[10-Q] System1, Inc. Quarterly Earnings Report

Rhea-AI Filing Summary

System1, Inc. (SST) filed its Q3 2025 10‑Q, reporting revenue of $61.6 million and a net loss of $22.0 million. Year to date, revenue was $214.2 million with a net loss of $63.4 million. Operating loss narrowed versus last year as costs declined alongside lower revenue.

Segment trends diverged: Marketing revenue fell to $39.1 million, while Products grew to $22.5 million, lifting Products’ adjusted gross profit. Cash and cash equivalents were $54.6 million, and the company had full availability on its $50.0 million revolving facility. The Term Loan had $265.1 million principal outstanding (carrying value $259.2 million) and matures in 2027.

Stockholders’ equity was $34.3 million, reflecting accumulated losses and non‑controlling interest. The company effected a 1‑for‑10 reverse stock split in June 2025. Key paid search partnerships remain in place with Google (through February 28, 2027 and September 30, 2027) and Microsoft (through December 31, 2026). Warrants moved to Level 3 fair value measurement after delisting.

Insights

Equity analyst

Costs fell faster than revenue, but losses persist.

System1 posted Q3 revenue of $61.6M and a net loss of $22.0M. Marketing softness drove most of the decline, while Products grew modestly and supported adjusted gross profit. Operating expenses decreased year over year, narrowing the operating loss.

Liquidity shows $54.6M in cash plus $50.0M undrawn on the revolver. Debt remains sizable, with Term Loan principal of $265.1M (maturing in 2027). Interest expense was manageable versus prior periods due to lower balances.

Partnership agreements with Google and Microsoft extend through 2026–2027, anchoring monetization channels. Actual results will depend on advertising demand and execution within Marketing; Products momentum provided a partial offset this quarter.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2025

or

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

For transition period from ______ to ______

Commission File Number 001-39331

System1, Inc.

(Exact name of registrant as specified in its charter)

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

(310) 924-6037

(Registrant’s telephone number including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

SST

The New York Stock Exchange

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

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

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

As of October 29, 2025 there were 8,128,321 shares of Class A common stock, $0.0001 par value per share, and 1,869,607 shares of Class C common stock, $0.0001 par value per share, outstanding.

Table of Contents

						Page
Part I - Financial Information						1
Item 1.			Financial Statements (Unaudited)			1
			Condensed Consolidated Balance Sheets			1
			Condensed Consolidated Statements of Operations			2
			Condensed Consolidated Statements of Comprehensive Loss			3
			Condensed Consolidated Statements of Changes in Stockholders' Equity			4
			Condensed Consolidated Statements of Cash Flows			6
			Notes to Unaudited Condensed Consolidated Financial Statements			7
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			28
Item 4.			Controls and Procedures			28
Part II - Other Information						30
Item 1.			Legal Proceedings			30
Item 1A.			Risk Factors			30
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			30
Item 3.			Defaults Upon Senior Securities			30
Item 4.			Mine Safety Disclosures			30
Item 5.			Other Information			30
Item 6.			Exhibits			31
Signatures						32

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

System1, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except par value)

			September 30, 2025						December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents			$	54,589					$	63,607
Restricted cash, current			1,243						3,970
Accounts receivable, net			54,356						62,916
Prepaid expenses and other current assets			6,430						3,984
Total current assets			116,618						134,477
Restricted cash, non-current			378						371
Property and equipment, net			1,655						2,104
Internal-use software development costs, net			14,170						14,436
Intangible assets, net			166,714						222,341
Goodwill			82,407						82,407
Operating lease right-of-use assets			2,923						2,644
Other non-current assets			295						349
Total assets			$	385,160					$	459,129
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable			$	23,065					$	10,401
Accrued expenses and other current liabilities			54,255						76,200
Operating lease liabilities, current			677						2,089
Current debt, net			24,127						16,405
Total current liabilities			102,124						105,095
Operating lease liabilities, non-current			2,783						1,365
Non-current debt, net			235,109						255,118
Deferred tax liability			4,662						6,199
Other non-current liabilities			6,222						6,356
Total liabilities			350,900						374,133
Commitments and contingencies (Note 7)
Stockholders' equity:
Class A common stock $0.0001 par value; 500,000 shares authorized, 8,100 and 7,365 Class A shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively			1						1
Class C common stock $0.0001 par value; 25,000 shares authorized, 1,869 and 1,870 Class C shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively			—						—
Additional paid-in capital			877,108						863,041
Accumulated deficit			(834,196)						(782,335)
Accumulated other comprehensive loss			(230)						(443)
Total stockholders' equity attributable to System1, Inc.			42,683						80,264
Non-controlling interest			(8,423)						4,732
Total stockholders' equity			34,260						84,996
Total liabilities and stockholders' equity			$	385,160					$	459,129

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

System1, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except for per share amounts)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2025						2024						2025						2024
Revenue			$	61,561					$	88,832					$	214,189					$	268,330
Operating expenses:
Cost of revenue			38,819						63,999						135,108						198,824
Salaries and benefits			21,354						29,177						72,639						87,597
Selling, general, and administrative			16,953						17,472						51,038						58,607
Total operating expenses			77,126						110,648						258,785						345,028
Operating loss			(15,565)						(21,816)						(44,596)						(76,698)
Other expense (income):
Interest expense, net			7,052						7,957						21,253						23,798
Gain on extinguishment of debt			—						—						—						(20,109)
Change in fair value of warrant liabilities			(71)						281						29						(1,471)
Total other expense, net			6,981						8,238						21,282						2,218
Loss before income tax			(22,546)						(30,054)						(65,878)						(78,916)
Income tax (benefit) expense			(543)						585						(2,477)						359
Net loss			(22,003)						(30,639)						(63,401)						(79,275)
Less: Net loss attributable to non-controlling interest			(3,487)						(7,037)						(11,539)						(18,763)
Net loss attributable to System1, Inc.			$	(18,516)					$	(23,602)					$	(51,862)					$	(60,512)
Basic and diluted net loss per share:			$	(2.30)					$	(3.37)					$	(6.67)					$	(8.76)
Weighted average number of shares outstanding - basic and diluted			8,054						7,005						7,773						6,907

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

System1, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(In thousands)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2025						2024						2025						2024
Net loss			$	(22,003)					$	(30,639)					$	(63,401)					$	(79,275)
Other comprehensive (loss) income:
Foreign currency translation (loss) income			(119)						(44)						263						(275)
Comprehensive loss			(22,122)						(30,683)						(63,138)						(79,550)
Comprehensive loss attributable to non-controlling interest			(3,509)						(7,114)						(11,489)						(18,957)
Comprehensive loss attributable to System1, Inc.			$	(18,613)					$	(23,569)					$	(51,649)					$	(60,593)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

System1, Inc. and Subsidiaries

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

(In thousands)

			Class A Common Stock									Class C Common Stock
			Shares			Amount						Shares			Amount						Additional Paid-In-Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Non-Controlling Interest						Total Stockholders' Equity
Balance at December 31, 2024			7,365			$	1					1,870			$	—					$	863,041					$	(782,335)					$	(443)					$	4,732					$	84,996
Net loss			—			—						—			—						—						(15,883)						—						(3,973)						(19,856)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			120			—						—			—						33						—						—						(325)						(292)
Other comprehensive income			—			—						—			—						—						—						11						2						13
Stock-based compensation			—			—						—			—						2,766						—						—						44						2,810
Distributions to members, net of contributions			—			—						—			—						—						—						—						(12)						(12)
Balance at March 31, 2025			7,485			1						1,870			—						865,840						(798,218)						(432)						468						67,659
Net loss			—			—						—			—						—						(17,463)						—						(4,079)						(21,542)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			75			—						—			—						145						—						—						(165)						(20)
Conversion of Class C shares to Class A shares			1			—						(1)			—						—						—						—						—						—
Issuance of common stock in private placement			450			—						—			—						3,275						—						—						(1,025)						2,250
Class A common stock repurchases			—			—						—			—						—						1						—						—						1
Other comprehensive income			—			—						—			—						—						—						299						70						369
Stock-based compensation			—			—						—			—						4,748						—						—						—						4,748
Distributions to members, net of contributions			—			—						—			—						—						—						—						(21)						(21)
Balance at June 30, 2025			8,011			$	1					1,869			$	—					$	874,008					$	(815,680)					$	(133)					$	(4,752)					$	53,444
Net loss			—			—						—			—						—						(18,516)						—						(3,487)						(22,003)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			89			—						—			—						149						—						—						(162)						(13)
Other comprehensive loss			—			—						—			—						—						—						(97)						(22)						(119)
Stock-based compensation			—			—						—			—						2,951						—						—						—						2,951
Balance at September 30, 2025			8,100			$	1					1,869			$	—					$	877,108					$	(834,196)					$	(230)					$	(8,423)					$	34,260

