market value of our Class A common stock.

Income tax benefit

The difference between the effective tax rates for the periods presented and the federal statutory tax rate of 21% was primarily due to the exclusion of non-controlling income (loss), non-deductible expenses, valuation allowance and outside basis adjustments.

Net loss from discontinued operations, net of tax

Net loss from discontinued operations, net of tax is comprised of the net loss from discontinued operations, net of tax only includes direct operating expenses incurred that (1) are clearly identifiable as costs being disposed of upon completion of the sale and (2) will not be continued by us on an ongoing basis.

Indirect expenses which supported our subscription business, and which remained as part of the continuing operations following the sale are not reflected in loss from discontinued operations, net of tax.

Liquidity and Capital Resources

We expect existing cash and cash equivalents, cash flows from operations and financing activities to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months. Our main sources of liquidity have historically been, and are expected to be from cash on hand, cash flows from operations and financing activities. Our ability to fund future operating expenses and capital expenditures, and our ability to meet our future debt service obligations, will depend on our ability to execute on our operational strategy and may be affected by our profitability, as well as general economic, financial and other factors which are beyond our control.

We continue to develop and implement plans to improve our liquidity. 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 RAMP by continuing to attract and monetize users with commercial intent on our owned and operated web properties 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. 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.

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As of March 31, 2024, we had unrestricted cash and cash equivalents of $69.9 million and $50.0 million available to borrow on our 2022 Revolving Facility. For the three months ended March 31, 2024, the Company had cash outflows from operations of $16.0 million. The principal drivers of our cash outflow from operations for the three months ended March 31, 2024, were cash bonus-related payments of $7.2 million primarily related to 2023 annual employee performance bonuses, $1.8 million of audit fees, $2.4 million of consulting fees, and interest paid on our Term Loan of $8.2 million.

Our revenue is dependent on two key Advertising Partners, which are Google and Microsoft. Refer to our concentration with customers discussion at Note 2, Summary of Significant Accounting Policies for additional information.

Credit Facilities

Term Loan

We entered into a new loan (“Term Loan”) and revolving facility (“2022 Revolving Facility” and, together with the Term Loan "Credit Agreement") with Bank of America, N.A. as administrative agent, on January 27, 2022, providing for a 5.5 year Term Loan with an initial principal balance of $400.0 million and with the net proceeds of $376.0 million. The 2022 Revolving Facility provided borrowing availability of up to $50.0 million. As of March 31, 2024, there was no balance outstanding on the 2022 Revolving Facility and principal of $296.3 million was outstanding on the Term Loan. Through December 31, 2025, $5.0 million of the Term Loan is payable quarterly. From March 31, 2026, $7.5 million of the Term Loan is payable quarterly. The Term Loan matures in 2027.

For every interest period, the interest rate on the Term Loan is the adjusted Secured Overnight Financing Rate (“SOFR”) plus 4.75%. The Term Loan is amortized in quarterly installments on each scheduled payment date. The Term Loan comes with a leverage ratio covenant, which goes into effect only if the utilization on the 2022 Revolving Facility exceeds 35% of the total availability under the 2022 Revolving Facility at each quarter-end starting the second quarter 2022, such that the first lien leverage ratio (as defined in the credit agreement) should not exceed 5.40. The Credit Agreement has certain financial and nonfinancial covenants, including the "springing" leverage ratio covenant described above. The Credit Agreement also requires that we deliver our audited consolidated financial statements to our lenders within 120 days of our fiscal year end, December 31. Should we fail to distribute the financial statements to our lender within 120 days, we have an additional 30 days to cure such default.

The 2022 Revolving Facility matures in January 2027, and accordingly, when there is a balance outstanding it is classified within long-term debt, net on the condensed consolidated balance sheet. The interest rate on the 2022 Revolving Facility is the adjusted SOFR plus 2.5% with an adjusted SOFR floor of 0%. As of March 31, 2024, there was no outstanding balance.

On January 17, 2024, we completed the repurchase of $63.7 million in principal amount of our Term Loan indebtedness or an aggregate purchase price of $40.9 million (at discount of 64.2% of its par value) pursuant to a Dutch auction tender offer. Following the repurchase, the outstanding principal amount of the Term Loan was $301.3 million. We used available cash on hand to fund the repurchase (see Note 5, Debt, Net).

We have been able to and expect to be able to continue to make the required payments of principal and interest on the Credit Agreement (as and when due) on a timely basis.

Cash Flows

The following table summarizes our cash flows for the periods presented (in thousands):

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	Three Months Ended March 31,
	2024		2023
Net cash used in operating activities	$	(15,987)	$	(5,801)
Net cash used in investing activities	$	(1,622)	$	(2,392)
Net cash used in financing activities	$	(48,158)	$	(9,132)

Operating Activities

Our cash flows from operating activities are primarily impacted by growth in our operations, timing of collections from our partner and related payments to our suppliers for advertising inventory and data. We typically pay suppliers in advance of collections from our clients and our collection and payment cycles can vary from period to period. In addition, seasonality may impact cash flows from operating activities on a sequential quarterly basis during the year.

In the three months ended March 31, 2024, cash used in operating activities of $16.0 million. The principal drivers of our cash outflow from operations three months ended March 31, 2024, were cash bonus payments of $7.2 million primarily related to 2023 annual employee performance bonuses, $1.8 million of audit fees, $2.4 million of consulting fees, and interest paid on our Term Loan of $8.2 million.

In the three months ended March 31, 2023, cash used in operating activities of $5.8 million resulted primarily from a net loss of $42.9 million, noncash deferred tax benefit of $7.9 million, an adjustment for the change in fair value of warrants of $1.4 million, a payment of long-term earnout liabilities of $10.0 million and a decrease in accrued expenses and other current liabilities of $5.1 million. This was partially offset by noncash items including depreciation and amortization expense of $29.4 million, stock-based compensation of $14.1 million, an increase in deferred revenue of $6.2 million, a decrease in accounts receivable of $11.3 million, and an increase in other long-term liabilities of $0.3 million.

Investing Activities

Our primary investing activities consisted of costs capitalized for internally developed software.

In the three months ended March 31, 2024, cash used in investing activities of $1.6 million resulted primarily from costs capitalized for internally developed software.

In the three months ended March 31, 2023, cash used in investing activities of $2.4 million resulted primarily from costs capitalized for internally developed software and purchases of property and equipment.

Financing Activities

Our financing activities consisted primarily of repayments of our indebtedness under our credit facilities.

In the three months ended March 31, 2024, cash used in financing activities of $48.2 million resulted primarily from repayment of the 2022 Term Note of $46.1 million.

In the three months ended March 31, 2023, cash used in financing activities of $9.1 million resulted primarily from repayment of existing term loan of $5.0 million, taxes paid related to net settlement of stock awards of $2.8 million, and payment of acquisition holdback of $1.3 million.

Off-Balance Sheet Arrangements

We do not have any relationships with entities often referred to as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet arrangements or other

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contractually narrow or limited purposes. We did not have any other off-balance sheet arrangements during the periods presented other than the indemnification agreements.

Contractual Obligations and Known Future Cash Requirements

Service Agreements

In June 2021, we entered into a multi-year agreement with a service provider whereby we are contractually obligated to spend $5.0 million annually between July 2023 and June 2026. As of March 31, 2024, we remain contractually obligated to spend a remaining $10.0 million towards this commitment.

Contingencies

From time to time, we are subject to contingencies that arise in the ordinary course of business. We record an accrual for a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We do not currently believe the resolution of any such contingencies will have a material adverse effect upon our condensed consolidated financial statements.

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with GAAP. Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

The critical accounting estimates, assumptions, and judgments that we believe to have the most significant impact on our condensed consolidated financial statements are stock-based compensation, business combinations and valuation of goodwill and income taxes.

There have been no material changes to our critical accounting policies and estimates as described in our Annual Report.

Recently Issued Accounting Pronouncements

For information regarding recent accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

As a “smaller reporting company”, as defined by Rule 10(f)(1) of Regulation S-K, we are not required to provide this information.

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Item 4. Controls and Procedures    

Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO concluded that, as of March 31, 2024, due to the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed in the reports required to be filed or submitted under the Securities Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Material weaknesses in internal control over financial reporting

We have identified material weaknesses in our internal control over financial reporting as of March 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, 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.

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•We did not design and maintain effective controls over accounting for accrued liabilities, stock-based compensation and equity transactions, including accounting for non-controlling interest.

•We did not design and maintain effective controls over the accuracy and valuation of goodwill, including the allocation of goodwill to reporting units and the identification and measurement of goodwill impairment.

These material weaknesses resulted in the restatement of the Company's condensed consolidated financial statements: as of March 31, 2022 and for the predecessor period from January 1, 2022 to January 26, 2022 and for the successor period from January 27, 2022 to March 31, 2022; as of June 30, 2022 and the predecessor period from January 1, 2022 to January 26, 2022 and the successor periods for the three months ended June 30, 2022 and from January 27, 2022 to June 30, 2022; and as of September 30, 2022 and for the predecessor period from January 1, 2022 to January 26, 2022 and the successor periods for the three months ended September 30, 2022 and from January 27, 2022 to September 30, 2022. These material weaknesses also resulted in immaterial misstatements to substantially all of the S1 Holdco, LLC accounts, which were recorded prior to the issuance of the consolidated financial statements as of December 31, 2021, 2020, 2019 and 2018 and for the years then ended; as of March 31, 2021 and 2020 and for the three-month periods then ended; as of June 30, 2021 and 2020 and for the six-month periods then ended; and as of September 30, 2021 and 2020 and for the nine-month periods then ended. These material weaknesses also resulted in the revision to the consolidated financial statements for the period from January 27, 2022 to December 31, 2022 and each of the three quarterly periods in the years ended December 31, 2022 and 2023.

These material weaknesses also resulted in an immaterial misstatement within cash flows from operating activities of System1, Inc. as of and for the three months ended March 31, 2024. These material weaknesses also resulted in immaterial misstatements within stockholders' equity of the consolidated financial statements of System1, Inc. as of September 30, 2022, December 31 2022, December 31, 2023 and all quarterly periods during 2023.

•We did not design and maintain effective controls over the accounting for complex financial instruments, including the impact of these instruments on earnings per share.

This material weakness also resulted in a material misstatement of the Trebia warrant liabilities, change in the fair value of the Trebia warrant liabilities, forward purchase agreement liabilities, change in the fair value of the forward purchase agreement liabilities, classification of redeemable shares of Class A common stock issued in connection with Trebia’s initial public offering, additional paid-in-capital, accumulated deficit, Earnings Per Share, and related financial disclosures of Trebia Acquisition Corp. as of December 31, 2020 and for the period from February 11, 2020 (inception) through December 31, 2020, as of September 30, 2020 and for three month period ended September 30, 2020 and for the period from February 11, 2020 (inception) through September 30, 2020, as of June 30, 2020 and for three month period ended June 30, 2020 and for the period from February 11, 2020 (inception) through June 30, 2020, as of March 31, 2021 and for three month period ended March 31, 2021. This material weakness also resulted in material adjustments relating to the Trebia forward purchase agreement liabilities and repurchases of common stock impacting the accumulated deficit and additional paid-in capital in the opening balance sheet as of January 27, 2022 and the earnings per share computations for the quarter ended June 30, 2022 of the Company.

Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

•We did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain:

i.program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized, and implemented appropriately;

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ii.user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel;

iii.computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored; and

iv.testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.

These IT deficiencies did not result in a material misstatement to the financial statements; however, the deficiencies, when aggregated, could impact the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Accordingly, we have determined these IT deficiencies in the aggregate constitute a material weakness.

Remediation plan for the material weaknesses

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:

•Assessing the need of additional senior level accounting personnel with applicable technical accounting knowledge, training, and experience in accounting matters, and hiring the appropriately skilled resources, supplemented by third-party resources;

•Designing and implementing controls to formalize roles and review responsibilities to align with our team’s skills and experience and designing and implementing controls ensuring segregation of duties;

•Engaged an accounting advisory firm to assist with the documentation, evaluation, remediation and testing of our internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission;

•Engaged third-party specialists to assist with the preparation of technical accounting analyses and valuations associated with business combinations, and ensuring adequate review by accounting personnel with applicable technical accounting knowledge, training, and experience in accounting for business combinations or dispositions;

•Designing and implementing controls to address the financial reporting risks over the accounting for dispositions, acquisitions and other complex, non-routine transactions, including controls over the preparation and review of accounting memoranda addressing these matters, valuations and key assumptions utilized in the valuations, tax impacts, and ongoing recording of the financial statement results of the acquired businesses;

•Designing and implementing formal accounting policies with periodic reviews, procedures and controls supporting our period-end financial reporting process, including controls over the preparation and review of account reconciliations and journal entries, business performance reviews, foreign exchange gains/losses for intercompany transactions, appropriate determination of asset groups for impairment consideration and classification and presentation of accounts and disclosures, including the statement of cash flows;

•Designing and implementing controls to address the financial reporting risks over accrued liabilities, stock-based compensation and equity transactions, including accounting for non-controlling interest;

•Designing and implementing controls to address the financial reporting risks over the accounting for complex financial instruments, including the earnings per share impacts;

•Designing and implementing controls to address the financial reporting risks over the accuracy and valuation of goodwill, including the allocation of goodwill to reporting units and the identification and measurement of goodwill impairment;

•Designing and implementing IT general controls, including controls over change management, the review and update of user access rights and privileges, controls over batch jobs and data backups, and program development approvals and testing.

