System1 Group PLC (SST) Earnings Call Transcript & Summary

Good morning, and welcome to the System1 Group PLC Annual General Meeting. [Operator Instructions] I'd now like to hand you over to Rupert Howell, Chair. Good morning, sir.

Thank you very much. Ladies and gentlemen, it is now 10:30. I'm pleased to welcome you all, including those joining remotely to the 2025 Annual General Meeting of System1 Group PLC. As there is a quorum present, we can start the meeting. You may wish to follow the proceedings by referring to the notice of this meeting. First of all, I'd like to introduce myself, Rupert Howell, Chairman; and my fellow Board members. To my right, James Gregory, Chief Executive Officer; to his right, Chris Willford, Chief Financial Officer; to his right, Sophie Tomkins, Senior Independent Director; as well as other nonexecutive directors. Next to me, Phil Machray; next to him, John Kearon; and at the end, Conrad Bona, who are all sitting here with me today. The notice of the meeting was sent to you in accordance with the Articles of Association of the company. And unless there are any objections, I will take the notice as read. Thank you. Before we start the formal business of the meeting, I'll explain briefly the procedures we will follow. You have been requested to submit questions electronically and those that have already been addressed or will be addressed -- I'm sorry, those have already been addressed or will be addressed in due course. Today, at the end of the meeting, there will be an additional opportunity to ask questions or make a statement. For those in the room, when posing a question, please introduce yourself and mention if you're a member or a representative. For those joining remotely, please route your questions via the Investor Meet Company platform. We appreciate brevity to give everyone a voice. Remember, only questions from members, representatives or proxies will be permitted. You have also been asked to submit your votes before today. Those who did not do so but are eligible to vote will be invited to vote by way of a poll once each resolution is read out. Please be reminded that those joining remotely are not able to vote. To ensure we capture all shareholders' perspectives, we will conduct a poll on each resolution today. I'm appointing MUFG Corporate Markets, the company's registrars, to act as scrutineers. When you registered your attendance here today, you will have been given a poll card, which the shareholders and proxies present at the meeting should complete and sign as indicated. In the case of corporate shareholders, the poll card should be completed by their authorized representatives present at the meeting or by their proxy. If a voter is both a shareholder and a proxy for another shareholder or if you are attending as a proxy or representative of more than one shareholding, please use separate poll cards. On your poll cards, there are 3 options for each resolution. You can vote for the proposed resolution, against the proposed resolution or you may withhold your vote. A vote withheld is not a vote in law and will not be counted in the calculation of the proportion of the votes for or against a resolution. Please complete your poll card by ticking the appropriate box next to the relevant resolution depending on how you wish to cast your vote. Once all votes have been taken on the resolutions, please would you sign the poll card and hand it to the representative of MUFG Corporate Markets, who will be coming around to collect the poll cards. Should you require any further assistance, our registrars will be happy to help you. I can confirm I've been appointed proxy in respect of 8,250,595 shares. Resolution 1 is the resolution to receive the report of the directors and the accounts of the company for the financial year 2024-'25. I formally propose Resolution 1 as an ordinary resolution. In accordance with good practice, I will let you know how shareholders who have submitted proxies have voted. Shareholders who have submitted proxies in relation to Resolution 1 as follows: shares in favor 8,249,959; shares against 13; shares withheld 623. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 2 is the resolution to approve the directors' remuneration report as sent to members with the notice of this meeting. I formally propose Resolution 2 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 2 as follows: shares in favor 8,159,023, shares against 11,767, shares withheld 79,805. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. In accordance with the Articles of Association, all directors are retiring and are offering themselves for reelection. Resolution 3 is the resolution to reelect John Kearon as a Director of the company. As announced on 9th of July 2025, John Kearon has from 1st of September 2025, become a Nonexecutive Director of the company. He's therefore standing for reelection as a Nonexecutive Director of the company. I formally propose Resolution 3 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 3 as follows: Shares in favor 8,163,149, shares against 86,195, shares withheld 1,251. This resolution is now put to the meeting to vote. Would you please tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 4 is the resolution to reelect Sophie Tomkins, who is a Nonexecutive Director. I formally propose Resolution 4 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 4 as follows: shares in favor 8,242,331, shares against 7,013, shares withheld 1,251. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 5 is the resolution to reelect Chris Willford as a Director of the company. I formally propose Resolution 5 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 5 as follows: shares in favor 8,240,326, shares against 7,013, shares withheld 3,256. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 6 is the resolution to reelect Rupert Howell, who is a Nonexecutive Director. I formally propose Resolution 6 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 6 as follows: shares in favor 8,240,326, shares against 7,013, shares withheld 3,256. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 7 is the resolution to reelect Phillip Machray, who is a Nonexecutive Director. I formally propose Resolution 7 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 7 as follows: shares in favor 8,240,326, shares against 7,013, shares withheld 3,256. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 8 is the resolution to reelect Conrad Bona, who is a Nonexecutive Director. I formally propose Resolution 8 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 8 as follows: shares in favor 8,240,326, shares against 7,013, shares withheld 3,256. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 9 is the resolution to reelect James Gregory as a Director of the company. I formally propose Resolution 9 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 9 as follows: shares in favor 8,240,326, shares against 9,018, shares withheld 1,251. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 10 is the resolution to reappoint HaysMacintyre LLP as auditors of the company and to authorize the directors to determine the auditors' remuneration. I formally propose Resolution 10 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 10 as follows: shares in favor 8,238,947, shares against 10,397, shares withheld 1,251. This resolution is now put to the meeting to vote. Would you please tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution #11 is the resolution to declare an ordinary dividend of 5.5p per share and a special dividend of 5.5p per share on each of the company's ordinary shares for the financial year 2024, 2025. As explained in the notice, if approved, this will be paid on 17th of October 2025 to shareholders who are on the register of members at the close of business on the 26th of September 2025. I formally propose Resolution 11 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 11 as follows: shares in favor 8,250,582, shares against 13, shares withheld 0. This resolution is now put to the meeting to vote. Please would you tick the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 12 is the resolution to authorize the directors to allot relevant securities subject to the provisions as set out in the notice. I formally propose Resolution 12 as an ordinary resolution. Shareholders have submitted proxies in relation to Resolution 12 as follows: shares in favor 8,161,172, shares against 88,800, shares withheld 623. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. We now come to the special business of the meeting. Resolution 13 is the special resolution to allow the company to disapply shareholders' preemptive rights on the issue of new shares subject to the provisions set out in the notice. I formally propose Resolution 13 as a special resolution. Shareholders have submitted proxies in relation to Resolution 13 as follows: shares in favor 7,578,395; shares against 671,549; shares withheld 651. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 14 is the special resolution to allow the company to disapply shareholders' preemptive rights on the issue of new shares in connection with an acquisition or specified capital investment subject to the provisions set out in the notice. I formally propose Resolution 14 as a special resolution. Shareholders have submitted proxies in relation to Resolution 14 as follows: shares in favor 6,613,028, shares against 1,636,916, shares withheld, 651. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. Resolution 15 is the special resolution to allow the company to purchase its own shares subject to the provisions as set out in the notice. I formally propose Resolution 15 as a special resolution. Shareholders have submitted proxies in relation to Resolution 1 as follows: shares in favor 7,479,508; shares against 1,963; shares withheld 769,124. This resolution is now put to the meeting to vote. Please would you tick the appropriate box on the poll card. [Voting]