4

System1, Inc. and Subsidiaries

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

(In thousands)

			Class A Common Stock									Class C Common Stock
			Shares			Amount						Shares			Amount						Additional Paid-In-Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Non-Controlling Interest						Total Stockholders' Equity
Balance at December 31, 2023			6,585			$	1					2,151			$	—					$	843,120					$	(707,662)					$	(181)					$	34,037					$	169,315
Net loss			—			—						—			—						—						(10,537)						—						(3,254)						(13,791)
Issuance of common stock in connection with settlement of incentive plan			97			—						—			—						2,464						—						—						(757)						1,707
Conversion of Class C shares to Class A shares			31			—						(31)			—						241						—						—						(241)						—
Tax receivable agreement liability and deferred taxes arising from LLC interest ownership exchanges and the issuance of common stock from equity incentive plans			—			—						—			—						(110)						—						—						—						(110)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			150			—						—			—						178						—						—						(1,169)						(991)
Other comprehensive loss			—			—						—			—						—						—						(90)						(45)						(135)
Stock-based compensation			—			—						—			—						4,317						—						—						88						4,405
Contributions from members, net of distributions			—			—						—			—						—						—						—						5						5
Balance at March 31, 2024			6,863			1						2,120			—						850,210						(718,199)						(271)						28,664						160,405
Net loss			—			—						—			—						—						(26,373)						—						(8,472)						(34,845)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			62			—						—			—						284						—						—						(308)						(24)
Other comprehensive loss			—			—						—			—						—						—						(24)						(72)						(96)
Stock-based compensation			—			—						—			—						3,784						—						—						87						3,871
Distributions to members			—			—						—			—						—						—						—						(32)						(32)
Balance at June 30, 2024			6,925			$	1					2,120			$	—					$	854,278					$	(744,572)					$	(295)					$	19,867					$	129,279
Net loss			—			—						—			—						—						(23,602)						—						(7,037)						(30,639)
Issuance of restricted stock, net of forfeitures and shares withheld for taxes			121			—						—			—						288						—						—						(308)						(20)
Other comprehensive loss			—			—						—			—						—						—						33						(77)						(44)
Stock-based compensation			—			—						—			—						4,182						—						—						88						4,270
Balance at September 30, 2024			7,046			$	1					2,120			$	—					$	858,748					$	(768,174)					$	(262)					$	12,533					$	102,846

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

System1, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

			Nine Months Ended September 30,
			2025						2024
Cash Flows from Operating Activities
Net loss			$	(63,401)					$	(79,275)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			61,832						59,877
Stock-based compensation			10,025						11,194
Amortization of debt issuance costs			2,714						2,966
Noncash lease expense			1,429						1,407
Change in fair value of warrant liabilities			29						(1,471)
Deferred tax benefits			(1,477)						(1,581)
Gain on extinguishment of debt			—						(20,109)
Share-based compensation liabilities			2,523						15,765
Other, net			32						(27)
Changes in operating assets and liabilities:
Accounts receivable			8,560						(1,487)
Prepaid expenses and other current assets			(2,377)						2,437
Accounts payable			13,056						(75)
Accrued expenses and other current liabilities			(25,908)						5,580
Other non-current liabilities			(546)						(1,228)
Net cash provided by (used in) operating activities			6,491						(6,027)
Cash Flows from Investing Activities
Purchases of property and equipment			(46)						(31)
Purchases of intangible asset			(275)						—
Capitalized software development costs			(4,775)						(4,931)
Net cash used in investing activities			(5,096)						(4,962)
Cash Flows from Financing Activities
Repayment of term loan			(15,000)						(56,786)
Taxes paid related to net settlement of stock awards			(324)						(2,137)
Distributions to members, net of contributions			(33)						(27)
Proceeds from private placement of Class A common stock			2,250						—
Net cash used in financing activities			(13,107)						(58,950)
Effect of exchange rate changes in cash, cash equivalents and restricted cash			(26)						81
Net decrease in cash, cash equivalents and restricted cash			(11,738)						(69,858)
Cash and cash equivalents and restricted cash, beginning of the period			67,948						143,450
Cash and cash equivalents and restricted cash, end of the period			$	56,210					$	73,592
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents			$	54,589					$	69,092
Restricted cash			1,621						4,500
Total cash, cash equivalents and restricted cash			$	56,210					$	73,592
Supplemental cash flow information:
Stock-based compensation included in capitalized software development costs			$	484					$	1,113
Settlement of incentive plan through issuance of common stock			$	—					$	1,707
Right-of-use assets obtained in exchange for operating lease obligations			$	1,700					$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Organization and Description of Business

System1, Inc. and subsidiaries (the "Company", "we", "our" or "us") operates several flagship brands across multiple consumer verticals, including shopping, travel and search, and a best-in-class customer acquisition and marketing platform powered by AI and machine learning. The Company's platform is omnichannel and omnivertical, delivering high-intent customers to its advertising partners to maximize their reach and effectiveness.

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 ("Advertising Partners"). 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.

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. 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 associated with our Products businesses, which include CouponFollow, Startpage and MapQuest, and (c) S1 Holdco holds our assets related to our Marketing businesses. System1 Holdings holds our remaining assets and business operations. 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.

2.Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements and related disclosures are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Our condensed consolidated financial statements include the accounts of System1, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidation. Our fiscal year ends on December 31, 2025. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the Securities and Exchange Commission on March 10, 2025.

In our opinion, the condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2025 or future operating periods.

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 that have had a material impact on our condensed consolidated financial statements and related notes. To conform to the current period’s presentation, (i) warrant liability was combined with other non-current liabilities in the comparative condensed consolidated balance sheet and (ii) depreciation and amortization expense was reclassified to cost of revenue and selling, general, and administrative in the prior periods condensed consolidated statement of operations.

7

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

On June 10, 2025, we filed a certificate of amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to effect a 1-for-10 reverse stock split of the Class A and Class C common stock (the "Reverse Stock Split"). The Reverse Stock Split does not reduce the number of authorized shares of Class A and Class C common stock which remains at 500,000,000 and 25,000,000, respectively, and does not change the par value of the common stock, which remains at $0.0001 per share. Accordingly, all share and per share amounts of common stock for all periods presented in these unaudited condensed consolidated financial statements and related notes have been retroactively adjusted to give effect to the Reverse Stock Split.

Use of Estimates

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

Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, valuation of goodwill, 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.

As of December 31, 2024, the Company had outstanding warrants classified as a liability. These warrants were measured at fair value using Level 1 inputs based on quoted market prices in active markets. During the quarter ended September 30, 2025, the fair value measurement of the warrants changed from Level 1 to Level 3 due to the delisting of the warrants from an exchange and lack of observable inputs.

Risks

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

Concentrations

As of September 30, 2025, we had two paid search advertising partnership agreements with Google, and one paid search advertising partnership agreement with Microsoft. The Google agreements are in effect through February 28, 2027 and September 30, 2027. The agreement with Microsoft (our next largest Advertising Partner by revenue) was renewed through December 31, 2026. Under certain circumstances, each of these agreements may be terminated by either us or the respective Advertising Partner immediately, or with minimal notice.

Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning with the year ending December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements.

8

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

In November 2024, the Financial Accounting Standards Board issued ASU No. 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. This guidance will be effective for the annual periods beginning with the year ending December 31, 2027 and interim periods during the year ending December 31, 2028. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. We are evaluating the effect that this guidance will have on our condensed consolidated financial statements and related disclosures.

In September 2025, the Financial Accounting Standards Board issued ASU No. 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends certain aspects of the accounting for and disclosure of software costs. This guidance will be effective for the annual periods beginning with the year ending December 31, 2028 and interim periods during the year ending December 31, 2028. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. We are evaluating the effect that this guidance will have on our condensed consolidated financial statements and related disclosures.

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

Goodwill

Goodwill was $82.4 million as of September 30, 2025 and December 31, 2024, all of which is attributable to the Partner Network reporting unit. In the second quarter of fiscal year 2025, as a result of organizational restructuring, the Company changed its identified segments and determined there are now two operating and reportable segments, Marketing and Products. There was no change to the Partner Network reporting unit. See Note 9, Segment Reporting, for further discussion of the Company’s operating segments. No impairment of goodwill was recognized in any of the periods presented. If revenue and gross profit performance deteriorate further, is it possible that there could be impairment of Goodwill and Intangible Assets in future periods in the Partner Network reporting unit.

Internal-use Software Development Costs, Net and Intangible Assets, Net

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

			September 30, 2025
			Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Internal-use software development costs			$	26,534					$	(12,364)					$	14,170
Intangible assets:
Developed technology			$	196,403					$	(180,344)					$	16,059
Trademarks and trade names			236,053						(86,350)						149,703
Software			5,100						(4,572)						528
Customer relationships			2,900						(2,476)						424
Total			$	440,456					$	(273,742)					$	166,714

9

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

			December 31, 2024
			Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Internal-use software development costs			$	21,393					$	(6,957)					$	14,436
Intangible assets:
Developed technology			$	196,128					$	(143,386)					$	52,742
Trademarks and trade names			236,053						(68,650)						167,403
Software			5,100						(3,616)						1,484
Customer relationships			2,900						(2,188)						712
Total			$	440,181					$	(217,840)					$	222,341

The internal-use software development costs include work in progress which is not being amortized of $2.2 million and $5.0 million as of September 30, 2025 and December 31, 2024, respectively.

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2025						2024						2025						2024
Amortization expense for internal-use software development			$	2,033					$	1,228					$	5,407					$	3,238
Amortization expense for intangible assets			$	18,626					$	18,665					$	55,902					$	55,995

Amortization expense was presented as follows in the Statements of Operations (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2025						2024						2025						2024
Cost of revenue			$	13,343					$	12,828					$	39,484					$	38,157
Selling, general, and administrative			$	7,316					$	7,065					$	21,825					$	21,076

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

10

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

4.Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

			September 30, 2025						December 31, 2024
Accrued revenue share			$	21,307					$	27,656
Accrued payroll and related benefits			8,907						15,893
Accrued marketing expenses			2,475						9,440
Shared-based compensation liability			12,514						17,821
Advertising partner liability			5,494						—
Other current liabilities			3,558						5,390
Accrued expenses and other current liabilities			$	54,255					$	76,200

CouponFollow Incentive Plan

During the 2024 Performance Period, the CouponFollow business achieved all applicable performance conditions under the CouponFollow Incentive Plan. As a result, the full performance-based award of $21.3 million vested or was expected to vest. Accordingly, we recognized a current share-based compensation liability of $17.8 million within accrued expenses and other current liabilities as of December 31, 2024, of which $7.8 million was paid in cash in February 2025. The final payment to settle the achievement of all the performance conditions of $13.5 million is payable 60 days following December 31, 2025. The carrying amount of the share-based liabilities approximates its fair value, which is determined using Level 3 inputs under the fair value hierarchy.

For the three and nine months ended September 30, 2025, we recognized $0.9 million and $2.5 million in salaries and benefits expenses on the condensed consolidated statements of operations for the performance-based portion of the awards under the CouponFollow Incentive Plan, respectively. As of September 30, 2025, the remaining share-based compensation expense to be recognized in 2025 is $0.9 million.

5.Debt, Net

We entered into a term loan ("Term Loan") and revolving facility ("2022 Revolving Facility") with Bank of America, N.A., on January 27, 2022, providing for a 5.5-year term loan with a principal balance of $400.0 million and with the net proceeds of $376.0 million. The 2022 Revolving Facility provided for borrowing availability of up to $50.0 million. As of September 30, 2025, principal of $265.1 million was outstanding on the Term Loan and there was no balance outstanding on the 2022 Revolving Facility. Through December 31, 2025, $5.0 million of the Term Loan is payable quarterly. From March 31, 2026, $7.5 million of the Term Loan is payable quarterly. The Term Loan matures in July 2027.

For every interest period, the interest rate on the Term Loan is the adjusted Secured Overnight Financing Rate ("SOFR") plus 4.75%. The Term Loan is amortized in quarterly installments on each scheduled payment date. The Term Loan comes with a leverage covenant, which goes into effect only if the utilization on the 2022 Revolving Facility exceeds 35% of the $50.0 million 2022 Revolving Facility at each quarter-end starting the second quarter 2022, such that the first lien leverage ratio (as defined in the credit agreement) should not exceed 5.40. The facility has certain financial and nonfinancial covenants, including a leverage ratio. The facility also requires that we deliver our audited consolidated financial statements to our lender within 120 days of our fiscal year end, December 31. Should we fail to distribute the financial statements to our lender within 120 days, we are allowed an additional 30 days to cure. We were in compliance with the financial covenants under the Term Loan as of September 30, 2025.

The interest rate on the 2022 Revolving Facility is the adjusted SOFR plus 2.5% with an adjusted SOFR floor of 0%. As of September 30, 2025 and December 31, 2024, respectively, we had $50.0 million available on the 2022 Revolving Facility.

11

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 an average discount of 64.1% of its par value) pursuant to a Dutch auction tender offer and a privately negotiated repurchase transaction. We used available cash on hand to fund the repurchase. Our aggregate gain on the repurchase during 2024 was $20.1 million before fees and expenses incurred to negotiate, document and consummate the repurchase.

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

			September 30, 2025						December 31, 2024
Term Loan 1, 2			$	259,236					$	271,523
Total debt, net			$	259,236					$	271,523
_______________
1 Includes unamortized discount of $5.6 million and $8.1 million and unamortized loan fees of $0.3 million and $0.4 million, as of September 30, 2025 and December 31, 2024, 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 $129.2 million as of September 30, 2025.

6.Income Taxes

During 2023 and through July 31, 2024, we were the sole managing member of S1 Holdco and, as a result, consolidated the financial results of S1 Holdco. S1 Holdco was treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, S1 Holdco was not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by S1 Holdco was passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We were subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of S1 Holdco, as well as any stand-alone income or loss generated by us.

As of August 1, 2024, we are the sole managing member of System1 Holdings and, as a result, consolidate the financial results of System1 Holdings. System1 Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, System1 Holdings is not subject to U.S. federal and certain state and local income taxes. 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. 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 recorded an income tax benefit of $0.5 million and $2.5 million for the three and nine months ended September 30, 2025, respectively and an income tax expense of $0.6 million and $0.4 million for the three and nine months ended September 30, 2024. The effective tax rate was 2.4% and 3.7% for the three and nine months ended September 30, 2025, respectively and (1.9)% and (0.5)% for the three and nine months ended September 30, 2024, respectively. The provision for income taxes differs from the amount of income tax computed by applying the U.S. statutory federal tax rate of 21% to the loss before income taxes due to the exclusion of non-controlling loss, state taxes, foreign rate differential, non-deductible expenses, increase to the valuation allowance related to unrealizable deferred tax assets, and outside basis adjustments. As of September 30, 2025, we had a full valuation allowance on our U.S. federal and state net deferred tax assets as it was more likely than not that those deferred tax assets would not be realized.