34

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 March 31, 2024.

Changes in Internal Control over Financial Reporting

There have been changes to our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the three months ended March 31, 2024 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

35

Part II

Item 1. Legal Proceedings

We are party to pending litigation and claims in connection with the ordinary course of our business. We make provisions for estimated losses to be incurred in such litigation and claims, including legal costs, and we believe such provisions are adequate. See Note 7, Commitments and Contingencies, within the notes to our unaudited condensed consolidated financial statements for a summary of material legal proceedings, in addition to Part I, Item 3, “Legal Proceedings” of our Annual Report on Form 10-K filed with the SEC on March 15, 2024.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in response to "Part I—Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchases

In August 2022, the Board authorized up to $25.0 million for the repurchase of our Class A common stock and Public Warrants. During the quarter ended, no repurchases of our equity securities were made by us or by any of our affiliated purchasers. As of March 31, 2024, we had $23.9 million available under this authorization remaining.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

			Incorporated by Reference				Filed or Furnished Herewith
Exhibit No.		Description	Form	File No.	Exhibit	Filing Date
2.1(a)		Business Combination Agreement, dated as of June  28, 2021, by and among Trebia Acquisition Corp., S1 Holdco, LLC, System1 SS Protect Holdings, Inc., and the other parties that are signatory thereto.	8-K	001-39331	2.1	6/29/2021
	0
2.1(b)		Amendment No. 1 to the Business Combination Agreement, dated as of November  30, 2021, by and among Trebia Acquisition Corp., S1 Holdco, LLC, System1 SS Protect Holdings, Inc., and the other parties that are signatory thereto.	S-4	333-260714	2.2	12/1/2021
2.1(c)		Amendment No. 2 to the Business Combination Agreement, dated January  10, 2022, by and among S1 Holdco, LLC, a Delaware limited liability company, System1 SS Protect Holdings, Inc., a Delaware corporation and the other parties signatory thereto.	8-K	001-39331	10.1	1/20/2022

36

2.1(d)	Amendment No. 3 to the Business Combination Agreement, dated January  25, 2022, by and among S1 Holdco, LLC, a Delaware limited liability company, System1 SS Protect Holdings, Inc., a Delaware corporation and the other parties signatory thereto.	8-K	001-39331	10.1	1/26/2022
2.2	Share Purchase Agreement, dated November 30, 2023, by and among System1, Inc., Orchid Merger Sub II, LLC, Sonic Newco, LLC, JDI Antarctica Limited and JDI Antarctica Sub II Limited	8-K	001-39331	2.1	12/4/2023
3.1	Certificate of Incorporation of System1, Inc.	8-K	001-39331	3.1	2/2/2022
3.2	Second Amended and Restated Bylaws of System1, Inc.	8-K	001-39331	3.1	3/1/2023
4.1	Warrant Agreement, dated June 19, 2020, by and between Trebia Acquisition Corp. and Continental Stock Transfer  & Trust Company, as warrant agent.	8-K	001-39331	4.1	6/2/2020
4.2	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934	10-K	001-39331	4.2	6/6/2023
10.1^	System1, Inc. 2022 Incentive Award Plan.	8-K	001-39331	10.2	2/20/2022
10.2#	Credit and Guaranty Agreement, dated as of January 27, 2022, among Orchid Finco LLC, System1 Midco, LLC, Orchid Merger Sub II, LLC and the subsidiaries from time to time party thereto, S1 Holdco, LLC, Bank of America, N.A. and the lenders from time to time party thereto.	10-K	001-39331	10.7	6/6/2023
10.9	Registration Rights Agreement, dated January 27, 2022, by and among System1, Inc. and the other parties that are signatory thereto.	S-1	333-262608	10.3	2/9/2022
10.10	Registration Rights Agreement, dated June 19, 2020, among the Company, the Sponsors and certain other security holders named therein.	8-K	001-39331	10.2	6/22/2020
10.11	Form of Indemnification Agreement and Advancement Agreement	8-K	001-39331	10.4	3/2/2022
10.12^	Employment Agreement, dated as of June 15, 2023, between Tridivesh Kidambi and System1, LLC.	8-K	001-39331	10.1	6/22/2022
10.17	Form of Stockholders Agreement	S-4/A	333-260714	10.3	12/16/2021
10.26	Insider Trading Policy	10-K	001-39331	10.26	3/15/2024
31.1*	Certification of principal executive officer pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2*	Certification of principal financial and accounting officer pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1**	Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2**	Certification of principal financial and accounting officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
97.1*	Policy for Recovery of Erroneously Awarded Compensation.	10-K	001-39331	97.1*	3/15/2024
101.INS*	XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

37

104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.
**	This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
^	Indicates management contract or compensatory plan.
#	Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant will furnish copies of any such schedules and exhibits to the SEC upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	System1 Inc.
Date: May 9, 2024
	By:	/s/ Michael Blend
		Michael Blend
		Chief Executive Officer
Date: May 9, 2024	By:	/s/ Tridivesh Kidambi
		Tridivesh Kidambi
		Chief Financial Officer

38

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Michael Blend, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of System1, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Michael Blend        

Michael Blend

Chief Executive Officer    

(Principal Executive Officer)

Date: May 9, 2024

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Tridivesh Kidambi, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of System1, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Tridivesh Kidambi    

Tridivesh Kidambi

Chief Financial Officer    

(Principal Financial Officer)

Date: May 9, 2024

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 of System1, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Blend, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael Blend                

Michael Blend

Chief Executive Officer

(Principal Executive Officer)

Date: May 9, 2024

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission (the “SEC”) or its staff upon request.

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 of System1, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tridivesh Kidambi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Tridivesh Kidambi        

Tridivesh Kidambi

Chief Financial Officer

(Principal Financial Officer)

Date: May 9, 2024

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission (the “SEC”) or its staff upon request.

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Cover Page - shares	3 Months Ended
	Mar. 31, 2024	May 07, 2024
Cover
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2024
Document Transition Report	false
Entity File Number	001-39331
Entity Registrant Name	System1, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	92-3978051
Entity Address, Address Line One	4235 Redwood Avenue
Entity Address, City or Town	Marina Del Rey
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90066
City Area Code	310
Local Phone Number	924-6037
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Central Index Key	0001805833
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Amendment Flag	false
Class A Common Stock
Cover
Title of 12(b) Security	Class A common stock, par value $0.0001 per share
Trading Symbol	SST
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		68,901,898
Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50 per share
Cover
Title of 12(b) Security	Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50 per share
Trading Symbol	SST.WS
Security Exchange Name	NYSE
Class C Common Stock
Cover
Entity Common Stock, Shares Outstanding		21,203,676

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 69,920	$ 135,343
Restricted cash, current	7,231	3,813
Accounts receivable, net	52,735	56,093
Prepaid expenses and other current assets	9,791	6,754
Total current assets	139,677	202,003
Restricted cash, non-current	533	4,294
Property and equipment, net	2,836	3,084
Internal-use software development costs, net	12,545	11,425
Intangible assets, net	278,336	297,001
Goodwill	82,407	82,407
Operating lease right-of-use assets	4,241	4,732
Other non-current assets	484	524
Total assets	521,059	605,470
Current liabilities:
Accounts payable	7,055	9,499
Accrued expenses and other current liabilities	52,351	59,314
Operating lease liabilities, current	2,375	2,333
Debt, net	16,190	15,271
Total current liabilities	77,971	86,417
Operating lease liabilities, non-current	2,938	3,582
Long-term debt, net	268,597	334,232
Warrant liability	2,438	2,688
Deferred tax liability	7,649	8,307
Other liabilities	1,061	929
Total liabilities	360,654	436,155
Commitments and contingencies (Note 7)
Stockholders' equity:
Additional paid-in capital	850,202	843,112
Accumulated deficit	(718,199)	(707,662)
Accumulated other comprehensive loss	(271)	(181)
Total stockholders' equity attributable to System1, Inc.	131,741	135,278
Non-controlling interest	28,664	34,037
Total stockholders' equity	160,405	169,315
Total liabilities and stockholders' equity	521,059	605,470
Class A Common Stock
Stockholders' equity:
Common stock value	7	7
Class C Common Stock
Stockholders' equity:
Common stock value	$ 2	$ 2

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares shares in Thousands	Mar. 31, 2024	Dec. 31, 2023
Common stock, par value (in dollars per share)		$ 0.0001
Common stock, shares authorized (in shares)		25,000
Common stock outstanding (in shares)	21,204	21,513
Class A Common Stock
Common stock, par value (in dollars per share)	$ 0.0001
Common stock, shares authorized (in shares)	500,000	500,000
Common stock issued (in shares)	68,632	65,855
Common stock outstanding (in shares)	68,632	65,855
Class C Common Stock
Common stock, par value (in dollars per share)	$ 0.0001
Common stock, shares authorized (in shares)	25,000
Common stock issued (in shares)	21,204	21,513

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Income Statement [Abstract]
Revenue	$ 84,917	$ 121,118
Operating expenses:
Cost of revenue (excluding depreciation and amortization)	53,698	82,953
Salaries and benefits	24,483	28,147
Selling, general, and administrative	12,728	14,855
Depreciation and amortization	19,804	19,392
Total operating expenses	110,713	145,347
Operating loss	(25,796)	(24,229)
Other expense (income):
Interest expense, net	7,970	11,402
Gain from debt extinguishment	(19,676)	0
Change in fair value of warrant liabilities	(251)	(1,409)
Total other (income) expense, net	(11,957)	9,993
Loss before income tax	(13,839)	(34,222)
Income tax benefit	(48)	(3,829)
Net loss from continuing operations	(13,791)	(30,393)
Net loss from discontinued operations, net of tax	0	(12,533)
Net loss	(13,791)	(42,926)
Less: Net loss from continuing operations attributable to non-controlling interest	(3,254)	(6,757)
Less: Net loss from discontinued operations attributable to non-controlling interest	0	(2,367)
Net loss attributable to System1, Inc.	(10,537)	(33,802)
Net loss from continuing operations	(10,537)	(23,636)
Net loss from discontinued operations	$ 0	$ (10,166)
Basic net loss per share, continuing operations (in dollars per share)	$ (0.16)	$ (0.25)
Diluted net loss per share, continuing operations (in dollars per share)	(0.16)	(0.25)
Basic net loss per share, discontinued operations (in dollars per share)	0	(0.11)
Diluted net loss per share, discontinued operations (in dollars per share)	0	(0.11)
Basic net loss per share (in dollars per share)	(0.16)	(0.36)
Diluted net loss per share (in dollars per share)	$ (0.16)	$ (0.36)
Weighted average number of shares outstanding - basic (in shares)	67,781	92,771
Weighted average number of shares outstanding - diluted (in shares)	67,781	92,771

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Statement of Comprehensive Income [Abstract]
Net loss	$ (13,791)	$ (42,926)
Other comprehensive income (loss)
Foreign currency translation income (loss)	(135)	(109)
Comprehensive loss	(13,926)	(43,035)
Comprehensive loss attributable to non-controlling interest	(3,299)	(9,170)
Comprehensive loss attributable to System1, Inc.	$ (10,627)	$ (33,865)

