System1 Inc.

05/19/2022 | Press release | Distributed by Public on 05/19/2022 05:38

System1, Inc./S1 Holdco LLC Unaudited Statements of Operations - Form 8-K

System1, Inc./S1 Holdco LLC

Unaudited Statements of Operations

(in thousands) System1, Inc.

Sucessor Period 		S1 Holdco LLC
Predecessor
Period 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD
1.27.22 -
3.31.22 		1.1.22 - 1.26.22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-21 30-Sep-21 30-Jun-21 31-Dec-20 30-Sep-20 30-Jun-20

Revenue

166,108 52,712 199,803 171,446 169,579 147,561 135,755 117,268 100,019 122,935 688,389 488,586 317,140 475,977 340,222 222,954

Operating cost and expenses:

Cost of revenues

120,131 41,760 155,276 128,885 126,167 110,785 96,635 83,892 73,937 86,532 521,113 365,837 236,952 340,996 244,361 160,469

Salaries, commissions, and benefits

43,459 35,175 18,715 15,139 17,698 15,195 15,915 13,120 13,183 13,330 66,747 48,032 32,893 55,548 39,633 26,513

Selling, general, and administrative

14,981 14,817 14,650 7,936 6,277 6,950 5,863 7,095 4,879 5,142 35,813 21,163 13,227 22,979 17,116 10,021

Depreciation and amortization

23,311 1,000 3,625 3,459 3,112 3,689 3,082 3,331 3,889 3,530 13,885 10,260 6,801 13,832 10,750 7,419

Total operating costs and expenses

201,882 92,752 192,266 155,419 153,254 136,619 121,495 107,438 95,888 108,534 637,558 445,292 289,873 433,355 311,860 204,422

Operating income

(35,774 ) (40,040 ) 7,537 16,027 16,325 10,942 14,260 9,830 4,131 14,401 50,831 43,294 27,267 42,622 28,362 18,532

Loss (gain) on Fait Value of Warrants

13,761 - - - - - - - - - - - - - - -

Interest expense

4,776 1,049 4,162 4,184 4,476 4,048 5,781 5,741 6,332 6,497 16,870 12,708 8,524 24,351 18,570 12,829

Income (loss) from continuing operations before income tax

(54,311 ) (41,089 ) 3,375 11,843 11,849 6,894 8,479 4,089 (2,201 ) 7,904 33,961 30,586 18,743 18,271 9,792 5,703

Income tax expense

(16,252 ) (629 ) 262 475 77 151 1,527 198 (173 ) 355 965 703 228 1,907 380 182

Net income (loss) from continuing operations

(38,059 ) (40,460 ) 3,113 11,368 11,772 6,743 6,952 3,891 (2,028 ) 7,549 32,996 29,883 18,515 16,364 9,412 5,521

Net Income (Loss) Attributable To Noncontrolling Interest

(8,068 ) - - - - - - - - - - - - - - -

Gain (loss) from discontinued operations, net of taxes

- - - - - - 55,315 99 (4,460 ) (3,557 ) - - - 47,397 (7,918 ) (8,017 )

Net income

(29,991 ) (40,460 ) 3,113 11,368 11,772 6,743 62,267 3,990 (6,488 ) 3,992 32,996 29,883 18,515 63,761 1,494 (2,496 )

System1, Inc./S1 Holdco LLC

Unaudited Condensed Balance Sheet

(in thousands) System1, Inc. S1 Holdco LLC S1 Holdco LLC S1 Holdco LLC S1 Holdco LLC S1 Holdco LLC S1 Holdco LLC S1 Holdco LLC S1 Holdco LLC
31-Mar-22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20

ASSETS

Current Assets:

Cash and cash equivalents

$ 42,178 $ 47,896 $ 36,209 $ 34,567 $ 30,853 $ 29,013 $ 37,657 $ 33,985 $ 55,763

Accounts receivable, net of allowance for doubtful accounts

99,976 90,203 85,588 79,446 75,610 71,140 58,404 53,662 66,331

Restricted cash

4,895 - - - - - - - -

Prepaid expenses and other current assets

14,468 7,689 7,236 4,870 3,996 3,016 4,012 4,825 5,739

Assets of discontinued operations

- - - - - - 20,602 13,936 13,229

Total current assets

161,517 145,788 129,033 118,883 110,459 103,169 120,675 106,408 141,062

Restricted Cash

$ 3,034 $ 743 $ - $ - $ - $ - $ - $ - $ -

Property and equipment, net

2,855 830 836 916 976 1,057 1,137 1,139 1,243

Internal-use software development costs, net

10,704 11,213 11,012 10,578 9,764 9,660 10,079 9,414 9,045

Intangible assets, net

568,675 50,368 52,534 54,698 56,740 59,009 60,829 52,638 54,764

Goodwill

907,009 44,820 44,820 44,820 44,820 44,820 44,820 54,566 54,898

Due from related party

- 2,469 2,469 2,453 1,222 969 969 - -

Operating lease right-of-use assets

6,388

Other assets

808 680 529 - - - - - -

Assets of discontinued operations

- - - - - - 67,714 69,138 70,101

Total Assets

$ 1,660,990 $ 256,911 $ 241,233 $ 232,348 $ 223,981 $ 218,684 $ 306,223 $ 293,304 $ 331,114