During the three and nine months ended September 30, 2025 and 2024, inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement. The total amount of Tax Receivable Agreement

12

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Payments due under the Tax Receivable Agreement was $5.3 million as of September 30, 2025 and December 31, 2024.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The Company does not expect these tax law changes to have a material impact on the Company's financial statements; however, the Company will continue to evaluate their impact as further information becomes available.

7.Commitments and Contingencies

In June 2023, we entered into a multi-year agreement with a service provider whereby we are contractually obligated to spend $5.0 million in each annual period between July 2023 and June 2026. As of September 30, 2025, we remain contractually obligated to spend $3.4 million towards this commitment.

As of September 30, 2025, we had various non-cancelable operating lease commitments for office space which have been recorded as Operating lease liabilities.

Litigation

We are subject to various legal proceedings and claims that arise in the ordinary course of business. We believe the ultimate liability, if any, with respect to these actions will not materially affect the consolidated financial position, results of operations, or cash flows reflected in the condensed consolidated financial statements as of September 30, 2025. There can be no assurance, however, that the ultimate resolution of such actions will not materially or adversely affect our consolidated financial position, results of operations, or cash flows. We accrue for losses when the loss is deemed probable and the liability can reasonably be estimated.

In September 2025, certain lenders (the "Lenders") under the Company’s Credit Agreement, dated January 27, 2022 (the "Credit Agreement"), filed a lawsuit in the Supreme Court of the State of New York (the "New York Loan Matter") alleging (i) breach of contract against certain named subsidiaries of the Company that are parties to the Credit Agreement related to the corporate reorganization transactions undertaken by the Company in August 2024 to better align its corporate entity structure with its reportable business segments (the "Corporate Reorg Transactions"), (ii) both intentional fraudulent transfer and constructive fraudulent transfer against certain named subsidiaries of the Company, including certain subsidiaries that are parties to the Credit Agreement, related to certain steps that such defendants undertook in connection with certain transactions undertaken by the Company related to the sale of its Total Security business in November 2023 (the "Total Security Transactions") and (iii) both intentional fraudulent transfer and constructive fraudulent transfer against certain named subsidiaries of the Company, including certain subsidiaries that are parties to the Credit Agreement, related to certain steps that such defendants undertook in connection with the Corporate Reorg Transactions. Concurrently with the filing of the New York Loan Matter, the same Lenders under the Company’s Credit Agreement filed a lawsuit in California Superior Court (Los Angeles County) (the "California Matter" and, together with the New York Loan Matter, the "Creditor Lawsuits") alleging intentional and constructive fraudulent transfer against Openmail2, LLC, an entity controlled by the Company’s co-founders ("Openmail2") and certain trusts established for the benefit of the co-founders families (the "Co-founder Trusts") which are significant shareholders of the Company in connection with certain arm’s-length negotiated loans that Openmail2 and the Co-founder Trusts extended to certain subsidiaries of the Company in fiscal year 2023 (the "Affiliate Loans") and which were repaid with a portion of the proceeds of the Total Security sale. The Company subsidiaries that were parties to the Affiliate Loans agreed to indemnify Openmail2 and the Co-founder Trusts for any third-party claims asserted against such parties in connection with extending the Affiliate Loans. The Lenders are consolidating the Creditor Lawsuits into a single matter in New York since the Lawsuits principally relate to the same allegations and underlying transactions. The Company disputes all of the allegations set forth in the Creditor Lawsuits, denies any liability related thereto and intends to defend itself vigorously against the allegations and claims set forth therein. The Company has not accrued a loss related to the Creditor Lawsuits, as a loss is not currently probable and a loss, or range of loss, is not reasonably estimable.

13

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Indemnifications

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments we could be required to make under these indemnification provisions may not be subject to claims related to these indemnifications. As a result, we believe the estimated fair value of these agreements was immaterial. Accordingly, we have no liabilities recorded for these agreements as of September 30, 2025 or December 31, 2024, respectively.

8.Net Loss Per Share

For the three and nine months ended September 30, 2025 and 2024, basic net loss per share was calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Basic and diluted net loss per share was calculated as follows (in thousands, except per share data):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2025						2024						2025						2024
Basic and diluted net loss per share
Net loss attributable to System1, Inc.			$	(2.30)					$	(3.37)					$	(6.67)					$	(8.76)
Numerator:
Net loss attributable to System1, Inc.			$	(18,516)					$	(23,602)					$	(51,862)					$	(60,512)
Denominator:
Weighted-average common shares outstanding used in computing basic and diluted net loss per share			8,054						7,005						7,773						6,907

Shares of Class C common stock, restricted stock units, Stock Appreciation Rights ("SARs") and warrants outstanding for the three and nine months ended September 30, 2025 and 2024, are considered potentially dilutive to 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. For the three and nine months ended September 30, 2025, a total of 16.8 million Warrants and 0.5 million vested SARs were excluded from the computation of diluted net loss per share as the impact was anti-dilutive. In addition, for the three and nine months ended September 30, 2025, we excluded 1.5 million SARs as they are contingently issuable based on performance conditions which were not achieved. For the three and nine months ended September 30, 2024, a total of 16.8 million Warrants were excluded from the computation of diluted net loss per share as the impact was anti-dilutive. In addition, for the three and nine months ended September 30, 2024, we excluded 2.2 million SARs as they are contingently issuable based on performance conditions which were not achieved. See Note 10, 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. These shares are not included in the denominator of the net loss per share calculation until the employee provides the requisite service resulting in the vesting of the award or the contingency is removed, or upon termination of an employee at which point the common stock underlying the award becomes issuable to the previous investors. Shares associated with the vested or forfeited replacement awards are deemed to be issued and outstanding for accounting purposes on the day of vesting or forfeiture.

14

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

9.Segment Reporting

We previously managed our business across two operating and reportable segments: the monetization of end-users acquired directly by the Company to its websites and products ("Owned & Operated Advertising"), and the monetization of end-users acquired by our Network Partners ("Partner Network"). In the second quarter of 2025, we had an internal organizational change that resulted in a change in how we manage our businesses. We combined the management of our Partner Network business with the portion of our Owned and Operated Advertising activities related to paid traffic acquisition via advertising costs and direct agency fees ("Marketing") and separately manage our CouponFollow, Startpage and MapQuest businesses which primarily acquire end-users organically ("Products"). This resulted in a change to our operating and reportable segments. We now have two operating and reportable segments: Marketing and Products. All prior year information in the tables below have been revised retrospectively to reflect the change to our reportable segments.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker ("CODM"), in deciding how to allocate resources and assess performance. Our Chief Executive Officer, who is considered to be our CODM, reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance. The CODM measures and evaluates operating and reportable segments based on segment adjusted gross profit. The CODM evaluates both potential future, as well as historical budget to actual variances, segment 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. Segment adjusted gross profit is also used to determine variable compensation expense for certain employees.

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 and agency fees), salaries and benefits, selling, general and administrative expenses and, at times, certain other transactions or adjustments. The CODM does not consider these expenses for the purposes of making decisions to allocate resources among segments or to assess segment performance, however these costs are included in reported condensed consolidated net loss before income tax and are included in the reconciliation that follows.