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock Class A Common Stock	Common Stock Class C Common Stock	Additional Paid-In-Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Non-Controlling Interest
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	$ (42,926)
Ending balance (in shares) at Mar. 31, 2023		93,147	21,513
Ending balance at Mar. 31, 2023	433,959	$ 9	$ 2	$ 838,745	$ (473,424)	$ (322)	$ 68,949
Beginning balance (in shares) at Dec. 31, 2023		65,855	21,513
Beginning balance at Dec. 31, 2023	169,315	$ 7	$ 2	843,112	(707,662)	(181)	34,037
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(13,791)				(10,537)		(3,254)
Issuance of common stock in connection with settlement of incentive plan (in shares)		970
Issuance of common stock in connection with settlement of incentive plan	1,707			2,464			(757)
Conversion of Class C shares to Class A shares (in shares)		309	(309)
Conversion of Class C shares to Class A shares	0			241			(241)
Tax receivable agreement liability and deferred taxes arising from LLC interest ownership exchanges and the issuance of common stock from equity incentive plans	(110)			(110)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes (in shares)		1,498
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	(991)			178			(1,169)
Other comprehensive income (loss)	(135)					(90)	(45)
Stock-based compensation	4,405			4,317			88
Contributions from members, net of distributions	5						5
Ending balance (in shares) at Mar. 31, 2024		68,632	21,204
Ending balance at Mar. 31, 2024	$ 160,405	$ 7	$ 2	$ 850,202	$ (718,199)	$ (271)	$ 28,664

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash Flows from Operating Activities
Net loss	$ (13,791)	$ (42,926)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	19,804	29,374
Stock-based compensation	3,970	14,122
Amortization of debt issuance costs	1,030	0
Noncash lease expense	462	436
Change in fair value of warrant liabilities	(251)	(1,409)
Deferred tax benefits	(656)	(7,869)
Gain from debt extinguishment	(19,676)	0
Other	(517)	686
Changes in operating assets and liabilities
Accounts receivable	3,387	11,282
Prepaids and other assets	(2,999)	(159)
Accounts payable	(2,444)	(810)
Accrued expenses and other liabilities	(3,654)	(5,057)
Deferred revenue	(65)	6,182
Long-term earnout liabilities	0	(10,000)
Other long-term liabilities	(587)	347
Net cash used in operating activities	(15,987)	(5,801)
Cash Flows from Investing Activities
Purchases of property and equipment	0	(714)
Capitalized software development costs	(1,622)	(1,678)
Net cash used in investing activities	(1,622)	(2,392)
Cash Flows from Financing Activities
Repayment of Term Loan	(46,071)	(5,000)
Payment of acquisition holdback	0	(1,250)
Taxes paid related to net settlement of stock awards	(2,092)	(2,837)
Contributions from (distributions to) members	5	(45)
Net cash used in financing activities	(48,158)	(9,132)
Effect of exchange rate changes in cash, cash equivalent and restricted cash	1	(44)
Net decrease in cash, cash equivalents and restricted cash	(65,766)	(17,369)
Cash and cash equivalents and restricted cash, beginning of the period	143,450	39,075
Cash and cash equivalents and restricted cash, end of the period	77,684	21,706
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents	69,920	8,267
Restricted cash	7,764	13,439
Total cash, cash equivalents and restricted cash	77,684	21,706
Supplemental cash flow information:
Cash paid for income taxes	634	0
Cash paid for interest	8,230	0
Capitalized assets financed by accounts payable	0	702
Stock-based compensation included in capitalized software development costs	432	561
Settlement of incentive plan through issuance of common stock	$ 1,707	$ 1,658

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Organization and Description of Business

3 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of Business

Organization and Description of Business

System1, Inc. and subsidiaries (the “Company”, “we”, “our” or “us”) operates an omnichannel customer acquisition platform, delivering high-intent customers to brands, advertisers and publishers.

We provide our omnichannel customer acquisition platform services through our proprietary responsive acquisition marketing platform (“RAMP”). Operating seamlessly across major advertising networks and advertising category verticals to acquire high-intent end-users, RAMP allows us to monetize these acquired end users through our relationships with third party advertisers and advertising networks (“Advertising Partners”). RAMP operates across our network of owned and operated websites, allowing us to monetize end-user traffic that we source from various acquisition marketing channels, including Google, Facebook, Zemanta, Taboola, and TikTok. RAMP also allows third party advertising platforms and publishers (“Network Partners”) to send end-user traffic to, and monetize end user traffic on, our owned and operated websites or through our monetization agreements.

We have two reportable segments: Owned and Operated Advertising and Partner Network (see Note 10, Segment Reporting).

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Our condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Our fiscal year ends on December 31. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) in March 2024.

In our opinion, the unaudited interim condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2024 or future operating periods.

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that have had a material impact on our condensed consolidated financial statements and related notes.

We completed the sale of Total Security Limited, formerly known as Protected.net Group Limited (“Protected”) on November 30, 2023. The results of operations of our Protected business prior to its sale are presented as net loss from discontinued operations in our condensed consolidated statements of operations in the periods applicable (see Note 12, Discontinued Operations).

Revision of Previously Issued Consolidated Financial Statements

During the fourth quarter of 2023, we identified certain errors related to our previously issued financial statements as of and for the three months ended March 31, 2023 as follows:

a.Accrued expenses and other current liabilities were understated by $0.9 million, additional paid-in capital was understated by $1.7 million and salaries and benefits expense was understated by $0.3 million as a result of our not accelerating expenses upon forfeiture of certain cash and equity Replacement Awards (as defined in Note 9, Net Loss Per Share) previously granted in 2022 that impacted the condensed consolidated balance sheet, condensed consolidated statements of operations, condensed consolidated statements of changes in stockholders' equity, and condensed consolidated statement of cash flows.

b.We did not appropriately account for changes in equity and earnings per share, specifically:

(i) the carrying amount of non-controlling interest was not updated as changes in ownership events occurred during each reporting period,

(ii) certain equity replacement awards granted during 2022 were not properly considered in the allocation of net income (loss) to controlling and non-controlling interest and earnings per share. These errors impact the condensed consolidated balance sheets, condensed consolidated statement of operations, condensed consolidated statements of changes in stockholders' equity, and condensed consolidated statement of cash flows.

c.We made additional corrections for other immaterial errors.

d.We adjusted for the tax impacts of the corrections related to such errors described above.

We concluded that the errors were not material, either individually or in the aggregate, to our previously issued condensed consolidated financial statements for the impacted period. To correct the immaterial errors, we have revised our previously issued condensed consolidated financial statements as of and for the period ended March 31, 2023.

We have revised the condensed consolidated balance sheet, condensed consolidated statement of operations, condensed consolidated statement of comprehensive income (loss), condensed consolidated statement of changes in stockholders' equity, and condensed consolidated statement of cash flows for the period ended March 31, 2023, as well as the associated Notes to the condensed consolidated financial statements to reflect the correction of these immaterial errors in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

The following table reflects the revisions and the impact of reporting Discontinued Operations related to the sale of Protected to the previously issued condensed consolidated balance sheet as of March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment		As Revised			Impact of Reclassification of Discontinued Operations		As Currently Reported
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses and other current liabilities	85,727		890		86,617		(a)	(14,620)		71,997
Total current liabilities	199,354		890		200,244			—		200,244
Deferred tax liability	35,995		830		36,825		(d)	(13,318)		23,507
Total liabilities	669,119		1,720		670,839			—		670,839
Stockholders’ Equity / Members’ Deficit
Additional paid-in capital	837,093		1,652		838,745		(a) (b)	—		838,745
Accumulated deficit	(479,579)		6,155		(473,424)		(a) (b) (d)	—		(473,424)
Accumulated other comprehensive loss	(479)		156		(323)		(d)	—		(323)
Total stockholders' equity attributable to System1, Inc.	357,046		7,963		365,009			—		365,009
Non-controlling interest	78,632		(9,683)		68,949		(b)	—		68,949
Total stockholders' equity	435,678		(1,720)		433,958			—		433,958
Total liabilities and stockholders' equity	$	1,104,797	$	—	$	1,104,797		$	—	$	1,104,797

The following table reflects the revisions and the impact of reporting Discontinued Operations related to the sale of Protected to the previously issued condensed consolidated statement of operations, for the three months ended March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment			As Revised		Impact of Reclassification of Discontinued Operations		As Currently Reported
Salaries and benefits	38,398		296		(a)	38,694		(10,547)		28,147
Total operating expenses	205,346		296			205,642		(60,295)		145,347
Operating loss	(37,492)		(296)			(37,788)		13,559		(24,229)
Other expense (income):
Interest expense, net	11,451		—			11,451		(49)		11,402
Total other (income) expense, net	10,042		—			10,042		(49)		9,993
Loss before income tax	(47,534)		(296)			(47,830)		13,608		(34,222)
Income tax benefit	(4,408)		(496)		(d)	(4,904)		1,075		(3,829)
Net loss from continuing operations	(43,126)		200			(42,926)		12,533		(30,393)
Net loss from discontinued operations, net of tax	—		—			—		(12,533)		(12,533)
Net loss	(43,126)		200			(42,926)		—		(42,926)
Less: Net loss from continuing operations attributable to non-controlling interest	(9,174)		50		(b)	(9,124)		2,367		(6,757)
Less: Net loss from discontinued operations attributable to non-controlling interest	—		—			—		(2,367)		(2,367)
Net loss attributable to System1, Inc.	$	(33,952)	$	150		$	(33,802)	$	—	$	(33,802)
Amounts attributable to System1, Inc.:
Net loss from continuing operations	$	(33,952)	$	150	(b)	$	(33,802)	$	10,166	$	(23,636)
Net loss from discontinued operations	—		—			—		(10,166)		(10,166)
Net loss attributable to System1, Inc.	$	(33,952)	$	150		$	(33,802)	$	—	$	(33,802)
Basic and diluted net loss per share:
Continuing operations	$	(0.37)	$	0.01	(b)	$	(0.36)	$	0.11	$	(0.25)
Discontinued operations	—		—			—		(0.11)		(0.11)
Basic and diluted net loss per share	$	(0.37)	$	0.01		$	(0.36)	$	—	$	(0.36)
Weighted average number of shares outstanding - basic and diluted	92,460		311		(b)	92,771				92,771

The following table reflects the revisions related to the previously issued condensed consolidated statement of comprehensive loss for the three months ended March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment			As Currently Reported
Net loss	$	(43,126)	$	200	(a) (d)	$	(42,926)
Other comprehensive income (loss)
Foreign currency translation income (loss)	(108)					(108)
Comprehensive loss	(43,234)		200			(43,034)
Comprehensive loss attributable to non-controlling interest	(9,220)		50		(b)	(9,170)
Comprehensive loss attributable to System1, Inc.	$	(34,014)	$	150		$	(33,864)

The following tables reflect the revisions to the previously issued condensed consolidated statement of changes in stockholders' equity for the quarter ended March 31, 2023. Although the impact is pervasive throughout the condensed consolidated statement of changes in stockholders' equity as a result of the errors described above, the most significant impact is a reduction of net loss of $0.2 million, an increase of non-controlling interest of

$0.5 million, a reduction in accumulated deficit of $0.2 million and a reduction in additional paid-in-capital of $0.2 million.

	Class A Common Stock			Class C Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In-Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Non-Controlling Interest		Total Stockholders’ Equity
As Previously Reported
Balance at December 31, 2022	91,674	$	9	21,747	$	2	$	831,566	$	(439,296)	$	(260)	$	78,650	$	470,671
Net loss	—	—		—	—		—		(33,952)		—		(9,174)		(43,126)
Cumulative-effect of adoption of ASU 2016-13	—	—		—	—		—		(326)		—		—		(326)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	832	—		—	—		(1,730)		—		—		—		(1,730)
Issuance of common stock in connection with settlement of incentive plan	407	—		—	—		1,659		—		—		—		1,659
Conversion of Class C shares to Class A shares	234	—		(234)	—		955		—		—		(955)		—
Increase in tax receivable agreement liability	—	—		—	—		(441)		—		—		—		(441)
Other comprehensive income (loss)	—	—		—	—		—		—		(62)		(47)		(109)
Stock-based compensation	—	—		—	—		6,963		—		—		—		6,963
Balance at March 31, 2023	93,147	$	9	21,513	$	2	$	838,972	$	(473,574)	$	(322)	$	68,474	$	433,561
Revision Adjustments
Net loss	—	—		—	—		—		150		—		50		200		(a) (b) (d)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	—	—		—	—		281		—		—		(281)		—		(a) (b)
Issuance of common stock in connection with settlement of incentive plan	—	—		—	—		160		—		—		(160)		—		(b)
Conversion of Class C shares to Class A shares	—	—		—	—		92		—		—		(92)		—		(b)
Other comprehensive income (loss)	—	—		—	—		—		—		—		—		—		(c)
Stock-based compensation	—	—		—	—		(760)		—		—		958		198		(a) (b)
Balance at March 31, 2023	—	$	—	—	$	—	$	(227)	$	150	$	—	$	475	$	398
As Revised
Net loss	—	—		—	—		—		(33,802)		—		(9,124)		(42,926)

Cumulative-effect of adoption of ASU 2016-13	—	—		—	—		—		(326)		—		—		(326)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	832	—		—	—		(1,449)		—		—		(281)		(1,730)
Issuance of common stock in connection with settlement of incentive plan	407	—		—	—		1,819		—		—		(160)		1,659
Conversion of Class C shares to Class A shares	234	—		(234)	—		1,047		—		—		(1,047)		—
Increase in tax receivable agreement liability	—	—		—	—		(441)		—		—		—		(441)
Other comprehensive income (loss)	—	—		—	—		—		—		(62)		(47)		(109)
Stock-based compensation	—	—		—	—		6,203		—		—		958		7,161
Balance at March 31, 2023	93,147	$	9	21,513	$	2	$	838,745	$	(473,424)	$	(322)	$	68,949	$	433,959

The following table reflects the revisions to the previously issued condensed consolidated statement of cash flows for the three months ended March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment			As Currently Reported
Cash Flows from Operating Activities
Net loss	$	(43,126)	$	200	(a) (d)	$	(42,926)
Stock-based compensation	13,925		197		(a)	14,122
Deferred tax benefits	(7,373)		(496)		(d)	(7,869)
Changes in operating assets and liabilities
Accrued expenses and other liabilities	(4,660)		(397)		(a)	(5,057)
Other long-term liabilities	(149)		496		(d)	347
Net cash used in operating activities	$	(5,801)	$	—		$	(5,801)

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Management’s estimates are based on historical information available as of the date of the condensed consolidated financial statements and various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from those estimates.

Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, valuation of goodwill, acquired intangible assets, assets held for sale and long-lived assets, valuation and recognition of stock-based compensation awards, income taxes, contingent consideration and determination of the fair value of the warrant liabilities. On an ongoing basis, management evaluates our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.

Risks and Concentrations

We are subject to certain business and operational risks, including competition from alternative technologies, as well as dependence on key Advertising Partners, key employees, key contracts, and growth to achieve our business and operational objectives.

Concentrations

The concentration as a percentage of total revenue for our key advertising partner Google is 83% and 89%, for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had (i) two paid search advertising partnership agreements with Google, and (ii) one paid search advertising partnership agreement with Microsoft. The Google agreements are in effect through February 28, 2025, and May 31, 2024, respectively. The agreement with Microsoft (our next largest Advertising Partner by revenue) is in effect through June 30, 2025. Under certain circumstances, each of these agreements may be terminated by either us or the respective Advertising Partner immediately, or with minimal notice.

Accounts receivable are primarily derived from Advertising Partners located within the United States. As of March 31, 2024, Google and Yahoo, represented 68% and 5%, respectively, of our accounts receivables balance. As of December 31, 2023, these two Advertising Partners represented 69% and 6%, respectively, of our accounts receivables balance.

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Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net

3 Months Ended

Mar. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net

Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net

Goodwill

Goodwill was $82.4 million as of March 31, 2024 and December 31, 2023, all attributable to the Partner Network reportable segment. No impairment of goodwill was identified for any of the periods presented.

Internal-use software development costs, net and intangible assets, net

Internal-use software development costs and intangible assets consisted of the following (in thousands):

	March 31, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Internal-use software development costs	$	15,842	$	(3,297)	$	12,545
Intangible assets:
Developed technology	$	196,128	$	(106,613)	$	89,515
Trademarks and trade names	236,053		(50,950)		185,103
Software	5,100		(2,659)		2,441
Customer relationships	2,900		(1,623)		1,277
Total	$	440,181	$	(161,845)	$	278,336

	December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Internal-use software development costs	$	13,788	$	(2,363)	$	11,425
Intangible assets:
Developed technology	$	196,128	$	(94,354)	$	101,774
Trademarks and trade names	236,053		(45,050)		191,003
Software	5,100		(2,341)		2,759
Customer relationships	2,900		(1,435)		1,465
Total	$	440,181	$	(143,180)	$	297,001

The internal-use software development costs includes construction in progress which is not being amortized of $4.2 million and $3.5 million as of March 31, 2024 and December 31, 2023, respectively.

Amortization expense for internal-use software development costs and intangible assets were as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
Amortization expense for internal-use software development	$	934	$	557
Amortization expense for intangible assets	$	18,665	$	18,665

No impairment of internal-use software development cost or intangible assets was identified for any of the periods presented.

As of March 31, 2024, the weighted average amortization period for all intangible assets was 7 years.

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Accrued Expenses and Other Current Liabilities

3 Months Ended

Mar. 31, 2024

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following items as of the periods presented (in thousands):

	March 31, 2024		December 31, 2023
Accrued revenue share	$	17,905	$	16,365
Accrued marketing expenses	15,073		19,737
Accrued payroll and related benefits	8,205		13,751
Accrued professional fees	2,611		1,455
Deferred revenue	1,693		1,757
Accrued tax liability	1,352		1,233
Other liabilities	5,512		5,016
Accrued expenses and other current liabilities	$	52,351	$	59,314

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Debt, Net

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Debt, Net

Debt, Net

We entered into a term loan (“Term Loan”) and revolving facility (“2022 Revolving Facility”) with Bank of America, N.A., on January 27, 2022, providing for a 5.5 year term loan with a principal balance of $400.0 million and with the net proceeds of $376.0 million. The 2022 Revolving Facility provided for borrowing availability of up

to $50.0 million. As of March 31, 2024, there was no balance outstanding on the 2022 Revolving Facility and principal of $296.3 million was outstanding on the Term Loan. Through December 31, 2025, the outstanding Term Loan is subject to quarterly amortization payments of $5.0 million. From March 31, 2026, the Term Loan is subject to quarterly amortization payments of $7.5 million. The Term Loan matures in 2027.

For every interest period, the interest rate on the Term Loan is the adjusted Secured Overnight Financing Rate (“SOFR”) plus 4.75%. The Term Loan is amortized in quarterly installments on each scheduled payment date. The Term Loan comes with a leverage covenant, which goes into effect only if the utilization on the 2022 Revolving Facility exceeds 35% of the $50.0 million 2022 Revolving Facility at each quarter-end starting the second quarter 2022, such that the first lien leverage ratio (as defined in the credit agreement) should not exceed 5.40. The facility has certain financial and nonfinancial covenants, including a leverage ratio. The facility also requires that we deliver our audited consolidated financial statements to our lender within 120 days of our fiscal year end, December 31. Should we fail to distribute the financial statements to our lender within 120 days, we are allowed an additional 30 days to cure. We were in compliance with our financial covenants as of March 31, 2024.

On January 17, 2024, we completed the repurchase of $63.7 million in principal amount of our Term Loan for an aggregate purchase price of $40.9 million (at discount of 64.2% of its par value) pursuant to a Dutch auction tender offer. Following the repurchase, the outstanding principal amount of the Term Loan was $301.3 million. We used available cash on hand to fund the repurchase. Our gain on the repurchase was $19.7 million before fees and expenses incurred.

The interest rate on the 2022 Revolving Facility is the adjusted SOFR plus 2.5% with an adjusted SOFR floor of 0%. As of March 31, 2024 we had $50.0 million available on the 2022 Revolving Facility.

The carrying values of our debt, net of discounts, deferred financing and debt issuance costs were as follows (in thousands):

	March 31, 2024		December 31, 2023
Term Loan1,2	$	284,787	$	349,503
Total Debt, net	$	284,787	$	349,503
_______________
1 Includes unamortized discount of $11.5 million and $14.7 million, and unamortized loan fees of $0.6 million and $0.8 million, as of March 31, 2024, and December 31, 2023, respectively, recorded as a reduction of the carrying amount of the debt and amortized to interest expense using the effective interest method.
2 Estimated fair value of the Term Loan was $180.7 million and $222.7 million as of March 31, 2024 and December 31, 2023, respectively.

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Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We are the sole managing member of S1 Holdco, LLC ("S1 Holdco") and, as a result, consolidate the financial results of S1 Holdco. S1 Holdco is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, S1 Holdco is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by S1 Holdco is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We are 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.

We recorded an immaterial benefit for income taxes for the three months ended March 31, 2024 and a benefit from income taxes of $3.8 million for the three months ended March 31, 2023. The effective tax rate for the three months ended March 31, 2024 and 2023 was 0.4% and 11.2%, respectively. The provision for income taxes differs from the amount of income tax computed by applying the U.S. statutory federal tax rate of 21% to the loss before income taxes due to the exclusion of non-controlling loss, state taxes, foreign rate differential, non-deductible

expenses, increase to the valuation allowance related to unrealizable deferred tax assets, and outside basis adjustments. As of March 31, 2024, we had a full valuation allowance on our U.S. federal and state net deferred tax assets as it was more likely than not that those deferred tax assets would not be realized.

During the three months ended March 31, 2024, and 2023, inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement. The total amount of Tax Receivable Agreement Payments due under the Tax Receivable Agreement was $0.9 million and $0.8 million as of March 31, 2024 and December 31, 2023, respectively.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

In June 2023, we entered into a multi-year agreement with a service provider whereby we are contractually obligated to spend $5.0 million in each annual period between July 2023 and June 2026. As of March 31, 2024, we remain contractually obligated to spend $10.0 million towards this commitment.

As of March 31, 2024, we had various non-cancelable operating lease commitments for office space which have been recorded as Operating lease liabilities.

Litigation

We are subject to various legal proceedings and claims that arise in the ordinary course of business. We believe the ultimate liability, if any, with respect to these actions will not materially affect the consolidated financial position, results of operations, or cash flows reflected in the condensed consolidated financial statements. There can be no assurance, however, that the ultimate resolution of such actions will not materially or adversely affect our consolidated financial position, results of operations, or cash flows. We accrued for losses when the loss is deemed probable and the liability can reasonably be estimated.

In October 2023, a putative California class action complaint (the “Complaint”) was filed against us and our Protected business regarding alleged violations of California’s Auto Renewal Law requirements related to the marketing and sale of its subscription service offerings for anti-virus and ad-blocking software (the “Protected Software”) to consumers. The Complaint alleges claims under California’s false advertising and unfair competition laws and primarily alleges that the marketing and sales checkout flows for the Protected Software did not clearly and conspicuously disclose that the named plaintiffs set forth in the Complaint were purchasing the Protected Software for a promotional period which would auto-renew after the applicable promotional period. We dispute the claims alleged, and intend to defend ourselves vigorously in this matter.

Indemnifications

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments we could be required to make under these indemnification provisions may not be subject to claims related to these indemnifications. As a result, we believe the estimated fair value of these agreements was immaterial. Accordingly, we have no liabilities recorded for these agreements as of March 31, 2024.

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Fair Value Measurement

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurement

Fair Value Measurement

Financial Liabilities Measured at Fair Value on a Recurring Basis

The following tables present our fair value hierarchy for liabilities measured at fair value on a recurring basis (in thousands):

	March 31, 2024		December 31, 2023
	Level 1
Public Warrants	$	2,438	$	2,688

The fair value of the Public Warrants has been estimated using the Public Warrants’ quoted market price. There were no transfers in or out of levels during the periods presented.

Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis

For further information on the fair value assessment of goodwill refer to Note 3, Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net.

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Net Loss Per Share

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Net Loss Per Share

Net Loss Per Share

Basic net loss per share was calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Basic and diluted net loss per share was calculated as follows (in thousands, except per share):

	Three Months Ended March 31,
	2024		2023
Basic and diluted net loss per share
Net loss from continuing operations attributable to System1, Inc.	$	(0.16)	$	(0.25)
Net loss from discontinued operations, net of tax attributable to System1, Inc.	—		(0.11)
Basic and Diluted net loss per share	$	(0.16)	$	(0.36)
Numerator:
Net loss from continuing operations attributable to System1, Inc.	$	(10,537)	$	(23,636)
Net loss from discontinued operations, net of tax attributable to System1, Inc.	—		(10,166)
Net loss attributable to System1, Inc.	$	(10,537)	$	(33,802)
Denominator:
Weighted-average common shares outstanding used in computing basic and diluted net loss per share	67,781		92,771

For the periods presented in the table above, a total of 16.8 million Public Warrants were excluded from the computation of net loss per share as the impact was anti-dilutive.

Pursuant to the Merger, we were required to replace certain profits interests awards, the value creation units and Class F units, with a combination of a restricted stock unit in our shares and a cash award (collectively, "Replacement Awards”). We do not consider unvested Class A common stock related to the Replacement Awards as outstanding for accounting purposes as they are subject to continued service requirements or contingencies. These shares are not included in the denominator of the net loss per share calculation until the employee provides the requisite service resulting in the vesting of the award or the contingency is removed, or upon termination of an employee at which point the common stock underlying the award becomes issuable to the previous investors. Shares associated with the vested or forfeited Replacement Awards are deemed to be issued and outstanding for accounting purposes on the day of vest or forfeiture.

