1 unchanged sentence
Index to Consolidated Financial Statements
−Removed: Reports of Independent Registered Public Accounting Firm (PCAOB ID 238 )
+Added: Reports of Independent Registered Public Accounting Firms (PCAOB ID 34 and 238 )
Consolidated Balance Sheets
Consolidated Statements of Operations
−Removed: Consolidated Statements of Comprehensive Income (Loss)
+Added: Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
−Removed: Consolidated Statements of Members’ Deficit
Consolidated Statements of Cash Flows
1 unchanged sentence
Report of Independent Registered Public Accounting Firm
−Removed: To the Board of Directors and Stockholders of System1, Inc.
+Added: To the stockholders and the Board of Directors of System1, Inc.
Opinion on the Financial Statements
−Removed: We have audited the accompanying consolidated statements of operations, comprehensive income (loss), changes in members’ deficit, and cash flows of S1 Holdco, LLC and its subsidiaries (Predecessor) (the “Company”) for the period from January 1, 2022 through January 26, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).
−Removed: In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the period from January 1, 2022 through January 26, 2022 in conformity with accounting principles generally accepted in the United States of America.
−Removed: Substantial Doubt about the Company’s Ability to Continue as a Going Concern
−Removed: The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
−Removed: As discussed in Note 1 to the consolidated financial statements, the Company has violated a covenant which resulted in the outstanding principal balances under the Company’s Term Loan and Revolving Facility with Bank of America being callable at the request of, or with the consent of, the required majority lenders and has insufficient liquidity to settle the outstanding principal balances of the Term Loan and Revolving Facility that raise substantial doubt about its ability to continue as a going concern.
−Removed: Management’s plans in regard to these matters are also described in Note 1.
−Removed: The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
+Added: We have audited the accompanying consolidated balance sheet of System1, Inc.
+Added: and subsidiaries (the "Company") as of December 31, 2024, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows, for the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).
+Added: In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
−Removed: These consolidated financial statements are the responsibility of the Company's management.
−Removed: Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.
+Added: These financial statements are the responsibility of the Company’s management.
+Added: Our responsibility is to express an opinion on the Company’s financial statements based on our audit.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
−Removed: We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America .
−Removed: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
−Removed: Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
−Removed: Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
−Removed: Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
+Added: We conducted our audit in accordance with the standards of the PCAOB.
+Added: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
+Added: The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
+Added: As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
+Added: Accordingly, we express no such opinion.
+Added: Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
+Added: Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
+Added: Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audit provides a reasonable basis for our opinion.
−Removed: /s/ PricewaterhouseCoopers LLP
−Removed: Los A ngeles, California
+Added: /s/ Deloitte & Touche LLP
+Added: Los Angeles, California
+Added: March 10, 2025
We have served as the Company’s auditor since 2024.
2 unchanged sentences
Opinion on the Financial Statements
−Removed: We have audited the accompanying consolidated balance sheets of System1, Inc.
−Removed: and its subsidiaries (Successor) (the “Company”) as of December 31, 2023 and December 31, 2022, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for the year ended December 31, 2023 and for the period from January 27, 2022 through December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).
−Removed: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2023 and for the period from January 27, 2022 through December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
+Added: We have audited the consolidated balance sheet of System1, Inc.
+Added: and its subsidiaries (the "Company") as of December 31, 2023, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”).
+Added: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management.
−Removed: Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.
+Added: Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
−Removed: We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.
+Added: We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
−Removed: The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
−Removed: As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
−Removed: Accordingly, we express no such opinion.
−Removed: Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
+Added: Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
−Removed: Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
−Removed: We believe that our audits provide a reasonable basis for our opinion.
+Added: Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
+Added: We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
1 unchanged sentence
March 15, 2024
−Removed: We have served as the Company’s auditor since 2020.
+Added: We served as the Company's auditor from 2020 to 2024.
System1, Inc.
1 unchanged sentence
Consolidated Balance Sheets
−Removed: (In thousands, except per share data)
+Added: (In thousands, except per share amounts)
December 31, 2024 December 31, 2023
4 unchanged sentences
Prepaid expenses and other current assets 3,984 6,754
−Removed: Current assets held for sale from discontinued operations — 20,292
Total current assets 134,477 202,003
6 unchanged sentences
Other non-current assets 349 524
−Removed: Assets held for sale from discontinued operations — 555,069
Total assets $ 459,129 $ 605,470
5 unchanged sentences
Debt, net 16,405 15,271
−Removed: Current liabilities held for sale from discontinued operations — 101,418
Total current liabilities 105,095 86,417
3 unchanged sentences
Deferred tax liability 6,199 8,307
−Removed: Other liabilities 929 1,661
−Removed: Liabilities held for sale from discontinued operations — 34,476
+Added: Other non-current liabilities 6,054 929
Total liabilities 374,133 436,155
13 unchanged sentences
Total liabilities and stockholders' equity $ 459,129 $ 605,470
−Removed: See notes to consolidated financial statements.
+Added: The accompanying notes are an integral part of these consolidated financial statements.
System1, Inc.
1 unchanged sentence
Consolidated Statements of Operations
−Removed: (In thousands, except for per share and per unit data)
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: (In thousands, except for per share amounts)
+Added: For the Year Ended
+Added: December 31, 2024 December 31, 2023
Revenue $ 343,925 $ 401,971
4 unchanged sentences
Depreciation and amortization 80,107 78,403
−Removed: Impairment of goodwill — 372,728 —
Total operating expenses 432,526 487,960
Operating loss ( 88,601 ) ( 85,989 )
+Added: Other expense (income):
Interest expense, net 31,562 48,745
+Added: Gain on extinguishment of debt ( 20,109 ) —
Loss on extinguishment of related-party debt — 2,004
Change in fair value of warrant liabilities ( 2,386 ) ( 5,109 )
−Removed: Total other expense 45,640 35,360 1,049
+Added: Total other expense, net 9,067 45,640
Loss before income tax ( 97,668 ) ( 131,629 )
13 unchanged sentences
Basic and diluted net loss per share:
−Removed: Continuing operations $ ( 0.94 ) $ ( 3.19 ) n/a
−Removed: Discontinued operations ( 1.54 ) ( 0.51 ) n/a
−Removed: Basic and diluted net loss per share $ ( 2.48 ) $ ( 3.70 ) n/a
−Removed: Weighted average number of shares outstanding - basic and diluted 91,454 89,310 n/a
−Removed: Basic and diluted net loss per unit n/a n/a $ ( 1.81 )
−Removed: Weighted average units outstanding - basic and diluted n/a n/a 20,488
−Removed: See notes to consolidated financial statements.
+Added: Continuing operations $ ( 1.07 ) $ ( 0.94 )
+Added: Discontinued operations — ( 1.54 )
+Added: Basic and diluted net loss per share $ ( 1.07 ) $ ( 2.48 )
+Added: Weighted average number of shares outstanding - basic and diluted 69,554 91,454
+Added: The accompanying notes are an integral part of these consolidated financial statements.
System1, Inc.
and Subsidiaries
−Removed: Consolidated Statements of Comprehensive Income (Loss)
+Added: Consolidated Statements of Comprehensive Loss
(In thousands)
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: For the Year Ended
+Added: December 31, 2024 December 31, 2023
Net loss $ ( 97,298 ) $ ( 285,585 )
−Removed: Other comprehensive income (loss)
−Removed: Foreign currency translation income (loss) 35 ( 394 ) 87
+Added: Other comprehensive (loss) income
+Added: Foreign currency translation (loss) income ( 500 ) 35
Comprehensive loss ( 97,798 ) ( 285,550 )
2 unchanged sentences
$ ( 74,935 ) $ ( 227,186 )
−Removed: See notes to consolidated financial statements.
+Added: The accompanying notes are an integral part of these consolidated financial statements.
System1, Inc.
2 unchanged sentences
(In thousands)
−Removed: Class A common stock
−Removed: Class C common stock
−Removed: Class D common stock
−Removed: Shares Amount Shares Amount Shares Amount Additional Paid-In-Capital Accumulated Deficit Accumulated Other Comprehensive Income Non-Controlling Interest Total Stockholders’
−Removed: Balance at January 26, 2022 (Predecessor) 51,750 $ 5 — $ — — $ — $ 574,003 $ ( 107,797 ) $ — $ — $ 466,211
−Removed: Effect of the Merger 29,017 3 22,077 2 1,450 — 148,359 — — 198,691 347,055
−Removed: Balance at January 27, 2022 (Successor) 80,767 8 22,077 2 1,450 — 722,362 ( 107,797 ) — 198,691 813,266
−Removed: Net loss — — — — — — — ( 330,392 ) ( 110,930 ) ( 441,322 )
−Removed: Exercise of warrants 3,969 — — — — — 34,348 — — ( 6,359 ) 27,989
−Removed: Issuance of restricted stock, net of forfeitures and shares withheld for taxes 968 — — — — — ( 2,687 ) — — 598 ( 2,089 )
−Removed: Issuance of common stock in connection with the Merger, net of offering costs, underwriting discounts and commissions 930 — — — — — 2,397 — — ( 1,736 ) 661
−Removed: Issuance of common stock in connection with the acquisition of business 2,000 — — — — — 29,234 — — ( 3,734 ) 25,500
−Removed: Issuance of market-based restricted stock units — — — — 1,450 — — — — — —
−Removed: Conversion of Class D shares to Class A shares 2,900 1 — — ( 2,900 ) — 5,414 — — ( 5,414 ) 1
−Removed: Conversion of Class C shares to Class A shares 330 — ( 330 ) — — — 2,734 — — ( 2,734 ) —
−Removed: Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — — — ( 41 ) — — — ( 41 )
−Removed: Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC — — — — — — ( 7,910 ) — 157 — ( 7,753 )
−Removed: Other comprehensive income — — — — — — — — ( 417 ) 23 ( 394 )
−Removed: Stock-based compensation — — — — — — 45,451 — — 12,020 57,471
−Removed: Distribution to members — — — — — — — — — ( 1,511 ) ( 1,511 )
−Removed: Class A common stock repurchases ( 190 ) — — — — — 264 ( 1,107 ) — ( 264 ) ( 1,107 )
−Removed: Balance at December 31, 2022 (Successor) 91,674 $ 9 21,747 $ 2 — $ — $ 831,566 $ ( 439,296 ) $ ( 260 ) $ 78,650 $ 470,671
+Added: common stock Class C
+Added: Shares Amount Shares Amount Additional Paid-In-Capital Accumulated Deficit Accumulated Other Comprehensive Income Non-Controlling Interest Total Stockholders’Equity
+Added: Balance at December 31, 2022 91,674 $ 9 21,747 $ 2 $ 831,566 $ ( 439,296 ) $ ( 260 ) $ 78,650 $ 470,671
Net loss — — — — — ( 227,221 ) ( 58,364 ) ( 285,585 )
5 unchanged sentences
Common stock cancelled in connection with disposition of business ( 29,075 ) ( 3 ) — — ( 13,570 ) ( 40,818 ) — 13,571 ( 40,820 )
−Removed: Other comprehensive income — — — — — — — — 79 ( 44 ) 35
+Added: Other comprehensive income (loss) — — — — — — 79 ( 44 ) 35
Stock-based compensation — — — — 23,072 — — 2,540 25,612
Distribution to members — — — — — — — ( 97 ) ( 97 )
−Removed: Balance at December 31, 2023 (Successor) 65,855 $ 7 21,513 $ 2 — $ — $ 843,112 $ ( 707,662 ) $ ( 181 ) $ 34,037 $ 169,315
−Removed: See notes to consolidated financial statements.
−Removed: System1, Inc.
−Removed: and Subsidiaries
−Removed: Consolidated Statements of Changes in Members’ Deficit
−Removed: (In thousands)
−Removed: Members’ Deficit Accumulated Other Comprehensive Income
−Removed: Total Members’ Deficit
−Removed: For the period January 1, 2022 to January 26, 2022 (Predecessor)
−Removed: Balance at January 1, 2022 (Predecessor) $ ( 28,829 ) $ 428 $ ( 28,401 )
+Added: Balance at December 31, 2023 65,855 $ 7 21,513 $ 2 $ 843,112 $ ( 707,662 ) $ ( 181 ) $ 34,037 $ 169,315
Net loss — — — — — ( 74,673 ) — ( 22,625 ) ( 97,298 )
−Removed: Accumulated other comprehensive income — 87 87
+Added: Issuance of common stock in connection with settlement of incentive plan 970 — — — 2,464 — — ( 757 ) 1,707
+Added: Conversion of Class C shares to Class A shares 2,809 — ( 2,809 ) — 3,291 — — ( 3,291 ) —
+Added: Tax receivable agreement liability and deferred taxes arising from LLC interest ownership exchanges and the issuance of common stock from equity incentive plans — — — — ( 4,502 ) — — — ( 4,502 )
+Added: Issuance of restricted stock, net of forfeitures and shares withheld for taxes 3,551 — — — 1,583 — — ( 2,630 ) ( 1,047 )
+Added: Issuance of restricted stock for vested replacement awards 468 — — — — — — — —
+Added: Other comprehensive income (loss) — — — — — — ( 262 ) ( 238 ) ( 500 )
Stock-based compensation — — — — 17,085 — — 263 17,348
−Removed: 23,705 — 23,705
−Removed: Balance at January 26, 2022 (Predecessor) $ ( 42,185 ) $ 515 $ ( 41,670 )
−Removed: See notes to consolidated financial statements.
+Added: Distribution to members — — — — — — — ( 27 ) ( 27 )
+Added: Balance at December 31, 2024 73,653 $ 7 18,704 $ 2 $ 863,033 $ ( 782,335 ) $ ( 443 ) $ 4,732 $ 84,996
+Added: The accompanying notes are an integral part of these consolidated financial statements.
System1, Inc.
2 unchanged sentences
(In thousands)
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: For the Year Ended
+Added: December 31, 2024 December 31, 2023
Cash Flows from Operating Activities
Net loss $ ( 97,298 ) $ ( 285,585 )
−Removed: Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
+Added: Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 80,107 105,208
1 unchanged sentence
Impairment of goodwill — 115,483
+Added: Shared-based compensation liabilities 17,949 —
Impairment of assets held for sale — 3,276
4 unchanged sentences
Deferred tax benefits ( 2,103 ) ( 22,330 )
+Added: Gain on extinguishment of debt ( 20,109 ) —
Loss on extinguishment of related-party debt — 2,004
−Removed: Other 2,042 661 ( 9 )
+Added: Other, net ( 161 ) 2,042
Changes in operating assets and liabilities
Accounts receivable ( 6,802 ) 20,857
−Removed: Prepaids and other assets 5,207 ( 3,348 ) 1,069
+Added: Prepaid expenses and other current assets 2,846 5,207
Accounts payable 903 ( 6,796 )
−Removed: Accrued expenses and other liabilities ( 19,438 ) ( 22,034 ) 57,488
+Added: Accrued expenses and other current liabilities 1,992 ( 19,438 )
Deferred revenue ( 364 ) 15,273
Long-term earnout liabilities — ( 20,000 )
−Removed: Other long-term liabilities ( 264 ) ( 18,145 ) 77
−Removed: Net cash provided by (used in) operating activities ( 24,742 ) 3,317 ( 10,603 )
+Added: Other non-current liabilities ( 1,497 ) ( 264 )
+Added: Net cash used in operating activities ( 5,255 ) ( 24,742 )
Cash Flows from Investing Activities
2 unchanged sentences
Proceeds from sale of business, net of cash sold
−Removed: Acquisition of businesses, net of cash acquired — ( 444,074 ) —
−Removed: Net cash provided by (used in) investing activities 203,179 ( 454,009 ) ( 441 )
+Added: Net cash (used in) provided by investing activities ( 6,255 ) 203,179
Cash Flows from Financing Activities
−Removed: Proceeds from Term Loan and 2022 Revolving Facility — 450,000 —
Proceeds from related-party loan, net of lender fees — 11,278
4 unchanged sentences
Repayment of 2022 Revolving Facility — ( 50,000 )
−Removed: Payments for financing costs — ( 24,845 ) —
Payment of acquisition holdback — ( 1,935 )
1 unchanged sentence
Taxes paid related to net settlement of stock awards ( 2,148 ) ( 3,063 )
−Removed: Redemptions of Class A common stock — ( 510,469 ) —
−Removed: Proceeds from Warrant exercises — 5,027 —
−Removed: Purchases of treasury stock — ( 1,122 ) —
−Removed: Cash received from the Backstop — 246,484 —
−Removed: Distributions to members ( 97 ) ( 1,511 ) —
+Added: Distributions to members, net of contributions
+Added: ( 27 ) ( 97 )
Net cash used in financing activities ( 63,961 ) ( 74,072 )
Effect of exchange rate changes in cash, cash equivalent and restricted cash ( 31 ) 10
−Removed: Net increase (decrease) in cash, cash equivalents and restricted cash 104,375 ( 478,478 ) ( 11,063 )
+Added: Net (decrease) increase in cash, cash equivalents and restricted cash ( 75,502 ) 104,375
Cash and cash equivalents and restricted cash, beginning of the period 143,450 39,075
3 unchanged sentences
Restricted cash 4,341 8,107
−Removed: Cash and restricted cash included in assets held for sale from discontinued operations — 19,058 —
Total cash, cash equivalents and restricted cash $ 67,948 $ 143,450
Supplemental cash flow information:
−Removed: Cash paid for income taxes $ 7,102 $ 8,298 $ 241
+Added: Cash (refunds) paid for income taxes $ ( 1,617 ) $ 7,102
Cash paid for interest $ 30,677 $ 42,875
Cash paid for operating lease liabilities $ 2,583 $ 2,141
−Removed: Operating lease assets obtained in exchange for operating lease liabilities $ — $ 2,064 $ 7,987
−Removed: Tenant improvements paid by lessor $ — $ 636 $ —
Stock-based compensation included in capitalized software development costs $ 1,382 $ 2,008
−Removed: Equity issuance to settle intercompany loan $ — $ — $ 941
Settlement of incentive plan through issuance of common stock $ 1,707 $ 1,658
Restructuring of holdback liability to promissory note $ — $ 5,156
−Removed: Deferred consideration for acquisition $ — $ 6,850 $ —
−Removed: See notes to consolidated financial statements.
+Added: The accompanying notes are an integral part of these consolidated financial statements.
System1, Inc.
3 unchanged sentences
System1, Inc.
−Removed: and subsidiaries (the “Company”, “we”, “our” or “us”) operates an omnichannel customer acquisition platform, delivering high-intent customers to brands, advertisers and publishers.
+Added: and subsidiaries (the "Company", "we", "our" or "us") 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 end-users, RAMP allows us to monetize such end users through our relationships with third party advertisers and advertising networks ("A dvertising Partners ") .
+Added: RAMP operates across our network of owned and operated websites and related products, allowing us to monetize user traffic that we source from various acquisition marketing channels, including Google, Meta, Outbrain, and TikTok.
RAMP also allows third party advertising platforms and publishers (" Network Partners ") , to send user traffic to, and monetize end user traffic on, our owned and operated websites or through our monetization agreements .
−Removed: RAMP operates across our network of owned and operated websites and related products, allowing us to monetize user traffic that we source from various acquisition marketing channels, including Google, Facebook, Zemanta, Taboola, and TikTok.
Our primary operations are in the United States, and we also have operations in Canada and the Netherlands.
2 unchanged sentences
We do not engage in hedging activities to mitigate our exposure to fluctuations in foreign currency exchange rates.
+Added: On June 28, 2021, we entered into a Business Combination Agreement (as amended on November 30, 2021, January 10, 2022 and January 25, 2022), ("Business Combination Agreement") by and among us, S1 Holdco, LLC ("S1 Holdco") and Total Security Limited, formerly known as Protected.net Group Limited ("Protected") .
+Added: On January 26, 2022 ("Closing Date"), we consummated the business combination ("Merger") pursuant to the Business Combination Agreement.
We, through Total Security Limited, formerly known as Protected.net Group Limited ("Protected"), also provided antivirus software solutions, offering customers a single packaged solution that provides protection and reporting to the end user.