I will now close the vote. The poll is now closed. You'll be pleased to hear that Resolution 15 was the final resolution of the AGM and concludes the formal business of the meeting. Thank you for joining us here in the room and remotely. The directors do appreciate your continued support and look forward to seeing you all in 2025. Please would you now sign the poll card and hand it to the representative of MUFG Corporate Markets, who will be coming around to collect the poll cards. The final results of the voting will be published by RNS later today. We will also publish the results on our website as soon as practical. We will now open the floor to questions or statements from those who've joined us. Please can I remind you that we should -- you should say who you are and if relevant, where you're from. And please can we keep it brief so that we can allow lots of questions to be answered.

[indiscernible], I'm happy to come to you first because I know you wish to make a statement.

The statement is not brief.

Well, can you make it as brief as it's possible to be?

I may not be...

So then I reserve the right to cut you off if you go on for too long because I wish to have other people.

[indiscernible], shareholder. Thank you, Mr. Chairman, for allowing me to make this statement. I'm a retail shareholder and own System1 shares behind you. Witnessed the company's many ups and downs during that time. I have become much more positive about the business from the early success of the platform strategies during the last 2 years. But following yesterday's update, I no longer have confidence in the executive team to maximize the value of this business for shareholders. And I believe the best course of action to create shareholder value is for the Board to sell the business or at the very least undertake radical executive changes. Yesterday's trading update was [indiscernible]. The update revealed a forecast of unchanged revenue for FY '26 versus guidance issued less than 3 months earlier of 15% revenue growth. I recognize business never runs smoothly and growth never happens in a straight line but the scale of the revised guidance and the short time scale in which it occurred is truly shocking. Yesterday's revised guidance committed one of the stock markets' cardinal sins, overpromising and then quickly underdeliver. I simply don't believe industry conditions have changed so much since July to warrant such a significant reduction to expected revenue. Now I'm not being clever with numbers up here. So on 11th of July, I participated in an investor call with the executives to discuss the full year results. I asked about what underpins the then 15% revenue growth guidance given the subdued Q1. I was not convinced by the response and on 16th of July, I e-mailed Canaccord with feedback from the investor call. I wrote, FY '26 guidance of 15% total revenue growth is welcome but management were not entirely convincing about what supported that 15%, for example, references to seasonality. 15% projection requires platform revenue to advance 26% during quarters 2, 3 and 4, which would result in some very exceptional quarters in H2 and that doesn't look ambitious following that Q1 update. As such, I would have expected more commentary on what exactly is going to support what for now seems an optimistic 15% projection. So shareholders have to trust management to issue credible guidance. And the 2 preceding strong years did give management the benefit of the doubt of that 15%. But now looking back, it seems ridiculous the executives are happy to publicly forecast 15% full year revenue growth when an outside retail shareholder such as me can easily doubt that projection. This sudden guidance downgrade really begs the question whether the executives have completely lost touch with what is actually happening within the business. The other year, shareholders were informed of a new performance culture within the business, which would deliver top-class outcomes to clients and in turn create value to shareholders. The early signs are very promising. But James ominously mentioned having to further professionalize the workforce and in a recent webinar, and I fear System1's lifestyle culture remains firmly embedded with this. For example, I still note Chief Innovation Officer, Orlando Wood, continues to flaunt plug his own marketing processes and making some indulgent sales. Chief Customer Officer, Jon Evans, is often too busy talking about himself [Technical Difficulty] System1 during his global trotting podcasts. The new innovation MD, Tristan Findlay, also admits to doing guided meditation in the middle of a wood, during at works, offsite day. I fear these examples are just the visible tip of the iceberg of keeping employees happy rather than shareholders. Following yesterday's update, James' LinkedIn feed provides further kick in the teeth for shareholders. Just a few days ago, employees past and present celebrated 25 years of System1 at shareholders' expense with and I quote "live music, pink cake and fizz." And as employees dance the night away, shareholders have since lost 35% of their money as management seemingly prioritize parties before profit. System1 may be deemed a great place to work but ultimately, great places to work has to deliver for the owners. Less than 3 years after the general meeting that asked for new leadership, System1 shareholders are once again left to wonder whether this business is being run for the benefit of the shareholders or for the employees. The share price is now back to a level first achieved 14 years ago. And I'm convinced the independent nonexecs -- sorry, Rupert, Rupert, Sophie, Phil and Conrad must immediately rebuild shareholder trust by seeking fresh executive talent that can issue credible guidance, can actually run the business for shareholders and can finally exploit System1's IP to the fore. The obvious solution is a full sale for sale of the business, whereby a larger trade player could integrate System1 into its own sales network and give hapless shareholders a clean exit from a business that has offered so much promise but delivered so little since its flotation 19 years ago. Finally, I would call on the major institutional shareholders, BGF, Herald, Kestrel, Crucible, [indiscernible] and Octopus to engage the 4 independent nonexecs and instigate the necessary changes. Thank you for listening and I will publish a copy of this statement on my website, [indiscernible].com in due course.

