System1 : Q2 23 Supplemental Financial Information

System1, Inc./S1 Holdco LLC

Unaudited Statements of Operations

Successor +

Successor +

Successor +

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

System1, Inc.

Predecessor Total

Predecessor Total

Predecessor Total

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

Predecessor

(in thousands)

QTD

QTD

QTD

QTD

QTD

Sucessor Period

Period

QTD

QTD

QTD

QTD

YTD

YTD

YTD

YTD

YTD

YTD

YTD

30-Jun-23

31-Mar-23

31-Dec-22

30-Sep-22

30-Jun-22

1.27.22 - 3.31.22

1.1.22 - 1.26.22

31-Dec-21

30-Sep-21

30-Jun-21

31-Mar-21

30-Jun-23

31-Dec-22

30-Sep-22

30-Jun-22

31-Dec-21

30-Sep-21

30-Jun-21

Revenue

147,238

167,854

186,859

201,176

219,797

166,108

52,712

199,803

171,446

169,579

147,561

315,092

826,652

639,793

438,617

688,389

488,586

317,140

Operating cost and expenses:

Cost of revenues

93,882

120,402

128,157

137,680

152,558

120,384

41,507

155,276

128,885

126,167

110,785

214,284

580,286

452,129

314,449

521,113

365,837

236,952

Salaries, commissions, and benefits

43,991

38,398

41,665

55,602

49,511

48,198

31,181

18,715

15,139

17,698

15,195

82,389

226,157

184,492

128,890

66,747

48,032

32,893

Selling, general, and administrative

17,735

17,172

16,224

15,419

16,747

15,088

15,665

14,650

7,936

6,277

6,950

34,907

79,143

62,919

47,500

35,813

21,163

13,227

Depreciation and amortization

28,052

29,374

32,416

32,214

32,094

21,928

1,000

3,625

3,459

3,112

3,689

57,426

119,652

87,236

55,022

13,885

10,260

6,801

Impairment of goodwill

-

-

26,200

340,109

-

-

-

-

-

-

-

-

366,309

340,109

-

-

-

-

Total operating costs and expenses

183,660

205,346

244,662

581,024

250,910

205,598

89,353

192,266

155,419

153,254

136,619

389,006

1,371,547

1,126,885

545,861

637,558

445,292

289,873

Operating income

(36,422)

(37,492)

(57,803)

(379,848)

(31,113)

(39,490)

(36,641)

7,537

16,027

16,325

10,942

(73,914)

(544,895)

(487,092)

(107,244)

50,831

43,294

27,267

Loss (gain) on Fair Value of Warrants

2,018

(1,409)

(10,360)

4,489

(4,139)

13,761

-

-

-

-

-

609

3,751

14,111

9,622

-

-

-

Interest expense

12,342

11,451

9,938

10,011

7,324

4,776

1,049

4,162

4,184

4,476

4,048

23,793

33,098

23,160

13,149

16,870

12,708

8,524

Income (loss) from continuing operations before income tax

(50,782)

(47,534)

(57,381)

(394,348)

(34,298)

(58,027)

(37,690)

3,375

11,843

11,849

6,894

(98,316)

(581,744)

(524,363)

(130,015)

33,961

30,586

18,743

Income tax expense

(6,605)

(4,408)

(6,224)

(80,649)

(454)

(14,649)

(629)

262

475

77

151

(11,013)

(102,605)

(96,381)

(15,732)

965

703

228

Net income (loss) from continuing operations

(44,177)

(43,126)

(51,157)

(313,699)

(33,844)

(43,378)

(37,061)

3,113

11,368

11,772

6,743

(87,303)

(479,139)

(427,982)

(114,283)

32,996

29,883

18,515

Net Income (Loss) Attributable To Noncontrolling Interest

(8,947)

(9,174)

(18,264)

(72,002)

(8,107)

(7,309)

-

-

-

-

-

(18,121)

(105,682)

(87,418)

(15,416)