−Removed: On September 6, 2023, we announced that we had received a non-binding indication of intent from Just Develop It Limited (“JDI”), one of our significant shareholders, which is principally owned and managed by certain members of the Protected management team ("Purchasing Parties"), related to the potential acquisition of Protected.
−Removed: Subsequently, on November 30, 2023, we completed the sale of Protected, including our antivirus and consumer privacy software solutions, pursuant to the terms of a share purchase agreement (“Share Purchase Agreement”).
−Removed: Pursuant to the Share Purchase Agreement, the Purchasing Parties acquired all of the outstanding preference and ordinary shares (“Protected Disposition”) of Protected for total consideration comprised:
−Removed: (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 the Purchasing Parties and (c) confirmation from JDI, Protected and the CEO of the Total Security business that the financial performance benchmarks related to certain contingent earnout payments (the "Protected Incentive Plan") based on the future performance of Protected’s business in an aggregate amount of up to $ 60.0 million contemplated by the Business Combination Agreement related to the Merger (see Note 3, Merger), will, as a result of the Protected Disposition, no longer be achievable.
−Removed: The results of operations of our Protected business prior to its sale are presented as net loss from discontinued operations in our consolidated statements of operations for all periods presented, and the assets and liabilities for our Protected business prior to its sale have been classified as held for sale from discontinued operations and segregated for all periods presented in the consolidated balance sheets (see Note 19, Discontinued Operations).
−Removed: We have two reportable segments:
−Removed: Owned and Operated Advertising and Partner Network ( see Note 16, Segment Reporting) .
+Added: On November 30, 2023, we completed the sale of Protected, including our antivirus and consumer privacy software solutions, pursuant to the terms of a share purchase agreement ("Share Purchase Agreement").
+Added: Pursuant to the Share Purchase Agreement, Just Develop It Limited ("JDI"), one of our significant shareholders, which is principally owned and managed by certain members of the Protected management team ("Purchasing Parties"), acquired all of the outstanding preference and ordinary shares ("Protected Disposition") of Protected for total consideration comprised:
+Added: (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 the Purchasing Parties and (c) confirmation from JDI, Protected and the Protected CEO that the financial performance benchmarks related to certain contingent earnout payments (the "Protected Incentive Plan") based on the future performance of Protected’s business in an aggregate amount of up to $ 60.0 million contemplated by the Business Combination Agreement related to the Merger, will, as a result of the Protected Disposition, no longer be achievable.
+Added: The results of operations of our Protected business prior to its sale are presented as net loss from discontinued operations in our consolidated statements of operations for all periods presented (see Note 17, Discontinued Operations).
+Added: On August 1, 2024, we undertook a corporate reorganization, the result of which was that all of the assets and business operations of the company are now held by System1 Holdings, LLC ("System1 Holdings"), a newly formed intermediate holding company of which we maintain the controlling interest and in which the non-controlling interest is owned by the holders of our Class C common stock.
+Added: Following the corporate reorganization, (a) System1 Holdings now owns 100 % of S1 Holdco, LLC ("S1 Holdco"), the previous intermediate holding company with the non-controlling interests, and 100 % of S1 Media, LLC (“S1 Media”), another new subsidiary formed in connection with the corporate reorganization, (b) S1 Media holds the assets and business operations
System1, Inc.
1 unchanged sentence
Notes to Consolidated Financial Statements
−Removed: Going Concern Considerations
−Removed: The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern.
−Removed: The going concern basis of presentation assumes that we will continue in operation one year after the date these consolidated financial statements are issued and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business.
−Removed: As of June 1, 2023, we had not delivered audited financial statements for the fiscal year ended December 31, 2022 to Bank of America as required by the covenants of the Term Loan.
−Removed: The failure to timely deliver the audited financial statements resulted in an event of default under the Term Loan and provided Bank of America the ability to immediately call the outstanding principal balances of the Term Loan and Revolving Facility of $ 430.0 million, at the request of, or with the consent of, the required majority of lenders until the time that the 2022 audited financial statements were delivered to Bank of America.
−Removed: We did not have sufficient liquidity to settle the outstanding principal balances should they be called, nor had we identified sufficient alternative sources of capital.
−Removed: As a result, this matter raised substantial doubt about our ability to continue as a going concern.
−Removed: We delivered the 2022 audited financial statements to Bank of America on June 6, 2023, resulting in the remediation of the event of default.
−Removed: Accordingly, Bank of America no longer had the ability to call the outstanding principal balances on the Term Loan and Revolving Facility.
−Removed: Starting in the third quarter of 2022 and continuing into 2023, we experienced declining cash flows and financial performance as a result of deteriorating macroeconomic conditions, resulting in reductions in both advertiser and overall consumer demand for our marketing services.
−Removed: In response to these conditions, we obtained additional financing in the second quarter of 2023 which was expected to provide us with sufficient liquidity to manage through the current business environment.
−Removed: However, subsequent to the quarter ended June 30, 2023, we experienced increased customer acquisition costs in addition to the loss of a significant Network Partner, both of which further negatively impacted our future cash forecasts and negatively impacted our forecasted compliance with the maximum leverage ratio covenant of the Term Loan (see Note 11, Debt, Net).
−Removed: Accordingly, we determined that there was substantial doubt about our ability to continue as a going concern as of June 30, 2023 and September 30, 2023.
−Removed: We had an accumulated deficit of $ 707.7 million as of December 31, 2023, a net loss of $ 285.6 million for the year ended December 31, 2023, and had cash outflows from operations of $ 24.7 million for the year ended December 31, 2023.
−Removed: On November 30, 2023, we completed the sale of Protected, which resulted in a net inflow of cash of $ 180.3 million , net of transaction expenses and after mandatory and voluntary debt payoffs (see Note 19, Discontinued Operations).
−Removed: As of December 31, 2023, we have paid off or paid down all of our outstanding notes, revolvers and loans (see Note 11, Debt, Net and Note 12, Related-Party Transactions), with the exception of the Term Loan and had unrestricted cash on hand of $ 135.3 million.
−Removed: 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 pursuant to a Dutch auction tender offer (see Note 11, Debt, Net ) .
−Removed: Following the repurchase, the outstanding principal amount of the Term Loan was $ 301.3 million .
−Removed: We have principal and interest payments due of approximately $ 5.0 million and $ 6.6 million, respectively, per quarter on our Term Loan, and as of the date of this filing, we have available capacity of $ 50.0 million under the 2022 Revolving Note, subject to maximum leverage ratio covenant (see Note 11, Debt, Net).
−Removed: In addition, we have implemented a significant reduction in headcount in both the second quarter of 2023 and in early September 2023, resulting in approximately $ 14.5 million of annualized prospective cash savings.
−Removed: As a result of the net cash inflow from the sale of Protected and an evaluation of our forecasted future cash flows from operating activities (including the impact of the headcount reductions taken in the second and third quarters of 2023), we believe that we have sufficient resources to continue as a going concern for the twelve-month period following the date these financial statements are issued.
−Removed: Accordingly, we have alleviated the substantial doubt regarding our ability to continue as a going concern that previously existed as of September 30, 2023, and we will have sufficient liquidity to meet our obligations as they become due over the next twelve months.
+Added: associated with our owned and operated products businesses, which include CouponFollow, Startpage and Mapquest, and (c) S1 Holdco holds our remaining assets and business operations associated with our digital advertising businesses, including our proprietary RAMP platform.
+Added: S1 Holdco and its subsidiaries remain obligors and guarantors under our Term Loan and 2022 Revolving Facility, and System1 Holdings and S1 Media are not parties thereto.
+Added: We have two reportable segments:
+Added: Owned and Operated Advertising and Partner Network ( see Note 14, Segment Reporting) .
Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
−Removed: We were a special purpose acquisition company originally incorporated as a Cayman Islands exempted company on February 11, 2020 under the name Trebia Acquisition Corp.
−Removed: We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.
−Removed: On January 27, 2022, we consummated a business combination ("Merger"), which resulted in the acquisition of S1 Holdco, LLC ("S1 Holdco") and Protected.
−Removed: We were deemed the accounting acquirer in the Merger, and S1 Holdco was deemed to be the predecessor entity.
−Removed: Accordingly, the historical financial statements of S1 Holdco became the historical financial statements of ours, upon the consummation of the Merger.
−Removed: As a result, the financial statements included in this report reflect (i) the historical operating results of S1 Holdco prior to the Merger ("Predecessor") and (ii) the combined results of our, including S1 Holdco and Protected following the closing of the Merger ("Successor").
−Removed: The accompanying financial statements include a Predecessor period, which was the period January 1, 2022 through January 26, 2022, concurrent with completion of the Merger and Successor periods from January 27, 2022 through December 31, 2022, and thereafter.
−Removed: As a result of the Merger, the results of operations, financial position and cash flows of the Predecessor and Successor may not be directly comparable.
−Removed: A black-line between the Successor and Predecessor periods has been placed in the consolidated financial statements and in the tables to the notes to the consolidated financial statements to highlight the lack of comparability between these two periods as the Merger resulted in a new basis of accounting for S1 Holdco.
−Removed: The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The accompanying consolidated financial statements include the accounts of System1, Inc.
−Removed: and its subsidiaries for the Successor periods, and S1 Holdco for the Predecessor period.
+Added: and its subsidiaries.
All intercompany accounts and transactions have been eliminated in the consolidation of the financial statements.
−Removed: Revision of Previously Issued Consolidated Financial Statements
−Removed: During the fourth quarter of 2023, we identified errors related to our previously issued financial statements as of and for the year ended December 31, 2022 as follows:
−Removed: Goodwill and deferred tax liabilities were understated by $ 6.4 million on the opening balance sheet as of the Merger in the first quarter of 2022 due to an error in the determining the outside basis difference in S1 Holdco.
−Removed: The goodwill recorded was subsequently impaired in the third and fourth quarters of 2022.
−Removed: The error impacted the consolidated balance sheets, consolidated statements of operations, and consolidated statement of cash flows.
−Removed: Accrued expenses and other current liabilities were understated by $ 0.8 million, additional paid-in capital was understated by $ 2.3 million and salaries and benefits expense was understated by $ 3.1 million as a result of our not accelerating expenses upon forfeiture of certain cash and equity Replacement Awards granted during the Merger that impacted the consolidated balance sheet, consolidated statements of operations, the consolidated statements of changes in stockholders' equity, and consolidated statement of cash flows.
−Removed: We did not appropriately account for changes in equity and earnings per share, specifically:
−Removed: (i) the carrying amount of non-controlling interest was not updated as changes in ownership events occurred during each reporting period,
−Removed: (ii) certain equity replacement awards granted during the Merger were not properly considered in the allocation of net income (loss) to controlling and non-controlling interest and earnings per share.
−Removed: These errors impact the consolidated balance sheets, consolidated statement of operations, consolidated statements of changes in stockholders' equity, and consolidated statement of cash flows.
−Removed: We made additional corrections for other immaterial errors.
−Removed: We adjusted for the tax impacts of the errors described above.
−Removed: We concluded that the errors were not material, either individually or in the aggregate, to our previously issued consolidated financial statements for each of the impacted periods.
−Removed: To correct the immaterial errors, we have revised our previously issued Consolidated Financial Statements as of and for the period ended December 31, 2022.
−Removed: We have revised the consolidated balance sheet, consolidated statement of operations, consolidated statement of comprehensive income (loss), consolidated statement of changes in stockholders' equity, and consolidated statement of cash flows for the period ended December 31, 2022, as well as the associated Notes to the consolidated financial statements to reflect the correction of these immaterial errors in this Annual Report on Form 10-K for the year ended December 31, 2023.
−Removed: With respect to the impact of the errors on the previously issued unaudited quarterly financial information for fiscal year 2022 and 2023, we concluded that the errors identified in each interim period were immaterial to the respective unaudited interim condensed consolidated financial statements and were consistent in nature to the revisions discussed above, with the addition of a $ 6.8 million misclassification as of June 30, 2023, between cash and cash equivalents and restricted cash – current, which understated cash and cash equivalents and overstated restricted cash.
−Removed: The restricted cash related to Protected and will be presented as Cash and restricted cash included in assets held for sale from discontinued operations in the June 30, 2024 Form 10-Q.
−Removed: As such, we have not included disclosure of the impact of the revisions and the impact of reporting Discontinued Operations related to the sale of Protected, for the 2022 or 2023 unaudited interim condensed consolidated financial statements within this Form 10-K.
−Removed: We will present the revisions of our previously issued 2023 unaudited interim condensed consolidated financial statements and associated Notes to the condensed consolidated financial statements in connection with the future filings of our 2024 interim reporting on Form 10-Q for the periods ended March 31, 2024, June 30, 2024 and September 30, 2024.
−Removed: The following table reflects the revisions and the impact of reporting Discontinued Operations related to the sale of Protected to the previously issued consolidated balance sheet as of December 31, 2022:
−Removed: December 31, 2022
−Removed: As Previously Reported Revision Adjustments As Revised Impact of Reclassification of Discontinued Operations As Currently Reported
−Removed: Accrued expenses and other current liabilities 95,447 790 (b) 96,237 ( 10,457 ) 85,780
−Removed: Total current liabilities 210,285 790 211,075 — 211,075
−Removed: Deferred tax liability 43,355 1,327 (a) (e) 44,682 ( 15,286 ) 29,396
−Removed: Total liabilities 687,668 2,117 689,785 — 689,785
−Removed: Additional paid-in capital 829,687 1,879 (b) (c) 831,566 — 831,566
−Removed: Accumulated deficit ( 445,301 ) 6,005 (b) (c) ( 439,296 ) ( 439,296 )
−Removed: Accumulated other comprehensive loss ( 417 ) 157 (e) ( 260 ) — ( 260 )
−Removed: Total stockholders' equity attributable to System1, Inc.
−Removed: 383,980 8,041 392,021 — 392,021
−Removed: Non-controlling interest 88,808 ( 10,158 ) (c) 78,650 — 78,650
−Removed: Total stockholders' equity 472,788 ( 2,117 ) 470,671 — 470,671
−Removed: Total liabilities and stockholders' equity $ 1,160,456 $ — $ 1,160,456 $ — $ 1,160,456
−Removed: The following table reflects the revisions and the impact of reporting Discontinued Operations related to the sale of Protected to the previously issued consolidated statement of operations, for the period from January 27, 2022 through December 31, 2022:
−Removed: Period from January 27, 2022 through December 31, 2022
−Removed: As Previously Reported Revision Adjustments As Revised Impact of Reclassification of Discontinued Operations As Currently Reported
−Removed: Salaries and benefits 194,976 3,074 (b) 198,050 ( 60,005 ) 138,045
−Removed: Impairment of goodwill 366,309 6,419 (a) 372,728 — 372,728
−Removed: Total operating expenses 1,282,194 9,493 1,291,687 ( 221,775 ) 1,069,912
−Removed: Operating loss ( 508,254 ) ( 9,493 ) ( 517,747 ) 60,064 ( 457,683 )
−Removed: Total other expense 35,801 — 35,801 ( 441 ) 35,360
−Removed: Loss before income tax ( 544,055 ) ( 9,493 ) ( 553,548 ) 60,505 ( 493,043 )
−Removed: Income tax benefit ( 101,976 ) ( 10,250 ) (a) (e) ( 112,226 ) 3,546 ( 108,680 )
−Removed: Net loss from continuing operations ( 442,079 ) 757 ( 441,322 ) 56,959 ( 384,363 )
−Removed: Net loss from discontinued operations, net of tax — — — ( 56,959 ) ( 56,959 )
−Removed: Net loss ( 442,079 ) 757 ( 441,322 ) — ( 441,322 )
−Removed: Net loss from continuing operations attributable to non-controlling interest ( 105,682 ) ( 5,248 ) (c) ( 110,930 ) 11,089 ( 99,841 )
−Removed: Net loss from discontinued operations attributable to non-controlling interest — — — ( 11,089 ) ( 11,089 )
−Removed: Net loss attributable to System1, Inc.
−Removed: $ ( 336,397 ) $ 6,005 $ ( 330,392 ) $ — $ ( 330,392 )
−Removed: Amounts attributable to System1, Inc.:
−Removed: Net loss from continuing operations $ ( 336,397 ) $ 6,005 (c) $ ( 330,392 ) $ 45,870 $ ( 284,522 )
−Removed: Net loss from discontinued operations — — ( 45,870 ) ( 45,870 )
−Removed: Net loss attributable to System1, Inc.
−Removed: $ ( 336,397 ) $ 6,005 $ ( 330,392 ) $ — $ ( 330,392 )
−Removed: Basic and diluted net loss per share:
−Removed: Continuing operations $ ( 3.77 ) $ 0.07 (c) $ ( 3.70 ) $ ( 0.51 ) $ ( 3.19 )
−Removed: Discontinued operations — — — ( 0.51 ) ( 0.51 )
−Removed: Basic and diluted net loss per share $ ( 3.77 ) $ 0.07 $ ( 3.70 ) $ — $ ( 3.70 )
−Removed: Weighted average number of shares outstanding - basic and diluted 89,251 59 (c) 89,310 89,310
−Removed: The following table reflects the revisions related to the sale of Protected to the previously issued consolidated statement of comprehensive loss for the period from January 27, 2022 through December 31, 2022:
−Removed: Period from January 27, 2022 through December 31, 2022
−Removed: As Previously Reported Revision Adjustments As Revised and Currently Reported
−Removed: Net loss $ ( 442,079 ) $ 757 (a) (b) (e) $ ( 441,322 )
−Removed: Other comprehensive income (loss)
−Removed: Foreign currency translation income (loss) ( 394 ) — ( 394 )
−Removed: Comprehensive loss ( 442,473 ) 757 ( 441,716 )
−Removed: Comprehensive loss attributable to non-controlling interest ( 105,682 ) ( 5,248 ) (c) ( 110,930 )
−Removed: Comprehensive loss attributable to System1, Inc.
−Removed: $ ( 336,791 ) $ 6,005 $ ( 330,786 )
−Removed: The following tables reflects the revisions to the previously issued consolidated statement of changes in stockholders' equity for the period from January 27, 2022 through December 31, 2022.