The following table summarizes revenue, segment cost of revenue and segment adjusted gross profit by reportable segment (in thousands):

			Three Months Ended September 30, 2025																		Three Months Ended September 30, 2024
			Marketing						Products						Total						Marketing						Products						Total
Revenue			$	39,065					$	22,496					$	61,561					$	68,083					$	20,749					$	88,832
Less: segment cost of revenue			22,417						1,278						23,695						48,693						680						49,373
Segment adjusted gross profit			16,648						21,218						37,866						19,390						20,069						39,459
Other cost of revenue															15,124																		14,626
Salaries and benefits															21,354																		29,177
Selling, general, and administrative															16,953																		17,472
Interest expense, net															7,052																		7,957
Change in fair value of warrant liabilities															(71)																		281
Loss before income tax															$	(22,546)																	$	(30,054)

15

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

			Nine Months Ended September 30, 2025																		Nine Months Ended September 30, 2024
			Marketing						Products						Total						Marketing						Products						Total
Revenue			$	145,457					$	68,732					$	214,189					$	214,867					$	53,463					$	268,330
Less: segment cost of revenue			87,389						3,862						91,251						152,199						2,423						154,622
Segment adjusted gross profit			58,068						64,870						122,938						62,668						51,040						113,708
Other cost of revenue															43,857																		44,202
Salaries and benefits															72,639																		87,597
Selling, general, and administrative															51,038																		58,607
Interest expense, net															21,253																		23,798
Gain on extinguishment of debt															—																		(20,109)
Change in fair value of warrant liabilities															29																		(1,471)
Loss before income tax															$	(65,878)																	$	(78,916)

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2025						2024						2025						2024
United States			$	59,387					$	85,216					$	206,281					$	258,113
Other countries			2,174						3,616						7,908						10,217
Total revenue			$	61,561					$	88,832					$	214,189					$	268,330

10.Stock-Based Compensation

We are authorized to issue and/or grant stock options, SARs, restricted stock, restricted stock units, dividend equivalents or other stock-based and cash-based awards under our 2022 Incentive Award Plan.

We recorded the following stock-based compensation expense for equity-classified awards included within salaries and benefits in the condensed consolidated statement of operations (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2025						2024						2025						2024
Stock-based compensation expense			$	2,832					$	3,783					$	10,025					$	11,196

Restricted Stock Units

In July 2025, we granted 2.0 million restricted stock unit awards in accordance with the 2022 Incentive Award Plan.

Stock Appreciation Rights

On May 30, 2025 the SARs plan administrator certified that the trailing twelve month ("TTM") adjusted EBITDA exceeded the Tranche I performance threshold and the Tranche I awards vested ("Vested SARs").

On June 10, 2025 our stockholders approved an amendment to the System1, Inc. 2024 Stock Appreciation Rights Plan, (as amended, the "2024 SARs Plan") and the repricing ("Repricing") of certain outstanding SARs previously granted to our employees and consultants under the SARs Plan (collectively, the "SARs Plan Amendment and Repricing"). The strike price of the SARs granted changed from $1.44 to $0.44 and the adjusted

16

System1, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

EBITDA performance threshold for any TTM period concluding on or after the applicable date of grant was modified from (i) $60 million ("Tranche II"), (ii) $70 million ("Tranche III") and (iii) $80 million ("Tranche IV") to (i) $55 million, (ii) $60 million and (iii) $65 million, respectively ("the Modification"). There were no changes to the other terms of the SARs Plan.

At the modification date, we used the Hull-White I binomial lattice option pricing model to estimate the SARs option fair value. The following table sets forth the key assumptions used to determine the modified fair value:

Input
Risk-free interest rate						3.87% - 4.11%
Term (in years)						3.06 - 6.06
Volatility factor						84.27% - 97.65%
Dividend yield						0.00%

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term is equal to the remaining contractual term. Volatility is based on a blend of the historical volatility of our common stock and the peer-leveraged volatility.

As of September 30, 2025, we recognized compensation cost for the Vested SARs and determined it is probable we would achieve the performance conditions of Tranche II before the fifth anniversary grant date of the awards. Accordingly, we recognized $0.8 million and $4.4 million of stock-based compensation expense, within equity for the three and nine months ended September 30, 2025, respectively. As of September 30, 2025, the total unrecognized compensation cost related to unvested Tranche II SARs was $0.5 million. During the three and nine months ended September 30, 2025, there were an immaterial number of SARs were exercised.

11.Related Party Transaction

During the second quarter of 2025, we entered into a Securities Purchase Agreement with one of our Founders' family foundation, pursuant to which we agreed to sell 450,000 shares of our Class A common stock at a price of $5.00 per share. The aggregate proceeds, which were received on May 2, 2025, was $2.3 million.

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

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

The following discussion and analysis of the financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ending December 31, 2024. In addition to historical information, the following discussion and analysis contains forward-looking statements. Our actual results may differ significantly from those projected in such forward-looking statements. Factors that might cause future results to differ materially from those projected in such forward-looking statements include, but are not limited to, those discussed in the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." included in our Annual Report on Form 10-K.

Company Overview

We operates several flagship brands across multiple consumer verticals, including shopping, travel and search, and a best-in-class customer acquisition and marketing platform powered by AI and machine learning. The Company's platform is omnichannel and omnivertical, delivering high-intent customers to its advertising partners to maximize their reach and effectiveness.

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 these acquired end users through our relationships with third party advertisers and advertising networks ("Advertising Partners"). RAMP operates across our network of owned and operated websites, allowing us to monetize 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.

Through RAMP, we process daily advertising campaign optimizations across approximately 40 advertising vertical categories as of September 30, 2025. We are able to efficiently monetize user intent by linking data on consumer engagement, such as first party search data like traffic sources, device type and search queries, with data on monetization rates and advertising spend. This context-enriched data, combined with our proprietary and data science driven algorithms, creates a closed-loop system that is not reliant on personally identifiable information or information obtained through third-party cookies, but which allows RAMP to efficiently match consumer demand with the appropriate advertiser or advertising experience across advertising category verticals.

We monetize user traffic acquired by our Network Partners. Since launching, this business has expanded to support additional advertising formats across multiple advertising platforms, and has acquired several leading websites, enabling it to control the entire flow of the user acquisition experience, while monetizing user traffic through our network of owned and operated websites. As of September 30, 2025, we own and operate approximately 40 websites, including leading search engines like info.com and Startpage.com, and digital media publishing websites and internet utilities, such as HowStuffWorks, MapQuest, CouponFollow and ActiveBeat.

Our primary operations are in the United States, and we also have operations in Canada and the Netherlands. Operations outside the United States are subject to risks inherent in operating under different legal systems as well as various political and economic environments. Among the risks are changes in existing tax laws, changes in the regulatory framework in foreign jurisdictions, data privacy laws, possible limitations on foreign investment and income repatriation, government foreign exchange controls, exposure to currency exchange fluctuations and employment laws impacting foreign employees. We do not engage in hedging activities to mitigate our exposure to fluctuations in foreign currency exchange rates.

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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. Following the corporate reorganization, (a) System1 Holdings now owns 100% of 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 associated with our Products businesses, which include CouponFollow, Startpage and MapQuest, and (c) S1 Holdco holds our assets related to our Marketing businesses. System1 Holdings holds our remaining assets and business operations. 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.

On June 12, 2025, we effected a 1-for-10 reverse stock split of our issued and outstanding common stock. The reverse stock split did not change the authorized number of shares or the par value of our common stock, but did effect a proportional adjustment to the number of shares of common stock outstanding and the number of shares of common stock issuable upon the vesting of restricted stock awards and stock appreciation rights, the conversion rate of our outstanding warrants into common stock and the number of shares of common stock eligible for issuance under our 2022 Incentive Award Plan. See Item 1, "Financial Statements —Note 2, Significant Accounting Policies" for additional information. regarding the reverse stock split.

Components of Our Results of Operations

Revenue

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. For this revenue stream, we have a single performance obligation and have determined that we are the principal in the transaction and report revenue on a gross basis for the amounts received from Advertising Partners. We have determined that we are the principal since we direct the use of our owned and operating websites, and as such have risk of loss on the user-traffic that we are acquiring for monetization with our Advertising Partners. 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.

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. We have determined that we are the agent in these transactions and therefore report revenue on a net basis, because our network partner runs the campaign to acquire user-traffic including managing traffic acquisition cost. 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.

We recognize revenue as we deliver user-traffic to our Advertising Partners based on a cost-per-click, cost-per-action or cost-per-thousand impression basis. The payment terms with our Advertising Partners are typically 30 days.