Thank you, [indiscernible]. Well, that wasn't too long. And you've made your point of view very clear. I'm going to just answer some of your macro points. You make it sound like forecasts are plucked out of thin air by management. They're not. Forecasts are done by canvassing every single major client, on what they're planning to spend in the forthcoming quarter, half and year. The forecast that we talked about in July were based on client confidence. And in fact, at the time, we even debated whether those forecasts were too conservative. Thankfully, we didn't. But we did debate that point. And what happened is this market changed fundamentally in August. And you only need to read the releases from M&C Saatchi last week and this week from both Mission Group and from Ebiquity, making similar, very similar points to the ones I'm about to make. I'm old enough to have seen, I think, 2 proper, if not 3 proper downturns in the advertising market. And I've seen nothing like this. And it is caused by the carnage of the Trump tariff regime, particularly in the U.S. but it's affecting things globally. So what happened is, we had a terrible August, completely unexpectedly, where the clients told us that, that -- not to worry that, that would all reappear, that money would reappear in September. That's what all the major clients told us. Basically, none of that money reappeared. And I've called around all weekend, all the people I know in my industry and there is a, there's a very odd state of panic going on in the business community, particularly in the U.S. about the impacts and cost effects of the tariff regime, which are material. And as ever in those situations, what people do is that they stop doing anything they can stop that's discretionary. And unfortunately, throughout history, that has always included advertising, which always comes back. And if this was a normal recession, I could predict you quite confidently when that might come back. Right now, we can't. We really can't. So our clients are still saying everything is going to come back in September and October but we now no longer can trust that because that's not what happened in August and September. So that's why we put out the statement yesterday. I think to state that you've lost confidence in the executive team after their performance over the last 2 years is frankly ridiculous. I have 100% confidence in this brilliant executive team who are managing a very difficult process extremely well. I hear what you say about selling the business. As you know, as a Board, we always consider all the options open to this business to the benefit of shareholders and we'll continue to do so. What we have to do short term is manage our cost base as best we can. But we actually have more clients now than we had a year ago and the best new business pipeline we've had in our history. So what you have to decide as a executive team and as the Board is do you cut costs to an extent that you put yourself into a doom loop, or do you actually manage your costs as best you can but recognize that you have to service those clients. And at some point, very little visibility right now but at some point, that spend will come back. We have in just the last 6 weeks, won globally one of the biggest streaming services in the world. We have won a huge soft drink business in the U.S., the first of the top 3 credit card business in the U.S. and also globally expanded our business with the world's largest retailer, I suppose, massively, all in the last 6 weeks. But that money does not flow through until the second half or perhaps even into next year. So the decision we have to make as an executive supported by the Board is, do you maintain the workforce to manage that business and grow it and get back to growth? Or do you slash and burn and risk going into a dooms [indiscernible]. We're not going to do the latter. We're just not going to do it because it would be stupid. And we're not going to change the executive because they're a first-class executive who have delivered for shareholders in terms of beating the market the last 2 years. We are now suffering alongside the market. This is not unique to System1, and we're going to do everything we can to get this business back into growth so that shareholders benefit. But we're certainly not closing down any kind of future possibilities for the business. That's not -- it's not our business to do that. Our business is always to look for the best solution for shareholders. But that does not include panicking short term. I will not panic, may not. Questions? Any other questions?

With regard to the investment in the innovation team, how is the -- you had 6 months of Tristan and team, well, how is that progressing?

I'll let James but we're 30% up already year-on-year. So...

Yes. So results are looking good in the short term as well as in the long term. We brought in Tristan mentioned [indiscernible] to the team in March. We brought in a Head of Sales in EMEA in April, May time and a Head of Sales in the U.S. in June, July. So the team, if you imagine, are on a relatively short basis despite you tend to have a relatively long cycle if you're winning big accounts. But it's fair to say, yes, so short-term numbers. So at TYI, our innovation product sales are up significantly year-on-year for the first half. We've had some excellent wins. So with -- for example, the first bit of work with the world's largest confectioner, for example, with [indiscernible] -- we always have a difficultly not being able to name customers. So without having to [indiscernible] in front of me [indiscernible] 3 to 4. When we come through to future statements, we'll be able to identify some of those. But we are winning in spaces where we haven't been able to win before. And that's because we have more credibility in that space. We have focus in that space, and it's starting to work. Having said that, it's growing off a small base. So it's going to take some time to -- it actually becomes to the level of where our advertising business is at but we've made the right early steps in the space.

Can I -- there's a couple of other points I want to make because [indiscernible] statement, while I disagree with a lot of it, does raise important issues. So your commentary about Orlando and Jon Evans completely misunderstands the value that they bring to this business. So we have now a record number of inbound leads from marketing directors, most of which are generated by Jon Evans' Uncensored CMO podcast, which is the most listened to and most subscribed marketing podcast in the world. If Jon did nothing else, if he did nothing else and he does a hell of a lot more, he would be of immeasurable value to us. Orlando is a genius. Orlando is the spark that turns a business from being good to great. And Orlando's course is educating. It's called APE, which is Advertising Principles Explained. He is teaching the next generation of marketers why System1's methodology and why emotion in advertising is so important. He is educating a whole cadre of future clients into why they should think about the methodologies that System1 particularly espouses as well as then working in the business to help design our products. And if you can't have a small party with one girl with a guitar who's a friend of somebody at System1 to celebrate 25 years...

I paid for the guitar. So...

With one pink cake to celebrate 25 years of a brilliant business, then you're miserable. So that's why I defend that. Well, that's a miserable comment, frankly. Any other questions?

Can I go with -- provide just a questionnaire?

Yes, of course.