-

-

-

Gain (loss) from discontinued operations, net of taxes

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Net income

(35,230)

(33,952)

(32,893)

(241,697)

(25,737)

(36,069)

(37,061)

3,113

11,368

11,772

6,743

(69,182)

(373,457)

(340,564)

(98,867)

32,996

29,883

18,515

(in thousands)

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

30-Jun-23

31-Mar-23

31-Dec-22

30-Sep-22

30-Jun-22

31-Mar-22

31-Dec-21

30-Sep-21

30-Jun-21

31-Mar-21

ASSETS

Current Assets:

Cash and cash equivalents

$

8,603

$

8,267

$

24,606

$

31,933

$

37,442

$

42,182

$

47,896

$

36,209

$

34,567

$

30,853

Accounts receivable, net of allowance for doubtful accounts

62,789

69,319

80,927

78,846

93,662

100,268

90,203

85,588

79,446

75,610

Restricted cash, current

11,762

7,862

9,074

7,338

4,572

4,801

-

-

-

-

Prepaid expenses and other current assets

11,976

12,061

11,901

10,817

12,298

15,409

7,689

7,236

4,870

3,996

Total current assets

95,130

97,509

126,508

128,934

147,974

162,660

145,788

129,033

118,883

110,459

Restricted cash, non-current

$

5,825

$

5,577

$

5,395

$

2,772

$

2,452

$

2,836

$

743

$

-

$

-

$

-

Property and equipment, net

5,047

4,469

4,022

4,372

4,330

2,855

830

836

916

976

Internal-use software development costs, net

10,162

8,630

6,948

5,690

3,610

1,344

11,213

11,012

10,578

9,764

Intangible assets, net

437,323

464,145

492,686

524,573

556,341

587,088

50,368

52,534

54,698

56,740

Goodwill

515,591

515,591

515,591

541,792

881,370

878,396

44,820

44,820

44,820

44,820

Operating lease right-of-use assets

5,637

6,050

6,484

6,893

7,533

6,388

-

-

-

-

Other assets

3,498

2,826

2,822

731

804

830

3,149

2,998

2,453

1,222

Total Assets

$

1,078,213

$

1,104,797

$

1,160,456

$

1,215,757

$

1,604,414

$

1,642,397

$

256,911

$

241,233

$

232,348

$

223,981

LIABILITIES AND MEMBERS' DEFICIT

Current Liabilities:

Accounts payable

$

19,942

$

11,258

$

12,068

$

12,241

$

17,286

$

76,004

$

72,846

$

64,625

$

60,659

$

57,410

Accrued expenses and other current liabilities

77,466

85,727

95,447

91,731

97,959

59,735

31,284

20,319

18,814

9,988

Protected incentive plan liability, current

12,272

8,755

15,436

19,266

-

-

-

-

-

-

Deferred Revenue

80,461

76,346

70,164

68,289

68,368

64,810

1,971

2,100

2,383

2,053

Operating lease liabilities, current

2,243

2,195

2,149

2,102

2,065

1,895

-

-

-

-

Due to related party

2,400

-

-

-

-

80

-

-

-

-

Notes payable, current

15,138

15,073

15,021

14,954

14,888

14,822

170,453

171,780

4,739

9,374

Total current liabilities

209,922

199,354

210,285

208,583

200,566

217,346

276,554

258,824

86,595

78,825

Operating lease liabilities, non current

$

4,778

$

5,314

$

5,875

$

6,406

$

7,073

$

5,645

$

-

$

-

$

-

$

-

Notes payable, non-current

391,888

395,704

399,504

402,273

406,026

409,777

-

-

168,226

169,411

Related-party loan

5,000

-

-

-

-

-

-

-

-

-

Warrant liability

8,406

6,389

7,798

18,158

13,669

40,773

-

-

-

-

Deferred tax liability

29,851

35,995

43,355

49,747

129,311

138,738

-

-

-

-

Protected incentive plan liability

24,298

20,037

15,824

11,517

18,163

-

-

-

-

-

Other long-term liabilities

7,125

6,326

5,027

1,622

5,735

5,595

8,758

9,368

9,051

16,497

Total liabilities

$

681,268

$

669,119

$

687,668

$

698,306

$

780,543

$

817,874

$

285,312

$

268,192

$

263,872

$

264,733

Commitments and contingencies (Note 8)