−Removed: Although the impact is pervasive throughout the consolidated statement of changes in stockholders' equity as a result of the errors described above, the most significant impact is an additional net loss of $ 0.8 million, a reduction of non-controlling interest of $ 10.2 million, an increase in accumulated deficit of $ 6.0 million and an increase in additional paid-in-capital of $ 1.9 million
−Removed: Class A Common Stock
−Removed: Class C Common Stock
−Removed: Class D Common Stock
−Removed: Amount Shares
−Removed: Amount Shares
−Removed: Amount Additional Paid-In-Capital
−Removed: Accumulated Deficit
−Removed: Accumulated Other Comprehensive Income
−Removed: Non-Controlling Interest
−Removed: Total Stockholders’
−Removed: As Previously Reported
−Removed: Balance at January 27, 2022 80,767 $ 8 22,077 $ 2 1,450 $ — $ 722,362 $ ( 107,797 ) $ — $ 198,691 $ 813,266
−Removed: Net loss — — — — — — — ( 336,397 ) — ( 105,682 ) ( 442,079 )
−Removed: Exercise of warrants 3,969 — — — — — 27,989 — — — 27,989
−Removed: Issuance of restricted stock, net of forfeitures and shares withheld for taxes 968 — — — — — ( 2,089 ) — — — ( 2,089 )
−Removed: Issuance of common stock in connection with the Merger, net of offering costs, underwriting discounts and commissions 930 — — — — — 661 — — — 661
−Removed: Issuance of common stock in connection with the acquisition of business 2,000 — — — — — 25,500 — — — 25,500
−Removed: Issuance of market-based restricted stock units — — — — 1,450 — — — — — —
−Removed: Conversion of Class D shares to Class A shares 2,900 1 — — ( 2,900 ) — — — — — 1
−Removed: Conversion of Class C shares to Class A shares 330 — ( 330 ) — — — 2,714 — — ( 2,714 ) —
−Removed: Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — — — ( 41 ) — — — ( 41 )
−Removed: Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC — — — — — — ( 2,596 ) — — — ( 2,596 )
−Removed: Other comprehensive income — — — — — — — — ( 417 ) 24 ( 393 )
−Removed: Stock-based compensation — — — — — — 55,187 — — — 55,187
−Removed: Distribution to members — — — — — — — — — ( 1,511 ) ( 1,511 )
−Removed: Class A common stock repurchases ( 190 ) — — — — — — ( 1,107 ) — — ( 1,107 )
−Removed: Balance at December 31, 2022 91,674 $ 9 21,747 $ 2 — $ — $ 829,687 $ ( 445,301 ) $ ( 417 ) $ 88,808 $ 472,788
−Removed: Revision Adjustments
−Removed: Net loss — — — — — — — 6,005 — ( 5,248 ) 757 (a) (b) (c) (e)
−Removed: Exercise of warrants — — — — — — 6,359 — — ( 6,359 ) — (c)
−Removed: Issuance of restricted stock, net of forfeitures and shares withheld for taxes — — — — — — ( 598 ) — — 598 — (b) (c)
−Removed: Issuance of common stock in connection with the Merger, net of offering costs, underwriting discounts and commissions — — — — — — 1,736 — — ( 1,736 ) — (c)
−Removed: Issuance of common stock in connection with the acquisition of business — — — — — — 3,734 — — ( 3,734 ) — (c)
−Removed: Conversion of Class D shares to Class A shares — — — — — — 5,414 — — ( 5,414 ) — (c)
−Removed: Conversion of Class C shares to Class A shares — — — — — — 20 — — ( 20 ) — (c)
−Removed: Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC — — — — — — ( 5,314 ) — 157 — ( 5,157 ) (e)
−Removed: Other comprehensive income — — — — — — — — ( 1 ) ( 1 ) (e)
−Removed: Stock-based compensation — — — — — — ( 9,736 ) — — 12,020 2,284 (b) (c)
−Removed: Class A common stock repurchases — — — — — — 264 — — ( 264 ) — (c)
−Removed: Balance at December 31, 2022 — $ — — $ — — $ — $ 1,879 $ 6,005 $ 157 $ ( 10,158 ) $ ( 2,117 )
−Removed: Net loss — — — — — — — ( 330,392 ) — ( 110,930 ) ( 441,322 )
−Removed: Exercise of warrants 3,969 — — — — — 34,348 — — ( 6,359 ) 27,989
−Removed: Issuance of restricted stock, net of forfeitures and shares withheld for taxes 968 — — — — — ( 2,687 ) — — 598 ( 2,089 )
−Removed: Issuance of common stock in connection with the Merger, net of offering costs, underwriting discounts and commissions 930 — — — — — 2,397 — — ( 1,736 ) 661
−Removed: Issuance of common stock in connection with the acquisition of business 2,000 — — — — — 29,234 — — ( 3,734 ) 25,500
−Removed: Issuance of market-based restricted stock units — — — — 1,450 — — — — — —
−Removed: Conversion of Class D shares to Class A shares 2,900 1 — — ( 2,900 ) — 5,414 — — ( 5,414 ) 1
−Removed: Conversion of Class C shares to Class A shares 330 — ( 330 ) — — — 2,734 — — ( 2,734 ) —
−Removed: Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — — — ( 41 ) — — — ( 41 )
−Removed: Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC — — — — — — ( 7,910 ) — 157 — ( 7,753 )
−Removed: Other comprehensive income — — — — — — — — ( 417 ) 23 ( 394 )
−Removed: Stock-based compensation — — — — — — 45,451 — — 12,020 57,471
−Removed: Distribution to members — — — — — — — — — ( 1,511 ) ( 1,511 )
−Removed: Class A common stock repurchases ( 190 ) — — — — — 264 ( 1,107 ) — ( 264 ) ( 1,107 )
−Removed: Balance at December 31, 2022 91,674 $ 9 21,747 $ 2 — $ — $ 831,566 $ ( 439,296 ) $ ( 260 ) $ 78,650 $ 470,671
−Removed: The following table reflects the revisions to the previously issued consolidated statement of cash flows for the period from January 27, 2022 through December 31, 2022:
−Removed: Period from January 27, 2022 through December 31, 2022
−Removed: As Previously Reported Revision Adjustments As Currently Reported
−Removed: Cash Flows from Operating Activities
−Removed: Net loss $ ( 442,079 ) $ 757 (a) (b) (e) $ ( 441,322 )
−Removed: Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
−Removed: Stock-based compensation 106,943 1,380 (b) (d) 108,323
−Removed: Impairment of goodwill 366,309 6,419 (a) 372,728
−Removed: Deferred tax benefits ( 107,798 ) ( 10,250 ) (a) (e) ( 118,048 )
−Removed: Changes in operating assets and liabilities
−Removed: Accrued expenses and other liabilities ( 13,478 ) ( 8,556 ) (b) (d) ( 22,034 )
−Removed: Other long-term liabilities ( 28,395 ) 10,250 (a) (e) ( 18,145 )
−Removed: Net cash provided by (used in) operating activities $ 3,317 $ — $ 3,317
−Removed: Risks and Concentrations
+Added: The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP").
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.
−Removed: Concentrations
−Removed: The following table illustrates the concentration as a percentage of total revenue for our key Advertising Partners:
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
−Removed: Google 85 % 86 % 88 %
−Removed: As of December 31, 2023 (Successor), we had (i) two paid search advertising partnership agreements with Google, and (ii) one paid search advertising partnership agreement with Microsoft.
−Removed: The Google agreements are in effect through February 28, 2025, and March 31, 2024, respectively.
−Removed: The agreement with Microsoft (our next largest Advertising Partner by revenue) is in effect through June 30, 2025.
−Removed: Under certain circumstances, each of these agreements may be terminated by either us or the respective Advertising Partner immediately, or with minimal notice.
−Removed: Accounts receivable are primarily derived from Advertising Partners located within the United States.
−Removed: As of December 31, 2023 (Successor), Google and Yahoo, represented 69 % and 6 %, respectively, of our accounts receivables balance.
−Removed: As of December 31, 2022 (Successor), these two Advertising Partners represented 68 % and 11 %, respectively, of our accounts receivables balance.
+Added: W e recorded revenue of $ 6.6 million from an Advertising Partner and an estimated contra revenue liability of $ 5.8 million for the year ended December 31, 2024 , due to certain Network Partners related to traffic sent to our platform by those Network Partners that generated search advertising revenue.
+Added: We have currently withheld payment to the impacted Network Partners pending our comprehensive ongoing review of whether such traffic generating the search advertising revenue was valid or otherwise complied with the terms of our commercial arrangements with such Network P artners.
+Added: For any traffic determined to be either invalid or not in compliance with such commercial arrangements, the corresponding amounts may be withheld from our Network Partners as a result of such violations and, in such cases, would be recognized as revenue in the period in which such final determinations are made.
Use of Estimates
2 unchanged sentences
Actual results could differ from those estimates.
−Removed: Significant estimates and assumptions reflected in these 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.
+Added: Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, valuation of goodwill, intangible assets and long-lived assets, valuation and recognition of stock-based compensation awards and income taxes.
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.
1 unchanged sentence
Cash and cash equivalents consist of amounts held as bank deposits.
−Removed: Cash is deposited with high-credit-quality financial institutions and, at times, such balances with any one financial institution may exceed the insurance limits of the prevailing regulatory body.
+Added: Cash is deposited with high-credit-quality financial institutions and, at times, such balances with any one financial institution may exceed the insurance
+Added: limits of the prevailing regulatory body.
Historically, we have not experienced any losses related to these cash balances and we believe that there is minimal risk of expected future losses.
However, there can be no assurance that there will not be losses on these deposits.
+Added: Restricted Cash
+Added: Restricted cash as of December 31, 2024 and December 31, 2023 primarily related to;
+Added: (i) cash collateralized letter of credit we maintain in connection with our corporate office lease, (ii) escrow account related to unvested equity awards as of the closing of the Merger that will be cash settled and (iii) escrow account related to the postcombination compensation arrangement related to the CouponFollow acquisition.
Accounts Receivable, Net
2 unchanged sentences
The payment term for our accounts receivable is typically 30 days.
−Removed: Foreign Currency
−Removed: The functional currency of our wholly-owned subsidiaries is the currency of the primary economic environment in which they operate.
−Removed: Assets and liabilities are translated into U.S.
−Removed: dollars using exchange rates prevailing at the balance sheet date, while revenue and expenses are translated at average exchange rates during the year.
−Removed: Gains and losses resulting from the translation of our consolidated balance sheets are recorded as a component of accumulated other comprehensive (loss) income.
−Removed: Foreign currency transaction gains and losses are recorded in other income (expense), net on our consolidated statement of operations.
−Removed: Warrant Liability
−Removed: We account for the Public Warrants and Private Placement Warrants (collectively “Warrants”), as liabilities measured at fair value each balance sheet date, with changes in fair value recorded in Change in fair value of warrant liabilities in the consolidated statements of operations.
−Removed: Refer to Note 13, Warrants and Note 14, Fair Value Measurement.
−Removed: Fair Value of Financial Instruments
−Removed: Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
−Removed: We measure fair value based on a three-level hierarchy of inputs, maximizing the use of observable inputs, where available, and minimizing the use of unobservable inputs when measuring fair value.
−Removed: A financial instrument’s level within the three-level hierarchy is based on the lowest level of input that is significant to the fair value measurement.
−Removed: The three-level hierarchy of inputs is as follows:
−Removed: Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
−Removed: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;
−Removed: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
−Removed: These inputs are based on our own assumptions about current market conditions and require significant management judgment or estimation.
−Removed: Financial instruments consist of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, and warrant liabilities.
−Removed: Cash equivalents and restricted cash are stated at fair value on a recurring basis.
−Removed: Accounts receivable, accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.
−Removed: As of December 31, 2023 and 2022 (Successor), our outstanding debt included a Term Loan, for which fair value was estimated using an observable market quotation (Level 2).
−Removed: Our liabilities measured at fair value relate to the Public Warrant liabilities (Level 1), Private Placement Warrant liabilities (Level 2), the former CEO of S1 Holdco's equity profits interest liability (Level 3) and contingent consideration (Level 3).
−Removed: Certain assets, including goodwill, intangible assets, assets held for sale and other long-lived assets, are also subject to measurement at fair value on a nonrecurring basis if they are deemed to be impaired as a result of an impairment review.
−Removed: We determine the fair value by applying Level 3 unobservable inputs.
−Removed: Restricted Cash
−Removed: Our restricted cash as of December 31, 2023 (Successor) and December 31, 2022 (Successor) primarily related to;
−Removed: (i) cash collateralized letter of credit we maintain in connection with our corporate office lease, (ii) escrow account related to unvested equity awards as of the closing of the Merger that will be cash settled, (iii) escrow account related to the indemnification of obligations related to the RoadWarrior acquisition and (iv) escrow account related to the postcombination compensation arrangement related to the CouponFollow acquisition.
Property and Equipment, Net
7 unchanged sentences
Furniture, fixtures and equipment
−Removed: Leasehold improvements Shorter of the remaining lease term or estimated useful life for leasehold improvements.
+Added: Leasehold improvements
+Added: Shorter of the remaining lease term or estimated useful life for leasehold improvements.
Internal-Use Software Development Costs, Net
2 unchanged sentences
Deployment activities focus on enhancement of our customer acquisition capabilities, including website enhancements and tools for marketing support, and upgrades of dashboards and reporting tools.
−Removed: These costs are comprised of personnel costs, which include salaries, bonuses, stock-based compensation and employee benefits’ expenses for employees who are directly associated with, and who devote significant time to, software projects, as well as external direct costs of materials and services consumed in developing or obtaining the software.
+Added: These costs are comprised of personnel costs, which include salaries, bonuses, stock-based compensation and employee benefits’ expenses for employees who are directly associated with, and who devote significant time to, software projects, as well as services consumed in developing or obtaining the software.
Internal-use software development costs that do not meet the qualification for capitalization are expensed as incurred, and are recorded in salaries and benefits expense on the consolidated statement of operations.
2 unchanged sentences
Costs incurred in the planning and post-implementation stages of software development, including costs associated with the post configuration training and repairs and maintenance of the developed technologies, are expensed as incurred.
−Removed: Costs incurred in the application and infrastructure development stage, including significant enhancements and upgrades, are capitalized once the preliminary project stage is completed, management has authorized further funding for the
−Removed: completion of the project, and it is probable that the project will be completed and the software will perform as intended.
+Added: Costs incurred in the application and infrastructure development stage, including significant enhancements and upgrades, are capitalized once the preliminary project stage is completed, management has authorized further funding for the completion of the project, and it is probable that the project will be completed and the software will perform as intended.
Capitalization ends once a project is substantially complete, and the software and technologies are ready for their intended purpose(s).
Internal-use software development costs are amortized using a straight-line method over an estimated useful life of three years , commencing when the software is ready for our intended use, which approximates the period over which the expected benefits will be derived.
−Removed: We do not transfer ownership of or software or lease our software to third parties.
−Removed: Intangible Assets
−Removed: Intangible assets primarily consist of acquired technology, customer relationships and trade names/trademarks.
+Added: We do not transfer ownership of our software or lease our software to third parties.
+Added: Intangible Assets, Net
+Added: Intangible assets primarily consist of acquired technology, customer relationships and trademarks and trade names.
We determine the appropriate useful life based on management’s estimate of the applicable intangible asset’s remaining economic useful life at the time of acquisition.
13 unchanged sentences
Impairment of Long-Lived Assets
−Removed: We assess the recoverability of our long-lived assets when events or changes in circumstances indicate that their carrying value may not be recoverable.
+Added: We assess the recoverability of our long-lived assets when events or changes in circumstances indicate that their carrying amount may not be recoverable.
Such events or changes in circumstances may include a significant adverse change in the extent or manner in which a long-lived asset is being used;
4 unchanged sentences
We perform impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
−Removed: We assess recoverability of our long-lived assets by determining whether the carrying value of the asset group can be recovered through projected undiscounted cash flows over their remaining useful lives inclusive of an estimated residual value.
−Removed: If the carrying value of the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized and measured as the amount by which the carrying amount exceeds the estimated fair value.
−Removed: An impairment loss is charged to operations in the period in which management determines such impairment has occurr ed.
−Removed: Refer to Note 6, Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net.
−Removed: Assets and Liabilities Held for Sale
−Removed: We report a business as held for sale when management has received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the ensuing year and certain other specified criteria are met.
−Removed: A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less costs to sell, which is required to be remeasured each reporting period.
−Removed: If the carrying amount of the business exceeds its estimated fair value, which is based on the estimated sales price of the transaction, less costs to sell, a loss is recognized.
−Removed: Depreciation and amortization is not recorded on assets of a business classified as held for sale.
−Removed: Refer to Note 19, Discontinued Operations.
+Added: We assess recoverability of our long-lived assets by determining whether the carrying amount of the asset group can be recovered through projected undiscounted cash flows over their remaining useful lives inclusive of an estimated residual value.
+Added: If the carrying amount of the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized and measured as the amount by which the carrying amount exceeds the estimated fair value.
+Added: An impairment loss is recognized in the statement of operations in the
+Added: period in which management determines such impairment has occurr ed.
+Added: See Note 4, Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net .
+Added: We perform annual impairment testing on goodwill in the fourth quarter of each fiscal year or whenever events or changes in circumstances indicate the carrying amount of a reporting unit may exceed its fair value.
+Added: We have the option to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount;
+Added: or to perform a quantitative goodwill impairment test.
+Added: The fair values of our reporting units are determined by weighting a discounted cash flow model and a reference transaction model which include inputs developed using both internal and market-based data, or in a disposal transaction based on the best indicator of fair value which might include the proceeds to be received upon sale.
+Added: Our key assumptions in the discounted cash flow model included, but are not limited to, the weighted average cost of capital, revenue growth rates (including long-term growth rates), and operating margins.
+Added: The weighted average cost of capital reflect the increases in market interest rates.
+Added: Our reference transaction model derives indications of value based on mergers and acquisition transactions in the digital advertising industry.
+Added: Key assumptions in this model include, but are not limited to, the selection of comparable transactions, and the revenue and EBITDA multiples and EBITDA margins from those transactions.
+Added: Unanticipated events or circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results.
+Added: We completed a quantitative assessment of our Partner Network reporting unit, the only reporting unit with goodwill, and determined it is not more likely than not that the fair value of the reporting unit is less than the carrying amount for fiscal year 2024.
+Added: See Note 4, Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net .
+Added: For our discontinued operations impairments in fiscal year 2023 s ee Note 17, Discontinued Operations.
Discontinued Operations
2 unchanged sentences
Assets and liabilities related to a business classified as held for sale which also meets the criteria for discontinued operations are segregated in the consolidated balance sheets for the current and prior periods presented.
−Removed: Refer to Note 19, Discontinued Operations.
−Removed: Business Combinations
−Removed: We allocate the consideration transferred to the fair value of assets acquired and liabilities assumed based on their estimated fair values.
−Removed: The excess of the consideration transferred over the fair values of these identifiable assets and liabilities is recorded as goodwill.
−Removed: Such valuations require management to make significant estimates and assumptions, including estimating average industry multiples, customer and service attrition rate, forecasted revenue and revenue growth rates, existing customer revenue, deferred revenue, discount rates, technology migration rates, royalty rates and estimating future cash flows.
−Removed: Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
−Removed: During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.
−Removed: Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
−Removed: Transaction costs associated with business combinations are expensed as incurred and are included in selling, general and administrative expenses on our consolidated statements of operations.
−Removed: When the purchase consideration includes contingent consideration, we record the fair value of the contingent consideration as of the date of acquisition, and subsequently remeasure the contingent consideration at fair value as of each reporting date through our consolidated statements of operations.
−Removed: We perform annual impairment testing on goodwill in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below our carrying value.
−Removed: We have the option (i) to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than our carrying amount or (ii) to perform the quantitative impairment test.
−Removed: The quantitative impairment test involves comparing the estimated fair value of a reporting unit with our respective carrying amount, including goodwill.
−Removed: If the estimated fair value exceeds carrying amount, goodwill is considered not to be impaired.
−Removed: If, however, the fair value of the reporting unit is less than carrying amount, an impairment loss is recognized in an amount equal to the excess, not to exceed the carrying amount of goodwill.
−Removed: The fair values of our reporting units are computed by weighting a discounted cash flow model and a reference transaction model which included inputs developed using both internal and market-based data, or in a disposal transaction based on the best indicator of fair value which might include the proceeds to be received upon sale.
−Removed: Our key assumptions in the discounted cash flow model included, but were not limited to, the weighted average
−Removed: cost of capital, revenue growth rates (including long-term growth rates), and operating margins.
−Removed: The weighted average cost of capital reflected the increases in market interest rates.
−Removed: Our reference transaction model derives indications of value based on mergers and acquisition transactions in the digital advertising industry.
−Removed: Key assumptions in this model include, but were not limited to, the selection of comparable transactions, and the revenue and EBITDA multiples and EBITDA margins from those transactions.
−Removed: Unanticipated events or circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results.
−Removed: We completed a qualitative assessment of our Partner Network reporting unit, the only reporting unit with goodwill, and determined it is not more likely than not that the fair value of the reporting unit is less than the carrying amount for fiscal 2023 .
−Removed: Refer to Note 6, Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net, regarding impairment of goodwill in fiscal 2022 and Note 19, Discontinued Operations regarding discontinued operation impairments in fiscal 2023.
+Added: See Note 17, Discontinued Operations.
We determine if an arrangement is a lease at inception.
−Removed: Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets.
−Removed: Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our consolidated balance sheets.
+Added: Operating leases are included in operating lease right-of-use ("ROU") assets, operating lease liabilities, current and operating lease liabilities, non-current in our consolidated balance sheets.
+Added: Finance leases are included in property and equipment, other current liabilities, and other non-current liabilities in our consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
−Removed: Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
−Removed: As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.
+Added: Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.
+Added: As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date.
The operating lease ROU asset also includes any lease payments made and excludes lease incentives.
1 unchanged sentence
Lease expense for lease payments is recognized on a straight-line basis over the lease term.