I've been a shareholder for 9 years [indiscernible]

Yes. But if you think that the best way to -- if you think that the best way to run a business is to hair shirt it instead of facing up to the challenge, encourage your people, motivate your people to do better, then you haven't run a business and I have. And I know what's the right way to run a business. Any other questions, please? You've had enough, may not, thank you. Any other questions? Yes.

You talked about 80 new customers in Q1, I think there wasn't a figure disclosed for, so is this...

Yes, we haven't closed our quarter yet. So the numbers we put out to the market were just in terms of the timing where we're at. We will actually be sharing in October the full Q2 numbers and they will come at that point. But it's fair to say that, as Rupert mentioned earlier, new business in the first half and continued into the second quarter, remains really positive, positive both on the customer accounts and on the total revenue that's bringing in. So that part of the business is working really, really well. I think as Rupert mentioned beforehand, what we're seeing in the business and what we talked about in our trading update yesterday is a soft underbelly of our large customers who are either pausing, delaying or doing smaller amounts of work with us. They're not leaving. They are still with us as customers.

And not going anywhere else as well. So this is really important. We haven't lost any business. This is just people are spending less. It's very important.

So geographically, I think in Q1, you suggested Europe and particularly [indiscernible]

Yes.

In Q2 whether they'll become more widespread across Europe, U.K. and the U.S. or...

Yes, at least, I'll say yes, so Europe remains tough. I think it's unfair to say you'll see that with lots of businesses who trade into there and mainly because lots of our businesses in Europe are ones who export into the U.S. and have been faced into those various tariffs that I mentioned. The U.S. has had a tougher second quarter as well. So we will remain positive in the first half but we'll have a tougher Q2 on Q2 than we had a Q1 on Q1. We've also had an, not as an excuse but there is also an FX headwind that flows from the U.S. as well, which isn't insignificant. Again, when we talk about our results, we'll be able to share more detail either in October or December.

Question?

So I'm [indiscernible] questions. In terms of -- you said before, you've been outperforming the market, now you're going down with the market. Do you -- with your talks to peers in the industry, do you feel you're still outperforming or you're -- this downturn, you're doing -- is it the same as everyone else or?

Hard to say. It was uncanny that the Ebiquity's sort of percentages were almost exactly the same as ours of what they reported on the same day, completely unknown to us, obviously, until we read it as well. I would say history shows that recessions, and as I said to [indiscernible], I'm not sure this is a conventional recession, shows that challenger brands like ours can actually do well because when times are really tough, the client community will look beyond the usual big boring global suppliers and will actually consider or are more likely to consider smaller challenger brands like us. So we see it, if we can get all our ducks in a row potentially as an opportunity. But as I said before, this isn't a normal recession. So the feedback I've been getting from our peers and the broader advertising media community is that we're all suffering a pretty similar fate. I haven't seen anybody yet who's bucking the trend. There's bound to be somebody who is. And obviously, if I ever see that, I'll try and find out how. But the way we're looking at it and we're spending all afternoon together to look at what we should -- what other things we should do, including looking at some of the points that [indiscernible] raised is, we are going to see what more we could do to at least outperform the market. I mean, ultimately, you can't buck market trend. I mean, for example, we have major pharmaceutical clients who are looking at massive cost increases on imported ingredients and then have a President who stood up 2 nights ago and told them their products were killing people. I mean that doesn't really help. And the chaos in the pharma sector in the U.S. is pretty frankly, I think the boss of Eli Lilly was saying this morning, I know he was trying to get prices down in the U.K. but was just saying generally the macro environment. It's not -- it is partly the tariffs themselves. But what our clients are telling us is they were expecting by now that at least they'd have settled down and they knew what's what. But they still don't know. Stuff is moving. I mean, every time there's a international summit, it changes. Somebody -- he meets with Putin and things changes. He meets with the EU and things changes. He's now gone off to the UN and upset everybody and no doubt something else will change. That's the problem, is they don't know what the outcome is going to be. And uncertainty is the enemy of marketing spend, always has been.

So I think just to add to that [indiscernible]. And the thing that we can do at the moment is ensure that we're truly focusing on driving that demand. So you take this week, just this week, for example, last night we had a launch with Aardman upon our partnership, so they deployed a [indiscernible] with them, which is excellent in showing how do you create true sort of showmanship advertising in that space. And also this week, we're also as part of -- with ITV -- in partnership with ITV 70 years of advertising and what does great advertising look like. And just to turn back on the earlier comments on Orlando and Jon, the reason we get invited to those partnerships, the reason we're on there is because we have the credibility of people like Orlando and Jon who can stand on a stage and actually project, not just as a supplier vendor but as a voice in the industry, what it means. And -- they are incredibly strong in driving our new business generation, both directly through inbounds that will come from a course or from a podcast or through that wider perspective that they can have because of their brands they've been able to build up.

[indiscernible] was on terms of staff morale, which you talked about, the LTIPs, now that seems sort of worthless in a sense or maybe. But how many people benefit -- how many executives benefit from the LTIPs? And what does that mean for morale going out for a few years?

Fortunately, I regularly take [indiscernible] on a Monday evening. So I'm feeling quite meditative and calm about it. But maybe [indiscernible] Yes. And obviously, the details of, the shape of the scheme are within the annual report that's been published. In terms of membership, so both -- clearly, both the executive directors are members of that scheme. And beyond that, there's a team of 8 of the exec team that benefit from it or could potentially benefit from it. Clearly, we're still 6 months away from the start of the first period, so the start of FY '27. So I don't -- sitting here today, clearly, I'm sure management will have a different view of the likelihood of achievement but I certainly don't feel we're in a position we should be ripping it up and starting again. We have a structure of both fixed remuneration, in-year remuneration, which we have used really tactically in the past when we've had strategy changes and we've had previous challenges in revenue trajectory. We've used those really well to kind of motivate and align the behavior of people in the business with the business' objectives. So they're all still in place. And as I say, we're still 6 months away from the start of a 3-year period of LTIP assessment.