LIABILITIES AND MEMBERS' DEFICIT

Current Liabilities:

Accounts payable

$ 76,004 $ 72,846 $ 64,625 $ 60,659 $ 57,410 $ 52,104 $ 40,690 $ 34,058 $ 42,476

Accrued expenses and other current liabilities

67,635 31,284 20,319 18,814 9,988 17,150 15,987 14,312 17,806

Deferred Revenue

64,810 1,971 2,100 2,383 2,053 1,889 2,727 2,453 2,242

Operating lease liabilities, current

1,895 - - - - - - - -

Due to related party

80 - - - - - - - -

Notes payable, current

14,822 170,453 171,780 4,739 9,374 9,374 19,347 24,347 44,237

Liabilities of discontinued operations

- - - - - - 62,523 56,303 47,141

Total current liabilities

225,246 276,554 258,824 86,595 78,825 80,517 141,274 131,473 153,902

Operating lease liabilities, non current

$ 5,645 $ - $ - $ - $ - $ - $ - $ - $ -

Notes payable, non-current

409,777 - - 168,226 169,411 170,595 226,417 228,469 229,432

Warrant liability

40,773 - - - - - - - -

Deferred tax liability

144,027 - - - - - - - -

Other long-term liabilities

5,804 8,758 9,368 9,051 16,497 15,801 12,935 11,821 13,208

Liabilities of discontinued operations

- - - - - - - - -

Total liabilities

$ 831,272 $ 285,312 $ 268,192 $ 263,872 $ 264,733 $ 266,913 $ 380,626 $ 371,763 $ 396,543

Commitments and contingencies (Note 8)

Members' deficit:

Class A common stock

$ 9 $ - $ - $ - $ - $ - $ - $ - $ -

Class C common stock

2 - - - - - - - -

Additional paid-in capital

728,540 - - - - - - - -

Accumulated deficit

(89,175 ) - - - - - - - -

Members' deficit in S1 Holdco

- (28,829 ) (27,182 ) (31,646 ) (40,850 ) (47,886 ) (74,078 ) (78,017 ) (64,753 )

Noncontrolling interest

190,370 - - - - - - - -

Accumulated other comprehensive income

(28 ) 428 223 122 98 (343 ) (325 ) (443 ) (675 )

Total members' deficit

829,718 (28,401 ) (26,959 ) (31,524 ) (40,752 ) (48,229 ) (74,403 ) (78,460 ) (65,428 )

Total Liabilities And Members' Deficit

$ 1,660,990 $ 256,911 $ 241,233 $ 232,348 $ 223,981 $ 218,684 $ 306,223 $ 293,303 $ 331,115

System1, Inc./S1 Holdco LLC

Unaudited Condensed Statements of Cash Flow
(in thousands) 		System1, Inc.
Sucessor Period 		S1 Holdco
LLC
Predecessor Period 		S1 Holdco
LLC
QTD 		S1 Holdco
LLC
QTD 		S1 Holdco
LLC
QTD 		S1 Holdco
LLC
QTD 		S1 Holdco
LLC
QTD 		S1 Holdco
LLC
QTD 		S1 Holdco
LLC
QTD 		S1 Holdco
LLC
QTD 		S1 Holdco
LLC
YTD 		S1 Holdco
LLC
YTD 		S1 Holdco
LLC
YTD 		S1 Holdco
LLC
YTD 		S1 Holdco
LLC
YTD 		S1 Holdco
LLC
YTD
1.27.22 - 3.31.22 1.1.22 - 1.26.22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-21 30-Sep-21 30-Jun-21 31-Dec-20 30-Sep-20 30-Jun-20

Cash Flows From Operating Activities:

Net cash provided by operating activities of continuing operations

(28,918 ) (10,490 ) 21,336 12,056 17,185 10,128 15,714 12,971 9,122 14,600 60,705 39,369 27,313 52,407 36,693 23,722

Net cash used for operating activities of discontinued operations

- - - - - - (1,917 ) 1,979 (390 ) (5,532 ) - - - (5,860 ) (3,943 ) (5,922 )

Net cash provided by operating activities

(28,918 ) (10,490 ) 21,336 12,056 17,185 10,128 13,797 14,950 8,732 9,068 60,705 39,369 27,313 46,547 32,750 17,800

Cash Flows From Investing Activities:

Purchases of property and equipment

(1,373 ) - (49 ) - - - (11 ) (8 ) - - (49 ) - - (19 ) (8 ) -

Proceeds from sale of Protected

- - - - - - 74,544 - - - - - - 74,544 -

Purchase of business, net of cash acquired

(423,853 ) - - - - - - - - -

Expenditures for internal-use software development costs

(922 ) (441 ) (1,585 ) (1,668 ) (1,793 ) (1,440 ) (617 ) (1,632 ) (1,970 ) (1,893 ) (6,486 ) (4,901 ) (3,233 ) (6,112 ) (5,495 ) (3,863 )