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

We have two reportable segments:

•Marketing; and

•Products

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Operating Expenses

    To conform to the current period’s presentation, depreciation and amortization expense was reclassified to cost of revenue and selling, general, and administrative in the prior period condensed consolidated statements of operations. We classify our operating expenses into the following categories:

Cost of revenue. Cost of revenue primarily consists of traffic acquisition costs, which are the costs to place advertisements to acquire customers to our websites and services, domain name registration costs, licensing costs to provide mapping services to Mapquest.com and amortization related to our RAMP platform. We do not pre-pay any traffic acquisition costs, and therefore, such costs are expensed as incurred. Amortization related to our RAMP platform is recognized over the estimated useful life of the intangible asset.

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

Selling, general, and administrative. Selling, general, and administrative expenses consist of depreciation and non-internally developed software platform amortization, fees for software services, professional services, occupancy costs and travel and entertainment. Depreciation and non-internally developed software platform amortization expense are primarily attributable to our capital investment(s) and consist of property and equipment depreciation and amortization of intangible assets with finite lives.

Other Expenses or Incomes:

Other expenses or incomes consist of the following:

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

Gain on extinguishment of debt. The recognition of the gain from the repurchase of a portion of our Term Loan at a discount. See Item 1, "Financial Statements —Note 5, Debt, Net" for additional information.

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

Income tax (benefit) expense

During 2023 and through July 31, 2024, we were the sole managing member of S1 Holdco and, as a result, consolidated the financial results of S1 Holdco. S1 Holdco was treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, S1 Holdco was not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by S1 Holdco was passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We were subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of S1 Holdco, as well as any stand-alone income or loss generated by us.

As of August 1, 2024, we are the sole managing member of System1 Holdings and, as a result, consolidate the financial results of System1 Holdings. System1 Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, System1 Holdings is not subject to U.S. federal and certain state and local income taxes. 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. 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.

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Results of Operations

The following tables set forth our condensed consolidated results of operations and condensed consolidated results of operations as a percentage of revenue and comparative period changes for the periods presented (in thousands):

			Three Months Ended September 30,																								Change
			2025						% of Revenue						2024						% of Revenue						($)						(%)*
Revenue			$	61,561					100		%				$	88,832					100		%				$	(27,271)					-31		%
Operating expenses:
Cost of revenue			38,819						63		%				63,999						72		%				(25,180)						-39		%
Salaries and benefits			21,354						35		%				29,177						33		%				(7,823)						-27		%
Selling, general, and administrative			16,953						28		%				17,472						20		%				(519)						-3		%
Total operating expenses			77,126						125		%				110,648						125		%				(33,522)						-30		%
Operating loss			(15,565)						-25		%				(21,816)						-25		%				6,251						-29		%
Other expense (income):
Interest expense, net			7,052						11		%				7,957						9		%				(905)						-11		%
Change in fair value of warrant liabilities			(71)						—		%				281						—		%				(352)						-125		%
Total other expense, net			6,981						11		%				8,238						9		%				(1,257)						-15		%
Loss before income tax			(22,546)						-37		%				(30,054)						-34		%				7,508						-25		%
Income tax (benefit) expense			(543)						-1		%				585						1		%				(1,128)						-193		%
Net loss			(22,003)						-36		%				(30,639)						-34		%				8,636						-28		%
Less: Net loss attributable to non-controlling interest			(3,487)						-6		%				(7,037)						-8		%				3,550						-50		%
Net loss attributable to System1, Inc.			$	(18,516)					-30		%				$	(23,602)					-27		%				$	5,086					-22		%
* Percentages may not sum due to rounding

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			Nine Months Ended September 30,																								Change
			2025						% of Revenue						2024						% of Revenue						($)						(%)*
Revenue			$	214,189					100		%				$	268,330					100		%				$	(54,141)					-20		%
Operating expenses:
Cost of revenue			135,108						63		%				198,824						74		%				(63,716)						-32		%
Salaries and benefits			72,639						34		%				87,597						33		%				(14,958)						-17		%
Selling, general, and administrative			51,038						24		%				58,607						22		%				(7,569)						-13		%
Total operating expenses			258,785						121		%				345,028						129		%				(86,243)						-25		%
Operating loss			(44,596)						-21		%				(76,698)						-29		%				32,102						-42		%
Other expense (income):
Interest expense, net			21,253						10		%				23,798						9		%				(2,545)						-11		%
Gain on extinguishment of debt			—						—						(20,109)						-7		%				20,109						-100		%
Change in fair value of warrant liabilities			29						—		%				(1,471)						-1		%				1,500						-102		%
Total other expense, net			21,282						10		%				2,218						1		%				19,064						860		%
Loss before income tax			(65,878)						-31		%				(78,916)						-29		%				13,038						-17		%
Income tax (benefit) expense			(2,477)						-1		%				359						—		%				(2,836)						-790		%
Net loss			(63,401)						-30		%				(79,275)						-30		%				15,874						-20		%
Less: Net loss attributable to non-controlling interest			(11,539)						-5		%				(18,763)						-7		%				7,224						-39		%
Net loss attributable to System1, Inc.			$	(51,862)					-24		%				$	(60,512)					-23		%				$	8,650					-14		%
* Percentages may not sum due to rounding

Revenue Metrics

The key non-financial performance metrics we use to evaluate our business, track the effectiveness of our operations and measure our performance are return on traffic acquisition cost ("RTAC"), the number of Products sessions and Products revenue-per-session ("Products RPS").

Marketing

We define RTAC as platform revenue divided by traffic acquisition cost. Platform revenue is Revenue plus Network Partner revenue share. Traffic Acquisition Cost ("TAC") is defined as the sum of total advertising spend, agency fees and Network Partner revenue share. Advertising spend is the amount of advertising that is spent to acquire traffic. Agency fees are the amount of costs for agencies acquiring traffic to Owned and Operated websites. We believe RTAC is a relevant measure to evaluate our effectiveness and efficiency in deploying capital to acquire monetizable traffic to our Marketing segment.

Products

We define Products sessions as the total number of monetizable user visits to our Products websites. Monetizable visits exclude those visits identified as spam, bot, or other invalid traffic. We define Products RPS as Products revenue divided by Products sessions. We believe Product sessions and RPS are relevant measures to evaluate our effectiveness and efficiency in converting monetizable traffic into revenue, which are key drivers of our Products reportable segment.

22

Revenue

The following tables presents our revenue by reportable segment (in thousands):

			Three Months Ended September 30,												Change
			2025						2024						($)						(%)
Marketing			$	39,065					$	68,083					$	(29,018)					-43%
Products			22,496						20,749						1,747						8%
Total revenue			$	61,561					$	88,832					$	(27,271)					-31%

			Nine Months Ended September 30,												Change
			2025						2024						($)						(%)
Marketing			$	145,457					$	214,867					$	(69,410)					-32%
Products			68,732						53,463						15,269						29%
Total revenue			$	214,189					$	268,330					$	(54,141)					-20%

Marketing

Marketing revenue decreased for the three and nine months ended September 30, 2025 as compared to the comparative periods. This was driven by a decrease in TAC, where for the three months ended September 30, 2025, compared to the prior year comparative period, TAC decreased by $26.8 million to $84.0 million from $110.8 million. This was slightly offset by an increase in RTAC of 2% to 120% from 118%. Similarly, for the nine months ended September 30, 2025, compared to the prior year comparative period, TAC decreased by $53.3 million to $284.8 million from $338.1 million, which was slightly offset by an increase in RTAC of 1% to 120% from 119%.

Products

Products revenue increased for the three and nine months ended September 30, 2025 as compared to the comparative periods. The increase was driven by an increase in Products sessions, where for the three months ended September 30, 2025, compared to the prior year comparative period, Products sessions increased by 111.3 million to 584.7 million from 473.4 million while Products RPS remained flat at $0.04. Similarly, for the nine months ended September 30, 2025, compared to the prior year comparative period, Products sessions increased by 208.6 million to 1,582.8 million from 1,374.2 million and Products RPS remained flat at $0.04.

Cost of revenue    

Cost of revenue decreased for the three and nine months ended September 30, 2025 as compared to the comparative periods. The decrease in advertising spend and agency fees is correlated with the decrease in revenue.