I mean it is a management challenge in times like this. I've been there myself in person in the past to keep up morale. But what you have to project to management, to the staff is confidence in the mid- to long term, which we have absolutely bundles of confidence in the mid- to long term, that you're doing all the right things in the short term but you're not blaming them, except where very specifically if somebody has underperformed, then clearly, that as a normal course of business, you'd be exiting underperformers. But people who are still working down hard and delivering good results, we -- you have to keep them motivated. And it's hard. That's going to be tough. But we know how to do it. James and Chris are held in huge regard by the team at System1. And it would be catastrophic if we change them or lost them for any reason. And so, I hope [indiscernible] hang around for a bit. Despite what [indiscernible] said, it would be absolutely catastrophic to the business, trying to change people who were manifestly successful previously and also are doing a cracking job of managing a very difficult situation.

Yes, I -- if it helps, I remain optimistic. I mean, if you wind the clock back 2.5, 3 years ago, we were in a period where top line hadn't grown and we were facing challenges. And then we delivered roughly 25% top line growth 2 years on the road. And that was working very, very well until the last 6 to 9 months when we have felt challenges to it. But fundamentally, does the product work? Yes. Do people want to buy it? Yes. And have we got the right team and the right culture to go and deliver it? Yes. Is there more we can do to continually improve always? I mean that's the fundamental job. That's why I go in every day and I have to tackle with Chris and the rest of the executive team on that basis supported by the Board. But we're here because we're optimistic that we can continue to grow the business for the long-term value for yourselves as shareholders and for everybody involved.

Other questions, [ Jim ]?

Can you just comment a little bit about channel mix in terms of, obviously, terrestrial TV advertising perhaps declining. You've, Test Your Ad for TikTok, for example, is a recent innovation. How do you see the advertising market across various channels that you address?

Yes. So I mean, for that reason, we've been expanding the product suite over the last couple of years. So as you said, we had originally sort of Test Your Ad product that was then applicable across them all but we've come in much more targeted. So having an out-of-home offer, an audio offer, a digital offer, a print offer, et cetera. And we've seen some really good traction with our partnership with TikTok and then the products which we offer in that space, which is great. We've seen a lot of the behavioral science applied across many parts of it. If you want to create great showmanship, you want to build your brand, you want to drive long-term brand growth alongside the short-term sales. But the tactics that they use in the different channels will be different, which is why we have those different products. I think as a very long-term thing, I mean, it's very obvious that the market is trending more towards the digital space. A lot of that is also about when you look at the total spend, you'll see people like spend on Amazon, buying AdWords on Google, which isn't necessarily traditional advertising but will fall under that bucket where that's also been taking a lot of spend. And I think the position that we have, which will give us a good defense and good sort of opportunity is, we can still help people understand how they can grow a brand on those channels rather than just go down the route of standard 2-for-1 buy now sort of direct marketing. And I think that's our position, has worked really well in the TV space and can definitely apply to the other part, which is why we're seeing success, for example, with TikTok.

Those media partnerships work well. So we've got partnerships with ITV, with TikTok, with ABC in the States. Those things do work well and LinkedIn, obviously, where they build our product into their sales efforts as well. So it's sort of mutually beneficial. Those things are working very well. And again, have protected us from some of the worst of what's going on at the moment in the market. Are there any other questions? You never saw AI question.

I know that you're working with Uni on AI and we've seen some AI-generated adverts, I think scored very well under the System1 methodology. Could you perceive an AI threat to actually the testing of [indiscernible] responses that you have built into your system.

Opportunity as well as a threat.

Yes. So we -- and we'll talk about more in our -- we have Capital Markets Day on the 22nd of October. And one of the topics that we'll be going into there will be AI. So in particular, how we can build out our product suite of both our innovation and advertising products in that, how you can underpin everything we do. I mean everybody today, whether it's using a phone to find a venue in the morning but AI is everywhere now and how we can use it for efficiencies within the business. So 3 areas that we can really look into it. If you think about the value chain, where it works, does AI mean that people can create more advertising and more ideas to be testing? Yes, fundamentally. So you can imagine actually a world where there is increased demand for testing at the back of it, especially if it's coming in from a more either commoditized or differentiated way than it has been coming traditionally. If you think about opportunities lower in the value chain, so could you swap out human respondents for synthetic respondents, yes and other vendors are doing that. We API to multiple vendors. So if that becomes appropriate for our business, we can do that. And then in our space, one of our sweet spots is truly understanding human emotion. Now we have an incredible database. We have over 140,000 outlets in our database, over 60,000 new products or innovations in our database as well. So if you wanted to truly build out AI that was able to mimic human emotion to be able to offer the services that we do, you need that level of data. So we're also in a really strong position in terms of having that data, which something can be trained on. Hence, the learnings with Warwick and other partners, have been doing since that point. So I think actually from us -- I think as an overall industry macro perspective, yes, it's there. Yes, it can be seen as a threat. This is one there's quite a lot of upside on that space, too.

And it's a lot of the excellent work that Jon has been doing in those partnerships.

I'm not allowed to say anything about it.

Well, to at the moment, but we will [indiscernible] You can say anything you like, but certainly, it's going to be a key part of the Capital Markets Day. That's for sure.

I'll be writing songs.

Yes. It writes songs as well.

Well, that -- maybe that is not frivolous. This is the help. Effort. So usually there's sunlight. There's nothing new to say about dish wash liquid. So I'm trying to bring the jingle back with a song about sunlight [indiscernible] which they love.

It's quite interesting. Anyway. So yes, we are looking at it very much from a business perspective but also playing with it with some clients because it's early days yet. The best bit of advice we ever got from -- I've got a friend in New York who's seen as the kind of AI called Noah [indiscernible]. He's like the AI guru in New York. And Noah, he's actually a friend of my nephew as it happens but I've met him. He's done a master class for us. And he just said, look, the only thing I'll -- the only advice I can give you about AI is make multiple small bets because if you make a big bet, you'll be wrong because everybody is going to be wrong. What you need to do is lots and lots of very little, very cheap bets and see what happens, see what works, you'll learn each time. And that's kind of what we're doing in partnership with our clients.