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Segment Reporting

3 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

We have two operating segments and reportable segments: Owned and Operated Advertising and Partner Network. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”), in deciding how to allocate resources and assess performance. Our Chief Executive Officer, who is considered to be our CODM, reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance.

The CODM measures and evaluates reportable segments based on segment operating revenue as well as adjusted gross profit. The tables below include the following operating expenses that are not allocated to the reporting segments presented to our CODM: depreciation and amortization of property, equipment and leasehold improvements, amortization of intangible assets and, at times, certain other transactions or adjustments. The CODM does not consider these expenses for the purposes of making decisions to allocate resources among segments or to assess segment performance, however these costs are included in reported condensed consolidated net loss from continuing operations before income tax and are included in the reconciliation that follows.

The following table summarizes revenue by reportable segments (in thousands):

	Three Months Ended March 31,
	2024		2023
Owned and Operated Advertising	$	69,030	$	106,025
Partner Network	15,887		15,093
Total revenue	$	84,917	$	121,118

The following table summarizes adjusted gross profit by reportable segments (in thousands):

	Three Months Ended March 31,
	2024		2023
Owned and Operated Advertising	$	22,462	$	29,839
Partner Network	10,919		10,217
Adjusted gross profit	33,381		40,056
Other cost of revenue	2,162		1,891
Salaries and benefits	24,483		28,147
Selling, general, and administrative	12,728		14,855
Depreciation and amortization	19,804		19,392
Interest expense, net	7,970		11,402
Gain from debt extinguishment	(19,676)		—
Change in fair value of warrant liabilities	(251)		(1,409)
Loss before income tax	$	(13,839)	$	(34,222)

The following table summarizes revenue by geographic region (in thousands):

	Three Months Ended March 31,
	2024		2023
United States	$	81,682	$	117,199
Other countries	3,235		3,919
Total revenue	$	84,917	$	121,118

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

We recorded the following total stock-based compensation expense (in thousands):

	Three Months Ended March 31,
	2024		2023
Stock-based compensation expense	$	3,970	$	5,832

CouponFollow Incentive Plan

As of March 31, 2024, we have determined that it was not probable that the CouponFollow business would achieve any of the contingent earnout targets during the Performance Periods, and accordingly, we did not record a liability for any of the Tier amounts set forth in the CouponFollow Incentive Plan. In the quarter ended March 31, 2024 we issued 1.0 million Class A Common Stock with an aggregate fair value of $1.7 million, net of shares withheld for taxes, on the date of the settlement to settle the second $3.3 million Fixed Amount. We recognized a gain of $0.5 million, being the difference between the fair value of the Class A common stock issued and the carrying value of the liability. During the quarter ended March 31, 2024, we recognized $0.8 million for the third Fixed Amount within salaries and benefits expenses on the condensed consolidated statements of operations. Our March 31, 2024 short-term restricted cash included $2.8 million for which the restriction was released related to the amount we paid during the quarter ended March 31, 2024 for continued services from certain individuals of CouponFollow. The amount was released from escrow in April 2024.

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Discontinued Operations

3 Months Ended

Mar. 31, 2024

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

Sale of Protected

On November 30, 2023, we completed the sale of Protected, our subscription reporting unit. 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 the financial benchmarks included in the Protected Incentive Plan, will, as a result of the Protected sale, no longer be achievable.

The financial results of Protected are presented as a loss from discontinued operations, net of taxes in the condensed consolidated statements of operations. The following table presents the summarized discontinued operations condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31, 2023
Revenue	$	46,736
Operating expenses:
Cost of revenue (excluding depreciation and amortization)	37,449
Salaries and benefits	10,547
Selling, general, and administrative	2,317
Depreciation and amortization	9,982
Total operating expenses	60,295
Operating loss	(13,559)
Other expense, net	49
Loss from discontinued operations before income taxes	(13,608)
Income tax benefit	(1,075)
Net loss from discontinued operations	$	(12,533)

The following table presents the significant non-cash items and capital expenditures for the discontinued operations with respect to the subscription business that are included in the condensed consolidated statements of cash flows (in thousands):

	Three Months Ended March 31, 2023
Depreciation and amortization	$	9,982
Stock-based compensation	$	8,290
Capital expenditures	$	496

Transition Service Agreement

In connection with a transition service agreement, we agreed to provide certain services for which full reimbursement of cost will be provided.

Discontinued Operations Related-Party Transactions

Payment Processing Agreement

Protected utilizes multiple credit card payment processors, including Paysafe Financial Services Limited (“Paysafe”). In March 2021, Paysafe completed a merger with Foley Trasimene Acquisition Corp. II (“Foley Trasimene”), a special purpose acquisition company sponsored by entities affiliated with a sponsor of Trebia who was also a member of our Board of Directors. We incurred credit card processing fees related to Paysafe for the three months ended March 31, 2023 of $1.1 million.

Office Facilities

Protected had an agreement with JDI Property Holdings Limited (“JDIP”), an entity controlled by one of our directors, which allowed Protected to use space at their property in exchange for GBP 0.1 million per year.

Protected Incentive Plan Installment Payments

In 2022 in connection with the acquisition of Protected, we effected an incentive plan for eligible recipients, providing up to $100 million payable in fully-vested shares of our Class A common stock contingent upon the achievement of the future performance of Protected’s business. The incentive plan originally was to be paid out in two tranches based on performance of the business for 2023 and 2024. The first award (2023), consisting of $50.0 million of Class A common stock payable in January 2024, was modified to a cash award resulting in $20 million of payments in 2022 and 2023 with an additional final $10.0 million, payable upon the achievement of certain performance thresholds around marketing spend and operating contribution of Protected are achieved on or before December 31, 2024. On November 30, 2023, none of the performance thresholds were met, and therefore, none of the additional cash bonus payments have been paid.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Our condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Our fiscal year ends on December 31. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) in March 2024.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Our condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Our fiscal year ends on December 31. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) in March 2024.

Use of Estimates

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Management’s estimates are based on historical information available as of the date of the condensed consolidated financial statements and various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from those estimates.

Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, valuation of goodwill, acquired intangible assets, assets held for sale and long-lived assets, valuation and recognition of stock-based compensation awards, income taxes, contingent consideration and determination of the fair value of the warrant liabilities. On an ongoing basis, management evaluates our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Schedule of Revision of Previously Issued Consolidated Financial Statements

The following table reflects the revisions and the impact of reporting Discontinued Operations related to the sale of Protected to the previously issued condensed consolidated balance sheet as of March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment		As Revised			Impact of Reclassification of Discontinued Operations		As Currently Reported
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses and other current liabilities	85,727		890		86,617		(a)	(14,620)		71,997
Total current liabilities	199,354		890		200,244			—		200,244
Deferred tax liability	35,995		830		36,825		(d)	(13,318)		23,507
Total liabilities	669,119		1,720		670,839			—		670,839
Stockholders’ Equity / Members’ Deficit
Additional paid-in capital	837,093		1,652		838,745		(a) (b)	—		838,745
Accumulated deficit	(479,579)		6,155		(473,424)		(a) (b) (d)	—		(473,424)
Accumulated other comprehensive loss	(479)		156		(323)		(d)	—		(323)
Total stockholders' equity attributable to System1, Inc.	357,046		7,963		365,009			—		365,009
Non-controlling interest	78,632		(9,683)		68,949		(b)	—		68,949
Total stockholders' equity	435,678		(1,720)		433,958			—		433,958
Total liabilities and stockholders' equity	$	1,104,797	$	—	$	1,104,797		$	—	$	1,104,797

The following table reflects the revisions and the impact of reporting Discontinued Operations related to the sale of Protected to the previously issued condensed consolidated statement of operations, for the three months ended March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment			As Revised		Impact of Reclassification of Discontinued Operations		As Currently Reported
Salaries and benefits	38,398		296		(a)	38,694		(10,547)		28,147
Total operating expenses	205,346		296			205,642		(60,295)		145,347
Operating loss	(37,492)		(296)			(37,788)		13,559		(24,229)
Other expense (income):
Interest expense, net	11,451		—			11,451		(49)		11,402
Total other (income) expense, net	10,042		—			10,042		(49)		9,993
Loss before income tax	(47,534)		(296)			(47,830)		13,608		(34,222)
Income tax benefit	(4,408)		(496)		(d)	(4,904)		1,075		(3,829)
Net loss from continuing operations	(43,126)		200			(42,926)		12,533		(30,393)
Net loss from discontinued operations, net of tax	—		—			—		(12,533)		(12,533)
Net loss	(43,126)		200			(42,926)		—		(42,926)
Less: Net loss from continuing operations attributable to non-controlling interest	(9,174)		50		(b)	(9,124)		2,367		(6,757)
Less: Net loss from discontinued operations attributable to non-controlling interest	—		—			—		(2,367)		(2,367)
Net loss attributable to System1, Inc.	$	(33,952)	$	150		$	(33,802)	$	—	$	(33,802)
Amounts attributable to System1, Inc.:
Net loss from continuing operations	$	(33,952)	$	150	(b)	$	(33,802)	$	10,166	$	(23,636)
Net loss from discontinued operations	—		—			—		(10,166)		(10,166)
Net loss attributable to System1, Inc.	$	(33,952)	$	150		$	(33,802)	$	—	$	(33,802)
Basic and diluted net loss per share:
Continuing operations	$	(0.37)	$	0.01	(b)	$	(0.36)	$	0.11	$	(0.25)
Discontinued operations	—		—			—		(0.11)		(0.11)
Basic and diluted net loss per share	$	(0.37)	$	0.01		$	(0.36)	$	—	$	(0.36)
Weighted average number of shares outstanding - basic and diluted	92,460		311		(b)	92,771				92,771

The following table reflects the revisions related to the previously issued condensed consolidated statement of comprehensive loss for the three months ended March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment			As Currently Reported
Net loss	$	(43,126)	$	200	(a) (d)	$	(42,926)
Other comprehensive income (loss)
Foreign currency translation income (loss)	(108)					(108)
Comprehensive loss	(43,234)		200			(43,034)
Comprehensive loss attributable to non-controlling interest	(9,220)		50		(b)	(9,170)
Comprehensive loss attributable to System1, Inc.	$	(34,014)	$	150		$	(33,864)

The following tables reflect the revisions to the previously issued condensed consolidated statement of changes in stockholders' equity for the quarter ended March 31, 2023. Although the impact is pervasive throughout the condensed consolidated statement of changes in stockholders' equity as a result of the errors described above, the most significant impact is a reduction of net loss of $0.2 million, an increase of non-controlling interest of

$0.5 million, a reduction in accumulated deficit of $0.2 million and a reduction in additional paid-in-capital of $0.2 million.