Amortization expense for our marketing platforms increased $0.5 million and $1.3 million for the three and nine months ended September 30, 2025, respectively compared to the prior comparative periods primarily due to increased amortization for our continued investment in developed technology and internally developed software.

Our chief operating decision maker measures and evaluates reportable segments based on segment operating revenue and segment adjusted gross profit. We define and calculate segment adjusted gross profit as revenue less traffic acquisition costs incurred to acquire users. The remaining cost of revenue consists of non-advertising expenses such as set-up costs, royalties, fees and amortization related to our marketing platforms. We exclude the following items from segment adjusted gross profit: other cost of revenue (total cost of revenue

23

excluding traffic acquisition cost), salaries and benefits, selling, general and administrative expenses and, at times, certain other transactions or adjustments.

The following tables presents our segment adjusted gross profit by reportable segment (in thousands):

			Three Months Ended September 30,												Change
			2025						2024						($)						(%)
Marketing			$	16,648					$	19,390					$	(2,742)					-14		%
Products			$	21,218					$	20,069					$	1,149					6		%

			Nine Months Ended September 30,												Change
			2025						2024						($)						(%)
Marketing			$	58,068					$	62,668					$	(4,600)					-7		%
Products			$	64,870					$	51,040					$	13,830					27		%

See the Revenue and Cost of revenue discussions above for changes to adjusted gross profit.

Salaries and benefits

Salaries and benefits expense decreased for the three and nine months ended September 30, 2025 compared to the comparative periods.

For the three months ended September 30, 2025, the $7.8 million decrease is primarily related to recognition of $7.2 million CouponFollow shared-based liability expense in the comparative period when all tier targets were determined to be probable of being achieved and a $1.4 million reduction in stock-based compensation related to reduced restricted stock unit issuances. This was offset by an increase of $0.8 million in stock-based compensation expense related to the vesting of Tranche I stock appreciation right awards issued in the current period and the expense of Tranche II stock appreciation right awards.

For the nine months ended September 30, 2025, the $15.0 million decrease is primarily related to recognition of $17.6 million reduction in CouponFollow share-based liability expense in the comparative period when all tier targets were determined to be probable of being achieved and a $6.2 million reduction in stock-based compensation related to reduced restricted stock units issuances. This was offset by an increase of $4.4 million in stock-based compensation expense related to the vesting of Tranche I stock appreciation right awards and continued accrual of Tranche II stock appreciation right awards, a $3.0 million increase in retention bonus expense, and a $1.3 million increase in severance expense.

Selling, general, and administrative

Selling, general, and administrative expense decreased for the three and nine months ended September 30, 2025 as compared to the prior comparative periods. The decrease was primarily related to a $0.5 million and $7.9 million reduction in professional services and consulting fees for the three and nine months ended September 30, 2025, respectively.

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Other expense (income):

Interest expense, net

Interest expense, net decreased for the three and nine months ended September 30, 2025 as compared to the prior comparative periods primarily due to a lower outstanding debt balance.

Gain on extinguishment of debt

Gain on extinguishment of debt decreased for the nine months ended September 30, 2025 as compared to the prior comparative period due to the repurchase of our principal debt balances via a Dutch auction in the first quarter and repurchase of principal debt in the second quarter of 2024. There was no repurchase of debt during the third quarter of 2024 or during 2025.

Change in fair value of warrant liabilities

Change in fair value of warrant liabilities increased for the three months ended September 30, 2025 and decreased for the nine months ended September 30, 2025 as compared to the prior comparative periods due to the fair value remeasurement of Warrants which have been delisted from the New York Stock Exchange.

Income tax (benefit) expense

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

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The Company does not expect these tax law changes to have a material impact on the Company's financial statements; however, the Company will continue to evaluate their impact as further information becomes available.

Liquidity and Capital Resources

We expect existing cash and cash equivalents and cash flows from operating and financing activities to continue to be sufficient to fund our operating and cash commitments for investing and financing activities for at least the next twelve months. Our principal sources of liquidity have historically been from cash received from the sale of Total Security Limited (formerly known as Protected. net Group Limited), indebtedness available under our credit facilities, other indebtedness and cash flows from operations. Our principal sources of liquidity are expected to be from cash on hand and cash flows from operating and financing activities. Our ability to fund future operating expenses and capital expenditures, and our ability to meet our future debt service obligations, will depend on our ability to execute on our operational strategy and may be affected by our profitability, as well as general economic, financial and other factors which are beyond our control.

We continue to develop and implement plans to improve our liquidity. Our main focus is executing on our operational strategy, which includes continued focus on expanding the number of advertising partners that are utilizing or integrated with RAMP by continuing to attract and monetize users with commercial intent on our owned and operated web properties and on behalf of our Network Partners as well as optimizing bids and driving higher returns on advertising spend. Additionally, we are focused on our current cost structure by reducing our cash operating expenses and debt service obligations. Adverse macroeconomic conditions have affected, and may in the future affect, the demand for advertising, resulting in fluctuations in the amounts our advertisers spend on advertising, which could have a negative impact on our financial condition and operating results.

25

As of September 30, 2025, we had unrestricted cash and cash equivalents of $54.6 million and $50.0 million available to borrow on our 2022 Revolving Facility. For the nine months ended September 30, 2025, we had cash outflows of $11.7 million.

Our revenue is dependent on two key Advertising Partners, Google and Microsoft. See our concentration with customers discussion at Item 1 "Financial Statements — Note 2, Summary of Significant Accounting Policies" for additional information.

Credit Facilities

See Item 1, "Financial Statements - Note 5, Debt, Net" of this Quarterly Report on Form 10-Q.

Cash Flows

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

			Nine Months Ended September 30,
			2025						2024
Net cash provided by (used in) operating activities			$	6,491					$	(6,027)
Net cash used in investing activities			$	(5,096)					$	(4,962)
Net cash used in financing activities			$	(13,107)					$	(58,950)

Operating Activities

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

In the nine months ended September 30, 2025, cash provided by operating activities was $6.5 million. The principal drivers of our cash inflow from operations primarily from favorable changes in net income, excluding the impact of non-cash items offset by unfavorable changes in working capital balances. The unfavorable changes in working capital balances included $13.2 million in outflows related to the payment of an earnout obligation for the CouponFollow acquisition offset by an decrease in account receivable balances.

In the nine months ended September 30, 2024, cash used in operating activities was $6.0 million resulted primarily from favorable changes in net income, excluding the impact of non-cash items offset by favorable changes in working capital balances. The favorable changes in working capital balances included an increase in accrued expenses and other current liabilities offset by an increase in account receivable balances.

Investing Activities

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

In the nine months ended September 30, 2025 and 2024, cash used in investing activities was $5.1 million and $5.0 million resulted primarily from costs capitalized for internally developed software, respectively.

26

Financing Activities

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

In the nine months ended September 30, 2025, cash used in financing activities was $13.1 million of which $15.0 million was related to the repayment of the 2022 Term Loan, offset by $2.3 million of cash received from the private placement with our founders' family foundation.

In the nine months ended September 30, 2024, cash used in financing activities was $59.0 million was primarily related to the repayment of the 2022 Term Note in the amount of $56.8 million.

Off-Balance Sheet Arrangements

We do not have any relationships with entities often referred to as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We did not have any other off-balance sheet arrangements during the periods presented other than the indemnification agreements.

Contractual Obligations and Known Future Cash Requirements

Service Agreements

In June 2023, we entered into a multi-year agreement with a service provider whereby we are contractually obligated to spend $5.0 million annually between July 2023 and June 2026. As of September 30, 2025, we remain contractually obligated to spend a remaining $3.4 million towards this commitment.

Contingencies

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

Critical Accounting Policies and Estimates

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

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

There have been no material changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K filed with the SEC on March 10, 2025.

Recently Issued Accounting Pronouncements

For information regarding recent accounting pronouncements, see Item 1, "Financial Statements - Note 2, Summary of Significant Accounting Policies."