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

(426,148 ) (441 ) (1,634 ) (1,668 ) (1,793 ) (1,440 ) 73,916 (1,640 ) (1,970 ) (1,893 ) (6,535 ) (4,901 ) (3,233 ) 68,413 (5,503 ) (3,863 )

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

- - - - - - (142 ) (79 ) 144 (170 ) - - - (247 ) (105 ) (26 )

Net cash provided by (used in) investing activities

(426,148 ) (441 ) (1,634 ) (1,668 ) (1,793 ) (1,440 ) 73,774 (1,719 ) (1,826 ) (2,063 ) (6,535 ) (4,901 ) (3,233 ) 68,166 (5,608 ) (3,889 )

Cash Flows From Financing Activities:

Proceeds from term loan and line of credit

449,000 - - - - - - - - 20,000 - - - 20,000 20,000 20,000

Repayment of line of credit

- - - - (34,862 ) - - - - (34,862 ) -

Repayment of term loan

(172,488 ) - (1,750 ) (1,750 ) (6,386 ) (1,750 ) (32,231 ) (7,715 ) (21,727 ) (1,750 ) (11,636 ) (9,886 ) (8,136 ) (63,423 ) (31,192 ) (23,477 )

Payments for deferred financing cost

(24,423 ) - (382 ) - - - - - - - (382 ) - - - - -

Cash received from backstop

246,484 - - - - - - - - -

Member capital contributions

- - (32 ) 109 3 147 206 551 747 751 227 259 150 2,255 2,049 1,498

Payments on contingent consideration

- - - - (1,715 ) (5,000 ) - - (5,038 ) (462 ) (6,715 ) (6,715 ) (6,715 ) (5,500 ) (5,500 ) (5,500 )

Related party loan

- - - - (1,500 ) - - - - - (1,500 ) (1,500 ) (1,500 ) - - -

Redemptions of Class A common stock

(510,469 ) - - - - - - - - -

Distributions to members from sale of Protected

- - - - (28,765 ) - - - - (28,765 ) -

Distributions to members

(247 ) - (4,786 ) (7,102 ) (2,691 ) - (12,575 ) (1,146 ) (3,558 ) (501 ) (14,579 ) (9,793 ) (2,691 ) (17,780 ) (5,205 ) (4,059 )

Net cash provided by financing activities

(12,143 ) - (6,950 ) (8,743 ) (12,289 ) (6,603 ) (108,227 ) (8,310 ) (29,576 ) 18,038 (34,585 ) (27,635 ) (18,892 ) (128,075 ) (19,848 ) (11,538 )

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

(237 ) (132 ) (322 ) (3 ) 611 (245 ) 120 35 130 (735 ) 41 363 366 (450 ) (570 ) (605 )

Net Increase In Cash

(467,446 ) (11,063 ) 12,430 1,642 3,714 1,840 (20,536 ) 4,956 (22,540 ) 24,308 19,626 7,196 5,554 (13,812 ) 6,724 1,768

Cash and restricted cash:

Beginning of period

517,553 48,639 36,209 34,567 30,853 29,013 49,549 44,593 67,133 42,825 29,013 29,013 29,013 42,825 42,825 42,825

End of period

$ 50,107 $ 37,576 $ 48,639 $ 36,209 $ 34,567 $ 30,853 $ 29,013 $ 49,549 $ 44,593 $ 67,133 $ 48,639 $ 36,209 $ 34,567 $ 29,013 $ 49,549 $ 44,593

System1, Inc./S1 Holdco LLC

Non-GAAP
Financials

(in thousands)

System1, Inc.
Sucessor Period 		S1 Holdco LLC
Predecessor
Period 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
QTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD 		S1 Holdco LLC
YTD
1.27.22 - 3.31.22 1.1.22 - 1.26.22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-21 30-Sep-21 30-Jun-21 31-Dec-20 30-Sep-20 30-Jun-20

Net income (loss) from continuing operations

$ (38,059 ) $ (40,460 ) $ 3,113 $ 11,368 $ 11,772 $ 6,743 $ 6,952 $ 3,891 $ (2,029 ) $ 7,549 $ 32,996 $ 29,883 $ 18,515 $ 16,364 $ 9,412 $ 5,520

Income tax expense

-16,252 -629 262 475 77 151 1,527 198 (173 ) 355 965 703 228 1,907 380 183

Interest expense

4,776 1,049 4,162 4,185 4,237 4,048 5,781 5,741 6,332 6,497 16,632 12,470 8,286 24,351 18,570 12,829

Depreciation & amortization

23,311 1,000 3,625 3,458 3,113 3,689 3,082 3,331 3,889 3,530 13,884 10,259 6,801 13,832 10,750 7,419

Other income/expense (1)

1,800 -61 70 (25 ) 256 84 196 294 138 (229 ) 385 315 340 399 202 (91 )

Stock-based compensation and distributions to Members (2)

27,208 27,355 3,458 673 3,342 2,118 3,362 1,817 2,288 2,008 9,591 6,133 5,460 9,474 6,113 4,295