	Class A Common Stock			Class C Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In-Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Non-Controlling Interest		Total Stockholders’ Equity
As Previously Reported
Balance at December 31, 2022	91,674	$	9	21,747	$	2	$	831,566	$	(439,296)	$	(260)	$	78,650	$	470,671
Net loss	—	—		—	—		—		(33,952)		—		(9,174)		(43,126)
Cumulative-effect of adoption of ASU 2016-13	—	—		—	—		—		(326)		—		—		(326)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	832	—		—	—		(1,730)		—		—		—		(1,730)
Issuance of common stock in connection with settlement of incentive plan	407	—		—	—		1,659		—		—		—		1,659
Conversion of Class C shares to Class A shares	234	—		(234)	—		955		—		—		(955)		—
Increase in tax receivable agreement liability	—	—		—	—		(441)		—		—		—		(441)
Other comprehensive income (loss)	—	—		—	—		—		—		(62)		(47)		(109)
Stock-based compensation	—	—		—	—		6,963		—		—		—		6,963
Balance at March 31, 2023	93,147	$	9	21,513	$	2	$	838,972	$	(473,574)	$	(322)	$	68,474	$	433,561
Revision Adjustments
Net loss	—	—		—	—		—		150		—		50		200		(a) (b) (d)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	—	—		—	—		281		—		—		(281)		—		(a) (b)
Issuance of common stock in connection with settlement of incentive plan	—	—		—	—		160		—		—		(160)		—		(b)
Conversion of Class C shares to Class A shares	—	—		—	—		92		—		—		(92)		—		(b)
Other comprehensive income (loss)	—	—		—	—		—		—		—		—		—		(c)
Stock-based compensation	—	—		—	—		(760)		—		—		958		198		(a) (b)
Balance at March 31, 2023	—	$	—	—	$	—	$	(227)	$	150	$	—	$	475	$	398
As Revised
Net loss	—	—		—	—		—		(33,802)		—		(9,124)		(42,926)

Cumulative-effect of adoption of ASU 2016-13	—	—		—	—		—		(326)		—		—		(326)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	832	—		—	—		(1,449)		—		—		(281)		(1,730)
Issuance of common stock in connection with settlement of incentive plan	407	—		—	—		1,819		—		—		(160)		1,659
Conversion of Class C shares to Class A shares	234	—		(234)	—		1,047		—		—		(1,047)		—
Increase in tax receivable agreement liability	—	—		—	—		(441)		—		—		—		(441)
Other comprehensive income (loss)	—	—		—	—		—		—		(62)		(47)		(109)
Stock-based compensation	—	—		—	—		6,203		—		—		958		7,161
Balance at March 31, 2023	93,147	$	9	21,513	$	2	$	838,745	$	(473,424)	$	(322)	$	68,949	$	433,959

The following table reflects the revisions to the previously issued condensed consolidated statement of cash flows for the three months ended March 31, 2023 (in thousands):

	As Previously Reported		Revision Adjustment			As Currently Reported
Cash Flows from Operating Activities
Net loss	$	(43,126)	$	200	(a) (d)	$	(42,926)
Stock-based compensation	13,925		197		(a)	14,122
Deferred tax benefits	(7,373)		(496)		(d)	(7,869)
Changes in operating assets and liabilities
Accrued expenses and other liabilities	(4,660)		(397)		(a)	(5,057)
Other long-term liabilities	(149)		496		(d)	347
Net cash used in operating activities	$	(5,801)	$	—		$	(5,801)

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Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net (Tables)

3 Months Ended

Mar. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets

Internal-use software development costs and intangible assets consisted of the following (in thousands):

	March 31, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Internal-use software development costs	$	15,842	$	(3,297)	$	12,545
Intangible assets:
Developed technology	$	196,128	$	(106,613)	$	89,515
Trademarks and trade names	236,053		(50,950)		185,103
Software	5,100		(2,659)		2,441
Customer relationships	2,900		(1,623)		1,277
Total	$	440,181	$	(161,845)	$	278,336

	December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Internal-use software development costs	$	13,788	$	(2,363)	$	11,425
Intangible assets:
Developed technology	$	196,128	$	(94,354)	$	101,774
Trademarks and trade names	236,053		(45,050)		191,003
Software	5,100		(2,341)		2,759
Customer relationships	2,900		(1,435)		1,465
Total	$	440,181	$	(143,180)	$	297,001

Amortization expense for internal-use software development costs and intangible assets were as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
Amortization expense for internal-use software development	$	934	$	557
Amortization expense for intangible assets	$	18,665	$	18,665

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Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2024

Payables and Accruals [Abstract]

Schedule of Accrued Expenses and Other Liabilities

Accrued expenses and other current liabilities consisted of the following items as of the periods presented (in thousands):

	March 31, 2024		December 31, 2023
Accrued revenue share	$	17,905	$	16,365
Accrued marketing expenses	15,073		19,737
Accrued payroll and related benefits	8,205		13,751
Accrued professional fees	2,611		1,455
Deferred revenue	1,693		1,757
Accrued tax liability	1,352		1,233
Other liabilities	5,512		5,016
Accrued expenses and other current liabilities	$	52,351	$	59,314

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Debt, Net (Tables)

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Schedule of Long-Term Debt Instruments

The carrying values of our debt, net of discounts, deferred financing and debt issuance costs were as follows (in thousands):

	March 31, 2024		December 31, 2023
Term Loan1,2	$	284,787	$	349,503
Total Debt, net	$	284,787	$	349,503
_______________
1 Includes unamortized discount of $11.5 million and $14.7 million, and unamortized loan fees of $0.6 million and $0.8 million, as of March 31, 2024, and December 31, 2023, respectively, recorded as a reduction of the carrying amount of the debt and amortized to interest expense using the effective interest method.
2 Estimated fair value of the Term Loan was $180.7 million and $222.7 million as of March 31, 2024 and December 31, 2023, respectively.

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Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Schedule of Liabilities Measured at Fair Value on Recurring Basis

The following tables present our fair value hierarchy for liabilities measured at fair value on a recurring basis (in thousands):

	March 31, 2024		December 31, 2023
	Level 1
Public Warrants	$	2,438	$	2,688

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Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Net Income (Loss) Per Share

Basic and diluted net loss per share was calculated as follows (in thousands, except per share):

	Three Months Ended March 31,
	2024		2023
Basic and diluted net loss per share
Net loss from continuing operations attributable to System1, Inc.	$	(0.16)	$	(0.25)
Net loss from discontinued operations, net of tax attributable to System1, Inc.	—		(0.11)
Basic and Diluted net loss per share	$	(0.16)	$	(0.36)
Numerator:
Net loss from continuing operations attributable to System1, Inc.	$	(10,537)	$	(23,636)
Net loss from discontinued operations, net of tax attributable to System1, Inc.	—		(10,166)
Net loss attributable to System1, Inc.	$	(10,537)	$	(33,802)
Denominator:
Weighted-average common shares outstanding used in computing basic and diluted net loss per share	67,781		92,771

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Schedule of Segment Reporting Information

The following table summarizes revenue by reportable segments (in thousands):

	Three Months Ended March 31,
	2024		2023
Owned and Operated Advertising	$	69,030	$	106,025
Partner Network	15,887		15,093
Total revenue	$	84,917	$	121,118

The following table summarizes adjusted gross profit by reportable segments (in thousands):

	Three Months Ended March 31,
	2024		2023
Owned and Operated Advertising	$	22,462	$	29,839
Partner Network	10,919		10,217
Adjusted gross profit	33,381		40,056
Other cost of revenue	2,162		1,891
Salaries and benefits	24,483		28,147
Selling, general, and administrative	12,728		14,855
Depreciation and amortization	19,804		19,392
Interest expense, net	7,970		11,402
Gain from debt extinguishment	(19,676)		—
Change in fair value of warrant liabilities	(251)		(1,409)
Loss before income tax	$	(13,839)	$	(34,222)

Schedule of Revenues Disaggregated by Geographic Region

The following table summarizes revenue by geographic region (in thousands):

	Three Months Ended March 31,
	2024		2023
United States	$	81,682	$	117,199
Other countries	3,235		3,919
Total revenue	$	84,917	$	121,118

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Schedule of Total Stock-Based Compensation Expense

We recorded the following total stock-based compensation expense (in thousands):

	Three Months Ended March 31,
	2024		2023
Stock-based compensation expense	$	3,970	$	5,832

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Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2024

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Discontinued Operations

The following table presents the summarized discontinued operations condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31, 2023
Revenue	$	46,736
Operating expenses:
Cost of revenue (excluding depreciation and amortization)	37,449
Salaries and benefits	10,547
Selling, general, and administrative	2,317
Depreciation and amortization	9,982
Total operating expenses	60,295
Operating loss	(13,559)
Other expense, net	49
Loss from discontinued operations before income taxes	(13,608)
Income tax benefit	(1,075)
Net loss from discontinued operations	$	(12,533)

The following table presents the significant non-cash items and capital expenditures for the discontinued operations with respect to the subscription business that are included in the condensed consolidated statements of cash flows (in thousands):

	Three Months Ended March 31, 2023
Depreciation and amortization	$	9,982
Stock-based compensation	$	8,290
Capital expenditures	$	496

XML

Organization and Description of Business (Details)	3 Months Ended
	Mar. 31, 2024 segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments	2

XML

Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Accrued expenses and other current liabilities	$ (52,351)		$ (59,314)
Additional paid-in capital	(850,202)		$ (843,112)
Net income (loss)	$ 10,537	$ 33,802
Revision of Prior Period, Error Correction, Adjustment
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Accrued expenses and other current liabilities		900
Additional paid-in capital		1,700
Salaries and benefits expense		300
Net income (loss)		200
Reduction of noncontrolling interest		500
Increase in accumulated deficit		200
Increase in additional paid-in-capital		$ 200

XML

Summary of Significant Accounting Policies - Schedule of Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023	Mar. 31, 2023
Current liabilities:
Accrued expenses and other current liabilities	$ 52,351	$ 59,314
Total current liabilities	77,971	86,417
Deferred tax liability	7,649	8,307
Total liabilities	360,654	436,155
Stockholders' equity:
Additional paid-in capital	850,202	843,112
Accumulated deficit	(718,199)	(707,662)
Accumulated other comprehensive loss	(271)	(181)
Total stockholders' equity attributable to System1, Inc.	131,741	135,278
Non-controlling interest	28,664	34,037
Total stockholders' equity	160,405	169,315	$ 433,959
Total liabilities and stockholders' equity	$ 521,059	$ 605,470
As Previously Reported
Current liabilities:
Accrued expenses and other current liabilities			85,727
Total current liabilities			199,354
Deferred tax liability			35,995
Total liabilities			669,119
Stockholders' equity:
Additional paid-in capital			837,093
Accumulated deficit			(479,579)
Accumulated other comprehensive loss			(479)
Total stockholders' equity attributable to System1, Inc.			357,046
Non-controlling interest			78,632
Total stockholders' equity			435,678
Total liabilities and stockholders' equity			1,104,797
Revision Adjustment
Current liabilities:
Accrued expenses and other current liabilities			890
Total current liabilities			890
Deferred tax liability			830
Total liabilities			1,720
Stockholders' equity:
Additional paid-in capital			1,652
Accumulated deficit			6,155
Accumulated other comprehensive loss			156
Total stockholders' equity attributable to System1, Inc.			7,963
Non-controlling interest			(9,683)
Total stockholders' equity			(1,720)
Total liabilities and stockholders' equity			0
As Revised
Current liabilities:
Accrued expenses and other current liabilities			86,617
Total current liabilities			200,244
Deferred tax liability			36,825
Total liabilities			670,839
Stockholders' equity:
Additional paid-in capital			838,745
Accumulated deficit			(473,424)
Accumulated other comprehensive loss			(323)
Total stockholders' equity attributable to System1, Inc.			365,009
Non-controlling interest			68,949
Total stockholders' equity			433,958
Total liabilities and stockholders' equity			1,104,797
Impact of Reclassification of Discontinued Operations
Current liabilities:
Accrued expenses and other current liabilities			(14,620)
Total current liabilities			0
Deferred tax liability			(13,318)
Total liabilities			0
Stockholders' equity:
Additional paid-in capital			0
Accumulated deficit			0
Accumulated other comprehensive loss			0
Total stockholders' equity attributable to System1, Inc.			0
Non-controlling interest			0
Total stockholders' equity			0
Total liabilities and stockholders' equity			0
As Currently Reported
Current liabilities:
Accrued expenses and other current liabilities			71,997
Total current liabilities			200,244
Deferred tax liability			23,507
Total liabilities			670,839
Stockholders' equity:
Additional paid-in capital			838,745
Accumulated deficit			(473,424)
Accumulated other comprehensive loss			(323)
Total stockholders' equity attributable to System1, Inc.			365,009
Non-controlling interest			68,949
Total stockholders' equity			433,958
Total liabilities and stockholders' equity			$ 1,104,797