+Added: Warrant Liability
+Added: We account for Public Warrants ("Warrants") as liabilities measured at fair value each balance sheet date, with changes in fair value recorded in Change in fair value of warrant liabilities in the consolidated statements of operations.
+Added: See Note 11, Warrants and Note 12, Fair Value Measurement.
+Added: Fair Value of Financial Instruments
+Added: Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
+Added: We measure fair value based on a three-level hierarchy of inputs, maximizing the use of observable inputs, where available, and minimizing the use of unobservable inputs when measuring fair value.
+Added: A financial instrument’s level within the three-level hierarchy is based on the lowest level of input that is significant to the fair value measurement.
+Added: The three-level hierarchy of inputs is as follows:
+Added: Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
+Added: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;
+Added: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
+Added: These inputs are based on our own assumptions about current market conditions and require significant management judgment or estimation.
+Added: Financial instruments consist of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, and warrant liabilities.
+Added: Cash equivalents and restricted cash are stated at fair value on a recurring basis.
+Added: Accounts receivable, accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.
+Added: As of December 31, 2024 and 2023, our outstanding debt included a Term Loan, for which fair value was estimated using an observable market quotation (Level 2).
+Added: Our liabilities measured at fair value relate to the Warrant liabilities (Level 1) and share-based liabilities (Level 3).
+Added: Certain assets, including goodwill, intangible assets and other long-lived assets, are also subject to measurement at fair value on a nonrecurring basis if they are deemed to be impaired as a result of an impairment review.
+Added: We determine the fair value by applying Level 3 unobservable inputs.
+Added: Foreign Currency
+Added: The functional currency of our wholly-owned subsidiaries is the currency of the primary economic environment in which they operate.
+Added: Assets and liabilities are translated into U.S.
+Added: dollars, our reporting currency, using exchange rates prevailing at the balance sheet date, while revenue and expenses are translated at average exchange rates during the year.
+Added: Gains and losses resulting from the translation of our consolidated balance sheets are recorded as a component of accumulated other comprehensive (loss) inco me.
+Added: Foreign currency transaction gains and losses are recorded in Total other expense, net on our consolidated statement of operations.
+Added: Non-Controlling Interest
+Added: We report a non-controlling interest representing the economic interest in System1 Holdings held by certain individuals and entities other than us.
+Added: The non-controlling interest is comprised of certain selling equity holders of System1 Holdings that retained an economic interest through their ownership of Class B units in System1 Holdings, along with the same number of corresponding shares of Class C common stock in us.
+Added: The non-controlling interest holders may, from time to time, require us to convert all or a portion of their economic interest via a redemption of their Class B units in System1 Holdings together with surrendering their corresponding shares of Class C common stock in us in exchange for shares of Class A common stock on a one -for-one basis.
+Added: Upon the redemption of Class B Units, our Board of Directors may also elect to settle the non-controlling interest holder's Class B units in cash.
+Added: We are required to maintain a one -to-one ratio of Class A common stock outstanding to our Class A units in System1 Holdings and Class C common stock to the non-controlling interest’s Class B units.
+Added: As redemptions occur or other transactions result in the issuance or retirement of a share of Class A common stock, System1 Holdings is required to issue or retire a Class A unit in System1 Holdings to maintain in parity with the corresponding number of outstanding shares of Class A common stock.
+Added: These transactions may result in a change in the total number of units outstanding in System1 Holdings and/or a change in the percentage that we own of System1 Holdings.
+Added: As a result, any change in ownership that does not result in a change of control is accounted for as an equity transaction and we adjust for the re-allocation of equity between us and our non-controlling interest.
+Added: The following table summarizes the ownership interest in System1 Holdings as of December 31, 2024, based on shares issued and outstanding.
+Added: (in thousands)
+Added: Class A units of S1 Holdings
+Added: 73,675 79.8 %
+Added: Class B units of S1 Holdings
+Added: 18,695 20.2 %
Revenue Recognition
−Removed: We recognize revenue when control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
+Added: We recognize revenue when or as control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We determine revenue recognition through the following steps;
(i) Identification of a contract with a customer, (ii) Identification of the performance obligations in the contract, (iii) Determination of the transaction price, (iv) Allocation of the transaction price to the performance obligations in the contract, and (v) Recognition of revenue when or as the performance obligations are satisfied.
−Removed: We earn revenue by directly acquiring traffic to our owned and operated websites and utilizing our RAMP platform and additional services to generate end-users for our Advertising Partners.
−Removed: For this revenue stream, we are the principal in the transaction and report revenue on a gross basis for the amounts received from Advertising Partners.
−Removed: For this revenue, we have determined that we are the principal since we have a risk of loss on the user-traffic that we are acquiring for monetization with our Advertising Partners, and, in the case of our owned and operated websites, we maintain the website, provide the content and bear the cost and risk of loss associated with the digital online inventory available on our website.
−Removed: Revenue is also earned from revenue-sharing arrangements with our Network Partners related to the use of our RAMP platform and additional services provided to them in order to direct advertising by our Advertising Partners to their digital online inventory.
−Removed: We have determined that we are the agent in these transactions and therefore report revenue on a net basis, because (a) we do not control the underlying digital online inventory, (b) we do not acquire the corresponding user-traffic and do not have risk of loss in connection therewith, and (c) the pricing is in the form of a substantively fixed-percentage revenue-sharing arrangement.
−Removed: We report the revenue generated under our revenue-sharing arrangements on a net basis, based on the difference between amounts received by us
−Removed: from our Advertising Partners, less amounts remitted to the Network Partners based on the underlying revenue-sharing agreements.
−Removed: We recognize revenue upon delivering user-traffic to our Advertising Partners based on a cost-per-click or cost-per-thousand impression basis.
+Added: Revenue recognized from performance obligations satisfied in prior periods is immaterial.
+Added: We earn revenue by directly acquiring traffic to our owned and operated websites and utilizing our RAMP platform and additional services to monetize end-users for our Advertising Partners.
+Added: For this revenue stream, we have a single performance obligation and have determined that we are the principal in the transaction.
+Added: Revenue is reported on a gross basis for the amounts received from Advertising Partners.
+Added: We are the principal since we direct the use of our owned and operated websites, and as such have risk of loss on the user-traffic that we are acquiring
+Added: for monetization with our Advertising Partners.
+Added: Additionally, we maintain the website, provide the content and bear the cost and risk of loss associated with the digital online inventory available on our website.
+Added: Revenue is also earned from revenue-sharing arrangements with our Network Partners related to the use of our RAMP platform and additional services in order to facilitate the placement of advertising by our Advertising Partners in the Network Partners digital online inventory.
+Added: For this revenue stream, we have a single performance obligation and have determined that we are the agent in these transaction.
+Added: Revenue is reported on a net basis, because our network partner runs the campaign to acquire user-traffic, including managing traffic acquisition cost.
+Added: We report the revenue generated under our revenue-sharing arrangements on a net basis, based on the difference between amounts received by us from our Advertising Partners, less amounts remitted to the Network Partners based on the underlying revenue-sharing agreements.
+Added: 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.
+Added: We recognize revenue as we deliver user-traffic to our Advertising Partners based on a cost-per-click or cost-per-thousand impression basis.
Cost of Revenue
3 unchanged sentences
Salaries and benefits expenses include salaries, bonuses, stock-based compensation and employee benefits costs.
+Added: Selling, General, and Administrative Expenses
+Added: Selling, general, and administrative expenses consist of fees for professional and subscription services, occupancy costs, travel and entertainment.
+Added: These costs are expensed as incurred.
+Added: Depreciation and Amortization
+Added: Depreciation and amortization expenses are primarily attributable to our capital investments and consist of property and equipment depreciation and amortization of intangible assets with finite lives.
Stock-Based Compensation
−Removed: Compensation cost related to stock-based payments is measured based on the fair value of the units issued and recognized in salaries and benefits expenses on our consolidated statement of operations.
−Removed: We have elected to treat stock-based payment awards with time-based service condition(s) only as a single award, with the related compensation expense recognized on a straight-line basis.
−Removed: Predecessor Period
−Removed: The assumptions used in the Black-Scholes model to value equity in the Predecessor period are based upon the following;
−Removed: (i) the fair value of S1 Holdco’s equity was determined by S1 Holdco’s Board of Directors, with input from management and contemporaneous valuation reports prepared by a third-party valuation specialist, as the equity was not publicly traded, (ii) the expected term of the award was estimated by considering the contractual term and vesting period of the award, the employees’ expected exercise behavior and the post-vesting employee turnover rate.
−Removed: For non-employees, the expected life equals the contractual term of the award, (iii) the risk-free interest rate was based on published U.S.
−Removed: Treasury Department interest rates for the expected term of the underlying award and (iv) the volatility was based on the expected unit price volatility of the underlying units over the expected term of the award which was based upon historical share price data of an index of comparable publicly traded companies.
+Added: Stock based compensation expense is recognized in salaries and benefits expenses on our consolidated statement of operations.
+Added: Restricted Stock Units
+Added: For awards granted, the fair value of the related restricted stock units is derived from the market price of our Class A common stock, which is traded on the NYSE.
+Added: As these awards are subject only to time-based service conditions, we recognize compensation expense for these awards on a straight-line basis over the requisite service period for each award, generally three years, and recognize forfeitures as they occur.
Replacement Awards
1 unchanged sentence
The fair value of the Replacement Awards was derived utilizing the transaction closing price of $ 10.00 .
−Removed: The Merger triggered a liquidating event, therefore, the portion of the Replacement Awards issued in connection with the Merger that was associated with services rendered through the date of the Merger are included in the total consideration transferred, with the exception of the unvested awards subject to service vesting conditions where the service condition has not been completed.
+Added: The Merger triggered a liquidating event, therefore, the portion of the Replacement Awards issued in connection with the Merger that was associated with services rendered through the date of the Merger was included in the total consideration transferred, with the exception of the unvested awards subject to service vesting conditions where the service condition had not been completed.
With regards to the remaining unvested portion of the Replacement Awards, we continue to recognize compensation expense on a straight-line basis over the original requisite service period and recognize forfeitures as they occur.
−Removed: For Replacement Awards forfeited prior to vesting, we recognize accelerated compensation expense for the remaining unvested shares, as a share of our common stock becomes issuable to the previous investors immediately upon forfeiture.
−Removed: For the cash portion of the Replacement Awards forfeited prior to vesting, we recognize accelerated compensation expense for the unpaid amount, as that cash amount becomes payable to the previous investors immediately upon forfeiture.
−Removed: Post-Combination Awards
−Removed: For awards granted subsequent to the Merger, our fair value of the related restricted stock units was derived from the market price of our Class A common stock, which is traded on the NYSE.
−Removed: As these awards are subject only to time-based service conditions, we recognize compensation expense for these awards on a straight-line basis over the requisite service period for each award, generally three years , and recognize forfeitures as they occur.
−Removed: Liability Awards
−Removed: In connection with the Merger and acquisition of Protected (see Note 3, Merger), we effected an incentive plan for eligible recipients, the Protected Incentive Plan, which is payable in a fixed value of fully-vested shares of our Class A common stock upon the satisfaction of certain performance and service conditions.
−Removed: The Protected Incentive Plan targets were deemed to no longer be achievable due to the sale of Protected (see Note 19, Discontinued Operations).
−Removed: In connection with the acquisition of CouponFollow (see Note 4, Acquisitions) we effected an incentive plan for eligible recipients.
−Removed: Refer to Note 18, Stock-Based Compensation.
−Removed: We recognize compensation cost for these liability awards with performance and service conditions if and when it is deemed probable that the performance condition will be achieved.
−Removed: The probability of vesting is evaluated at each reporting period taking into consideration actual results to-date and forecasts and compensation cost adjusted to reflect the completed portion of the service period with a graded vesting attribution .
−Removed: Repurchased Shares
−Removed: Repurchased shares of our common stock are retired, and the cost of the retired shares in excess of par value, including any direct and incremental costs associated with the repurchase, is recorded as a decrease in retained earnings.
−Removed: Selling, General, and Administrative Expenses
−Removed: Selling, general, and administrative expenses consist of fees for professional services, occupancy costs, travel and entertainment.
−Removed: These costs are expensed as incurred.
−Removed: Depreciation and Amortization
−Removed: Depreciation and amortization expenses are primarily attributable to our capital investments and consist of property and equipment depreciation and amortization of intangible assets with finite lives.
−Removed: We are the sole managing member of S1 Holdco and, as a result, consolidate the financial results of S1 Holdco.
−Removed: S1 Holdco is treated as a partnership for U.S.
+Added: For Replacement Awards forfeited prior to vesting, we recognize accelerated compensation expense for the remaining unvested shares and unpaid cash amount, as the shares of our common stock become issuable and the cash amount becomes payable to the previous investors immediately upon forfeiture.
+Added: Share-based Liability Awards
+Added: In connection with the acquisition of CouponFollow we effected an incentive plan for eligible recipients.
+Added: See Note 6, Accrued Expenses and Other Current Liabilities.
+Added: We recognize compensation cost for these share-based liability awards with performance and service conditions if and when it is deemed probable that the performance condition will be achieved.
+Added: The probability of vesting is evaluated at each reporting period taking into consideration actual results to-date and forecasts, and compensation cost is adjusted to reflect the completed portion of the service period with a graded vesting attribution .
+Added: Stock Appreciation Rights
+Added: We use the Black-Scholes option pricing model to estimate the grant date fair value of each Stock Appreciation Right award granted under the 2024 Stock Appreciation Rights Plan ("2024 SAR Plan").
+Added: The expected term is estimated using the simplified method, which is the midpoint between the vesting date and the contractual term.
+Added: Volatility is based on a blend of the historical volatility of our common stock and the peer-leveraged volatility.
+Added: The risk-free rate is based on the U.S.
+Added: Treasury yield curve in effect at the time of grant.
+Added: We are the sole managing member of System1 Holdings and, as a result, consolidate the financial results of System1 Holdings.
+Added: System1 Holdings is treated as a partnership for U.S.
federal and most applicable state and local income tax purposes.
−Removed: As a partnership, S1 Holdco is not subject to U.S.
+Added: As a partnership, System1 Holdings is not subject to U.S.
federal and certain state and local income taxes.
−Removed: 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.
+Added: Any taxable income or loss generated by System1 Holdings 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.
−Removed: 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 .
+Added: federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of System1 Holdings, as well as any stand-alone income or loss generated by us .
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities ("DTAs" and "DTLs", as applicable) for the expected future tax consequences of events that have been included in the financial statements.
−Removed: Under this method, we determine DTAs and DTLs on the
−Removed: basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.
+Added: Under this method, we determine DTAs and DTLs on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.
The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.
1 unchanged sentence
In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of operations.
−Removed: If we determine that we would not be able to realize our DTAs in the future in excess of their net recorded amount, we would make an adjustment to the DTA valuation allowance, which would increase the provision for income taxes.
−Removed: We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of our technical merits and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
+Added: If we determine that we would not be able to realize our
+Added: DTAs in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which would increase the provision for income taxes.
+Added: We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of our technical merits and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than fifty percent likely to be realized upon ultimate settlement with the related tax authority.
We recognize both accrued interest and penalties, when appropriate, in the provision for income taxes on the consolidated statements of operations.
−Removed: Non-Controlling Interest
−Removed: We report a non-controlling interest representing the economic interest in S1 Holdco held by certain individuals and entities other than us.
−Removed: The non-controlling interest is comprised of certain selling equity holders of S1 Holdco that retained an economic interest through their ownership of Class B units in S1 Holdco as of the closing of the Merger, along with the same number of corresponding shares of Class C common stock in us.
−Removed: The non-controlling interest holders may, from time to time, require us to convert all or a portion of their economic interest via a redemption of their Class B units in S1 Holdco together with surrendering their corresponding shares of Class C common stock in us in exchange for shares of Class A common stock on a one -for-one basis.
−Removed: Upon the redemption of Class B Units, our Board of Directors may also elect to settle the non-controlling interest holder's Class B units in cash.
−Removed: We are required to maintain a one -to-one ratio of Class A common stock outstanding to our Class A units in S1 Holdco and Class C common stock to the non-controlling interest’s Class B units.
−Removed: As redemptions occur or other transactions result in the issuance or retirement of a share of Class A common stock, S1 Holdco is required to issue or retire a Class A unit in S1 Holdco to maintain in parity with the corresponding number of outstanding shares of Class A common stock.
−Removed: These transactions may result in a change in the total number of units outstanding in S1 Holdco and/or a change in the percentage that we own of S1 Holdco.
−Removed: As a result, any change in ownership that does not result in a change of control is accounted for as an equity transaction and we adjust for the re-allocation of equity between us and our non-controlling interest.
−Removed: The following table summarizes the ownership interest in S1 Holdco as of December 31, 2023 (Successor), based on shares issued and outstanding.
−Removed: (in thousands)
−Removed: Class A units of S1 Holdco 65,855 75 %
−Removed: Class B units of S1 Holdco 21,513 25 %
−Removed: Recent Accounting Pronouncements
−Removed: On January 1, 2023, we adopted ASU No.
−Removed: 2016-13, "Financial Instruments - Credit Losses (Topic 326):
−Removed: Measurement of Credit Loss on Financial Instruments".
−Removed: Accordingly, upon adoption of this new standard, we recorded an allowance for credit losses of $ 0.3 million, with a corresponding cumulative adjustment to the beginning balance of accumulated deficit in the first quarter of fiscal 2023.
−Removed: Accounting Pronouncements Not Yet Adopted
+Added: Accounting Pronouncements Recently Adopted
In November 2023, the Financial Accounting Standards Board issued ASU No.
1 unchanged sentence
Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and interim basis.
−Removed: This guidance will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025.
−Removed: Early adoption is permitted.
−Removed: Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements.
−Removed: We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
−Removed: In December 2023, the FASB issued ASU No.
+Added: This guidance was adopted during the year ended December 31, 2024, and for interim periods beginning January 1, 2025.
+Added: The guidance was applied retrospectively to all prior periods presented in the financial statements.
+Added: The adoption of this new accounting pronouncement did not have a material impact on our consolidated financial statements, see Note 14, Segment Reporting.
+Added: Accounting Pronouncements Not Yet Adopted
+Added: In December 2023, the Financial Accounting Standards Board issued ASU No.
2023-09, Income Taxes (Topic 740):
1 unchanged sentence
It also includes certain other amendments to improve the effectiveness of income tax disclosures.
−Removed: This guidance will be effective for the annual periods beginning the year ended December 31, 2025.
+Added: This guidance will be effective for the annual periods beginning the year ending December 31, 2025.
Early adoption is permitted.
1 unchanged sentence
We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
−Removed: 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 S1 Holdco, Trebia, and Protected (collectively, “Companies”).
−Removed: On January 26, 2022 (“Closing Date”), we consummated the business combination ("Merger") pursuant to the Business Combination Agreement.
−Removed: Following the consummation of the Merger, the combined company is organized via an “Up-C” structure, in which substantially all of the assets and business operations of System1 are held by S1 Holdco.
−Removed: Until the disposition of Protected in November 2023, the combined Companies’ business continued to operate through the subsidiaries of S1 Holdco and Protected.
−Removed: Additionally, Trebia’s ordinary shares and public Warrants ceased trading on the NYSE, and System1 Inc.'s Class A common stock and the Public Warrants began trading on the NYSE on January 28, 2022 under the symbols “SST” and “SST.WS,” respectively.
−Removed: The consideration paid to the existing equity holders of S1 Holdco and Protected in connection with the Merger consisted of the following:
−Removed: • Class A common stock;
−Removed: • Class C common stock;
−Removed: • Replacement Awards.
−Removed: The aggregate cash consideration was $ 440.2 million.
−Removed: The aggregate equity consideration paid and/or retained for S1 Holdco Class B Units was $ 610.1 million, consisting of (a) the aggregate equity consideration payable under the Business Combination Agreement, consisting of shares of Class A common stock and Replacement Awards, and (b) the aggregate Class B Units in S1 Holdco retained by S1 Holdco equity holders at the Closing.
−Removed: The fair value of the Class A common stock was determined by utilizing the transaction closing price per share per the Business Combination Agreement of $ 10.00 and a discount of 10 %, as the shares were not immediately available for sale upon issuance and this restriction is viewed to be a function of the security characteristics.