Revaluation of non-cash warrant liability

13,761 0 - - - - - - - - - - - - - -

Terminated product lines (3)

0 0 - - - - - - (2 ) 559 - - - 556 556 556

Costs related to acquisitions/business combinations

6,390 15,676 7,970 2,755 623 1,484 1,033 222 71 1,032 12,833 4,862 2,108 2,358 1,325 1,103

Acquisition earnout

274 9 32 31 32 63 62 2,278 373 - 158 126 95 2,713 2,651 373

Severance costs

206 0 3 118 164 330 121 393 545 21 615 612 494 1,080 960 567

Other costs, including restructuring

26 0 0 8 98 99 101 11 185 98 206 205 197 396 294 283

Adjusted EBITDA

$ 23,442 $ 3,938 $ 22,696 $ 23,046 $ 23,715 $ 18,809 $ 22,217 $ 18,177 $ 11,616 $ 21,420 $ 88,265 $ 65,570 $ 42,524 $ 73,430 $ 51,214 $ 33,036
(1)

Non-cash adjustments related to foreign exchange and asset disposals

(2)

Comprised of distributions to equity holders and non-cash stock-based compensation

(3)

In 2020, S1 Holdco terminated its Social Publishing product line, where it created quiz content primarily for the purpose of display advertising monetization. S1 Holdco has excluded revenue and direct costs associated with this product line for all presented periods

Non-Financial Metrcis

(In thousands except ratios)

QTD QTD QTD QTD QTD QTD QTD QTD QTD YTD YTD YTD YTD YTD YTD
O&O Advertising 31-Mar-22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-21 30-Sep-21 30-Jun-21 31-Dec-20 30-Sep-20 30-Jun-20

Revenue

$ 180,049 $ 190,035 $ 162,606 $ 160,817 $ 139,426 $ 125,241 $ 108,314 $ 92,067 $ 111,878 $ 652,884 $ 462,848 $ 300,242 $ 437,501 $ 312,259 $ 203,945

Advertising Spend (1)

$ 137,948 $ 152,653 $ 126,404 $ 123,244 $ 107,298 $ 93,800 $ 80,217 $ 69,406 $ 84,066 $ 509,599 $ 356,946 $ 230,542 $ 327,489 $ 233,689 $ 153,472

Adjusted Gross Profit

$ 42,101 $ 37,383 $ 36,202 $ 37,572 $ 32,128 $ 31,442 $ 28,097 $ 22,661 $ 27,812 $ 143,284 $ 105,902 $ 69,700 $ 110,012 $ 78,570 $ 50,473

O&O Sessions (2)

975,025 999,975 859,392 766,293 741,122 691,279 644,780 670,112 815,554 3,366,783 2,366,807 1,507,415 2,821,726 2,130,446 1,485,666

O&O CPS (3)

$ 0.14 $ 0.15 $ 0.15 $ 0.16 $ 0.14 $ 0.14 $ 0.12 $ 0.10 $ 0.10 $ 0.15 $ 0.15 $ 0.15 $ 0.12 $ 0.11 $ 0.10

O&O RPS (4)

$ 0.18 $ 0.19 $ 0.19 $ 0.21 $ 0.19 $ 0.18 $ 0.17 $ 0.14 $ 0.14 $ 0.19 $ 0.20 $ 0.20 $ 0.16 $ 0.15 $ 0.14

Spread

31 % 24 % 29 % 30 % 30 % 34 % 35 % 33 % 33 % 28 % 30 % 30 % 34 % 34 % 33 %

Partner Network

Revenue

$ 10,897 $ 9,768 $ 8,840 $ 8,763 $ 8,135 $ 10,514 $ 8,955 $ 7,951 $ 11,056 $ 35,505 $ 25,738 $ 16,898 $ 38,477 $ 27,963 $ 19,008

Adjusted Gross Profit

$ 10,897 $ 9,768 $ 8,840 $ 8,763 $ 8,135 $ 10,514 $ 8,955 $ 7,951 $ 11,056 $ 35,505 $ 25,738 $ 16,898 $ 38,477 $ 27,963 $ 19,008

Network Sessions (5)

295,052 286,291 278,460 312,406 326,127 318,930 323,878 484,653 392,906 $ 1,203,284 916,993 638,533 1,520,367 1,201,437 877,559

Network RPS (6)

$ 0.04 $ 0.03 $ 0.03 $ 0.03 $ 0.02 $ 0.03 $ 0.03 $ 0.02 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.02 $ 0.02

O&O Advertising, Excluding Terminated Product Lines

Revenue

$ 180,049 $ 190,035 $ 162,606 $ 160,817 $ 139,426 $ 125,241 $ 108,314 $ 91,712 $ 106,587 $ 652,884 $ 462,848 $ 300,242 $ 431,855 $ 306,613 $ 198,299

Advertising Spend

$ 138,052 $ 152,653 $ 126,404 $ 123,244 $ 107,298 $ 93,800 $ 80,217 $ 69,053 $ 79,165 $ 509,599 $ 356,946 $ 230,542 $ 322,235 $ 228,436 $ 148,218

