ICR Conference: System1 Fireside Chat Highlights

Our CFO Tridivesh “Tridi” Kidambi provided a deep dive into System1’s strategic outlook following the sale of Total Security during a fireside chat at the 2024 ICR Conference. Below are highlights from the chat that you can listen to here.

Excerpts have been edited for length and clarity.

Q: What is System1 trying to solve and what do we do differently than competitors?

Tridi: Very simply, we’re an advertising platform. Everything is based on our marketing platform RAMP (Responsive Acquisition Marketing Platform). We’re identifying and acquiring high-intent customers and delivering those customers to advertising partners. Our big differentiator is the conversion of those customers and we really pride ourselves on delivering customers, not just delivering eyeballs.

Q: What does the recent sale of Total Security mean for the business?

Tridi: It was a big transaction; spent a lot of the last half of last year working on it. Total Security was a subscription business that we acquired as part of our de-SPAC in January of 2022. It was and is very cash-generative – did roughly $40 million+ of EBITDA in 2022. As we were going through last year and dealing with some of the downturns that we saw in the AdTech industry, one of the things we were looking at in terms of our balance sheet was how can we monetize some of our assets to make sure we really have a strong runway.

Around the same time the management team from Total Security came in with an offer to buy back the business. At the time, and today, it made a lot of sense. Operationally, we really hadn’t had a chance to integrate it so it was a very easy divestiture to accomplish operationally. Secondly, the transaction generated a lot of cash. We took $240 million of cash out of that transaction to help with some capital structure and balance sheet improvement. And third, and most importantly, it really simplifies our story.

Q: Where does System1 intend to use the proceeds?

Tridi: We intend to be very ROI-focused in terms of how we deploy that capital. The initial use of the $240 million; we spent $90 million paying down debt. We have roughly $130 million of cash on the balance sheet and we’re looking at the best way to deploy that.

Q: What are System1’s key areas of growth moving forward?

Tridi: As we think about what will drive our growth in the advertising business in 2024 and beyond, it’s really two pieces of the business: one is we have a platform of 40 websites that we acquire traffic to and then monetize that traffic with. And it’s really kind of heads down execution – a lot of turbulence in the AdTech markets that we started to see some stability in recently so just having kind of a level macro environment to work in we think will be helpful for our business.

And then on our network advertising business we’re seeing a lot of growth just from some great improvements that we’ve released into the marketplace regarding our console and the tools that we’re providing our network partners.

Listen to the entire fireside chat here.