−Removed: Additionally, the aggregate Class B units in S1 Holdco retained by S1 Holdco equity holders at the Closing Date resulted in a non-controlling interest.
−Removed: The 22.1 million Class B units in S1 Holdco and the corresponding Class C common stock in us were determined to have an estimated value of $ 198.7 million .
−Removed: As the Class B units in S1 Holdco together with the corresponding shares of our Class C common stock are exchangeable for shares of Class A common stock on a one -for-one basis, the fair value was determined using the same method as for the shares of
−Removed: Class A common stock, utilizing the transaction closing price of $ 10.00 and a discount of 10 % (as the units and the corresponding shares of Class C common stock were not immediately available for sale upon issuance and this restriction is viewed to be a function of the security characteristics).
−Removed: The fair value of $ 198.7 million was included in non-controlling interest on the consolidated balance sheets and consolidated statements of changes in stockholders' equity.
−Removed: In connection with the Merger, System1 and Cannae Holdings, Inc.
−Removed: (“Cannae”), an investor in the Sponsor of Trebia, entered into a backstop agreement (“Backstop Agreement”) on June 28, 2021, as amended on January 10, 2022, whereby Cannae agreed, to subscribe for up to 25.0 million shares of Trebia Class A common stock in order to fund up to $ 250.0 million of redemptions by shareholders of Trebia.
−Removed: See discussion below regarding the Amended and Restated Sponsor Agreement, which was amended in conjunction with the Backstop Agreement.
−Removed: As a result of shareholder redemptions, Cannae provided $ 246.5 million of the cash used to fund the Closing Cash Consideration pursuant to its obligations under the Backstop Agreement and in exchange received 24.6 million shares of Class A common stock ("Backstop shares").
−Removed: Additionally, pursuant to the Backstop Agreement, the Selling Shareholders (i.e., certain shareholders of S1 Holdco and Protected prior to the Merger) agreed that, in the event shareholders of Trebia requested redemption of Trebia outstanding equity immediately prior to the Merger in excess of a certain dollar value threshold, certain equity holders of S1 Holdco and Protected would reduce their cash consideration and proportionally increase their equity consideration for the Merger, which is referred to as the “Seller Backstop Election”.
−Removed: In the event that the Seller Backstop Election was made, the Sponsors would forfeit their shares to allow us to then issue shares to the Selling Shareholders.
−Removed: The Seller Backstop Election was triggered and, as a result, the Sponsors forfeited 0.9 million shares of Trebia Class B ordinary shares which were converted at time of Merger, at a one -to-one ratio, into shares of Class A common stock of System1 and delivered to the various selling shareholders of S1 Holdco (“Sponsor Promote Shares”).
−Removed: The total consideration amount, in a combination of cash and equity consideration, did not change from the amount agreed in the Business Combination Agreement due to this Seller Backstop Election.
−Removed: We recorded $ 7.7 million in Salaries and benefits expense and $ 0.7 million in S elling, general and administrative expense for Sponsor Promote Shares during the period January 27, 2022 through March 31, 2022 (Successor).
−Removed: In connection with the execution of the Business Combination Agreement and the Backstop Agreement, on June 28, 2021, as amended on January 10, 2022, the sponsors of Trebia entered into the Amended and Restated Sponsor Agreement whereby the sponsors agreed to forfeit up to 2.6 million shares of Trebia Class B common stock in order for us to then issue the shares to Cannae (“Backstop forfeiture shares”), in exchange for Cannae entering into the Backstop Agreement.
−Removed: On January 27, 2022, based upon the final backstop funding provided by Cannae, the sponsors forfeited 2.5 million shares of Trebia Class B shares, after which we then issued 2.5 million shares of Class A common stock to Cannae.
−Removed: Trebia recorded a forward purchase liability of $ 25.3 million immediately prior to the Merger, representing the fair value of the Backstop shares and the Backstop forfeiture shares.
−Removed: In accordance with the Amended and Restated Sponsor Agreement entered into concurrently with the Business Combination Agreement, we issued 1.5 million Class D shares to the Trebia sponsors in exchange for 1.5 million Trebia Class B shares ("Sponsor RSA").
−Removed: The difference in the fair value of the two was treated as a capital contribution.
−Removed: The founders of S1 Holdco and Protected were also issued 1.5 million Class D shares ("Seller RSU").
−Removed: Further, in connection with the Merger, we also effected an incentive plan for the Protected business.
−Removed: Concurrently with the consummation of the Merger, System1 entered into a tax receivable agreement with the minority holders of S1 Holdco, (“Tax Receivable Agreement” or "TRA"), pursuant to which, among other things, the parties to the Tax Receivable Agreement have agreed to the allocation and payment of 85 % of the actual savings, if any, in U.S.
−Removed: federal, state and local income tax that System1 may realize as a result of certain tax benefits (if any) related to the transactions contemplated by the Business Combination Agreement and future exchanges of Class B Units in S1 Holdco (together with the corresponding shares of our shares of Class C common stock) in exchange for shares of our Class A common stock.
−Removed: As of the Closing Date, the fair value of obligations under the TRA were determined to be zero as any tax savings were uncertain.
−Removed: The TRA is contingent consideration and subsequent changes in fair value of the contingent liability are recognized in earnings.
−Removed: Refer to TRA discussion in Note 9, Income Taxes .
−Removed: The Merger has been accounted for as a business combination using the acquisition method of accounting.
−Removed: The total purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values on the acquisition date.
−Removed: The purchase consideration, inclusive of the Protected assets and liabilities, was allocated to the following assets and liabilities (in thousands):
−Removed: Tangible assets acquired and liabilities assumed:
−Removed: Cash and marketable securities $ 68,748
−Removed: Accounts receivable 79,086
−Removed: Prepaid expenses 7,807
−Removed: Income tax receivable 4,566
−Removed: Property, plant & equipment, net 1,551
−Removed: Other assets 6,950
−Removed: Accounts payable ( 9,798 )
−Removed: Deferred revenue ( 60,768 )
−Removed: Accrued expenses and other current liabilities ( 110,004 )
−Removed: Income tax payable ( 2,091 )
−Removed: Notes payable ( 172,038 )
−Removed: Deferred tax liabilities ( 145,032 )
−Removed: Other liabilities ( 8,474 )
−Removed: Total tangible assets acquired and liabilities assumed ( 339,497 )
−Removed: Trademarks - 10 years estimated useful life
−Removed: Customer relationships - 4 years estimated useful life
−Removed: Technology - 4 years estimated useful life
−Removed: Goodwill 827,696
−Removed: Net assets acquired $ 1,050,299
−Removed: Consideration:
−Removed: Cash $ 440,155
−Removed: Equity 411,453
−Removed: Total consideration attributable to System1 851,608
−Removed: Total consideration attributable to non-controlling interest 198,691
−Removed: Total consideration $ 1,050,299
−Removed: Goodwill is not deductible for tax purposes.
−Removed: Answers Holdings, Inc.
−Removed: On May 4, 2022, we acquired the assets of Answers Holdings, Inc.
−Removed: and its subsidiaries ("Answers") for total cash consideration of $ 4.6 million .
−Removed: The results of Answers' operations from the date of acquisition have been included in our consolidated financial statements within the Owned and Operated Advertising segment.
−Removed: The allocation of the total purchase consideration for this acquisition was as follows (in thousands):
−Removed: Working capital $ 32
−Removed: Trademark - 10 years estimated useful life
−Removed: Goodwill 3,500
−Removed: Net assets acquired $ 4,632
−Removed: The goodwill arising from the acquisition consists largely of the expected synergies from combining operations, and is deductible for tax purposes over 15 years.
−Removed: We incurred $ 0.1 million in transaction costs related to the acquisition.
−Removed: NextGen Shopping, Inc.
−Removed: On March 4, 2022, we acquired NextGen Shopping, Inc.
−Removed: (“CouponFollow”) for total cash consideration of $ 75.1 million, of which $ 16.4 million was deferred, $ 5.6 million was held-back, and $ 25.5 million related to the fair value of 2.0 million shares of Class A common stock issued.
−Removed: The fair value of the shares of Class A common stock was determined by utilizing the closing price per share on March 3, 2022, and a discount rate of 7.5 %, as the shares were not immediately available for sale upon issuance, and this restriction was deemed to be a function of the security characteristics.
−Removed: The deferred consideration of $ 16.4 million was paid subsequent to the acquisition.
−Removed: The held-back consideration amount became payable eighteen months subsequent to the acquisition date, subject to our satisfaction of any potential post-closing purchase price adjustments and indemnification claims.
−Removed: The cash payment included the transaction costs of $ 3.1 million that we paid on behalf of CouponFollow in connection with the closing of the transaction.
−Removed: The results of CouponFollow’s operations from the date of acquisition have been included in our consolidated financial statements within the Owned and Operated Advertising segment.
−Removed: In conjunction with this acquisition, we also committed to pay postcombination compensation of $ 8.5 million which is payable in cash and subject to continued services from certain individuals of CouponFollow.
−Removed: Separately, in conjunction with the acquisition, we entered into the CouponFollow Incentive Plan.
−Removed: On September 6, 2023, in connection with entering into the Senior Unsecured Promissory Note (the “Promissory Note”) with the seller and current employee of ours ("Lender") (see Note 12, Related-Party Transactions), the parties made certain modifications to the CouponFollow Incentive Plan (see Note 18, Stock-Based Compensation).
−Removed: The allocation of the total purchase consideration for this acquisition was as follows (in thousands):
−Removed: Assets acquired and liabilities assumed:
−Removed: Cash and cash equivalents $ 21,232
−Removed: Accounts receivable 5,860
−Removed: Other current assets 446
−Removed: Accounts payable ( 116 )
−Removed: Accrued expenses and other current liabilities ( 118 )
−Removed: Income tax payable ( 197 )
−Removed: Deferred tax liabilities ( 10,895 )
−Removed: Trademark - 10 years estimated useful life
−Removed: Software - 4 years estimated useful life
−Removed: Goodwill 42,175
−Removed: Net assets acquired $ 100,587
−Removed: The goodwill is not deductible for tax purposes.
−Removed: We incurred $ 0.8 million in transaction costs related to the acquisition.
−Removed: RoadWarrior, LLC
−Removed: On February 9, 2022, we acquired the assets of RoadWarrior, LLC (“RoadWarrior”) for total cash consideration of $ 19.6 million.
−Removed: The results of RoadWarrior's operations from the date of acquisition have been included in our consolidated financial statements within the Owned and Operated Advertising segment.
−Removed: The allocation of the total purchase consideration for this acquisition was as follows (in thousands):
−Removed: Assets acquired and liabilities assumed:
−Removed: Working capital $ 155
−Removed: Trademark - 10 years estimated useful life
−Removed: Software - 4 years estimated useful life
−Removed: Customer relationships - 3 years estimated useful life
−Removed: Goodwill 14,981
−Removed: Net assets acquired $ 19,636
−Removed: The goodwill arising from the acquisition consists largely of the expected synergies from combining operations as well as the value of the workforce.
−Removed: The goodwill is deductible for tax purposes over 15 years.
−Removed: We incurred $ 0.3 million in transaction costs related to the acquisition.
−Removed: Unaudited Pro Forma Information
−Removed: The unaudited pro forma information reflects adjustments for additional amortization resulting from the fair value adjustments to assets acquired and liabilities assumed, adjustments for alignment of accounting policies, adjustments for transaction expenses, adjustments for certain stock-based compensation and equity related expenses incurred as a result of the transaction and the resulting tax effects, as if the Merger and acquisitions of Answers, CouponFollow and RoadWarrior occurred January 1, 2021.
−Removed: The pro forma results do not include any anticipated cost synergies or other effects of the merged companies.
−Removed: Accordingly, pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on the dates indicated, nor is it indicative of the future operating results of the combined company.
−Removed: The following table provides unaudited pro forma information as if the 2022 acquisitions occurred as of January 1, 2021 (in thousands).
−Removed: Year Ended December 31, 2022 (Successor)
−Removed: Pro forma revenue $ 682,161
−Removed: Pro forma net loss $ ( 366,278 )
+Added: In November 2024, the Financial Accounting Standards Board issued ASU No.
+Added: 2024-03, Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which improves the disclosures about a public business entity's expenses and requires detailed information about the types of expenses in commonly presented expense financial statement captions.
+Added: This guidance will be effective for the annual periods ending December 31, 2027 and interim periods ending December 31, 2028.
+Added: Early adoption is permitted.
+Added: Upon adoption, the guidance can be applied prospectively or retrospectively.
+Added: We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures
Property and Equipment, Net
6 unchanged sentences
Property and equipment, net $ 2,104 $ 3,084
−Removed: The aggregate depreciation expense related to property and equipment was $ 0.8 million and $ 0.5 million for the year ended December 31, 2023 (Successor) and for the period from January 27, 2022 through December 31, 2022 (Successor) , respectively.
−Removed: The aggregate depreciation expense related to property and equipment was not material for the period from January 1, 2022 through January 26, 2022 (Predecessor).
+Added: The aggregate depreciation expense related to property and equipment was $ 0.9 million and $ 0.8 million for the year ended December 31, 2024 and 2023, respectively.
Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net
−Removed: The changes to goodwill by reportable segments were as follows (in thousands):
−Removed: Owned and Operated Advertising Partner Network Total
−Removed: Goodwill at January 27, 2022 (Successor) $ — $ — $ —
−Removed: Additions 360,194 94,941 455,135
−Removed: Impairment ( 360,194 ) ( 12,534 ) ( 372,728 )
−Removed: Goodwill at December 31, 2022 (Successor) and December 31, 2023 (Successor) $ — $ 82,407 $ 82,407
−Removed: Additions to goodwill during the period from January 27, 2022 through December 31, 2022 (Successor), were from the acquisitions of S1 Holdco, CouponFollow, RoadWarrior and Answers (see Note 4, Acquisitions).
−Removed: There was no goodwill activity for the period from January 1, 2022 through January 26, 2022 (Predecessor).
−Removed: Goodwill Impairment
−Removed: During 2022 we experienced adverse macroeconomic impacts as a result of changes in market conditions and increases in interest rates, which contributed to reduced forecasted revenue and reduced expectations for future cash flows.
−Removed: As a result, we recorded an impairment of goodwill of $ 346.1 million in the third quarter of 2022.
−Removed: In the fourth quarter of 2022 as part of our annual impairment analysis, we recorded an impairment charges related to a write-down of goodwill by $ 26.6 million.
+Added: Goodwill was $ 82.4 million as of December 31, 2024 and 2023, all of which was attributable to the Partner Network reporting unit.
Upon classifying Protected as held for sale as of September 30, 2023, we performed a goodwill impairment test on the Subscription reporting unit resulting in a goodwill impairment charge.
−Removed: Additionally, we recorded an impairment upon the classification of the disposal group as held for sale, see Note 19, Discontinued Operations.
+Added: We recorded an impairment upon the classification of the disposal group as held for sale, see Note 17, Discontinued Operations.
+Added: During the fourth quarter of 2024, we performed our annual impairment test and determined each reporting unit's fair value exceeded its carrying amount.
+Added: No impairment of goodwill was identified for any of the periods presented relating to continuing operations.
+Added: There were no events or changes in circumstances subsequent to the fourth quarter assessment that indicate that the carrying amount of a reporting unit may exceed its fair value as of December 31, 2024.
Internal-use software development costs, net and intangible assets, net
Internal-use software development costs and intangible assets consisted of the following (in thousands):
−Removed: December 31, 2023 (Successor)
+Added: December 31, 2024
Gross Carrying Amount Accumulated Amortization Net Carrying Amount
6 unchanged sentences
Total $ 440,181 $ ( 217,840 ) $ 222,341
−Removed: December 31, 2022 (Successor)
+Added: December 31, 2023
Gross Carrying Amount Accumulated Amortization Net Carrying Amount
6 unchanged sentences
Total $ 440,181 $ ( 143,180 ) $ 297,001
−Removed: The internal-use software development costs includes construction in progress which is not being amortized of $ 3.5 million and $ 5.0 million as of December 31, 2023 (Successor) and 2022 (Successor), respectively.
+Added: The internal-use software development costs includes construction in progress which is not being amortized of $ 5.0 million and $ 3.5 million as of December 31, 2024 and 2023, respectively.
Amortization expense for internal-use software development costs and intangible assets were as follows (in thousands):
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: For the Year Ended
+Added: December 31, 2024 December 31, 2023
Amortization expense for internal-use software development
1 unchanged sentence
Amortization expense for intangible assets $ 74,660 $ 74,660
−Removed: During the fourth quarter of 2023 due to adverse macroeconomic impacts, we performed an impairment assessment on our Owned and Operated Advertising long-lived asset group.
−Removed: Additionally, during 2022, in conjunction with our testing for impairment of goodwill, we performed an impairment assessment of our long-lived asset groups.
−Removed: For the respective analysis, we compared the undiscounted cash flows of the asset groups with their carrying values.
−Removed: The undiscounted cash flows exceeded the carrying value, and accordingly, we did not record any impairments of long-lived assets in either 2023 or 2022.
−Removed: No impairment of internal-use software development cost or intangible assets was identified for any of the periods presented.
−Removed: As of December 31, 2023 (Successor), the expected amortization expense associated with our intangible assets and internal-use software development costs was as follows (in thousands):
+Added: We test our amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
+Added: Our amortizable intangible assets primarily consist of trademarks and trade names and developed technology.
+Added: During 2024 and 2023, no impairment of our amortizable intangible assets relating to continuing operations was identified.
+Added: As of December 31, 2024, the expected amortization expense associated with our intangible assets and internal-use software development costs was as follows (in thousands):
2025 $ 80,767
1 unchanged sentence
Total amortization expense $ 236,777
−Removed: As of December 31, 2023 (Successor) , the weighted average amortization period for all intangible assets was 7 years.
+Added: As of December 31, 2024, the weighted average amortization period for all intangible assets was 7 years.
We lease office facilities under noncancelable operating lease agreements.
−Removed: During the periods from January 1, 2022 through January 26, 2022 (Predecessor), from January 27, 2022 through December 31, 2022 (Successor), and the year ended December 31, 2023 (Successor), we had leases for office facilities in Marina del Rey, California;
+Added: During the years ended December 31, 2024 and 2023 , we had leases for office facilities in Los Angeles, California;
Bellevue, Washington;
and Guelph, Canada.
−Removed: The components of lease expense were as follows (in thousands) :
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: The components of lease expense consisted of the following (in thousands) :
+Added: For the Year Ended
+Added: December 31, 2024 December 31, 2023
Operating lease expense $ 2,396 $ 2,141
4 unchanged sentences
Supplemental information related to leases was as follows:
−Removed: As of December 31, 2023
+Added: December 31, 2024
Weighted average remaining lease terms (in years) 6.3
Weighted average discount rate 5.2 %
−Removed: Maturities of lease liabilities by fiscal year for our operating leases are as follows:
−Removed: As of December 31, 2023
+Added: Maturities of our operating leases liabilities by fiscal year are as follows (in thousands):
+Added: December 31, 2024
Thereafter 636
3 unchanged sentences
Accrued Expenses and Other Current Liabilities
−Removed: Accrued expenses and other current liabilities consisted of the following items as of the periods presented (in thousands):
+Added: Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31, 2024 December 31, 2023
2 unchanged sentences
Accrued payroll and related benefits 15,893 13,751
−Removed: Accrued professional fees 1,455 2,706
−Removed: Deferred revenue 1,757 1,553
−Removed: Accrued tax liability 1,233 1,092
−Removed: Holdback liabilities — 6,885
−Removed: Other liabilities 5,016 7,659
+Added: Shared-based compensation liability 17,821 —
+Added: Other current liabilities 5,390 9,461
Accrued expenses and other current liabilities $ 76,200 $ 59,314
+Added: CouponFollow Incentive Plan
+Added: In connection with the acquisition of CouponFollow, we approved and adopted the CouponFollow Incentive Plan, which includes CouponFollow’s key employees, including CouponFollow’s founder ("Principal Participant" and together collectively "Participants").