Adjusted Gross Profit

$ 41,996 $ 37,383 $ 36,202 $ 37,572 $ 32,128 $ 31,442 $ 28,097 $ 22,659 $ 27,422 $ 143,284 $ 105,902 $ 69,700 $ 109,619 $ 78,178 $ 50,081

O&O Sessions (2)

975,025 999,975 859,392 766,293 741,122 691,279 644,780 663,135 737,243 3,366,783 2,366,807 1,507,415 2,736,438 2,045,159 1,400,378

O&O CPS (3)

$ 0.14 $ 0.15 $ 0.15 $ 0.16 $ 0.14 $ 0.14 $ 0.12 $ 0.10 $ 0.11 $ 0.15 $ 0.15 $ 0.15 $ 0.12 $ 0.11 $ 0.11

O&O RPS (4)

$ 0.18 $ 0.19 $ 0.19 $ 0.21 $ 0.19 $ 0.18 $ 0.17 $ 0.14 $ 0.14 $ 0.19 $ 0.20 $ 0.20 $ 0.16 $ 0.15 $ 0.14

Spread

30 % 24 % 29 % 30 % 30 % 34 % 35 % 33 % 35 % 28 % 30 % 30 % 34 % 34 % 34 %
(1)

Advertising spend is the amount of advertising that is spent to acquire traffic to Owned & Operated websites

(2)

O&O sessions are the total number of monetizable user visits to Owned & Operated websites

(3)

CPS is advertising spend divided by O&O Sessions

(4)

RPS is O&O Revenue divided by O&O Sessions

(5)

Network sessions are the number of monetizable user visits delivered by network partners to RAMP

(6)

RPS is Partner Network revenue divided by Network Sessions

Non-Financial Metrcis

(In thousands except ratios)

QTD QTD QTD QTD QTD QTD QTD QTD QTD YTD YTD YTD YTD YTD YTD
31-Mar-22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-21 30-Sep-21 30-Jun-21 31-Dec-20 30-Sep-20 30-Jun-20

Billings (1)

$ 45,405 $ 38,443 $ 37,632 $ 40,473 $ 37,992 $ 31,126 $ 27,758 $ 26,458 $ 22,529 $ 154,541 $ 116,097 $ 78,465 $ 107,871 $ 76,745 $ 48,987

Change in Deferred Revenue During Period

$ 5,512 $ (671) $ (567) $ 4,445 $ 6,792 $ 6,287 $ 2,591 $ 4,796 $ 4,409 $ 9,999 $ 10,671 $ 11,238 $ 18,084 $ 11,796 $ 9,205

Advertising Spend (2)

$ 22,296 $ 17,986 $ 16,966 $ 17,884 $ 23,626 $ 17,562 $ 18,059 $ 22,467 $ 18,575 $ 76,462 $ 58,477 $ 41,510 $ 76,664 $ 59,101 $ 41,042

Beginning Subscribers

2,208 2,208 2,187 2,128 1,905 1,770 1,586 1,357 1,234 1,905 1,905 1,905 1,234 1,234 1,234

Ending Subscribers (3)

2,284 2,208 2,208 2,187 2,128 1,905 1,770 1,586 1,357 2,208 2,208 2,187 1,905 1,770 1,586

New Subscribers (4)

388 312 298 331 462 324 341 398 275 1,403 1,091 793 1,338 1,014 673

CTA (5)

$ 57.49 $ 57.73 $ 56.91 $ 54.10 $ 51.10 $ 54.23 $ 52.95 $ 56.42 $ 67.53 $ 54.51 $ 53.60 $ 52.35 $ 57.29 $ 58.27 $ 60.96

ARPU (6)

$ 20.22 $ 17.41 $ 17.13 $ 18.76 $ 18.84 $ 16.94 $ 16.54 $ 17.98 $ 17.39 $ 75.15 $ 56.45 $ 38.35 $ 68.72 $ 51.09 $ 34.74
(1)

Billings is the total amount billed to customers during a period

(2)

Advertising spend is the total amount spent on advertising to acquire new subscribers during a period

(3)

Ending subscribers are the number of paying subscribers for its products, at the end of a period

(4)

New subscribers are the number of new subscribers acquired for its products, during a period

(5)

CTA is advertising spend divided by new subscribers in a period

(6)

ARPU is the billings in a period divided by average of the beginning and ending subscribers during that period

*

Deferred revenue from billings is amortized on a straight line basis over the subscription period and recognized as revenue in the financial statements

**

Excludes metrics for terminated product lines

Protected.net Group Limited

Unaudited Statements of Operations

(in thousands) Predecessor Period QTD QTD QTD QTD QTD QTD QTD QTD YTD YTD YTD YTD YTD YTD
1.1.22 - 1.26.22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-21 30-Sep-21 30-Jun-21 31-Dec-20 30-Sep-20 30-Jun-20

Revenue

12,016 39,115 38,199 36,028 31,199 25,149 25,415 21,965 18,379 144,541 105,426 67,227 90,908 65,759 40,345

