System1 Q2 FY26 earnings call SST

The company successfully finalized a debt exchange, reducing total outstanding debt from $302.6 million to $150 million. This move strengthened the capital structure and positioned System1 to pursue strategic goals and long-term shareholder value creation, with lenders becoming preferred shareholders. The pro forma cash balance at June 30 was $16.2 million, and consolidated net leverage was 5.88x.

System1 reported encouraging progress across its product portfolio, with total sessions to owned and operated sites increasing 31% year-over-year and 5% sequentially. This growth is attributed to the utility nature of its search, mapping, and shopping products, contrasting with traffic declines seen by other digital publishers due to AI usage. Products revenue accounted for 64% of total revenue.

CouponFollow delivered a strong quarter, benefiting from a rebound in Google SEO, leading to 11% sequential organic session growth and becoming the #2 coupon site by organic traffic behind Reddit. Gross profit from paid traffic acquisition was up 37% year-over-year, and the business is actively integrating AI for content quality, campaign management, coupon data verification, and revenue optimization tools. CouponFollow is also pursuing opportunities in the AI and agentic commerce ecosystems.

The MapQuest team continued to deliver strong display advertising performance, supported by healthy CPMs and a high-intent audience. User engagement improved, with total sessions increasing 25% year-over-year in H1 2026. The company is expanding the MapQuest ecosystem with products like Lighthouse, a family safety app, and launching MapQuest MCP server this week to integrate with AI agents and applications, leveraging existing B2B partners as a sales channel.

Startpage saw continued growth in search queries, with 11% sequential user session growth and 63% year-over-year mobile app session increase, driven by consumer privacy tailwinds and a backlash against heavy AI integration in other search engines. However, this growth was more than offset by declining monetization from Google, which showed fewer ads and paid less per search query, limiting the translation of usage growth into revenue.

System1 is making early progress in its emerging products division, focusing on AI-driven subscription businesses. These products, while small, show exceptional velocity in development and marketing experimentation. The company also launched IntentStream in Q2, an audience data product that collects, enriches, and packages non-private first-party data to provide brands with real-time pre-purchase intent signals, with initial customer acquisition underway.

The partner network business experienced significant volatility in Q2. After performing well in April and May, generating over $100,000 per day in net revenue, a Google-initiated change at the end of May/early June caused monetization to drop more than 30%. While about 50% of the daily net revenue was recovered by the end of June, the company is intensely focused on diversifying its network partners and improving traffic quality to reduce Google concentration risk.

For the second half of the year, System1's strategic priorities include continued investment in its product portfolio (search, commerce, location, AI), diversifying the partner network to restore prior gross profit levels, and operating efficiently. The company intends to resume M&A efforts, which have been successful in the past, once overall business growth stabilizes.