Members' deficit:

Class A common stock

$

9

$

9

$

9

$

9

$

9

$

9

$

-

$

-

$

-

$

-

Class C common stock

2

2

2

2

2

2

-

-

-

-

Additional paid-in capital

842,350

837,093

829,687

819,188

812,309

777,325

-

-

-

-

Accumulated deficit

(514,809)

(479,579)

(445,301)

(411,480)

(169,603)

(143,867)

-

-

-

-

Members' deficit in S1 Holdco

-

-

-

-

-

-

(28,829)

(27,182)

(31,646)

(40,850)

Noncontrolling interest

69,663

78,632

88,808

109,676

181,576

190,951

-

-

-

-

Accumulated other comprehensive income

(270)

(479)

(417)

56

(422)

103

428

223

122

98

Total members' deficit

396,945

435,678

472,788

517,451

823,871

824,523

(28,401)

(26,959)

(31,524)

(40,752)

Total Liabilities And Members' Deficit

$

1,078,213

$

1,104,797

$

1,160,456

$

1,215,757

$

1,604,414

$

1,642,397

$

256,911

$

241,233

$

232,348

$

223,981

System1, Inc./S1 Holdco LLC

Successor +

Successor +

Successor +

Predecessor

Predecessor

Predecessor

Unaudited Condensed Statements of Cash Flow

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

System1, Inc.

Total

Total

Total

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

(in thousands)

QTD

QTD

QTD

QTD

QTD

Sucessor Period

Predecessor Period

QTD

QTD

QTD

QTD

YTD

YTD

YTD

YTD

YTD

YTD

YTD

30-Jun-23

31-Mar-23

31-Dec-22

30-Sep-22

30-Jun-22

1.27.22 - 3.31.22

1.1.22 - 1.26.22

31-Dec-21

30-Sep-21

30-Jun-21

31-Mar-21

30-Jun-23

31-Dec-22

30-Sep-22

30-Jun-22

31-Dec-21

30-Sep-21

30-Jun-21

Cash Flows From Operating Activities:

Net cash provided by operating activities of continuing operations

7,153

(5,801)

4,251

7,368

22,558

(30,871)

(10,605)

21,336

12,056

17,185

10,128

1,352

(7,299)

(11,550)

(18,918)

60,705

39,369

27,313

Net cash used for operating activities of discontinued operations

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Net cash provided by operating activities

7,153

(5,801)

4,251

7,368

22,558

(30,871)

(10,605)

21,336

12,056

17,185

10,128

1,352

(7,299)

(11,550)

(18,918)

60,705

39,369

27,313

Cash Flows From Investing Activities:

Purchases of property and equipment

(866)

(715)

(326)

(910)

(883)

(1,427)

-

(49)

-

-

-

(1,581)

(3,546)

(3,220)

(2,310)

(49)

-

-

Proceeds from sale of Protected

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Purchase of business, net of cash acquired

-

-

-

-

(21,100)

(422,974)

-

-

-

-

-

-

(444,074)

(444,074)

(444,074)

Expenditures for internal-use software development costs

(1,810)

(1,677)

(1,254)

(1,638)

(2,108)

(1,389)

(441)

(1,585)

(1,668)

(1,793)

(1,440)

(3,487)

(6,830)

(5,576)

(3,938)

(6,486)

(4,901)

(3,233)

Net cash provided by (used in) investing activities of continuing operations

(2,676)

(2,392)

(1,580)

(2,548)

(24,091)

(425,790)

(441)

(1,634)

(1,668)

(1,793)

(1,440)

(5,068)

(454,450)