+Added: The CouponFollow Incentive Plan at the time of acquisition provided for total payments of $ 35.0 million payable at our option in cash or in fully-vested shares of our Class A common s tock, up to a maximum of 4.7 million shares, which subjects these awards to ASC 718, Compensation - Stock Compensation and are therefore classified as share-based liabilities.
+Added: The awards consist of a fixed amount of $ 10.0 million (which vests and is settled in three equal annual installments on December 31, 2022, 2023, and 2024) and performance-based amounts of $ 25.0 million which could be earned by achieving three Tiers of EBITDA targets, representing performance conditions.
+Added: During the first quarter of 2023, we issued 0.4 million shares of Class A Common stock with an aggregate fair value of $ 1.7 million, net of shares withheld for taxes, on the date of settlement to settle the first $ 3.3 million fixed award that vested on December 31, 2022.
+Added: The settlement is net of a $ 0.6 million adjustment to remeasure the liability to its fair value as of the settlement date.
+Added: The adjustment represents the difference in fair value between the share-based liability carrying value as of December 31, 2022, and the fair value of the Class A shares issued upon settlement.
+Added: On September 6, 2023, the parties made certain modifications to the CouponFollow Incentive Plan.
+Added: The restructured CouponFollow Incentive Plan provides for total payments of $ 31.3 million.
+Added: There was no change to the fixed amount, except for the requirement for the Company to make the last payment in cash.
+Added: The performance-based amount decreased to $ 21.3 million, with the performance terms changed to allow for achieving three Tiers of EBITDA-target performance conditions over a three calendar year period between each January 1 to December 31 of 2023, 2024 and 2025 (each a "Performance Period" and collectively, “Performance Periods”).
+Added: These modifications did not result in the recognition of any incremental compensation costs.
+Added: As of December 31, 2023, the business had not achieved any performance conditions nor was it probable that the performance conditions would be met, so no amount was recognized for the performance-based awards.
+Added: During the first quarter of 2024, we issued 1.0 million shares of 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 award that vested on December 31, 2023.
+Added: The settlement is net of a $ 0.5 million adjustment to remeasure the liability to its fair value as of the settlement date.
+Added: The adjustment represents the difference in fair value between the share-based liability carrying value as of December 31, 2023, and the fair value of the Class A shares issued upon settlement.
+Added: During the 2024 Performance Period, the CouponFollow business achieved all performance conditions such that the entire performance-based portion of the award vested or is expected to vest, and accordingly, we recognized a short-term liability in shared-based compensation liability within accrued expenses and other current liabilities of $ 17.8 million for the amount vested as of the year ended December 31, 2024 , of which $ 7.8 million was paid in cash in February 2025, and $ 10.0 million is payable 60 days after December 31, 2025.
+Added: The carrying amount of the share-based liabilities approximates its fair value, determined using Level 3 fair value inputs .
+Added: The total amount to be earned under the CouponFollow Incentive Plan relating to the performance conditions is $ 21.3 million.
+Added: For the year ended December 31, 2024, w e recognized $ 3.3 million for the third installment of the fixed amount within salaries and benefits expenses on the consolidated statements of operations, which was settled in cash in February 2025.
+Added: If a Participant’s continued employment is terminated prior to vesting, with the exception of the Principal Participant as discussed above, we will reverse all cumulative compensation cost recorded for the forfeited award(s).
+Added: If we elect to settle the payment obligations in shares of our Class A common stock, the number of shares payable under the CouponFollow Incentive Plan will be determined based on the VWAP of our Class A common stock.
Domestic and foreign components of our loss before income taxes from continuing operations were as follows (in thousands):
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: For the Year Ended
+Added: December 31, 2024 December 31, 2023
Domestic $ ( 92,190 ) $ ( 126,830 )
2 unchanged sentences
The components of the income tax provision (benefit) were as follows (in thousands):
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: For the Year Ended
+Added: December 31, 2024 December 31, 2023
Federal $ 145 $ ( 64 )
8 unchanged sentences
A reconciliation of the statutory tax rate to the effective income tax rate for the periods presented was as follows (in thousands):
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
−Removed: Amount % Amount % Amount %
+Added: For the Year Ended
+Added: December 31, 2024 December 31, 2023
+Added: Amount % Amount %
Income tax (benefit) provision at statutory tax rate $ ( 20,510 ) 21.0 % $ ( 27,642 ) 21.0 %
State tax, net of federal ( 797 ) 0.8 % ( 1,718 ) 1.3 %
−Removed: Non-Controlling interests 5,865 ( 4.5 ) % 19,626 ( 4.0 ) % — —
−Removed: Effect of flow-through entity — — — — 7,994 ( 21.2 ) %
+Added: Non-Controlling interest 6,661 ( 6.8 ) % 5,865 ( 4.5 ) %
Changes in unrecognized tax benefits 754 ( 0.8 ) % 2,320 ( 1.8 ) %
1 unchanged sentence
Investment in partnership basis adjustments ( 3,571 ) 3.7 % ( 17,627 ) 13.4 %
−Removed: Stock-based compensation 3,408 ( 2.6 ) % 2,858 ( 0.6 ) % — —
+Added: Share-based compensation 1,966 ( 2.0 ) % 3,408 ( 2.6 ) %
Change in valuation allowance 15,798 ( 16.2 ) % 19,521 ( 14.8 ) %
2 unchanged sentences
The aggregate amount of gross unrecognized tax benefits related to uncertain tax positions were as follows (in thousands) :
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: December 31, 2024 December 31, 2023
Balance at the beginning of the period $ 1,850 $ 593
3 unchanged sentences
Interest and penalties related to our unrecognized tax benefits are recorded as components of the provision for income taxes.
−Removed: Interest or penalties accrued for the years ended December 31, 2023 (Successor) and 2022 (Successor) were not material.
−Removed: Due to our full valuation allowance, the total amount of unrecognized benefits that, if recognized, would favorably affect the effective tax by $ 0.2 million (net of Federal benefit) at December 31, 2023 (Successor) .
−Removed: We are not currently under examination in any jurisdiction.
+Added: Interest or penalties accrued for the years ended December 31, 2024 and 2023 were not material.
+Added: Due to our full valuation allowance, the total amount of unrecognized benefits that, if recognized, would favorably affect the effective tax by $ 0.8 million (net of Federal benefit) at December 31, 2024.
+Added: We are not currently under examination in any material jurisdiction.
It is reasonably possible that, within the next twelve months, statutes of limitation will expire which could have the effect of reducing the balance of unrecognized tax benefits by an immaterial amount.
3 unchanged sentences
Netherlands 2018
−Removed: The components of the deferred income taxes were as follows (in thousands):
+Added: The components of the deferred income taxes consisted of the following (in thousands):
December 31, 2024 December 31, 2023
1 unchanged sentence
Net operating loss and capital loss carryforwards
+Added: $ 6,638 $ 6,362
Tax credits 4,894 4,289
2 unchanged sentences
Other 225 231
−Removed: Total deferred tax assets
+Added: Total gross deferred tax assets
+Added: 38,863 23,066
Valuation allowance ( 38,616 ) ( 22,658 )
1 unchanged sentence
Deferred tax liabilities:
−Removed: Investment in partnerships $ — $ ( 22,471 )
Intangibles $ ( 6,026 ) $ ( 8,243 )
Other ( 420 ) ( 472 )
−Removed: Total deferred tax liabilities
+Added: Total gross deferred tax liabilities
$ ( 6,446 ) $ ( 8,715 )
−Removed: Net deferred tax liabilities
+Added: Net deferred tax liability
$ ( 6,199 ) $ ( 8,307 )
−Removed: As of December 31, 2023 (Successor), we had a full valuation allowance on our U.S.
+Added: As of December 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.
−Removed: As of December 31, 2023 (Successor) , we had U.S.
+Added: As of December 31, 2024, we had U.S.
federal net operating loss carryovers ("NOLs") of $ 25.3 million that may be used indefinitely and various state NOLs that will expire at different times.
3 unchanged sentences
The change in the valuation allowance was comprised of the following (in thousands) :
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: December 31, 2024 December 31, 2023
Balance at the beginning of the period $ 22,658 $ 1,087
3 unchanged sentences
Tax Receivable Agreement
−Removed: Pursuant to our election under Section 754 of the Code, we expect to obtain an increase in our share of the tax basis in the net assets of S1 Holdco when LLC Interests are redeemed or exchanged by the other members of S1 Holdco.
+Added: Pursuant to our election under Section 754 of the Code, we expect to obtain an increase in our share of the tax basis in the net assets of System1 Holdings when LLC interests are redeemed or exchanged by the other members of System1 Holdings.
We intend to treat any redemptions and exchanges of LLC interests as direct purchases of LLC interests for U.S.
1 unchanged sentence
These increases in tax basis may reduce the amounts that would otherwise be paid in the future to various tax authorities.
−Removed: On January 27, 2022, we entered into a Tax Receivable Agreement with certain of the then-existing members of S1 Holdco that provides for the payment by us of 85 % of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of S1 Holdco resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (“TRA Payments”).
+Added: On January 27, 2022, we entered into a Tax Receivable Agreement with certain of the then-existing members of System1 Holdings that provides for the payment by us of 85 % of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of System1 Holdings resulting from any redemptions or exchanges of LLC interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement ("TRA Payments").
We expect to benefit from the remaining 15 % of any tax benefits that we may actually realize.
−Removed: We acquired an aggregate of 0.2 million and 0.3 million LLC Interests in connection with the redemption of LLC Interests in the year ended December 31, 2023 (Successor) and the period ended December 31, 2022 (Successor), respectively, which resulted in an increase in the tax basis of our investment in S1 Holdco subject to the provisions of the Tax Receivable Agreement.
+Added: We acquired an aggregate of 2.8 million and 0.2 million LLC interests in connection with the redemption of LLC interests in the years ended December 31, 2024 and 2023, respectively, which resulted in an increase in the tax basis of our investment in System1 Holdings subject to the provisions of the Tax Receivable Agreement.
We have recognized a total liability in the amount of $ 5.3 million for the TRA Payments due to the redeeming members, representing 85 % of the aggregate tax benefits we expect to realize from the tax basis increases related to the redemption of LLC interests, after concluding it was probable that such TRA Payments would be paid based on estimates of future taxable income.
−Removed: During the year ended December 31, 2023 (Successor) , inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement.
−Removed: The total amount of TRA Payments due under the Tax Receivable Agreement, was $ 0.8 million and $ 1.0 million as of December 31, 2023 (Successor) and December 31, 2022 (Successor), respectively.
−Removed: The TRA Liability is classified within other long term liabilities on the consolidated balance sheet.
+Added: During the year ended December 31, 2024, inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement.
+Added: The total amount of TRA Payments due under the Tax Receivable Agreement, was $ 5.3 million and $ 0.8 million as of December 31, 2024 and 2023, respectively.
+Added: The Tax Receivable Agreement liabilities are classified within Other non-current liabilities on the consolidated balance sheets.
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.
−Removed: As of December 31, 2023 (Successor), we remain contractually obligated to spend $ 11.1 million towards this commitment.
−Removed: As of December 31, 2023 (Successor) , we had various non-cancelable operating lease commitments for office space which have been recorded as Operating lease liabilities.
−Removed: Refer to Note 7, Leases for additional information regarding lease commitments.
+Added: As of December 31, 2024, we remain contractually obligated to spend $ 6.2 million towards this commitment.
+Added: As of December 31, 2024, we had various non-cancelable operating lease commitments for office space which have been recorded as Operating lease liabilities.
+Added: See Note 5, Leases for additional information regarding lease commitments.
We are subject to various legal proceedings and claims that arise in the ordinary course of business.
2 unchanged sentences
We accrued for losses when the loss is deemed probable and the liability can reasonably be estimated.
−Removed: In July 2021, System1 OpCo, LLC (“System1 OpCo”, f/k/a System1, LLC) received correspondence from counsel for a United Kingdom-based marketing research company and its United States subsidiary (“System1 Group”) alleging trademark infringement based on its use of the “SYSTEM1” trade name and mark in the United States and the United Kingdom.
−Removed: In September 2021, System1 Group filed a lawsuit in the United States District Court for the Southern District of New York (the “Infringement Suit”), alleging (i) trademark infringement, (ii) false designation of origin, (iii) unfair competition and (iv) certain violations of New York business laws.
−Removed: While we believe that System1 Group’s infringement and other allegations and claims set forth in the Infringement Suit would have been subject to a laches defense, among other defenses, the parties entered into a Co-Existence and Settlement Agreement in June 2023 (the “Settlement Agreement”) in which the parties have agreed to co-exist with their current usage of the “System1” mark in their respective business operations with certain requirements and other conditions.
−Removed: The Settlement Agreement contemplates the payment of a fixed amount to System1 Group over the course of seventeen ( 17 ) months, and the Infringement Suit was dismissed with prejudice.
−Removed: The amount accrued as of December 31, 2023 for the loss is consistent with the terms of the Settlement Agreement and is considered immaterial.
−Removed: In March 2023, we received a demand letter from counsel for Alta Partners, LLC (“Alta”), which purports to be a holder of certain Public Warrants of the Company (“Demand Letter”).
+Added: In March 2023, we received a demand letter from counsel for Alta Partners, LLC ("Alta"), which purports to be a holder of certain Warrants of the Company ("Demand Letter").
The Demand Letter alleged, among other claims, that we breached the terms of the Warrant Agreement, and that Alta was entitled to approximately $ 5.7 million in damages, plus prejudgment interest, as a result, and subsequently sent us a draft complaint (the "Complaint") alleging substantially the same claims as those set forth in Alta’s Demand Letter.
2 unchanged sentences
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.
−Removed: We dispute the claims alleged, and intends to defend itself vigorously in this matter.
+Added: While we dispute the claims alleged, we reached a Settlement Agreement during September 2024 and paid $ 2.5 million during December 2024, presented within Selling, general, and administrative expenses in our consolidated statement of operations for the year ended December 31, 2024.
Indemnifications
2 unchanged sentences
As a result, we believe the estimated fair value of these agreements was immaterial .
−Removed: Accordingly, we have no liabilities recorded for these agreements as of December 31, 2023 or December 31, 2022 (Successor), respectively.
−Removed: In connection with the Merger, we entered into a new 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 , of which a portion of the proceeds were used by us, to settle the outstanding debt of $ 172.0 million with Cerberus Business Finance, LLC.
+Added: Accordingly, we have no liabilities recorded for these agreements as of December 31, 2024 or December 31, 2023, respectively.
+Added: 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 .
−Removed: As of December 31, 2023 (Successor), there was no balance outstanding on the 2022 Revolving Facility and principal of $ 365.0 million was outstanding on the Term Loan.
+Added: As of December 31, 2024, there was no balance outstanding on the 2022 Revolving Facility and principal of $ 280.1 million was outstanding on the Term Loan.
Through December 31, 2025, $ 5.0 million of the Term Loan is payable quarterly.
3 unchanged sentences
The Term Loan is amortized in quarterly installments on each scheduled payment date.
−Removed: 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 from the first full quarter after the effective date of the Merger, such that the first lien leverage ratio (as defined in the credit agreement) should not exceed 5.40 .
+Added: 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.
3 unchanged sentences
The interest rate on the 2022 Revolving Facility is the adjusted SOFR plus 2.5 % with an adjusted SOFR floor of 0 %.
−Removed: In March 2022, we borrowed $ 49.0 million under our 2022 Revolving Facility, to fund a portion of the purchase price related to the CouponFollow acquisition.
−Removed: In October 2022, we borrowed the remaining $ 1.0 million available.
−Removed: During 2023 the borrowed amount was repaid in full.
−Removed: As of December 31, 2023 (Successor) we had $ 50.0 million available on the 2022 Revolving Facility.
+Added: As of December 31, 2024 and 2023, respectively, 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):
5 unchanged sentences
$ 271,523 $ 349,503
−Removed: 1 Includes unamortized discount of $ 14.7 million and $ 19.4 million, and unamortized loan fees of $ 0.8 million and $ 1.1 million, as of December 31, 2023 (Successor), and December 31, 2022 (Successor), respectively, recorded as a reduction of the carrying amount of the debt and amortized to interest expense using the effective interest method.
+Added: _______________
+Added: 1 Includes unamortized discount of $ 8.1 million and $ 14.7 million, and unamortized loan fees of $ 0.4 million and $ 0.8 million, as of December 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 $ 175.1 million as of December 31, 2024.
−Removed: As of December 31, 2023 (Successor), future minimum principal payments on long-term debt were as follows (in thousands) :
+Added: As of December 31, 2024, future minimum principal payments on long-term debt were as follows (in thousands) :
2025 $ 20,000
2 unchanged sentences
Long-term portion $ 260,090
−Removed: As of December 31, 2023 (Successor) loan fees amounting to $ 0.8 million and unamortized discount of $ 14.7 million for the Term Loan have been recorded as a reduction of the carrying amount of the debt and are amortized to interest expense using the effective interest method.
−Removed: 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.
−Removed: Following the repurchase, the outstanding principal amount of the Term Loan was $ 301.3 million.
−Removed: We used available cash on hand to fund the repurchase.
+Added: During 2024, we completed the repurchase of $ 64.9 million in principal amount of our Term Loan for an aggregate purchase price of $ 41.6 million (at discount of 64.12 % of its par value).
+Added: Following the repurchases on January 17, 2024 and April 30, 2024, the outstanding principal amount of the Term Loan was $ 301.3 million and $ 295.0 million, respectively.
+Added: We used available cash on hand to fund the repurchases.
Our gain on the repurchase was approximately $ 20.1 million before fees and expenses incurred.
9 unchanged sentences
The 2023 Revolving Note was subsequently terminated in December 2023.
−Removed: Promissory Note
−Removed: On September 6, 2023, we entered into a $ 5.2 million Promissory Note with the Lender, in order to convert the amount owed to him as a result of the acquisition of CouponFollow (see Note 4, Acquisitions) into a loan to us (the “Loan”).
+Added: Senior Unsecured Promissory Note
+Added: On September 6, 2023, we entered into a $ 5.2 million Senior Unsecured Promissory Note (the "Promissory Note") with the CouponFollow seller and an employee of ours ("Lender"), in order to convert the amount owed to him as a result of the acquisition of CouponFollow into a loan to us (the "Loan").
The amount of the Loan was equal to the amount of the Holdback liability of $ 5.2 million owed to the Lender.
3 unchanged sentences
(ii) may prepay the Loan at any time without penalty or interest;
−Removed: and (iii) must make four substantially equal amortization payments on April 1, 2024, May 1, 2024, June 1, 2024, and July 1,
−Removed: 2024, unless there is an event of default, including a continuing event of default on the Credit Agreement, at which point the holder may declare all amounts due immediately.
+Added: and (iii) must make four substantially equal amortization payments on April 1, 2024, May 1, 2024, June 1, 2024, and July 1, 2024, unless there is an event of default, including a continuing event of default on the Credit Agreement, at which point the holder may declare all amounts due immediately.
The Lender under the Promissory Note is also entitled to a closing fee equal to 12 % of the initial principal amount outstanding under the Promissory Note with 50 % paid on October 15, 2023 and the remaining 50 % due on December 15, 2023.
17 unchanged sentences
The previously unamortized portion of the loan fee and the early settlement fee for an aggregate amount of $ 1.4 million was included in net loss from discontinued operations, net of tax on our consolidated statements of operations.
−Removed: Cannae Services Agreement
+Added: Services Agreement
On June 20, 2023, we engaged with one of our significant shareholders, for management and consulting services .
The agreement was terminated in August 2023.
−Removed: During the year ended December 31, 2023 (Successor), we paid all amounts owed and outstanding, tot aling $ 0.1 million.
−Removed: In June 2020, we issued Public Warrants and Private Placement Warrants in conjunction with the initial public offering of Trebia.
−Removed: Public Warrants may only be exercised for a whole number of shares.
−Removed: No fractional shares will be issued upon exercise of the Public Warrants.
−Removed: The Public Warrants became exercisable on April 18, 2022,
−Removed: when the S-1/A registration statement, which was required to be filed under the terms of the Warrant Agreement and the Business Combination Agreement, was declared effective.