XML

Summary of Significant Accounting Policies - Schedule of Consolidated Statements of Operations (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Salaries and benefits	$ 24,483	$ 28,147
Total operating expenses	110,713	145,347
Operating loss	(25,796)	(24,229)
Interest expense, net	7,970	11,402
Total other (income) expense, net	(11,957)	9,993
Loss before income tax	(13,839)	(34,222)
Income tax benefit	(48)	(3,829)
Net loss from continuing operations	(13,791)	(30,393)
Net loss from discontinued operations, net of tax	0	(12,533)
Net loss	(13,791)	(42,926)
Less: Net loss from continuing operations attributable to non-controlling interest	(3,254)	(6,757)
Less: Net loss from discontinued operations attributable to non-controlling interest	0	(2,367)
Net loss attributable to System1, Inc.	(10,537)	(33,802)
Net loss from continuing operations	(10,537)	(23,636)
Net loss from discontinued operations	$ 0	$ (10,166)
Basic net loss per share, continuing operations (in dollars per share)	$ (0.16)	$ (0.25)
Diluted net loss per share, continuing operations (in dollars per share)	(0.16)	(0.25)
Basic net loss per share, discontinued operations (in dollars per share)	0	(0.11)
Diluted net loss per share, discontinued operations (in dollars per share)	0	(0.11)
Basic net loss per share (in dollars per share)	(0.16)	(0.36)
Diluted net loss per share (in dollars per share)	$ (0.16)	$ (0.36)
Weighted average number of shares outstanding - basic (in shares)	67,781	92,771
Weighted average number of shares outstanding - diluted (in shares)	67,781	92,771
As Previously Reported
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Salaries and benefits		$ 38,398
Total operating expenses		205,346
Operating loss		(37,492)
Interest expense, net		11,451
Total other (income) expense, net		10,042
Loss before income tax		(47,534)
Income tax benefit		(4,408)
Net loss from continuing operations		(43,126)
Net loss from discontinued operations, net of tax		0
Net loss		(43,126)
Less: Net loss from continuing operations attributable to non-controlling interest		(9,174)
Less: Net loss from discontinued operations attributable to non-controlling interest		0
Net loss attributable to System1, Inc.		(33,952)
Net loss from continuing operations		(33,952)
Net loss from discontinued operations		$ 0
Basic net loss per share, continuing operations (in dollars per share)		$ (0.37)
Diluted net loss per share, continuing operations (in dollars per share)		(0.37)
Basic net loss per share, discontinued operations (in dollars per share)		0
Diluted net loss per share, discontinued operations (in dollars per share)		0
Basic net loss per share (in dollars per share)		(0.37)
Diluted net loss per share (in dollars per share)		$ (0.37)
Weighted average number of shares outstanding - basic (in shares)		92,460
Weighted average number of shares outstanding - diluted (in shares)		92,460
Revision Adjustment
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Salaries and benefits		$ 296
Total operating expenses		296
Operating loss		(296)
Interest expense, net		0
Total other (income) expense, net		0
Loss before income tax		(296)
Income tax benefit		(496)
Net loss from continuing operations		200
Net loss from discontinued operations, net of tax		0
Net loss		200
Less: Net loss from continuing operations attributable to non-controlling interest		50
Less: Net loss from discontinued operations attributable to non-controlling interest		0
Net loss attributable to System1, Inc.		150
Net loss from continuing operations		150
Net loss from discontinued operations		$ 0
Basic net loss per share, continuing operations (in dollars per share)		$ 0.01
Diluted net loss per share, continuing operations (in dollars per share)		0.01
Basic net loss per share, discontinued operations (in dollars per share)		0
Diluted net loss per share, discontinued operations (in dollars per share)		0
Basic net loss per share (in dollars per share)		0.01
Diluted net loss per share (in dollars per share)		$ 0.01
Weighted average number of shares outstanding - basic (in shares)		311
Weighted average number of shares outstanding - diluted (in shares)		311
As Revised
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Salaries and benefits		$ 38,694
Total operating expenses		205,642
Operating loss		(37,788)
Interest expense, net		11,451
Total other (income) expense, net		10,042
Loss before income tax		(47,830)
Income tax benefit		(4,904)
Net loss from continuing operations		(42,926)
Net loss from discontinued operations, net of tax		0
Net loss		(42,926)
Less: Net loss from continuing operations attributable to non-controlling interest		(9,124)
Less: Net loss from discontinued operations attributable to non-controlling interest		0
Net loss attributable to System1, Inc.		(33,802)
Net loss from continuing operations		(33,802)
Net loss from discontinued operations		$ 0
Basic net loss per share, continuing operations (in dollars per share)		$ (0.36)
Diluted net loss per share, continuing operations (in dollars per share)		(0.36)
Basic net loss per share, discontinued operations (in dollars per share)		0
Diluted net loss per share, discontinued operations (in dollars per share)		0
Basic net loss per share (in dollars per share)		(0.36)
Diluted net loss per share (in dollars per share)		$ (0.36)
Weighted average number of shares outstanding - basic (in shares)		92,771
Weighted average number of shares outstanding - diluted (in shares)		92,771
Impact of Reclassification of Discontinued Operations
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Salaries and benefits		$ (10,547)
Total operating expenses		(60,295)
Operating loss		13,559
Interest expense, net		(49)
Total other (income) expense, net		(49)
Loss before income tax		13,608
Income tax benefit		1,075
Net loss from continuing operations		12,533
Net loss from discontinued operations, net of tax		(12,533)
Net loss		0
Less: Net loss from continuing operations attributable to non-controlling interest		2,367
Less: Net loss from discontinued operations attributable to non-controlling interest		(2,367)
Net loss attributable to System1, Inc.		0
Net loss from continuing operations		10,166
Net loss from discontinued operations		$ (10,166)
Basic net loss per share, continuing operations (in dollars per share)		$ 0.11
Diluted net loss per share, continuing operations (in dollars per share)		0.11
Basic net loss per share, discontinued operations (in dollars per share)		(0.11)
Diluted net loss per share, discontinued operations (in dollars per share)		(0.11)
Basic net loss per share (in dollars per share)		0
Diluted net loss per share (in dollars per share)		$ 0

XML

Summary of Significant Accounting Policies - Schedule of Consolidated Statements of Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Net loss	$ (13,791)	$ (42,926)
Foreign currency translation income (loss)	(135)	(109)
Comprehensive loss	(13,926)	(43,035)
Comprehensive loss attributable to non-controlling interest	(3,299)	(9,170)
Comprehensive loss attributable to System1, Inc.	$ (10,627)	(33,865)
As Previously Reported
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Net loss		(43,126)
Foreign currency translation income (loss)		(108)
Comprehensive loss		(43,234)
Comprehensive loss attributable to non-controlling interest		(9,220)
Comprehensive loss attributable to System1, Inc.		(34,014)
Revision Adjustment
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Net loss		200
Foreign currency translation income (loss)
Comprehensive loss		200
Comprehensive loss attributable to non-controlling interest		50
Comprehensive loss attributable to System1, Inc.		150
As Revised
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Net loss		(42,926)
Foreign currency translation income (loss)		(108)
Comprehensive loss		(43,034)
Comprehensive loss attributable to non-controlling interest		(9,170)
Comprehensive loss attributable to System1, Inc.		$ (33,864)

XML

Summary of Significant Accounting Policies - Schedule of Consolidated Statements of Changes in Stockholders' Equity (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2022
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	$ 169,315
Net loss	(13,791)	$ (42,926)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	(991)
Issuance of common stock in connection with settlement of incentive plan	1,707
Conversion of Class C shares to Class A shares	0
Increase in tax receivable agreement liability	(110)
Other comprehensive income (loss)	(135)
Stock-based compensation	4,405
Ending balance	160,405	433,959
Additional Paid-In-Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	843,112
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	178
Issuance of common stock in connection with settlement of incentive plan	2,464
Conversion of Class C shares to Class A shares	241
Increase in tax receivable agreement liability	(110)
Stock-based compensation	4,317
Ending balance	850,202	838,745
Accumulated Deficit
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	(707,662)
Net loss	(10,537)
Ending balance	(718,199)	(473,424)
Accumulated Other Comprehensive Income
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	(181)
Other comprehensive income (loss)	(90)
Ending balance	(271)	(322)
Non-Controlling Interest
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	34,037
Net loss	(3,254)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes	(1,169)
Issuance of common stock in connection with settlement of incentive plan	(757)
Conversion of Class C shares to Class A shares	(241)
Other comprehensive income (loss)	(45)
Stock-based compensation	88
Ending balance	$ 28,664	$ 68,949
Class A Common Stock | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance (in shares)	65,855
Beginning balance	$ 7
Issuance of restricted stock, net of forfeitures and shares withheld for taxes (in shares)	1,498
Issuance of common stock in connection with the acquisition of business (in shares)	970
Conversion of Class C shares to Class A shares (in shares)	309
Ending balance (in shares)	68,632	93,147
Ending balance	$ 7	$ 9
Class C Common Stock | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance (in shares)	21,513
Beginning balance	$ 2
Conversion of Class C shares to Class A shares (in shares)	(309)
Ending balance (in shares)	21,204	21,513
Ending balance	$ 2	$ 2
As Previously Reported
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance		470,671
Net loss		(43,126)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes		(1,730)
Issuance of common stock in connection with settlement of incentive plan		1,659
Conversion of Class C shares to Class A shares		0
Increase in tax receivable agreement liability		(441)
Other comprehensive income (loss)		(109)
Stock-based compensation		6,963
Ending balance		433,561	$ 470,671
Accounting Standards Update [Extensible Enumeration]			Accounting Standards Update 2016-13 [Member]
As Previously Reported | Cumulative Effect, Period of Adoption, Adjustment
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance		(326)
Ending balance			$ (326)
As Previously Reported | Additional Paid-In-Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance		831,566
Issuance of restricted stock, net of forfeitures and shares withheld for taxes		(1,730)
Issuance of common stock in connection with settlement of incentive plan		1,659
Conversion of Class C shares to Class A shares		955
Increase in tax receivable agreement liability		(441)
Stock-based compensation		6,963
Ending balance		838,972	831,566
As Previously Reported | Accumulated Deficit
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance		(439,296)
Net loss		(33,952)
Ending balance		(473,574)	(439,296)
As Previously Reported | Accumulated Deficit | Cumulative Effect, Period of Adoption, Adjustment
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance		(326)
Ending balance			(326)
As Previously Reported | Accumulated Other Comprehensive Income
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance		(260)
Other comprehensive income (loss)		(62)
Ending balance		(322)	(260)
As Previously Reported | Non-Controlling Interest
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance		78,650
Net loss		(9,174)
Conversion of Class C shares to Class A shares		(955)
Other comprehensive income (loss)		(47)
Ending balance		$ 68,474	$ 78,650
As Previously Reported | Class A Common Stock | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance (in shares)		91,674
Beginning balance		$ 9
Issuance of restricted stock, net of forfeitures and shares withheld for taxes (in shares)		832
Issuance of common stock in connection with the acquisition of business (in shares)		407
Conversion of Class C shares to Class A shares (in shares)		234
Ending balance (in shares)		93,147	91,674
Ending balance		$ 9	$ 9
As Previously Reported | Class C Common Stock | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance (in shares)		21,747
Beginning balance		$ 2
Conversion of Class C shares to Class A shares (in shares)		(234)
Ending balance (in shares)		21,513	21,747
Ending balance		$ 2	$ 2
Revision Adjustment
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss		200
Issuance of restricted stock, net of forfeitures and shares withheld for taxes		0
Issuance of common stock in connection with settlement of incentive plan		0
Conversion of Class C shares to Class A shares		0
Other comprehensive income (loss)		0
Stock-based compensation		198
Ending balance		398
Revision Adjustment | Additional Paid-In-Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of restricted stock, net of forfeitures and shares withheld for taxes		281
Issuance of common stock in connection with settlement of incentive plan		160
Conversion of Class C shares to Class A shares		92
Stock-based compensation		(760)
Ending balance		(227)
Revision Adjustment | Accumulated Deficit
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss		150
Ending balance		150
Revision Adjustment | Accumulated Other Comprehensive Income
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Other comprehensive income (loss)		0
Ending balance		0
Revision Adjustment | Non-Controlling Interest
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss		50
Issuance of restricted stock, net of forfeitures and shares withheld for taxes		(281)
Issuance of common stock in connection with settlement of incentive plan		(160)
Conversion of Class C shares to Class A shares		(92)
Stock-based compensation		958
Ending balance		$ 475
Revision Adjustment | Class A Common Stock | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Ending balance (in shares)		0
Ending balance		$ 0
Revision Adjustment | Class C Common Stock | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Ending balance (in shares)		0
Ending balance		$ 0
As Revised
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss		(42,926)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes		(1,730)
Issuance of common stock in connection with settlement of incentive plan		1,659
Conversion of Class C shares to Class A shares		0
Increase in tax receivable agreement liability		(441)
Other comprehensive income (loss)		(109)
Stock-based compensation		7,161
Ending balance		433,959
As Revised | Cumulative Effect, Period of Adoption, Adjustment
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance		(326)
Ending balance			(326)
As Revised | Additional Paid-In-Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of restricted stock, net of forfeitures and shares withheld for taxes		(1,449)
Issuance of common stock in connection with settlement of incentive plan		1,819
Conversion of Class C shares to Class A shares		1,047
Increase in tax receivable agreement liability		(441)
Stock-based compensation		6,203
Ending balance		838,745
As Revised | Accumulated Deficit
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss		(33,802)
Ending balance		(473,424)
As Revised | Accumulated Deficit | Cumulative Effect, Period of Adoption, Adjustment
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance		(326)
Ending balance			$ (326)
As Revised | Accumulated Other Comprehensive Income
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Other comprehensive income (loss)		(62)
Ending balance		(322)
As Revised | Non-Controlling Interest
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss		(9,124)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes		(281)
Issuance of common stock in connection with settlement of incentive plan		(160)
Conversion of Class C shares to Class A shares		(1,047)
Other comprehensive income (loss)		(47)
Stock-based compensation		958
Ending balance		$ 68,949
As Revised | Class A Common Stock | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of restricted stock, net of forfeitures and shares withheld for taxes (in shares)		832
Issuance of common stock in connection with the acquisition of business (in shares)		407
Conversion of Class C shares to Class A shares (in shares)		234
Ending balance (in shares)		93,147
Ending balance		$ 9
As Revised | Class C Common Stock | Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Conversion of Class C shares to Class A shares (in shares)		(234)
Ending balance (in shares)		21,513
Ending balance		$ 2