Yes. And I mean, we are trying to be on the forefront of -- this is a good example. So again, we're not going to name customers but we carried out within partnership, a project for a customer, first time working with that customer in the innovation space, a large global brand. And we were able to use their AI, which was very much focused on sort of scouring human emotion across Internet, et cetera, data points and alongside our testing as a way to truly accelerate their experimentation and the potential go-to-market in a new region for them. I think that's -- so those are some of the opportunities where you can move quickly in partnerships, et cetera, before we work out where the market is going to trend and where it can go. So there is real upside for us in that space.

One question. There's 1 question from...

Okay. Sorry, Christophe...

So there's a question from Christophe. So if the market has turned down, is this a good time to be increasing expenditure, or "investment."

This probably comes from multiple studies, which -- that's a question normally aimed at the client community because there are multiple, multiple studies, notably by Procter & Gamble, showing that actually the best time to gain market share is in a recession when you can -- you get more bang for your buck by outperforming your competitors. When it comes to the, now, our System1, I wouldn't say this is a time for us to invest more. I think it's the time for us to stick to our guns with what we've already invested and committed because it's beginning to work and that's in the innovation space. Now of course, there's fine-tuning to be done and so on in the new world we find ourselves in. But we made that commitment to invest in our innovation product, which we're doing and innovation people. So I wouldn't say with System1, now it's time to invest more but it's definitely time to hold our nerve and to stick to a strategy that has so far served us very well, although we will always look at it on a sort of continual basis in case it needs to be adapted. Any other questions? Yes, please. Can you -- sorry, could you say...

Yes, [ Oliver Levy ]. If you could tell me -- to predict your data and improve your data, labeled as -- one is labeled as sort of data and data-led consultancy and the consultant is going, all those data. Mike, can you support me from what you mean by data, winding that back because often data spend doesn't go as volatile as you're showing?

So I think the other word that could be applied to it would be predictions. So we have a platform, which in our advertising, our innovation or in our brand space allows us to predict an outcome. So how likely will your advert drive long-term brand growth or short-term sales and impact on your brand fluency. Those reports are driven through an automated platform. So -- and that's what we refer to as the data. So if I'm a customer, I want to upload my ad to the platform, I want to understand the impact that's going to have on my business. That revenue derived from those tests and those predictive outcomes are what we call data. The data-led consultancy is when our consultants are able to help the customer truly understand what that says but then improve it further. So we have those database of adverts, we have that database of innovations. So we can go on and we can inspire, we can say use of jingle earlier, like how does your sound work? Like how could you differentiate your product better? How can you add more surprise or have less surprise depending on what you want to add into the overall products you're developing. So that data we offer is in reality sort of almost project-led deliveries of data but the data is a prediction and a outcome. It's not a SaaS subscription to, access to x number of data points across the market, which is just fed through onto a platform on a daily, monthly or yearly basis.

And perhaps my question was -- I understood a little bit, I've understood some of that in the sense of what I thought. My question comes to how is it -- how do you price for clients? So do you have -- what visibility do you have? That's the sort of story [indiscernible]

Yes. Sorry. So, yes -- so we -- our revenue model is that we -- so for the majority, so our brand business tends to be long-term commitments, people might have a brand tracker for 2, 3 years, for example. Access to our database, so those 100,000-plus adverts that I've talked about is on a subscription basis. But that's outside that 10% roughly of revenue, 90% of the rest of the revenue will come on a project basis. So we do work with customers to get towards long-term commitments that allow them to have, for example, certain rate cards based on spend commitments, et cetera. But what we don't have is cash upfront, which is then drawn down against, which would be more of, I'd say, traditional kind of subscription project-based business. Now again, something which we can look out further in terms of giving more consideration of have defensibility in downturn, for example. But the advantage of that business model also does mean that when you are growing, you are able to grow faster than the market. So part of the reason we've been able to grow faster and have sort of good competitive pricing is because of that model as well. So it's something -- again, it's a topic we've got -- we've mentioned we've got time later on today. It's one of those topics on the table of refinement of pricing models, for example, in a downturn and would you want to consider something different.

And sticking to that pricing question is, what do you think your return on investment for your clients is by using you? And do you have a view on that? Are you generating 10x return, 5x return for them? For every $100,000 they spend with you, how much do you -- how much do they save? I mean I think it's going through your system and you're refining it.

I mean we have -- and if you want it, we can definitely share. So we have shared -- we have -- I think on our website, we have various validations to take you through the various levels. So if your category average star score is X and you are Y, this is the long-term brand market share you can see for it. We also -- and that's what we tend to work on with our customers. So when we have like a new pitch conversation. It's very easy for us to have a conversation to say, look, you know the business results you've had over the last year. You've run 10 campaigns. We can tell you what we predicted those campaigns to do. You know the results, do the correlation and see if it works. predictive correlation is what allows us to win in that space.

We're ahead of the market by a long way on the predictive -- what we call predictiveness, which is the predictive correlation.

And at the end of it [indiscernible] reflect, if you think about, say, for example, in the advertising space, free testing is worth about 1/3 of total spend in advertising. So the money spent on us is very, very much worth it, either to work out should you add ad in the first instance, should you share it for the minimal amount or should you really be doubling down on this one as you go forward because that's where the long-term return is going to come as well.

Any clients you'd like to talk about?

Not many, [ John ] but either for example, or...

Don't know the figures for that one. Anything else?

I'll ask another question.

[indiscernible] In answer to your question, the market -- the spend that they give us, when they have a 4- or 5-star ad and their brand share grows -- these are big companies, the answer to your specific question could possibly be 1,000:1. I mean massively, it could be 10,000:1.

So with that data point and let's just say it's 10:1, 10,000:1.

It's much more than that. Okay.

Why would anybody cut penny of spend unless they're not airing ads at all. They're not airing an ad at all. I get it.

Yes, that's...