(452,870)

(450,322)

(6,535)

(4,901)

(3,233)

Net cash provided by (used in) investing activities of discontinued operations

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Net cash provided by (used in) investing activities

(2,676)

(2,392)

(1,580)

(2,548)

(24,091)

(425,790)

(441)

(1,634)

(1,668)

(1,793)

(1,440)

(5,068)

(454,450)

(452,870)

(450,322)

(6,535)

(4,901)

(3,233)

Cash Flows From Financing Activities:

Proceeds from term loan and line of credit

-

-

1,000

-

-

449,000

-

-

-

-

-

-

450,000

449,000

449,000

-

-

-

Repayment of line of credit

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Repayment of term loan

(5,000)

(5,000)

(5,000)

(5,000)

(5,000)

(172,488)

-

(1,750)

(1,750)

(6,386)

(1,750)

(10,000)

(187,488)

(182,488)

(177,488)

(11,636)

(9,886)

(8,136)

Proceeds from related-party loan

39,000

-

-

-

-

-

-

-

-

-

-

39,000

-

-

-

-

-

-

Repayment related-party loan

(34,000)

-

-

-

-

-

-

-

-

(1,500)

-

(34,000)

-

-

-

(1,500)

(1,500)

(1,500)

Payments for deferred financing cost

-

-

-

-

-

(24,845)

-

(382)

-

-

-

-

(24,845)

(24,845)

(24,845)

(382)

-

-

Cash received from backstop

-

-

-

-

-

246,484

-

-

-

-

-

-

246,484

246,484

246,484

-

-

-

Member capital contributions

-

-

-

-

-

-

-

(32)

109

3

147

-

-

-

-

227

259

150

Payments on contingent consideration

-

(1,250)

-

-

-

-

-

-

-

(1,715)

(5,000)

(1,250)

-

-

-

(6,715)

(6,715)

(6,715)

Redemptions of Class A common stock

-

-

-

-

-

(510,469)

-

-

-

-

-

-

(510,469)

(510,469)

(510,469)

-

-

-

Distributions to members from sale of Protected

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Payments for earnouts

-

-

-

-

(1,715)

-

-

-

-

-

-

-

(1,715)

(1,715)

(1,715)

-

-

-

Taxes paid related to net settlement of restricted stock awards

(215)

(2,837)

(54)

(2,035)

-

-

-

-

-

-

-

(3,052)

(2,089)

(2,035)

Proceeds from warrant exercises

-

-

(1,122)

-

-

-

-

-

-

-

(1,122)

-

-

-

-

-

Purchases of treasury stock

-

-

-

-

5,027

-

-

-

5,027

Distributions to members

(21)

(45)

(1)

(10)

(1,038)

(463)

-

(4,786)

(7,102)

(2,691)

-

(66)

(1,512)

(1,511)

(1,501)

(14,579)

(9,793)

(2,691)

Net cash provided by financing activities

(236)

(9,132)

(5,177)

(7,045)

(2,726)

(12,781)

-

(6,950)

(8,743)

(12,289)

(6,603)

(9,368)

(27,729)

(27,579)

(20,534)

(34,585)

(27,635)

(18,892)

Effect of exchange rate changes in cash, cash equivalents and restricted cash

243

(44)

(462)

(198)

(1,094)

1,708

(17)

(322)

(3)

611

(245)

199

(63)

399

597

41

363

366

Net Increase In Cash

4,484

(17,369)

(2,968)

(2,423)

(5,353)

(467,734)

(11,063)

12,430

1,642

3,714

1,840

(12,885)

(489,541)

(491,600)

(489,177)

19,626

7,196

5,554

Cash and restricted cash:

Beginning of period

21,706

39,075

42,043

44,466

49,819

517,553

48,639

36,209

34,567

30,853

29,013

39,075

48,639

48,639

48,639

29,013

29,013

29,013

End of period

$

26,190

$

21,706

$

39,075

$

42,043

$

44,466

$

49,819

$

37,576

$

48,639

$

36,209

$

34,567

$

30,853

$

26,190

$

39,075

$

42,043

$

44,466

$

48,639

$

36,209

$

34,567

System1, Inc./S1 Holdco LLC

Successor +

Successor +

Successor +

Non-GAAP Financials

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

System1, Inc.

