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SEGMENT REPORTING | 6 Months Ended
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Jun. 30, 2022
Segment Reporting [Abstract] |
SEGMENT REPORTING | SEGMENT REPORTING ASC 280-10, Segment Reporting, establishes standards for reporting information about operating 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. System1’s Chief Executive Officer, who is considered to be its 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 reportable segments based on segment operating revenues as well as adjusted gross profit and other measures. The Company defines and calculates adjusted gross profit as revenue less advertising expense and agency fees to acquire users (r efer to Note 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES), as well as content, publishing, domain name registration costs, licensing costs to provide mapping services to Mapquest.com, credit card processing fees, and licensing costs related to the antivirus and other software available via APIs for sale and distribution of its SaaS products to end customers. The Company excludes the following items from segment adjusted gross profit: depreciation and amortization of property, equipment and leasehold improvements, amortization of intangible assets and, at times, certain other transactions or adjustments, that the CODM does not consider for the purposes of making decisions to allocate resources among segments or to assess segment performance. Although these amounts are excluded from segment adjusted gross profit, they are included in reported consolidated net income from operations before income tax and are included in the reconciliation that follows. The Company’s computation of segment adjusted gross profit may not be comparable to other similarly-titled measures computed by other companies because all companies do not calculate segment Adjusted Gross Profit in the same fashion. Operating segments do not sell products and services across segments, and, accordingly, there are no intersegment revenues to be reported. The accounting policies for segment reporting are the same as for System1 as a whole. The CODM of the Company reviews operating results, assesses performance and makes decisions by operating segment. Management views each of the Company’s business lines as an operating segment. The Company has four business lines and operating segments: Publishing and Lead Generation, Search & Applications, Partner Network, and Subscription. The Publishing and Lead Generation and Search & Applications operating segments are aggregated into one reportable segment, referred to as Owned and Operated, based on their similar economic characteristics, technology platform utilized, types of services provided, Advertising Partners, and cost structures. The Company has three reportable segments: Owned and Operated, Partner Network and Subscription. The following summarizes revenue by reportable segments:
| Three-Month Period |  | Six-Month Period
| Successor |  |  | Predecessor |  | Successor |  |  | Predecessor
| Three Months Ended June 30, 2022 |  |  | Three Months Ended June 30, 2021 |  | Period from January 27, 2022 through June 30, 2022 |  |  | Period from January 1, 2022 through January 26, 2022 |  | Six Months Ended June 30, 2021
Owned and Operated | $ | 157,952 |  |  |  | $ | 160,816 |  |  | $ | 284,836 |  |  |  | $ | 49,249 |  |  | $ | 300,242 |
Partner Network | 19,077 |  |  |  | 8,763 |  |  | 30,427 |  |  |  | 3,463 |  |  | 16,898 |
Subscription | 42,768 |  |  |  | — |  |  | 70,642 |  |  |  | — |  |  | — |
Total revenue | $ | 219,797 |  |  |  | $ | 169,579 |  |  | $ | 385,905 |  |  |  | $ | 52,712 |  |  | $ | 317,140 |
The following summarizes adjusted gross profit by reportable segments:
| Successor |  |  | Predecessor |  | Successor |  |  | Predecessor
| Three Months Ended June 30, 2022 |  |  | Three Months Ended June 30, 2021 |  | Period from January 27, 2022 through June 30, 2022 |  |  | Period from January 1, 2022 through January 26, 2022 |  | Six Months Ended June 30, 2021
Owned and Operated | $ | 36,799 |  |  |  | $ | 37,572 |  |  | $ | 66,217 |  |  |  | $ | 8,768 |  |  | $ | 69,700 |
Partner Network | 13,908 |  |  |  | 8,763 |  |  | 22,321 |  |  |  | 3,012 |  |  | 16,898 |
Subscription | 22,890 |  |  |  | — |  |  | 35,537 |  |  |  | — |  |  | — |
Adjusted gross profit | $ | 73,597 |  |  |  | $ | 46,335 |  |  | $ | 124,075 |  |  |  | $ | 11,780 |  |  | $ | 86,598 |
Other cost of revenues | 6,358 |  |  |  | 2,923 |  |  | 11,112 |  |  |  | 575 |  |  | 6,410 |
Salaries, commissions and benefits | 49,511 |  |  |  | 17,698 |  |  | 97,709 |  |  |  | 31,181 |  |  | 32,893 |
Selling, general and administrative | 16,747 |  |  |  | 6,277 |  |  | 31,835 |  |  |  | 15,665 |  |  | 13,227 |
Depreciation and amortization | 32,094 |  |  |  | 3,112 |  |  | 54,022 |  |  |  | 1,000 |  |  | 6,801 |
Interest expense | 7,324 |  |  |  | 4,476 |  |  | 12,100 |  |  |  | 1,049 |  |  | 8,524 |
Change in fair value of warrant liabilities | (4,139) |  |  |  | — |  |  | 9,622 |  |  |  | — |  |  | — |
Net income (loss) before income tax | $ | (34,298) |  |  |  | $ | 11,849 |  |  | $ | (92,325) |  |  |  | $ | (37,690) |  |  | $ | 18,743 |
The following table presents the revenues disaggregated by geographic region.
| Three-Month Period |  | Six-Month Period
| Successor |  |  | Predecessor |  | Successor |  |  | Predecessor
| Three Months Ended June 30, 2022 |  |  | Three Months Ended June 30, 2021 |  | Period from January 27, 2022 through June 30, 2022 |  |  | Period from January 1, 2022 through January 26, 2022 |  | Six Months Ended June 30, 2021
Geographic Region |  |  |  |  |  |  |  |  |  |  |
United States | $ | 167,872 |  |  |  | $ | 163,072 |  |  | $ | 302,480 |  |  |  | $ | 51,701 |  |  | $ | 307,630 |
United Kingdom | 42,924 |  |  |  | 168 |  |  | 70,643 |  |  |  | — |  |  | 169 |
Other international | 9,001 |  |  |  | 6,339 |  |  | 12,782 |  |  |  | 1,011 |  |  | 9,341 |
Total revenue | $ | 219,797 |  |  |  | $ | 169,579 |  |  | $ | 385,905 |  |  |  | $ | 52,712 |  |  | $ | 317,140 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI https://asc.fasb.org/topic&trid=2134510 + Details
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