Cost of Revenue

8,434 23,186 22,570 23,460 29,731 23,122 23,827 27,892 23,139 98,946 75,760 53,191 97,980 74,858 51,030

Gross profit (Loss)

3,582 15,929 15,629 12,568 1,469 2,027 1,587 (5,926 ) (4,759 ) 45,595 29,666 14,037 (7,072 ) (9,099 ) (10,686 )

General and administrative

1,431 4,231 3,910 5,074 2,697 2,365 1,730 1,978 637 15,912 11,681 7,771 6,711 4,346 2,616

Related party rent expense

62 208 133 180 144 111 159 116 150 665 457 324 536 425 266

Total Operating Expenses

1,493 4,440 4,042 5,254 2,841 2,476 1,889 2,094 788 16,577 12,138 8,095 7,247 4,771 2,882

Gain on sale of intangible assets

- - - - - - (1,580 ) - - - - - (1,580 ) (1,580 ) -

Foreign currency transaction (gains)/losses

97 225 583 209 322 (170 ) 37 60 207 1,341 1,115 532 135 304 267

Other operating income

- - (0 ) (222 ) (121 ) (18 ) (3 ) (27 ) (0 ) (343 ) (343 ) (343 ) (48 ) (30 ) (27 )

Other operating expense (income)

97 225 583 (13 ) 201 (188 ) (1,546 ) 33 207 997 772 189 (1,494 ) (1,306 ) 240

Operating income (loss)

1,992 11,264 11,004 7,326 (1,574 ) (262 ) 1,244 (8,054 ) (5,754 ) 28,020 16,757 5,753 (12,826 ) (12,564 ) (13,808 )

Related party interest expense

- - - - - 105 136 130 35 - - - 406 301 165

Related party interest income

(83 ) (303 ) (153 ) (328 ) (157 ) - - - - (941 ) (638 ) (485 ) - - -

Interest expense

230 53 144 235 151 29 - - - 583 530 386 29 - -

Other non-operating expenses/(income)

- - - (70 ) 70 (2 ) - - - - - - (2 ) - -

Total non-operating expenses/(income), net

147 (250 ) (9 ) (163 ) 64 132 136 130 35 (358 ) (108 ) (99 ) 433 301 165

Net income (loss) before income taxes

1,844 11,514 11,013 7,489 (1,638 ) (394 ) 1,108 (8,184 ) (5,789 ) 28,378 16,865 5,852 (13,258 ) (12,865 ) (13,973 )

Income Tax Expense (Benefit)

(1,688 ) (16,139 ) 966 - - - - - - (15,173 ) 966 - - - -

Net income (loss)

3,532 27,653 10,047 7,489 (1,638 ) (394 ) 1,108 (8,184 ) (5,789 ) 43,551 15,899 5,852 (13,258 ) (12,865 ) (13,973 )

Protected.net Group Limited

Unaudited Condensed Balance Sheet

(in thousands)

31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20

ASSETS

Current assets:

Cash

$ 35,067 $ 21,112 $ 14,227 $ 11,296 $ 6,253 $ 7,060 $ 5,356 $ 7,020

Restricted cash

1,333 2,148 2,458 5,757 5,604 4,943 4,874 7,321

Prepaid expenses and other current assets

546 548 691 791 359 317 404 327

Deposits

15 3,000 3,000 3,000 3,000 3,000 3,000 -

Total current assets

36,963 26,807 20,376 20,844 15,216 15,320 13,634 14,667

Due from related parties

33,082 33,115 26,249 15,719 10,230 - 244 139

Property, plant and equipment

616 398 373 370 270 195 184 196

Intangible Assets

369 386 415 62 53 54 90 108

Deferred tax assets

17,237 - - - - - - -

Goodwill

284 284 284 - - - - -

Total assets

$ 88,550 $ 60,991 $ 47,696 $ 36,995 $ 25,769 $ 15,568 $ 14,153 $ 15,112

Liabilities and Shareholders' Deficit:

Accounts payable

$ 216 $ 3,029 $ 732 $ 2,876 $ 3,005 $ 2,698 $ 3,739 $ 436

Accrued expenses

10,162 7,537 6,199 7,686 6,704 5,896 5,907 8,441

VAT tax liability

11,404 9,696 9,351 6,965 6,366 8,939 8,446 6,211

Deferred revenue

57,405 58,186 58,731 54,139 47,431 41,855 39,044 34,156

Related party deferred revenue

166 187 208 229 168 - - -

Current portion of note payable

2,813 2,250 2,813 2,250 1,500 - - -

Due to related party

23 - - - 4 3,501 5,599 6,243

Refund liability

537 429 449 597 512 558 405 428

Total current liabilities

82,725 81,313 78,482 74,741 65,690 63,447 63,140 55,915

Note payable, net of current portion and deferred financing costs

10,546 11,086 11,636 12,164 8,352 - - -

Deferred tax liability

- 966 - - - - - -

Total liabilities

$ 93,271 $ 93,365 $ 90,118 $ 86,905 $ 74,042 $ 63,447 $ 63,140 $ 55,915

Commitments and Contingencies

Shareholders' Deficit:

Class A Preferred shares

11 11 11 11 11 11 11 11

Class B Common shares

11 11 11 11 11 11 11 11

Additional paid-in capital

40,953 40,953 40,953 40,953 40,953 40,953 40,953 40,953

Accumulated deficit

(45,696 ) (73,349 ) (83,396 ) (90,885 ) (89,247 ) (88,854 ) (89,962 ) (81,778 )

Total Shareholders' deficit

(4,721 ) (32,374 ) (42,421 ) (49,911 ) (48,273 ) (47,879 ) (48,987 ) (40,803 )

Total Liabilities and Shareholders' Deficit

$ 88,550 $ 60,991 $ 47,696 $ 36,995 $ 25,769 $ 15,568 $ 14,153 $ 15,112
*

Class A Preferred shares, par value £0.0001 per share, 7,992,009 shares authorized, issued, and outstanding on September 30, 2021 and December 31, 2020, respectively

**

Class B Common shares, par value £0.0001 per share, 7,960,105 shares authorized, issued, and outstanding on September 30, 2021 and December 31, 2020, respectively

Protected.net Group Limited

Unaudited Condensed Statements of Cash Flow

(in thousands) QTD QTD QTD QTD QTD QTD QTD QTD YTD YTD YTD YTD YTD YTD
31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-21 30-Sep-21 30-Jun-21 31-Dec-20 30-Sep-20 30-Jun-20

Cash Flows From Operating Activities:

Net income (loss)

27,653 10,047 7,489 (1,638 ) (394 ) 1,108 (8,184 ) (5,789 ) 43,551 15,899 5,852 (13,258 ) (12,865 ) (13,973 )

Adjustments to reconcile net loss to net cash used in operating activities:

-

Depreciation

49 39 36 28 24 18 17 15 151 102 63 75 51 33

Amortization

24 29 29 12 13 16 18 19 94 70 41 67 54 37

Gain on sale of Network Protected intangible assets

- - - - - (1,580 ) - - - - - (1,580 ) (1,580 ) -

Amortization of deferred financing costs

23 13 34 13 2 - - - 82 59 46 2 - -

Interest income on loan with System 1 SS Protect Holdings, Inc.

638 (189 ) (307 ) (143 ) (2 ) - - - - (638 ) (450 ) (2 ) - -

Financing fee income on loan with System 1 SS Protect Holdings, Inc.

(21 ) (21 ) (21 ) (14 ) - - - - (77 ) (56 ) (35 ) - - -

Change in operating assets and liabilities:

- - - - - - - - - - - - - -

Prepaid expenses and other current assets

(98 ) 143 112 (432 ) (43 ) 188 (77 ) (244 ) (275 ) (177 ) (320 ) (177 ) (134 ) (321 )

Deposits

2,985 - - - - - (3,000 ) - 2,985 - - (3,000 ) (3,000 ) (3,000 )

Accounts payable

(2,813 ) 2,295 (2,471 ) (129 ) 302 (1,041 ) 3,303 (2,620 ) (3,118 ) (305 ) (2,600 ) (56 ) (358 ) 683

Accrued expenses

2,625 1,338 (1,402 ) 982 808 (11 ) (2,534 ) 3,809 3,544 918 (420 ) 2,072 1,264 1,275

VAT tax liability

1,708 345 2,385 599 (2,573 ) 494 2,235 (1,957 ) 5,037 3,329 2,984 (1,801 ) 772 278

Refund liability

108 (20 ) (148 ) 85 (46 ) 152 (22 ) 11 25 (83 ) (63 ) 95 141 (11 )

Deferred revenue

(780 ) (545 ) 4,593 6,708 5,576 2,811 4,888 4,453 9,974 10,755 11,300 17,727 12,152 9,340

Deferred tax assets

(17,237 ) - - - - - - - (17,237 ) - - - - -

Related party deferred revenue

(21 ) (21 ) (21 ) 61 168 - - - (2 ) 19 40 168 - -

Deferred tax liability

(966 ) 966 - - - - - - - 966 - - - -

Due from related party

(921 ) 109 29 (83 ) (168 ) 244 (104 ) (137 ) (866 ) 55 (54 ) (165 ) 3 (241 )

Due to related party

23 - - (4 ) 1,266 (861 ) (644 ) (11 ) 18 (4 ) (4 ) (250 ) (1,516 ) (655 )

Net cash generated by (used in) operating activities

12,978 14,529 10,337 6,043 4,933 1,539 (4,105 ) (2,451 ) 43,887 30,909 16,380 (84 ) (5,017 ) (6,556 )

Cash Flows From Investing Activities:

Purchases of intangibles, property, plant and equipment

(274 ) (63 ) (40 ) (147 ) 106 (29 ) (5 ) (72 ) (524 ) (250 ) (187 ) - (106 ) (77 )

Proceeds from sale of intangibles

100 - - - 1,500 - - 100 - - 1,500 1,500 -

Cash received in acquisition of Host Plus Limited, net of cash paid

- - 13 - - - - - 13 13 13 - - -

Loan advanced to Just Develop It

(16,223 ) (4,981 ) (8,430 ) - - - - - (29,635 ) (13,411 ) (8,430 ) - - -

Repayment of loan by Just Develop It

16,223 4,981 8,430 - (213 ) - - - 29,635 13,411 8,430 (213 ) - -

Loan advanced to Company director

(228 ) (1,706 ) (282 ) - 238 (238 ) - - (2,216 ) (1,988 ) (282 ) - (238 ) -

Repayment of loan by Company director

566 1,651 - - - - - - 2,216 1,651 - - - -

Loan advanced to System 1 SS Protect Holdings, Inc.