Maybe I should have said also in my commentary, it's -- is a lot of what's happening -- so I was talking to a Nonexecutive Director friend of mine of one of the biggest, if not the biggest retailer in the U.K., who said basically they're having the discussion about rerunning their Christmas ad this year, not doing a new one. We then if they do that, there's no testing. So we get 0 revenue and they're protecting. In fact, there was a report about a week ago and I've been trying to find it. I've definitely read it but I couldn't find it, that's showing that clients are protecting their media spend, in other words, their reach by cutting advertising production, i.e., by making ad instead of 2 or no new ads. And inevitably, if they make less ads or use old ads, they use less of us. That's the issue. So that's how it tumbles down the system. But the ones who are making new ads, our clients always test them because the value is absolutely immeasurable. And one of the things we are looking at is, as James said, in this environment, maybe there are more solid contracts we can negotiate with some of the clients who have shown at least over a couple of years that they do stuff every quarter even in difficult times, even if it's less and maybe we can have a more retained relationship. Although again, this week in Campaign magazine, it's a big article saying the move from retained relationships to project relationships in ad agencies is growing exponentially. So perhaps our model is where the world is going. And fortunately, we know how to work it better than most.

And your clients at the end customers, do you also have ad agencies as major clients? Do you think every ad agency has to use you?

Yes. So over 90% of our revenue will come from end customers and brands. We do work with agencies. So either that is because they want to use us to help validate their work what see in front of the customer. They want to help convince the customer that they're better than another ad agency or because we have strong relations with them as well. Again, we do try and -- I think because of our celebration of creativity, where a lot of our competitors tend to bring things back to the normal sort of almost done down creativity in a way, we are seen more favorably by them. I think if you look in that space at the moment, though there aren't many who have a wonderful set of results who are looking to kind of increase and spread the pie. Yes. So they are definitely in a place, if you ask, themselves. So again, we need to make sure we can add value to them and we're seen as providing value to them and to the end customers so that we can have that. I think there's probably just one macro point on this kind of questioning as well. What we offer is incredible, okay? So the predictiveness we offer our customers is market-leading and best than anybody in the market. The customers who use us truly see that and truly understand it. What we don't have enough is enough brand awareness globally, that is the case. Yes. So the reason we invest in things and again, going back to the earlier point that, for example, Orlando's course is exactly that. If anybody goes on that course, it is 8 hours of System1 -- like saying how incredible it is and how it's the only way that you should think about advertising in the future. So for example, it's not surprising that we then win new business or we retain customers longer on it. The reason that Jon Evans has his global podcast is because he's able to go and have conversations with the world's biggest CMOs. And again, he's able to talk about in my role as System1's Chief Commercial Officer, for example -- Chief Customer Officer. So those are the bits where we are trying to, in a challenger brand way, extend our brand beyond the norm. We're a small business. We don't have the budgets that the likes of a [indiscernible] or a Google or whoever will be a competitor in the space will have to buy a beach at [ Cannes ]. So at [ Cannes ] for example, we do great [indiscernible] that gets us on the stage. We don't spend any money on that. This is where we are after the [indiscernible], whereas other people spend hundreds of thousands of millions of pounds just to have a logo [indiscernible]. So that for us has always been a focus. Hence, the investment we've been doing on long-term brand growth. If we get that right, the more we win, the more we retain, the more that will cycle upwards. And again, that's what gives me, you asked that question earlier. That's what gives me hope. We've got that momentum. That's why we're spending. We've just got to keep pushing it.

Any more questions?

Another question online from [ Christophe ]. And again, I'm struggling to reconcile the Board's positivity and the fact that the share price is down almost 70% in the last 12 months. Please summarize why investors should remain invested.

I would say if you take a medium-term view, if you take a short-term view, I can imagine that you are a bit depressed. If you take a medium-term view, which is the view as a Board, we have to take alongside the short-term view, we're extremely confident because we know our product outperforms, we know our people outperform. And the thing that gives us the most confidence in the lot, is we haven't lost clients and we've got the best new business pipeline, certainly in recent history in terms of not just the number of clients we're winning but the nature of the clients we're winning. We're talking about big global industry leaders that we are starting to win. In one case, taking the entire global business of one of our mega competitors and in other cases, taking significant share of mega competitors. That's what gives us confidence for the future alongside what I've seen from this executive team and how they -- how seriously they take both the management of the business, the delivery of the strategy and their desire to give a good result to shareholders. It is -- there is absolutely no indication whatsoever that anybody on this table wants anything other than the best for all our shareholders and we need to deliver to that. But the market is the market and you can bucket to a degree and we're going to look for every way we can. But the great thing about -- I always say that I knew that [ Gordan Brown ] was a moron when he said either bullish boom and bust because I grew up by the sea. The tide always goes in and the tide always goes out, whatever you do. Sometimes it goes in and out more. And just when you think things couldn't get any worse, they start to get better. And what you have to do is to make sure you're in the right place to take advantage of it when things get better. The issue at the moment is it's hard to see when that might be, whereas in a traditional recession, it's easier to predict when that might be. I think the only thing I'd be particularly positive about is this might actually change quicker than a conventional recession because it's -- a lot of it is sort of [indiscernible] madness based rather than genuine economic fundamental downturns. So yes, we are midterm confident but we know we've got a hell of a job to do short term to both ensure the business is in the healthiest shape and to try and recover some shareholder confidence because obviously, we're not remotely happy about where we are today.

Other reasons for optimism, of course, we have a significant amount of cash in our balance sheet, which for any company is very important because it means significant fate is in our own hands.

Good point. Sorry, should I say...

So with calm heads able to navigate very difficult uncertain environment, having that kind of balance sheet strength and a strong exec team means we're in a great position to navigate this through.

Yes. Something that actually was mentioned on a number of our major shareholders. So that's a good asset. Any other questions? Yes, please.

Can I just follow up on the multiple question for the client. Given Jon's answers, the natural question to ask, the question is, are you underpricing your product?