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

System1, Inc.

Predecessor

Predecessor

Predecessor

S1 Holdco LLC

S1 Holdco LLC

S1 Holdco LLC

Total

Total

Total

(in thousands)

Sucessor Period

Sucessor Period

Sucessor Period

Sucessor Period

Sucessor Period

Sucessor Period

Predecessor Period

QTD

QTD

QTD

QTD

YTD

YTD

YTD

YTD

YTD

YTD

YTD

30-Jun-23

31-Mar-23

31-Dec-22

30-Sep-22

30-Jun-22

1.27.22 - 3.31.22

1.1.22 - 1.26.22

31-Dec-21

30-Sep-21

30-Jun-21

31-Mar-21

30-Jun-23

31-Dec-22

30-Sep-22

30-Jun-22

31-Dec-21

30-Sep-21

30-Jun-21

Net income (loss) from continuing operations

$

(44,177)

$

(43,126)

$

(51,158)

$

(313,698)

$

(33,845)

$

(43,378)

$

(37,061)

$

3,113

$

11,368

$

11,772

$

6,743

$

(87,303)

$

(479,141)

$

(427,982)

$

(114,284)

$

32,996

$

29,883

$

18,515

Income tax expense

(6,605)

(4,408)

(6,223)

(80,649)

(454)

(14,649)

(629)

262

475

77

151

(11,013)

(102,604)

(96,381)

(15,732)

965

703

228

Interest expense

12,344

11,450

9,938

10,011

7,324

4,776

1,049

4,162

4,185

4,476

4,048

23,794

33,098

23,160

13,149

16,871

12,709

8,524

Depreciation & amortization

28,052

29,374

32,416

32,214

32,094

21,928

1,000

3,625

3,458

3,113

3,689

57,426

119,653

87,236

55,022

13,884

10,259

6,801

Impairment of goodwill

-

-

26,200

340,109

-

-

-

-

-

-

-

-

366,309

340,109

-

-

-

-

Other income/expense (1)

600

213

1,767

2,008

2,168

1,800

(61)

70

(25)

18

84

813

7,682

5,916

3,907

147

76

102

Stock-based compensation and distributions to Members (2)

4,953

6,392

7,619

8,757

7,363

32,343

23,362

3,458

673

3,342

2,118

11,345

79,444

71,825

63,068

9,591

6,133

5,460

Protected.net acquisition bonus accrual

12,778

7,533

10,477

22,620

18,163

-

-

0

0

0

0

20,310

51,260

40,783

18,163

-

-

-

Revaluation of non-cash warrant liability

2,018

(1,409)

(10,360)

4,489

(4,139)

13,761

-

-

-

-

-

609

3,751

14,111

9,622

-

-

-

Costs related to acquisitions/business combinations

3,523

3,559

4,149

4,021

5,102

9,660

13,153

7,970

2,755

623

1,484

7,082

36,085

31,935

27,914

12,833

4,862

2,108

Acquisition earnout

-

-

-

22

72

269

9

32

31

32

63

-

372

372

350

158

126

95

Severance costs

1,076

587

1,759

475

153

206

-

3

118

164

330

1,663

2,593

834

359

615

612

494

Other costs, including restructuring

83

167

118

-

200

26

-

0

8

98

99

250

343

226

226

206

205

197

Adjusted EBITDA

$

14,643

$

10,334

$

26,702

$

30,380

$

34,201

$

26,742

$

822

$

22,696

$

23,046

$

23,715

$

18,809

$

24,977

$

118,846

$

92,144

$

61,764

$

88,265

$

65,570

$

42,524

Non-Financial Metrcis

(In thousands except ratios)