XML

Summary of Significant Accounting Policies - Schedule of Consolidated Statements of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash Flows from Operating Activities
Net loss	$ (13,791)	$ (42,926)
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities [Abstract]
Stock-based compensation	3,970	14,122
Deferred tax benefits	(656)	(7,869)
Accrued expenses and other liabilities	(3,654)	(5,057)
Other long-term liabilities	(587)	347
Net cash used in operating activities	$ (15,987)	(5,801)
As Previously Reported
Cash Flows from Operating Activities
Net loss		(43,126)
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities [Abstract]
Stock-based compensation		13,925
Deferred tax benefits		(7,373)
Accrued expenses and other liabilities		(4,660)
Other long-term liabilities		(149)
Net cash used in operating activities		(5,801)
Revision Adjustment
Cash Flows from Operating Activities
Net loss		200
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities [Abstract]
Stock-based compensation		197
Deferred tax benefits		(496)
Accrued expenses and other liabilities		(397)
Other long-term liabilities		496
Net cash used in operating activities		$ 0

XML

Summary of Significant Accounting Policies - Capital Resources and Liquidity (Details)	3 Months Ended
	Mar. 31, 2024 contract	Mar. 31, 2023	Dec. 31, 2023 customer
Product Information [Line Items]
Number of customers | customer			2
Google
Product Information [Line Items]
Number of contract	2
Google | Revenue Benchmark | Advertising Partner Risk
Product Information [Line Items]
Concentration risk, percentage	83.00%	89.00%
Google | Accounts Receivable | Advertising Partner Risk
Product Information [Line Items]
Concentration risk, percentage	68.00%	69.00%
Microsoft
Product Information [Line Items]
Number of contract	1
Yahoo | Accounts Receivable | Advertising Partner Risk
Product Information [Line Items]
Concentration risk, percentage	5.00%	6.00%

XML

Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net - Narrative (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 82,407,000		$ 82,407,000
Goodwill impairment loss	0
Internal-use software development costs	4,200,000		$ 3,500,000
Impairment of intangible assets	0	$ 0
Computer software impairments	$ 0	$ 0
Weighted Average
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period	7 years

XML

Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 15,842	$ 13,788
Accumulated Amortization	(3,297)	(2,363)
Net Carrying Amount	12,545	11,425
Gross Carrying Amount	440,181	440,181
Accumulated Amortization	(161,845)	(143,180)
Net Carrying Amount	278,336	297,001
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	196,128	196,128
Accumulated Amortization	(106,613)	(94,354)
Net Carrying Amount	89,515	101,774
Trademarks and trade names
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	236,053	236,053
Accumulated Amortization	(50,950)	(45,050)
Net Carrying Amount	185,103	191,003
Software
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	5,100	5,100
Accumulated Amortization	(2,659)	(2,341)
Net Carrying Amount	2,441	2,759
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,900	2,900
Accumulated Amortization	(1,623)	(1,435)
Net Carrying Amount	$ 1,277	$ 1,465

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Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net - Amortization Expense for Internal-Use Software Development Costs and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense for internal-use software development	$ 934	$ 557
Amortization expense for intangible assets	$ 18,665	$ 18,665

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Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Payables and Accruals [Abstract]
Accrued revenue share	$ 17,905	$ 16,365
Accrued marketing expenses	15,073	19,737
Accrued payroll and related benefits	8,205	13,751
Accrued professional fees	2,611	1,455
Deferred revenue	1,693	1,757
Accrued tax liability	1,352	1,233
Other liabilities	5,512	5,016
Accrued expenses and other current liabilities	$ 52,351	$ 59,314

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Debt, Net - Narrative (Details) - USD ($) $ in Millions			3 Months Ended		9 Months Ended	42 Months Ended
	Jan. 17, 2024	Jan. 27, 2022	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2026	Dec. 31, 2025
Debt Instrument [Line Items]
Period of financial report distribution to lender			120 days
Additional remediate period			30 days
Revolving Credit Facility
Debt Instrument [Line Items]
Long-term line of credit		$ 50.0	$ 0.0
Debt Instrument covenant percentage		35.00%
Credit agreement, leverage ratio		5.40
Revolving Credit Facility | Secured Overnight Financing Rate (SOFR)
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate				2.50%
Revolving Credit Facility | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate Floor
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate				0.00%
Term Loan
Debt Instrument [Line Items]
Long-term debt			$ 296.3
Debt instrument,discount percentage	64.20%
Term Loan | Revolving Credit Facility
Debt Instrument [Line Items]
Principle amount	$ 63.7
Debt instrument, repurchase amount	40.9
Debt outstanding amount	301.3
Estimated gain on the repurchase	$ 19.7
Term Loan | Revolving Credit Facility | Forecast
Debt Instrument [Line Items]
Amortization quarterly payment					$ 7.5	$ 5.0
Term Loan | Secured Debt
Debt Instrument [Line Items]
Term of loan		5 years 6 months
Principle amount		$ 400.0
Proceeds from term loan		$ 376.0
Term Loan and Revolving Facility | Secured Overnight Financing Rate (SOFR)
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		4.75%

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Debt, Net - Schedule of Long-Term Debt Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Debt Instrument [Line Items]
Total Debt, net	$ 284,787	$ 349,503
Unamortized discount	11,500	14,700
Loan fees	600	800
Fair Value, Inputs, Level 2
Debt Instrument [Line Items]
Long-term debt, fair value	180,700	222,700
Term Loan | Secured Debt | Line of Credit
Debt Instrument [Line Items]
Total Debt, net	$ 284,787	$ 349,503

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Income Taxes - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Income Tax Examination [Line Items]
Income tax expense (benefit)	$ (48)	$ (3,829)
Effective income tax rate reconciliation, (percent)	0.40%	11.20%
S1 Holdco, LLC
Income Tax Examination [Line Items]
TRA payment including interest amount	$ 0	$ 0
TRA payments due	$ 900		$ 800

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Commitments and Contingencies (Details) - USD ($) $ in Millions	Mar. 31, 2024	Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
Obligated to pay, year one		$ 5.0
Obligated to pay, year two		$ 5.0
Remaining contractual obligated to be pay	$ 10.0

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Fair Value Measurement - Schedule of Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Public Warrants | Level 1 | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Public Warrants	$ 2,438	$ 2,688

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Net Loss Per Share - Basic And Diluted Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Earnings Per Share [Abstract]
Net loss from continuing operations attributable to System1, Inc., Basic (in dollars per share)	$ (0.16)	$ (0.25)
Net loss from continuing operations attributable to System1, Inc., Diluted (in dollars per share)	(0.16)	(0.25)
Net loss from discontinued operations, net of tax attributable to System1, Inc., Basic (in dollars per share)	0	(0.11)
Net loss from discontinued operations, net of tax attributable to System1, Inc., Diluted (in dollars per share)	0	(0.11)
Basic net loss per share (in dollars per share)	(0.16)	(0.36)
Diluted net loss per share (in dollars per share)	$ (0.16)	$ (0.36)
Numerator:
Net loss from continuing operations attributable to System1, Inc.	$ (10,537)	$ (23,636)
Net loss from discontinued operations, net of tax attributable to System1, Inc.	0	(10,166)
Net loss attributable to System1, Inc.	$ (10,537)	$ (33,802)
Denominator:
Weighted-average common shares outstanding used in computing basic net loss per share (in shares)	67,781	92,771
Weighted-average common shares outstanding used in computing diluted net loss per share (in shares)	67,781	92,771

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Net Loss Per Share - Narrative (Details) - shares shares in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Public Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares (in shares)	16.8	16.8

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Segment Reporting - Narrative (Details)	3 Months Ended
	Mar. 31, 2024 segment
Segment Reporting [Abstract]
Number of operating segments	2
Number of reportable segments	2

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Segment Reporting - Schedule of Segment Reporting Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Segment Reporting Information [Line Items]
Total revenue	$ 84,917	$ 121,118
Adjusted gross profit	33,381	40,056
Other cost of revenue	2,162	1,891
Salaries and benefits	24,483	28,147
Selling, general, and administrative	12,728	14,855
Depreciation and amortization	19,804	19,392
Interest expense, net	7,970	11,402
Gain from debt extinguishment	(19,676)	0
Change in fair value of warrant liabilities	(251)	(1,409)
Loss before income tax	(13,839)	(34,222)
Owned and Operated Advertising
Segment Reporting Information [Line Items]
Total revenue	69,030	106,025
Adjusted gross profit	22,462	29,839
Partner Network
Segment Reporting Information [Line Items]
Total revenue	15,887	15,093
Adjusted gross profit	$ 10,919	$ 10,217

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Segment Reporting - Schedule of Revenues Disaggregated by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	$ 84,917	$ 121,118
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	81,682	117,199
Other countries
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	$ 3,235	$ 3,919

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Stock-Based Compensation - Total Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Share-Based Payment Arrangement [Abstract]
Stock-based compensation expense	$ 3,970	$ 5,832

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Stock-Based Compensation - Narrative (Details) - CouponFollow Incentive Plan shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2024 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Cash EBITDA	$ 3.3
Recognized fixed amount	0.8
Short-term restricted cash	$ 2.8
Class A Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common stock in connection with the acquisition of business (in shares) | shares	1.0
Aggregate fair value	$ 1.7
Difference between fair value of common stock issued to settle the earnout liability and the carrying value of the earnout liability	$ 0.5

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Discontinued Operations - Narrative (Details) $ / shares in Units, £ in Millions, $ in Millions		3 Months Ended
	Aug. 30, 2022 USD ($) shares	Mar. 31, 2024 USD ($) $ / shares shares	Mar. 31, 2024 GBP (£)	Dec. 31, 2023 $ / shares shares	Nov. 30, 2023 USD ($) $ / shares shares
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Common stock outstanding (in shares) | shares		21,204,000		21,513,000
Common stock, par value (in dollars per share) | $ / shares				$ 0.0001
Class A Common Stock
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Common stock outstanding (in shares) | shares		68,632,000		65,855,000
Common stock, par value (in dollars per share) | $ / shares		$ 0.0001
Paysafe | Related Party
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Credit card processing fees		$ 1.1
Just Develop It Limited | Related Party
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Monthly payment for desk occupancy | £			£ 0.1
Just Develop It Limited | Related Party | Waiver
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Quarterly payments	$ 10.0
Just Develop It Limited | Related Party | Waiver | Class A Common Stock
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of shares in waiver agreement (in shares) | shares	50,000,000.0
2023 Award Modification | Protected Incentive Plan | Class A Common Stock
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Incentive plan for eligible recipients total	$ 100.0
Cash rewards	$ 20.0
JDIL | Discontinued Operations, Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from sale					$ 240.0
Common stock outstanding (in shares) | shares					29,100,000
JDIL | Discontinued Operations, Held-for-sale | Class A Common Stock
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Common stock, par value (in dollars per share) | $ / shares					$ 0.0001

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Discontinued Operations - Statements of Operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net loss from discontinued operations	$ 0	$ (10,166)
JDIL | Discontinued Operations, Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenue	46,736
Cost of revenue (excluding depreciation and amortization)	37,449
Salaries and benefits	10,547
Selling, general, and administrative	2,317
Depreciation and amortization	9,982
Total operating expenses	60,295
Operating loss	(13,559)
Other expense, net	49
Loss from discontinued operations before income taxes	(13,608)
Income tax benefit	(1,075)
Net loss from discontinued operations	$ (12,533)

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Discontinued Operations - Depreciation, Amortization, Capital Expenditures (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2024 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Income Loss Ongoing Equity Method Investment In Discontinued Operation After Disposal Extensible Enumeration Not Disclosed Flag	Stock-based compensation
JDIL | Discontinued Operations, Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Depreciation and amortization	$ 9,982
Stock-based compensation	8,290
Capital expenditures	$ 496