- (6,711 ) (9,948 ) (5,250 ) (10,060 ) - - - (21,909 ) (21,909 ) (15,197 ) (10,060 ) - -

Net cash used by investing activities

164 (6,829 ) (10,257 ) (5,397 ) (9,929 ) 1,234 (5 ) (72 ) (22,319 ) (22,483 ) (15,653 ) (8,773 ) 1,157 (77 )

Cash Flows From Financing Activities:

Proceeds from bank loan

- - - 5,000 10,000 - - - 5,000 5,000 5,000 10,000 - -

Repayment of principal on bank loan

- (1,125 ) - (375 ) - - - - (1,500 ) (1,500 ) (375 ) - - -

Proceeds from related party loans

- - - - 2,000 - - 9,000 - - - 11,000 9,000 9,000

Repayment of related party loans

- - - - (11,000 ) 3,000 - (3,000 ) - - - (11,000 ) - (3,000 )

Repayment of loan to Just Develop It

- - (449 ) - 4,000 (4,000 ) - - (449 ) (449 ) (449 ) - (4,000 ) -

Payment of deferred financing costs

- - - (75 ) (150 ) - - - (75 ) (75 ) (75 ) (150 ) - -

Net cash (used in) provided by financing activities

- (1,125 ) (449 ) 4,550 4,850 (1,000 ) - 6,000 2,976 2,976 4,101 9,850 5,000 6,000

Effect of exchange rate changes on cash

- - - - - - - - - - - - - -

Net change in cash

13,142 6,574 (368 ) 5,197 (147 ) 1,773 (4,110 ) 3,477 24,544 11,403 4,828 993 1,140 (633 )

Cash, beginning of period

23,259 16,685 17,053 11,856 12,003 10,230 14,341 10,863 11,856 11,856 11,856 10,863 10,863 10,863

Cash, end of period

$ 36,401 $ 23,259 $ 16,685 $ 17,053 $ 11,856 $ 12,003 $ 10,230 $ 14,341 $ 36,401 $ 23,259 $ 16,685 $ 11,856 $ 12,003 $ 10,230

Protected.net Group Limited

Non-GAAP Financials

(in thousands) Predecessor Period QTD QTD QTD QTD QTD QTD QTD QTD YTD YTD YTD YTD YTD YTD
1.1.22 - 1.26.22 31-Dec-21 30-Sep-21 30-Jun-21 31-Mar-21 31-Dec-20 30-Sep-20 30-Jun-20 31-Mar-20 31-Dec-21 30-Sep-21 30-Jun-21 31-Dec-20 30-Sep-20 30-Jun-20

Net income (loss)

$ 3,532 $ 27,653 $ 10,047 $ 7,489 $ (1,638 ) $ (394 ) $ 1,108 $ (8,184 ) $ (5,789 ) $ 43,551 $ 15,899 $ 5,852 $ (13,258 ) $ (12,865 ) $ (13,973 )

Income Tax Expense

(1,688 ) (16,139 ) 966 - - - - - - (15,173 ) 966 - - - -

Interest expense, net

147 (56 ) (131 ) (165 ) (6 ) 93 131 176 35 (358 ) (302 ) (171 ) 435 342 211

Depreciation & amortisation

19 73 69 65 39 37 35 35 34 245 172 104 141 105 70

Terminated product lines (1)

0 (13 ) 29 3 62 (336 ) (1,691 ) 86 163 81 94 64 (1,777 ) (1,441 ) 250

Costs related to acquisitions/business combinations

104 699 196 499 297 32 - - - 1,690 991 795 32 - -

Non-cash foreign exchange adjustments

97 228 581 209 322 (194 ) 46 68 190 1,341 1,112 532 110 304 258

VAT accrual for previously uncollected VAT

368 956 1,110 1,492 1,116 615 866 1,408 46 4,675 3,718 2,608 2,934 2,319 1,453

Director salary payments

- 922 936 949 - - - - - 2,806 1,885 949 - - -

Other costs including restructuring

- - - - - 424 34 - - - - - 458 34 -

Adjusted EBITDA

$ 2,581 $ 14,323 $ 13,803 $ 10,540 $ 193 $ 277 $ 529 $ (6,411 ) $ (5,320 ) $ 38,859 $ 24,536 $ 10,733 $ (10,925 ) $ (11,202 ) $ (11,731 )
(1)

Protected terminated its Network Protect VPN product. Protected has excluded revenue, direct costs and operating expenses associated with this product line from Adjusted EBITDA for all presented periods