QTD

QTD

QTD

QTD

QTD

QTD

QTD

QTD

QTD

QTD

YTD

YTD

YTD

YTD

YTD

YTD

YTD

O&O Advertising

30-Jun-23

31-Mar-23

31-Dec-22

30-Sep-22

30-Jun-22

31-Mar-22

31-Dec-21

30-Sep-21

30-Jun-21

31-Mar-21

30-Jun-23

31-Dec-22

30-Sep-22

30-Jun-22

31-Dec-21

30-Sep-21

30-Jun-21

Revenue

$

77,300

$

106,025

$

127,867

$

143,600

$

157,952

$

176,133

$

190,035

$

162,606

$

160,817

$

139,426

$

183,325

$

605,552

$

477,686

$

334,085

$

652,884

$

462,848

$

300,242

Advertising Spend (1)

$

49,711

$

76,186

$

92,785

$

106,340

$

121,153

$

137,948

$

152,653

$

126,404

$

123,244

$

107,298

$

125,897

$

458,225

$

365,440

$

259,100

$

509,599

$

356,946

$

230,542

Revenue less Advertising Spend and Agency Fees

$

27,589

$

29,839

$

35,082

$

37,261

$

36,799

$

38,186

$

37,383

$

36,202

$

37,572

$

32,128

$

57,428

$

147,328

$

112,246

$

74,985

$

143,284

$

105,902

$

69,700

O&O Sessions (2)

819,813

1,026,262

1,042,908

1,077,915

1,012,761

975,025

999,975

859,392

766,293

741,122

1,846,075

4,108,610

3,065,702

1,987,786

3,366,783

2,366,807

1,507,415

O&O CPS (3)

$

0.06

$

0.07

$

0.09

$

0.10

$

0.12

$

0.14

$

0.15

$

0.15

$

0.16

$

0.14

$

0.07

$

0.11

$

0.12

$

0.13

$

0.15

$

0.15

$

0.15

O&O RPS (4)

$

0.09

$

0.10

$

0.12

$

0.13

$

0.16

$

0.18

$

0.19

$

0.19

$

0.21

$

0.19

$

0.10

$

0.15

$

0.16

$

0.17

$

0.19

$

0.20

$

0.20

Spread

55%

39%

38%

35%

30%

28%

24%

29%

30%

30%

46%

32%

31%

29%

28%

30%

30%

Partner Network

Revenue

$

19,614

$

15,093

$

12,204

$

13,295

$

19,077

$

14,812

$

9,768

$

8,840

$

8,763

$

8,135

$

34,708

$

59,389

$

47,185

$

33,890

$

35,505

$

25,738

$

16,898

Agency Fees (5)

$

4,806

$

4,876

$

2,535

$

2,994

$

5,170

$

3,387

$

-

$

-

$

-

$

-

$

9,683

$

14,087

$

11,551

$

8,557

$

-

$

-

$

-

Revenue less Advertising Spend and Agency fees

$

14,808

$

10,217

$

9,669

$

10,301

$

13,908

$

11,425

$

9,768

$

8,840

$

8,763

$

8,135

$

25,025

$

45,302

$

35,633

$

25,333

$

35,505

$

25,738

$

16,898

Network Sessions (6)

676,763

448,287

375,605

364,196

361,432

308,805

289,331

297,142

321,934

338,960

1,125,049

1,410,037

1,034,433

670,237

$

1,247,366

958,035

660,894

Network CPS (7)

$

0.01

$

0.01

$

0.01

$

0.01

$

0.01

$

0.01

$

-

$

-

$

-

$

-

$

0.01

$

0.01

$

0.01

$

0.01

$

-

$

-

$

-

Network RPS (8)

$

0.03

$

0.03

$

0.03

$

0.04

$

0.05

$

0.05

$

0.03

$

0.03

$

0.03

$

0.02

$

0.03

$

0.04

$

0.05

$

0.05

$

0.03

$

0.03

$

0.03