27

Item 3. Quantitative and Qualitative Disclosure about Market Risk

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

Item 4. Controls and Procedures    

Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO concluded that, as of September 30, 2025, due to the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed in the reports required to be filed or submitted under the Securities Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Material Weaknesses in Internal Control Over Financial Reporting

We have identified material weaknesses in our internal control over financial reporting as of September 30, 2025. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified were as follows:

•We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately. Additionally, the limited personnel resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in our finance and accounting functions;

•We did not design and maintain effective controls in response to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement to financial reporting.

These material weaknesses contributed to the following additional material weaknesses:

•We did not design and maintain effective controls to timely analyze and record the financial statement effects from complex, non-routine transactions, including acquisitions, dispositions, equity commitments and post-combination compensation arrangements. Specifically, we did not design and maintain effective controls over the application of United States Generally Accepted Accounting Principles ("US GAAP") to such transactions, and, as it relates to acquisitions, did not design and maintain effective controls over (i) the review of the inputs and assumptions used in the measurement of assets acquired and liabilities assumed, including discounted cash flow analysis to value acquired intangible assets at an appropriate level of precision, (ii) the tax impacts of acquisitions to the financial statements, and (iii) conforming of US GAAP and accounting policies of acquired entities to that of the Company. In addition, we did not design and maintain effective controls relating to the oversight and ongoing recording of the financial statement results of the acquired businesses;

28

•We did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over (i) the preparation and review of business performance reviews, account reconciliations, journal entries, and identification of asset groups and (ii) maintaining appropriate segregation of duties. Additionally, we did not design and maintain controls over the classification and presentation of accounts and disclosures in the consolidated financial statements, including the statement of cash flows.

Remediation plan for the material weaknesses

We are in the process of, and we are focused on, designing and implementing effective measures to improve our internal control over financial reporting and remediate the material weaknesses. Our remediation efforts to address the identified material weaknesses are ongoing. Our efforts include a number of actions:

•Assessed the need of additional senior level accounting personnel with applicable technical accounting knowledge, training, and experience in accounting matters, and hired the appropriately skilled resources;

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

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

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

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

We believe the measures described above will facilitate the remediation of the material weaknesses we have identified and will strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control over financial reporting and will continue to review, optimize and enhance our processes, procedures and controls. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify, or in appropriate circumstances not complete, certain of the remediation measures described above. These material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Therefore, these material weaknesses have not been remediated as of September 30, 2025.

Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the three months ended September 30, 2025 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

29

Part II—OTHER INFORMATION

Item 1. Legal Proceedings

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

For information in response to this item, see Part I, Item I, "Financial Statements - Note 7, Commitments and Contingencies", within the notes to our unaudited condensed consolidated financial statements and for a summary of material legal proceedings see Part I, Item 3, "Legal Proceedings" of our Annual Report on Form 10-K filed with the SEC on March 10, 2025.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K Part I, Item "1A. Risk Factors" for the year ended December 31, 2024 filed with the SEC on March 10, 2025.

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

Recent Sales of Unregistered Equity Securities

None.

Issuer Purchases of Equity Securities

In August 2022, the Board authorized up to $25.0 million for the repurchase of our Class A common stock and Warrants. As of September 30, 2025, we had $23.9 million available under this authorization remaining. There were no share repurchases during the third quarter.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

30

Item 6. Exhibits

Incorporated by Reference

Filed or Furnished Herewith

Exhibit No.

Description

Form

File No.

Exhibit

Filing Date

2.1(a)

Business Combination Agreement, dated as of June 28, 2021, by and among Trebia Acquisition Corp., S1 Holdco, LLC, System1 SS Protect Holdings, Inc., and the other parties that are signatory thereto.

8-K

001-39331

2.1

6/29/2021

2.1(b)

Amendment No. 1 to the Business Combination Agreement, dated as of November  30, 2021, by and among Trebia Acquisition Corp., S1 Holdco, LLC, System1 SS Protect Holdings, Inc., and the other parties that are signatory thereto.

S-4

333-260714

2.2

12/1/2021

2.1(c)

Amendment No. 2 to the Business Combination Agreement, dated January 10, 2022, by and among S1 Holdco, LLC, a Delaware limited liability company, System1 SS Protect Holdings, Inc., a Delaware corporation and the other parties signatory thereto.

8-K

001-39331

10.1

1/20/2022

2.1(d)

Amendment No. 3 to the Business Combination Agreement, dated January 25, 2022, by and among S1 Holdco, LLC, a Delaware limited liability company, System1 SS Protect Holdings, Inc., a Delaware corporation and the other parties signatory thereto.

8-K

001-39331

10.1

1/26/2022

2.2

Share Purchase Agreement, dated November 30, 2023, by and among System1, Inc., Orchid Merger Sub II, LLC, Sonic Newco, LLC, JDI Antarctica Limited and JDI Antarctica Sub II Limited

8-K

001-39331

2.1

12/4/2023

3.1

Certificate of Incorporation of System1, Inc.

8-K

001-39331

3.1

2/2/2022

3.2

Second Amended and Restated Bylaws of System1, Inc.

8-K

001-39331

3.1

3/1/2023

3.3

Amendment to the System1, Inc. Certificate of Incorporation

8-K

001-39331

3.1

6/14/2024

3.4

Amendment to the System1, Inc. Certificate of Incorporation

8-K

001-39331

3.1

6/11/2025

4.1

Warrant Agreement, dated June 19, 2020, by and between Trebia Acquisition Corp. and Continental Stock Transfer  & Trust Company, as warrant agent.

8-K

001-39331

4.1

6/2/2020

4.2

Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

10-K

001-39331

4.2

6/6/2023

10.1^

System1, Inc. 2022 Incentive Award Plan.

8-K

001-39331

10.2

2/2/2022

10.2#

Credit and Guaranty Agreement, dated as of January 27, 2022, among Orchid Finco LLC, System1 Midco, LLC, Orchid Merger Sub II, LLC and the subsidiaries from time to time party thereto, S1 Holdco, LLC, Bank of America, N.A. and the lenders from time to time party thereto.

10-K

001-39331

10.7

6/6/2023

10.3

Registration Rights Agreement, dated January 27, 2022, by and among System1, Inc. and the other parties that are signatory thereto.

S-1

333-262608

10.3

2/9/2022

10.4

Registration Rights Agreement, dated June 19, 2020, among the Company, the Sponsors and certain other security holders named therein.

8-K

001-39331

10.2

6/22/2020

31.1*

Certification of principal executive officer pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

31.2*

Certification of principal financial and accounting officer pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

32.1**

Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

32.2**

Certification of principal financial and accounting officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101.INS*

XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*

XBRL Taxonomy Extension Schema Document.

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document.

104*

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

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

31

SIGNATURES

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

			System1, Inc.
Date: November 5, 2025			By:			/s/ Michael Blend
						Michael Blend
						Chief Executive Officer
Date: November 5, 2025			By:			/s/ Tridivesh Kidambi
						Tridivesh Kidambi
						Chief Financial Officer

32

FAQ

How did System1 (SST) perform in Q3 2025?

Revenue was $61.6 million and net loss was $22.0 million, with an operating loss that narrowed versus the prior year.

What are System1’s key segment results for Q3 2025?

Marketing revenue was $39.1 million, while Products grew to $22.5 million, improving Products’ adjusted gross profit.

What is System1’s liquidity position as of September 30, 2025?

Cash and cash equivalents were $54.6 million, plus $50.0 million available on the 2022 Revolving Facility.

How much debt does System1 have outstanding?

Term Loan principal outstanding was $265.1 million (carrying value $259.2 million), maturing in 2027.

What were year‑to‑date results for 2025?

Revenue was $214.2 million and net loss was $63.4 million for the nine months ended September 30, 2025.

Did System1 execute a reverse stock split?

Yes. A 1‑for‑10 reverse stock split was effected in June 2025.

What is the status of major ad partnerships?

Paid search agreements are in effect with Google through February 28, 2027 and September 30, 2027, and with Microsoft through December 31, 2026.