−Removed: The Public Warrants will expire five years from the completion of the Merger, or earlier upon redemption or liquidation.
−Removed: We are not obligated to deliver any shares of Class A common stock pursuant to the exercise of a Public Warrant and have no obligation to settle such Public Warrants exercises unless a registration statement under the Securities Act with respect to the Class A common stock underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to us satisfying our obligations with respect to registration, or a valid exemption from registration is available.
−Removed: Warrants are exercisable and we are obligated to issue a share of Class A common stock upon exercise of each Warrant, as the Warrants have been registered with the SEC.
−Removed: We are obligated to use commercially reasonable efforts to maintain the effectiveness of a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the Warrants, and a current prospectus relating thereto, until the expiration or redemption of the Warrants in accordance with the provisions of the Warrant Agreement.
−Removed: If the effectiveness of a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the Warrants is not maintained, Warrant holders may exercise Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
−Removed: In addition, if our Class A common stock is, at the time of any exercise of a Warrant, not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of the Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we elect to do so, we will not be required to file or maintain in effect a registration statement, but we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
−Removed: In such event, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the Public Warrants, multiplied the excess of the “fair market value” less the exercise price of the Public Warrants by (y) the fair market value and (B) 0.361 .
−Removed: The “fair market value” shall mean the volume weighted average price of the Class A common stock for the 10 trading days ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent.
−Removed: Redemption of Warrants when the Price per Class A common stock equals or exceeds $ 18.00 —We may redeem the outstanding Public Warrants:
+Added: During the year ended December 31, 2023, we paid all amounts owed and outstanding, tot aling $ 0.1 million.
+Added: In June 2020, we issued Warrants.
+Added: The Warrants may only be exercised for a whole number of shares.
+Added: No fractional shares will be issued upon exercise of the Warrants.
+Added: The Warrants became exercisable on April 18, 2022, when the S-1/A registration statement, which was required to be filed under the terms of the Warrant Agreement and the Business Combination Agreement, was declared effective.
+Added: The Warrants will expire five years from the completion of the Merger, or earlier upon redemption or liquidation.
+Added: Redemption of Warrants when the Price per Class A common stock equals or exceeds $ 18.00 —We may redeem the outstanding Warrants:
• in whole and not in part;
2 unchanged sentences
• if, and only if, the last reported sale price of the Class A common stock for any 20 trading days within a 30 -trading day period ending three business days before sending the notice of redemption to warrant holders ("Reference Value") equals or exceeds $ 18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like).
−Removed: If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
−Removed: However, we will not redeem the Warrants unless an effective registration statement under the Securities Act covering the underlying shares of Class A common stock issuable upon exercise of the Warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30 -day redemption period.
Redemption of Warrants When the Price per Class A common stock equals or exceeds $ 10.00 —Once the Warrants become exercisable, we may redeem the outstanding Warrants:
2 unchanged sentences
• if, and only if, the Reference Value (as defined above under "Redemption of Warrants When the Price per Class A common stock Equals or Exceeds $ 18.00 ") equals or exceeds $ 10.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like);
−Removed: • if the Reference Value is less than $ 18.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) the Private Placement Warrants must also be concurrently -called for redemption on the same terms as the outstanding Public Warrants, as described above.
−Removed: The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation.
−Removed: However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below our exercise price.
−Removed: Additionally, in no event will we be required to net cash settle the Public Warrants.
−Removed: The Private Placement Warrants were identical to the Public Warrants underlying the units sold in the initial public offering of Trebia, except that (x) the Private Placement Warrants and the shares of Class A common stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or salable until 30 days after the completion of the Merger, subject to certain limited exceptions, and (y) the Private Placement Warrants were exercisable on a cashless basis.
−Removed: The Public and Private Placement Warrants are accounted for as liabilities and marked-to-market at each reporting period, with changes in fair value included as change in fair value of warrant liabilities on the consolidated statements of operations.
−Removed: In April 2022, the Private Placement Warrant holders exercised their Warrants on a cashless basis in exchange for 3.5 million shares of our Class A common stock.
−Removed: There were no outstanding Private Placement Warrants as of December 31, 2022 (Successor).
−Removed: During the year ended December 31, 2023 (Successor), there were no Warrants exercised.
−Removed: During the period ended December 31, 2022 (Successor), Public Warrant holders exercised 0.4 million Warrants for cash resulting in total proceeds paid to us of $ 5.0 million.
−Removed: The total outstanding Public Warrants as of December 31, 2023 (Successor) and December 31, 2022 (Successor) was 16.8 million.
+Added: • if the Reference Value is less than $ 18.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) the Private Placement Warrants must also be concurrently -called for redemption on the same terms as the outstanding Warrants, as described above.
+Added: If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
+Added: However, we will not redeem the Warrants unless an effective registration statement under the Securities Act covering the underlying shares of Class A common stock issuable upon exercise of the Warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30 -day redemption period.
+Added: The exercise price and number of common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation.
+Added: However, except as described below, the Warrants will not be adjusted for issuances of common stock at a price below our exercise price.
+Added: Additionally, in no event will we be required to net cash settle the Warrants.
+Added: The Warrants are accounted for as liabilities at fair market value at each reporting period, with changes in the fair value presented as change in fair value of warrant liabilities on the consolidated statements of operations.
+Added: During the years ended December 31, 2024 and 2023 , there were no Warrants exercised.
+Added: The total outstanding Warrants as of December 31, 2024 and 2023 was 16.8 million.
Fair Value Measurement
Financial Liabilities Measured at Fair Value on a Recurring Basis
−Removed: The following tables present our fair value hierarchy for liabilities measured at fair value on a recurring basis was as follows (in thousands):
+Added: Level 1 liabilities measured at fair value on a recurring basis are summarized below (in thousands):
December 31, 2024 December 31, 2023
−Removed: Level 1 Level 1
−Removed: Public Warrants $ 2,688 $ 7,798
−Removed: The fair value of the Public Warrants has been estimated using the Public Warrants’ quoted market price.
−Removed: The fair value of the Private Placement Warrants was estimated using the Public Warrants’ quoted market price.
−Removed: All Private Placement Warrants were exercised in April 2022.
−Removed: In 2021 we reached an agreement with our former CEO which included payment of cash-settled S1 Holdco's equity profits interest, which was settled in conjunction with the consummation of the Merger.
−Removed: The fair value of the equity profits interest was determined with an option pricing model and utilizing significant unobservable inputs for a discount for lack of marketability and projected financial information.
−Removed: The fair value contingent consideration was determined with an option pricing model and contains significant unobservable inputs for projected financial information.
−Removed: Changes in estimated fair value of Level 1, 2 and 3 financial liabilities were as follows (in thousands):
−Removed: Former CEO Equity Profits Interest Contingent Consideration
−Removed: Level 3 Level 3
−Removed: Fair value of liabilities at December 31, 2021 (Predecessor) and January 26, 2022 (Predecessor) $ 11,132 $ 1,682
−Removed: Public Warrant Liability Private Warrant Liability Contingent Consideration
−Removed: Level 1 Level 2 Level 3
−Removed: Fair value of liabilities at January 27, 2022 (Successor) $ 18,285 $ 8,727 $ 1,682
−Removed: Additions — — 28
−Removed: Settlements ( 1,147 ) ( 21,818 ) ( 1,715 )
−Removed: Change in fair value ( 9,340 ) 13,091 5
−Removed: Fair value of liabilities at December 31, 2022 (Successor) 7,798 — —
−Removed: Change in fair value ( 5,110 ) — —
−Removed: Fair value of liabilities at December 31, 2023 (Successor) $ 2,688 $ — $ —
−Removed: The total impact of the changes in fair values related to contingent consideration and the former CEO's equity profits interest in S1 Holdco were included in selling, general and administrative expenses on the consolidated statements of operations.
−Removed: There were no transfers in or out of levels during the period January 1, 2022 through January 26, 2022 (Predecessor), the period January 27, 2022 through December 31, 2022 (Successor), or for the year ended December 31, 2023 (Successor).
+Added: Warrants $ 302 $ 2,688
+Added: Fair value of liabilities $ 302 $ 2,688
+Added: There were no Level 3 financial liabilities as of December 31, 2023.
+Added: There were no transfers in or out of levels for the years ended December 31, 2024 and 2023, respectively .
Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis
−Removed: For further information on the fair value assessment of goodwill and impairment charge recorded refer to Note 6, Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net and Note 19, Discontinued Operations.
−Removed: Net Loss Per Share or Unit
−Removed: For the period from January 1, 2022 through January 26, 2022 (Predecessor), the basic net loss per unit attributable to members was calculated by dividing the net loss attributable to common equity holders by the weighted-average number of membership units.
−Removed: For the period from January 27, 2022 through December 31, 2022 (Successor) and the year ended December 31, 2023 (Successor), the 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
−Removed: Basic and diluted net loss per share was calculated as follows (in thousands, except per share and per unit data) :
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: For further information on the fair value assessment of goodwill and impairment charge recorded for the discontinued operation, see Note 4, Goodwill, Internal-Use Software Development Costs, Net, and Intangible Assets, Net and Note 17, Discontinued Operations.
+Added: Net Loss Per Share
+Added: For the years ended December 31, 2024 and 2023, the 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.
+Added: Basic and diluted net loss per share was calculated as follows (in thousands, except per share data) :
+Added: For the Year Ended
+Added: December 31, 2024 December 31, 2023
Basic and diluted net loss per share
Net loss from continuing operations attributable to System1, Inc.
−Removed: $ ( 0.94 ) $ ( 3.19 ) n/a
+Added: $ ( 1.07 ) $ ( 0.94 )
Net loss from discontinued operations, net of tax attributable to System1, Inc.
−Removed: ( 1.54 ) ( 0.51 ) n/a
−Removed: Basic and Diluted net loss per share $ ( 2.48 ) $ ( 3.70 ) n/a
+Added: Basic and Diluted net loss per share $ ( 1.07 ) $ ( 2.48 )
Net loss from continuing operations attributable to System1, Inc.
−Removed: $ ( 85,727 ) $ ( 284,522 ) n/a
+Added: $ ( 74,673 ) $ ( 85,727 )
Net loss from discontinued operations, net of tax attributable to System1, Inc.
−Removed: ( 141,494 ) ( 45,870 ) n/a
+Added: — ( 141,494 )
Net loss attributable to System1, Inc.
−Removed: $ ( 227,221 ) $ ( 330,392 ) n/a
−Removed: Weighted-average common shares outstanding used in computing basic and diluted net loss per share 91,454 89,310 n/a
−Removed: Basic and diluted net loss per unit n/a n/a $ ( 1.81 )
−Removed: Net loss n/a n/a $ ( 37,061 )
−Removed: Weighted-average membership units outstanding - basic
−Removed: and diluted n/a n/a 20,488
−Removed: Shares of Class C common stock, RSUs and Public Warrants outstanding for the year December 31, 2023 (Successor), and the period from January 27, 2022 through December 31, 2022 (Successor), are considered potentially dilutive of the shares of Class A common stock and are included in the computation of diluted loss per share, except when the effect would be anti-dilutive.
−Removed: 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.
+Added: $ ( 74,673 ) $ ( 227,221 )
+Added: Weighted-average common shares outstanding used in computing basic and diluted net loss per share 69,554 91,454
+Added: Shares of Class C common stock, RSUs and Warrants outstanding for the year December 31, 2024 and 2023, are considered potentially dilutive of the shares of Class A common stock and are included in the computation of diluted loss per share, except when the effect would be anti-dilutive.
+Added: For the periods presented in the table above, a total of 16.8 million Warrants were excluded from the computation of net loss per share as the impact was anti-dilutive.
+Added: For the year ended December 31, 2024, we excluded 21.9 million Stock Appreciation Rights as they are contingently issuable based on certain performance conditions, which were not achieved.
+Added: See Note 16, Stock-Based Compensation, for additional details.
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.
2 unchanged sentences
Segment Reporting
−Removed: We have two operating segments and reportable segments:
+Added: We have two operating and reportable segments:
Owned and Operated Advertising and Partner Network.
−Removed: 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
−Removed: allocate resources and assess performance.
+Added: Operating segments are defined as components of an enterprise about which separate financial information is
+Added: 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.
−Removed: The CODM measures and evaluates reportable segments based on segment operating revenue as well as adjusted gross profit.
−Removed: The tables below includes the following operating expenses that are not allocated to the reporting segments presented to our CODM :
−Removed: 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 consolidated net loss from continuing operations before income tax and are included in the reconciliation that follows.
−Removed: The following table summarizes revenue by reportable segments (in thousands):
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: The CODM measures and evaluates reportable segments based on segment adjusted gross profit.
+Added: The CODM evaluates both potential future, as well as historical budget to actual variances, adjusted gross profit by segment on a quarterly basis to determine the allocation of capital for acquisition marketing, as well as technical and personnel resources.
+Added: Adjusted gross profit is also used to determine variable compensation expense for certain employees.
+Added: We have not presented segment assets as our CODM does not use segment assets to evaluate or measure segment performance or allocate resources.
+Added: The tables below include the following operating expenses that are not allocated to the reportable segments presented to our CODM, such as other cost of revenue (total cost of revenue excluding traffic acquisition cost), salaries and benefits, depreciation and amortization and, at times, certain other transactions or adjustments.
+Added: 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 consolidated net loss from continuing operations before income tax and are included in the reconciliation that follows.
+Added: The following table summarizes revenue, segment cost of revenue and adjusted gross profit by reportable segments (in thousands):
+Added: For the Year Ended
Owned and Operated Advertising $ 281,930 $ 328,934
1 unchanged sentence
Total revenue $ 343,925 $ 401,971
−Removed: The following table summarizes adjusted gross profit by reportable segments (in thousands):
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
Owned and Operated Advertising $ 173,721 $ 221,238
Partner Network 10,136 19,617
+Added: Total segment cost of revenue $ 183,857 $ 240,855
+Added: Owned and Operated Advertising $ 108,209 $ 107,696
+Added: Partner Network 51,859 53,420
Adjusted gross profit 160,068 161,116
Other cost of revenue
−Removed: 7,890 7,461 575
Salaries and benefits 113,512 106,505
1 unchanged sentence
Depreciation and amortization 80,107 78,403
−Removed: Impairment of goodwill — 372,728 —
Interest expense, net 31,562 48,745
+Added: Gain on extinguishment of debt ( 20,109 ) —
Loss on extinguishment of related-party debt — 2,004
2 unchanged sentences
The following table summarizes revenue by geographic region (in thousands):
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: For the Year Ended
United States $ 333,069 $ 385,847
1 unchanged sentence
Total revenue $ 343,925 $ 401,971
−Removed: The following table summarizes property and equipment, net and operating leases by applicable reportable segment:
−Removed: (in thousands):
−Removed: December 31, 2023 December 31, 2022
−Removed: Owned and Operated Advertising $ 7,816 $ 9,646
−Removed: The following table summarizes property and equipment, net and operating leases by geographic region (in thousands):
+Added: Concentrations
+Added: The following tables illustrate the concentrations as a percentage of total revenue and total accounts receivable for our key Advertising Partners:
+Added: Concentration of revenue from key Advertising Partners
+Added: For the Year Ended
+Added: Google 78 % 85 %
+Added: Concentration of accounts receivable from key Advertising Partners
December 31, 2024 December 31, 2023
−Removed: United States $ 3,927 $ 5,473
−Removed: Canada 3,432 3,730
−Removed: Other countries 457 443
−Removed: Total $ 7,816 $ 9,646
−Removed: Capitalization
−Removed: Class A common stock
−Removed: Voting rights.
−Removed: Except as provided in our Charter or as required by applicable law, holders of Class A common stock will be entitled to one vote per share on all matters to be voted on by our Stockholders generally.
−Removed: At annual and extraordinary general meetings of our Stockholders, the holders of Class A common stock and Class C common stock will vote together as a single class on any matters submitted to a vote of our Stockholders, or, holders of Preferred Stock, if any, are entitled to vote together with the holders of Class A common stock or Class C common stock, as a single class with the holders of Preferred Stock.
−Removed: Generally, unless a different voting standard applies under our Organizational Documents or applicable law, all matters to be voted on by shareholders must be approved by a majority of the votes cast (except for the election of directors, which will be decided based on a plurality of the votes cast by stockholders present in person or represented by proxy at the applicable meeting and entitled to vote on the election of such directors).
−Removed: Reservation of Shares.
−Removed: Under our Charter, we will have at all times, authorized and unissued shares of Class A common stock for the purposes of effecting any redemptions or exchanges under the New S1 Holdco Agreement.
−Removed: Class C common stock
−Removed: Voting rights.
−Removed: Except as provided in our Charter or as required by applicable law, holders of Class C common stock will be entitled to one vote per share on all matters to be voted on by our Stockholders generally.
−Removed: At any annual and extraordinary general meeting of our Stockholders, the holders of Class A common stock and Class C common stock will vote together as a single class on any matters submitted to a vote of our Stockholders, or, holders of Preferred Stock, if any, are entitled to vote together with the holders of Class A common stock or Class C common stock, as a single class with the holders of Preferred Stock.
+Added: Google 56 % 69 %
+Added: Microsoft 8 % 5 %
+Added: Yahoo 7 % 6 %
+Added: As of December 31, 2024, we had two paid search advertising partnership agreements with Google, and one paid search advertising partnership agreement with Microsoft.
+Added: The Google agreements are in effect through February 28, 2025 and September 30, 2027.
+Added: The Google agreement set to expire on February 28, 2025 was extended through February 28, 2027.
+Added: The agreement with Microsoft (our next largest Advertising Partner by revenue) is in effect through June 30, 2025.
+Added: Under certain circumstances, each of these agreements may be terminated by either us or the respective Advertising Partner immediately, or with minimal notice.
+Added: Stockholders' Equity
+Added: We have two classes of stock, Class A and Class C common stock.
+Added: The voting rights of each class of our common stock is identical.
Holders of Class C common stock have no economic rights, only voting rights.
−Removed: Generally, unless a different voting standard applies under our Organizational Documents or applicable law, all matters to be voted on by stockholders must be approved by a majority of the votes cast (except for the election of directors, which will be decided based on a plurality of the votes cast by stockholders present in person or represented by proxy at the applicable meeting and entitled to vote on the election of such directors).
−Removed: Future Issuances.
−Removed: Under our Charter, System1 is not permitted to issue additional shares of Class C common stock after the adoption of our Charter, other than in connection with the valid issuance S1 Holdco Common Units under the New S1 Holdco Operating Agreement.
−Removed: Restriction on Transfer.
−Removed: Under our Charter, holders of Class C common stock may only transfer their Class C common stock to certain permitted transferees, while also simultaneously transferring an equal number of such holder’s S1 Holdco Common Units.
−Removed: Class D common stock
−Removed: Voting Rights.
−Removed: Except as provided in our Charter or as required by applicable law, holders of Class D common stock are not entitled to any voting rights.
−Removed: Notwithstanding the preceding sentence, under our Charter, any vote that changes the terms of the Class D common stock requires the separate approval of a majority of the holders of Class D common stock.
−Removed: Restriction on Transfer.
−Removed: Under our Charter, holders of Class D common stock may only transfer their Class D common stock to certain permitted transfers.
−Removed: Class D common stock automatically converted into Class A common stock on a one -for-one basis, following the consummation of the Merger, once the volume-weighted average price ("VWAP") of the Post-Closing Company exceeded $ 12.50 per share (adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any twenty ( 20 ) trading days within a period of thirty ( 30 ) consecutive trading days before the fifth anniversary of the consummation of the Merger.
−Removed: All shares of Class D common stock converted to Class A common stock in the period ended March 31, 2022.
+Added: We will have at all times, authorized and unissued shares of Class A common stock for the purposes of effecting any redemptions or exchanges.
+Added: We are not permitted to issue additional shares of Class C common stock other than in connection with the valid issuance of System1 Holdings Common Units under the New System1 Holdings Operating Agreement.
+Added: Holders of Class C common stock may only transfer their Class C common stock to certain permitted transferees, while also simultaneously transferring an equal number of such holder’s System1 Holdings Common Units.