The very first thing I said when I joined this Board and when there was different executive team in charge as I said, I think our product is too cheap. Because it's an amazing product. And I think we might be undervaluing it. And actually, we priced it up quite a lot, I think, [indiscernible], certainly over the last couple of years. Again, it's something we've got on the agenda this afternoon. Is there a way we should be pricing? So one of the things I tried to do in my advertising career was to get more bonus payments by results because if you're predicting something great, you steer a client in a certain way, they gain their market share. Is there some kind of bonusing arrangement you can get involved? And again, that's something -- a topic we might [indiscernible]. It's quite hard to do. I couldn't with a few clients. I've tried to because I was involved directly right from the outset in launching Go for British Airways, First Direct for HSBC. I launched Amazon over here for Jeff Bezos, never met him but lots of e-mails, blah, blah, blah. And I tried to get shares. I wish to God I had. I certainly wouldn't be here. I'd be in Monaco and joining you remotely. But it's very hard to do because of the way the sort of governance works in major companies. Even on a new product launch, you can't get it. But you sometimes can get performance bonuses. And I think that's something that we should be looking at midterm. So good point.

And just on, specifically on the tactical point, we did put our prices up by 25% in sort of the first 12 to 18 months of -- but after I took on sort of the role. We've also done things like we've launched the ability to ask additional questions on top of it to what we call [ Pro Plus ]. So if you buy a standard test [indiscernible] at GBP 5,000, every additional question you ask is another GBP 1,000 on top. So we are both at the macro at the top level looking at pricing but also how can you drive value for the customer, which they're happy to give you the revenue back for. I agree. I mean, the value which we deliver to customers, if we can link into a plenty of choice, then we can be [indiscernible].

Since I said [indiscernible] running, market research in general is bought by the yard. One of the things I've always felt and we're going to talk this afternoon, is targeting the CFOs of companies where you have actual proof of the increased brand share and the money that, that brings in for the company. No one's ever done that. I don't know whether we will but I think we should. Is that -- do you [indiscernible]

All I can say to that is you have to do it carefully because I tried it once, without telling the CMOs, I was going to do it. They didn't like that if I -- because I -- they accused me of going over their head. So -- but actually, once you could get the CFO and the CMO in the room together, then the discussion became more mature and more interesting. So this is all stuff we need to look at again because when things are going great, stuff -- the machine works. When things are going less well, you've got to look at every component in the machine and see what you can do to make it better, which is, we're starting that very process for the whole of this afternoon. So -- sorry, another one online, 2 more questions.

How are you improving -- this is from [indiscernible]. How are you improving and strengthening your business moats and strengthening the longer game and longer-term sustainability? Are you looking for markets that are out of alignment or sync with the Anglo-Saxon world?

Yes. Well, I mean, we'll talk about, as we said, the future of kind of advertising innovation and AI, which we will address in large part how strategically, in a month's time. So I'll leave that part to there. I mean, recently, the investments in our innovation offer is exactly that, so that we aren't just beholden just to advertising but we can also have a great business in the innovation space as well.

Which is a much bigger market certainly than the advertising market.

I mean for awareness and everyone know that we offer our products in over 80 markets as well to both our advertising and our innovation. So we have got global reach, so we can do it, be that across non-English-speaking countries as well. So we do have some of that as well. So yes, I think probably one that we'll come back to in a future point, if that's okay.

And there was another one, Chris [indiscernible]

Yes. This is probably a very broader question, lifting us out of the kind of near-term business performance. Can the technology you have understand human -- sorry, can technology understanding human emotion be used, for example, for suicide prevention by analyzing speech and written communication?

How caring. Jon?

No, not really.

Not really. I mean mainly or partly or mainly because with that specific example, part of the problem is people can't talk. They don't talk. They can't -- they don't share. So how would you pick it up? And even facial recognition, what, I mean you're going to find a way to sort of watch people for the whole sort of week, day?

Not on our current agenda.

[indiscernible] How can it help society beyond advertising? Yes, you can measure the mood of the nation.

And political ideas and stuff like that.

You can -- Yes. That's...

I think it definitely can help with that. And again, the focus -- the sort of this hegemony of the focus groups where people, particularly politicians nowadays ask people what they think. My whole career, what I learned about, 99% of focus groups is people tell you what they think you want to hear and they're trying to be helpful. So people are trying -- people on the whole in focus groups are trying to be helpful. And what they do is they always bring you back to what they already know. So they bring you back to the average. So you might wonder why every car ad has somebody driving on a windy road on the south of France. That's because if you do a car ad that isn't like that, people say, well, why haven't you got the car driving on a nice windy road in the desert or something. And it's because they're trying to be helpful. They're not trying to be boring, or virtuoso, or -- they're trying to be helpful. But unfortunately, that is what people do when you try and talk to them rationally about these things. The whole difference with us is, we look at how they emotionally respond. And the fact is if you show car ads with windy roads, they start yawning because they've seen it a million times before. So the whole point is that it's emotional response that makes the difference. And I think that could be used in wider society massively more.

Our current sessions are basically the broader the population you're looking at, the more it can help.

Exactly.

And when it comes to the original question about suicide, that's where AI, I think, has something to say, the #1 use of AI in the world, therapy or basically treating it as psychology, #1.

Interesting. I think unless there's any more open questions, I'm going to close it down. I mean, thank you. That was a lively old question session. I mean my apologies if I've got slightly irritated at one point. But you make perfectly acceptable valid questions and points and I'm glad you put your whole statement out and it wasn't as long as you threatened it was going to be. And I hope that you can see that we've tried to answer your questions even if you don't agree with the answers. And gentlemen, I hope that you feel that we've answered as fully as we could any questions you have. So I think at this point, I hand back to the moderator. So I have to say first, thank you. That brings us to the end of our Q&A session and officially concludes today's meeting. A special thanks to all the shareholders who joined us today. Genuinely, we do -- it would be pretty dull if nobody turned up at all. So thank you for that. And it actually gives us more food for thought for our strategy session this afternoon. So it's genuinely helpful. I'd say even if some of the things we might not like, it's still genuinely helpful because it makes us think and that's what we need to do. Thank you very much. So if I hand back to the moderator to close the session.

Thank you very much indeed and thank you to the Board for updating attendees today. Can I please ask attendees not to close the session, you'll be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete and it's greatly valued by the company. On behalf of the Board of System1 Group PLC, I'd like to thank you for attending today's Annual General Meeting proceedings. That concludes today's session and good morning to you all.