Repurchase Program
−Removed: In August 2022, our Board of Directors authorized up to $ 25.0 million for the repurchase of our Class A common stock and Public Warrants ( “ 2022 Repurchase Program ” ).
−Removed: During the period ended December 31, 2022 (Successor) we repurchased 190 thousand shares for an aggregate purchase price of $ 1.1 million under the 2022 Repurchase Program.
−Removed: During the year ended December 31, 2023 (Successor) we did not repurchase any shares.
−Removed: As of December 31, 2023 (Successor) and 2022 (Successor) , all repurchased shares were retired.
+Added: In August 2022, the Company announced that our Board of Directors authorized up to $ 25.0 million for the repurchase of our Class A common stock and Warrants ( " 2022 Repurchase Program " ).
+Added: During the years ended December 31, 2024 and 2023 we did not repurchase Class A common stock or Warrants.
+Added: The amount outstanding under the 2022 Repurchase Program is $ 23.9 million.
Stock-Based Compensation
We are authorized to issue and/or grant restricted stock, restricted stock units, stock options, stock appreciation rights, and other stock-based and cash-based awards under our 2022 Incentive Award Plan ("2022 Plan").
−Removed: As of December 31, 2023, 2.9 million grant awards were reserved and authorized for issuance and/or grant under the 2022 Plan.
−Removed: In addition, the number of underlying shares authorized for issuance/grant under the 2022 Plan are subject to increase each year on January 1, equal to the lesser of (a) a number of shares equal to 2.5 % of the
−Removed: aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as is determined by the compensation committee of the board of directors.
+Added: During the year ended December 31, 2024, 1.1 million grant awards were reserved and authorized for issuance and/or grant under the 2022 Plan.
+Added: In addition, the number of underlying shares authorized for issuance/grant under the 2022 Plan are subject to increase each year on January 1, equal to the lesser of (a) a number of shares equal to 2.5 % of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as is determined by the compensation committee of the board of directors.
On January 1, 2025, the number of shares authorized and reserved for grant under the 2022 Plan was increased by 2.3 million shares in accordance with the foregoing provision of the 2022 Plan.
As described in Note 2, Summary of Significant Accounting Policies, the Replacement Awards continue to vest over the original vesting schedule of the original underlying awards.
−Removed: We recognized a total stock-based compensation expense of $ 23.7 million upon the consummation of the Merger during the period January 1, 2022 through January 26, 2022 (Predecessor).
−Removed: We recognized stock-based compensation expense for the Replacement Awards of $ 6.6 million and $ 23.6 million during the year ended December 31, 2023 (Successor) and the period from January 27, 2022 through December 31, 2022 (Successor), respectively.
−Removed: The unrecognized stock-based compensation expense associated with these unvested Replacement Awards was $ 2.7 million a s of December 31, 2023 (Successor).
−Removed: When the VWAP of our common stock price exceeded the threshold in March 2022 the Sponsor RSAs and Seller RSUs vested, and we recorded their conversion from Class D common stock to Class A common stock on our consolidated statements of changes in stockholders' equity.
−Removed: We also recorded $ 12.7 million in stock-based compensation expense associated with the vesting of the Sponsor RSUs during the period January 27, 2022 through March 31, 2022 (Successor).
−Removed: Since these Sponsor RSAs and Sponsor RSUs had a market condition to vest, we estimated the fair values of these market-based RSAs and RSUs using a Monte Carlo simulation.
−Removed: The key assumptions used to determine the fair value of these Sponsor RSUs and Sponsor RSAs were as follows:
−Removed: Risk-free interest rate 1.6 %
−Removed: Expected price volatility 50.0 %
−Removed: Cost of equity 23.6 %
−Removed: Expected term (years) 5
−Removed: Fair value of Class A Common stock $ 10.00
−Removed: We recorded $ 7.7 million in stock-based compensation expense for Sponsor Promote Shares during the period January 27, 2022 through March 31, 2022 (Successor).
−Removed: We recorded the following total stock-based compensation expense (in thousands) :
−Removed: Successor Predecessor
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022 Period from January 1, 2022 through January 26, 2022
+Added: We recognized stock-based compensation expense for the Replacement Awards of $ 2.2 million and $ 6.6 million during the years ended December 31, 2024 and 2023, respectively.
+Added: The unrecognized stock-based compensation expense associated with these unvested Replacement Awards was $ 0.2 million a s of December 31, 2024, expected to be recognized during the first quarter of 2025.
+Added: We recorded the following stock-based compensation expenses for equity-classified awards (in thousands) :
+Added: For the Year Ended
Stock-based compensation expense $ 15,763 $ 21,235
1 unchanged sentence
(in thousands) Weighted-Average Grant Date Fair Value per Share
−Removed: Unvested as of December 31, 2022 (Successor) 5,463 $ 9.83
+Added: Unvested as of December 31, 2023 4,423 $ 5.41
Granted 6,135 $ 1.42
1 unchanged sentence
Forfeited ( 544 ) $ 3.14
−Removed: Unvested as of December 31, 2023 (Successor) 4,423 $ 5.41
−Removed: At December 31, 2023 (Successor), we had unrecognized stock-based compensation relating to restricted stock of approximately $ 19.1 million , which is expected to be recognized over a weighted-average period of 0.8 years.
−Removed: CouponFollow Incentive Plan
−Removed: In connection with the acquisition of CouponFollow (see Note 4, Acquisitions), we approved and adopted the CouponFollow Incentive Plan, which includes CouponFollow’s key employees, including CouponFollow’s founder (“Principal Participant” and together collectively “Participants”).
−Removed: The CouponFollow Incentive Plan at the time of acquisition provided for total payments of $ 35.0 million payable at our option in cash or in fully-vested shares of our Class A common stock, consisting of a fixed amount of $ 10.0 million and contingent amounts of $ 25.0 million, which could be earned over a three calendar year period between each January 1 to December 31 of 2022, 2023 and 2024 ( each a “Performance Period” and collectively, “Performance Periods” ).
−Removed: On September 6, 2023, in connection with entering into the Promissory Note (see Note 12, Related-Party Transactions ) , the parties made certain modifications to the CouponFollow Incentive Plan.
−Removed: Such modifications include (i) the lowering of the contingent earnout payout amounts, (ii) the lowering of contingent earnout tier targets to the amounts noted below, (iii) the increase of the contingent earnout performance period by one year, and (iv) adding the requirement for the payment of the third fixed earnout amount to be in cash.
−Removed: The restructured CouponFollow Incentive Plan provides for total payments of $ 31.3 million payable at our option in cash or in fully-vested shares of our Class A common stock (unless otherwise noted) over the Performance Periods.
−Removed: In order to be eligible for the CouponFollow Incentive Plan, the Participants must maintain continuous employment through the last day of each Performance Period, with the exception of the Principal Participant who is still eligible if terminated without cause or if they terminate their employment for good reason.
−Removed: Payment amounts and at the times set forth below:
−Removed: • Fixed Amount.
−Removed: Over the performance periods, we shall pay to each eligible Participant $ 10.0 million (“Fixed Amount”) in three substantially equal pro rata installment payments.
−Removed: The first two payments are to be settled at our option in cash or in fully-vested shares of our Class A common stock.
−Removed: The third payment is required to be settled in cash.
−Removed: • Tier 1 Target.
−Removed: If, during any of the Performance Periods, the CouponFollow business achieves the first tier TTM EBITDA (as defined in the CouponFollow Incentive Plan) for the first time (“Tier 1 Target”), we will pay a total of $ 8.5 million (“Tier 1 Amount”) in substantially equal pro rata amounts at the times in the table set forth below (in thousands).
−Removed: • Tier 2 Target.
−Removed: If, during any of the Performance Periods, the CouponFollow business achieves the second tier TTM EBITDA for the first time (“Tier 2 Target”), we will pay an additional $ 6.4 million (“Tier 2 Amount”) in substantially equal pro rata amounts at the times in the table set forth below (in thousands).
−Removed: • Tier 3 Target.
−Removed: If, during any of the Performance Periods, the CouponFollow business achieves the third tier TTM EBITDA for the first time (“Tier 3 Target” and together with the Tier 1 Target and Tier 2 Target, collectively “Targets”), we will pay an additional $ 6.4 million (“Tier 3 Amount” and together with the Tier 1 Amount and the Tier 2 Amount, collectively “Tier Amounts”) in substantially equal pro rata amounts at the times in the table set forth below (in thousands).
−Removed: Performance Period* Fixed Amount Tier 1 Amount*
−Removed: Tier 2 Amount*
−Removed: Tier 3 Amount*
−Removed: Total maximum Payment per Performance Period
−Removed: $ 3,333 $ — $ — $ — $ 3,333
−Removed: 31, 2023 3,333 2,833 — — 6,166
−Removed: 31, 2024 3,334 2,833 3,187 — 9,354
+Added: Unvested as of December 31, 2024 5,925 $ 2.08
+Added: The weighted average grant date fair value per share for the restricted stock units granted during the year ended December 31, 2023 was $ 3.04 .
+Added: The weighted average grant date fair value per share for the 3.1 million restricted stock units vested during the year ended December 31, 2023 was $ 8.99 .
+Added: At December 31, 2024, we had unrecognized stock-based compensation relating to restricted stock units of approximately $ 9.3 million , which is expected to be recognized over a weighted-average period of 0.9 years.
+Added: Stock Appreciation Rights
+Added: During the year ended December 31, 2024, we adopted the 2024 SAR Plan.
+Added: The maximum number of Class A common stock that may be issued pursuant to awards of Stock Appreciation Rights ("SARs") granted under the 2024 Plan ("Awards") is 23.8 million shares.
+Added: Financial performance in the 2024 Plan is determined by the achievement of Adjusted EBITDA performance targets, defined as, with respect to any particular period, our net income (loss) before interest expense,
+Added: income taxes, depreciation and amortization expense, stock-based compensation expenses, dividends or other distributions to equity holders, expense associated with revaluation of any warrants, costs associated with acquisitions or dispositions, deferred compensation, management fees, minority interest expense, restructuring charges, impairment and certain segment-specific adjustments, and such other adjustments as may be appropriate to accurately reflect performance, in each case, as determined by the 2024 Plan administrator.
+Added: In July 2024, we granted 22.4 million SARs.
+Added: Each Award is subject to the employee's continued service through the applicable vesting date (as defined in the SAR Plan).
+Added: The term of any SARs shall not exceed seven years .
+Added: The SARs will vest in four equal tranches upon achieving trailing twelve month Adjusted EBITDA targets of $ 50.0 million, $ 60.0 million, $ 70.0 million, and $ 80.0 million.
+Added: Upon exercise, the SARs will be settled in shares of our Class A common stock or in cash at our election.
+Added: The probability that the award will vest for each of the four tranches will be assessed at the end of every reporting period.
+Added: If and when the award is deemed probable of vesting, we will recognize stock-based compensation expense for the award on a graded basis through the date of vesting for each individual tranche.
+Added: Unvested SARs are forfeited upon termination of service.
+Added: We use the Black-Scholes option pricing model to estimate the grant date fair value of each SARs award granted under the 2024 Plan.
+Added: The expected term is estimated using the simplified method, which is the midpoint between the vesting date and the contractual term.
+Added: Volatility is based on a blend of the historical volatility of our common stock and the peer-leveraged volatility.
+Added: The risk-free rate is based on the U.S.
+Added: Treasury yield curve in effect at the time of grant.
+Added: The following table sets forth the key assumptions used to determine the fair value:
+Added: Risk-free interest rate 4.01 % - 4.56 %
+Added: Term (in years) 2.5 - 7.0
+Added: Volatility factor 73.18 % - 89.76 %
+Added: Dividend yield 0.00 %
+Added: The weighted-average grant date fair value of SARs granted during the year ended December 31, 2024 was $ 0.94 .
+Added: A summary of our SARs activity is as follows:
+Added: Number of Shares
+Added: (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands)
+Added: Outstanding at January 1, 2024 — $ — — $ —
+Added: Granted 22,446 1.44
+Added: Forfeited/canceled ( 498 ) 1.44
+Added: Outstanding at December 31, 2024
21,948 1.44 5
+Added: Expected to vest as of December 31, 2024
— $ 1.44 5 $ —
−Removed: * If the Tier 1 Amount is not achieved in the first Performance Period but is achieved in the second Performance Period, the Tier 1 Amount for the first Performance Period shall be paid out at the end of the second Performance Period and if achieved in the third Performance period the full amount will be paid at the end of the third Performance Period.
−Removed: If the Tier 2 Amount is not achieved in the second Performance Period but is achieved in the third Performance Period, the Tier 2 Amount will be paid at the end of the third Performance Period.
−Removed: If the Tier 2 Amount or the Tier 3 Amount is achieved in the first Performance Period, such Tier Amounts shall be paid as noted in the table above.
−Removed: Amounts earned are payable within 60 days of the end of each performance period.
−Removed: ** On March 1, 2023, we issued 0.4 million shares of Class A Common stock with an aggregate fair value of $ 1.7 million , net of shares withheld for taxes, on th e date of settlement, to settle the first Fixed Amount of $ 3.3 million.
−Removed: If a Participant’s continued employment is terminated prior to applicable payment date(s), with the exception of the Principal Participant as discussed above, we will reverse all prior liabilities for their pro rata share of any Tier Amounts or Fixed Amounts associated with that Participant.
−Removed: If we elect to settle the payment obligations in shares of our Class A common stock, the number of shares payable under the CouponFollow Incentive Plan will be determined based on the VWAP of our Class A common stock.
−Removed: As of December 31, 2023 (Successor), we have determined that it was not probable that the CouponFollow business would achieve any o f the contingent earnout targets during the Performance Periods, and accordingly, we did not record a liability for any of the Tier amounts.
−Removed: During the year ended December 31, 2023 (Successor), we recognized $ 2.7 million for the Fixed Amount within salaries and benefits expenses on the consolidated statements of operations.
−Removed: The amount for the year ended December 31, 2023 (Successor) is net of a $ 0.6 million difference between the fair value of the Class A common stock issued to settle the earnout liability for fiscal 2022 and the carrying value of the earnout liability.
+Added: As of December 31, 2024, we determined the performance conditions of the Tranche I SARs awards were probable of being achieved before the fourth anniversary date of the awards.
+Added: Accordingly, we recognized $ 0.9 million in stock-based compensation expense within equity for the twelve months ended December 31, 2024.
+Added: As of December 31, 2024, the total unrecognized compensation cost related to unvested SARs was $ 3.5 million, expected
+Added: to be recognized over the remaining period of two years .
+Added: No SARs vested or were exercised for the year ended December 31, 2024.
Discontinued Operations
11 unchanged sentences
This impairment was the result of decreases in long-term forecasts due to recent adverse customer trends and other macroeconomic outcomes.
−Removed: We recorded a further impairment charge of $ 3.3 million upon the classification of the disposal group as held for sale, for a total impairment charge of $ 118.8 million that was recorded in the results of discontinued operations for the year ended December 31, 2023 (Successor).
−Removed: There was no tax benefit of this charge for the year ended December 31, 2023 (Successor).
−Removed: The following table presents the assets and liabilities classified as held for sale from discontinued operations as of December 31, 2022 (in thousands):
−Removed: December 31, 2022
−Removed: Carrying amount of assets included as part of discontinued operations:
−Removed: Current assets:
−Removed: Cash and cash equivalents $ 15,701
−Removed: Restricted cash, current 3,357
−Removed: Other current assets, net 1,234
−Removed: Current assets held for sale from discontinued operations 20,292
−Removed: Property and equipment, net 860
−Removed: Intangible assets, net 121,025
−Removed: Goodwill 433,184
−Removed: Total assets held for sale from discontinued operations $ 575,361
−Removed: Carrying amount of liabilities included as part of discontinued operations:
−Removed: Current liabilities:
−Removed: Protected incentive plan liability, current
−Removed: Deferred revenue 68,611
−Removed: Other current liabilities 17,371
−Removed: Current liabilities held for sale from discontinued operations 101,418
−Removed: Protected incentive plan liability, non-current
−Removed: Deferred tax liability 15,286
−Removed: Other liabilities 3,366
−Removed: Total liabilities held for sale from discontinued operations $ 135,894
+Added: We recorded a further impairment charge of $ 3.3 million upon the classification of the disposal group as held for sale, for a total impairment charge of $ 118.8 million that was recorded in the results of discontinued operations for the year ended December 31, 2023.
+Added: There was no tax benefit of this charge for the year ended December 31, 2023.
+Added: There were no assets and liabilities classified as held for sale from discontinued operations as of December 31, 2023.
The financial results of Protected are presented as loss from discontinued operations, net of taxes in the consolidated statements of operations.
The following table presents the summarized discontinued operations consolidated statements of operations (in thousands):
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022
+Added: Year Ended December 31, 2023
Revenue $ 190,090
14 unchanged sentences
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 consolidated statements of cash flows (in thousands):
−Removed: December 31, 2023 Period from January 27, 2022 through December 31, 2022
+Added: Year Ended December 31, 2023
Impairment of assets held for sale $ 3,276
Impairment of goodwill
−Removed: $ 115,483 $ —
Loss on sale of business $ 4,247
3 unchanged sentences
Transition Service Agreement
−Removed: In connection with a transition service agreement, we agreed to provide certain services for which full reimbursement of cost will be provided.
+Added: In connection with a transition service agreement, we agreed to provide certain services for which full reimbursement of cost was provided through November 30, 2024.
+Added: We were reimbursed $ 4.3 million in costs through the end of the transition service agreement.
Discontinued Operations Related-Party Transactions
2 unchanged sentences
In March 2021, Paysafe completed a merger with Foley Trasimene Acquisition Corp.
−Removed: II (“Foley Trasimene”), a special purpose acquisition company sponsored by entities affiliated with a sponsor of Trebia who
−Removed: was also a member of our Board of Directors.
+Added: 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.
Protected's payment processing agreement with Paysafe was negotiated before the announcements of both (i) the Merger as well as (ii) the business combination between Paysafe and Foley Trasimene.
−Removed: We incurred credit card processing fees related to Paysafe for the year ended December 31, 2023 (Successor), and the period from January 27, 2022 through December 31, 2022 (Successor) of $ 14.9 million and $ 2.8 million, respectively.
−Removed: The amount receivable from Paysafe was $ 2.4 million as of December 31, 2022 (Successor).
+Added: We incurred credit card processing fees related to Paysafe for the year ended December 31, 2023 of $ 14.9 million.
Office Facilities
−Removed: We have an agreement with JDI Property Holdings Limited (“JDIP”), an entity controlled by one of our directors, which allows us to use space at their property in exchange for GBP 0.1 million per year.
−Removed: The agreement with JDIP expires on October 31, 2026.
+Added: We had an agreement with JDI Property Holdings Limited ("JDIP"), an entity controlled by one of our former directors, which allows us to use space at their property in exchange for GBP 0.1 million per year.
+Added: The agreement with JDIP terminated concurrently with the sale of Protected.
Protected Incentive Plan Installment Payments
−Removed: In connection with the Merger, we effected an incentive plan for eligible recipients as defined in the Business Combination Agreement, providing up to $ 100 million payable in fully-vested shares of our Class A common stock based contingent upon the achievement of the future performance of Protected’s business.
+Added: In connection with the Merger, we effected an incentive plan for eligible recipients (the "Protected Incentive Plan") providing up to $ 100 million payable in fully-vested shares of our Class A common stock based 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.
−Removed: 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 (Successor).
+Added: 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 have been met, and therefore, none of the additional cash bonus payments have been paid.
At the closing of the Protected Disposition, JDI, Protected and the Protected CEO confirmed that the financial performance benchmarks related to certain contingent earnout payments based on the future performance of Protected’s Business will no longer be achievable.
−Removed: As such, we reversed $ 40.8 million of expense during the year ended December 31, 2023 (Successor) for the Protected Incentive Plan within loss on sale of business segment of discontinued operations on the consolidated statements of operations .
+Added: As such, we reversed $ 40.8 million of expense during the year ended December 31, 2023 for the Protected Incentive Plan within loss on sale of business segment of discontinued operations on the consolidated statements of operations .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.