Q4 2023 Paltalk Inc Earnings Call

Good morning, and welcome to the earnings results call for Powell talks fourth quarter and year ended December 31st 2023.

Operator: Good morning, and welcome to the earnings results call for Paltalk's fourth quarter and year ended December 31, 2021. At this time, all participants have been placed on a listen-only call. It is now my pleasure to turn the floor over to your host.

At this time, all participants have been placed on a listen only mode.

It is now my pleasure to turn the floor over to your host Jason Katz, Chief Executive Officer of Paul talk when the coverage any chief Financial Officer, Paul talk Kara the floor is yours.

Operator: Jason Katz, Chief Executive Officer of Paltalk; Kara Jenny, Chief Financial Officer of Paltalk; Kara, the floor is yours. Hello, everyone, and welcome to the Paltalk Operating and Financial Results conference call for the fourth quarter and year ended December 31, 2023. By now, everyone should have access to the earnings results press release, which was issued earlier today before the market opens at 7.30am Eastern Time. This call is being webcast and will be available for replay.

Hello, everyone and welcome to the <unk> operating and financial results Conference call for the fourth quarter and year ended December 31, 2023 by now everyone should have access to the earnings results press release, which was issued earlier today before the market opened at 730 a M. Eastern time this call is being <unk>.

Cast will be available for replay in our remarks today. We will include statements that are considered forward looking within the meaning of the private Securities Litigation Reform Act of 1995, including forward looking statements about future results of operations business strategies and plans, our relationships with our customers as well as market and potential.

Kara B. Jenny: In our remarks today, we will include statements that are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, as well as market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your question. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks, uncertainties, and assumptions related to factors that may cause actual results to differ materially from those anticipated in the forward-looking statements. We offer no assurance that these expectations and beliefs will prove to be correct.

Growth opportunities. In addition management may make additional forward looking statements in response to your question.

Forward looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks uncertainties and assumptions related to factors that may cause actual results to differ materially from those anticipated in the forward looking statements. We offer no assurance that these expectations and beliefs will prove to be correct.

Kara B. Jenny: A detailed discussion of such risks and uncertainties is contained in our filings with the SEC, including our most recent quarterly reports on Form 10-Q and annual report on Form 10-K. You should refer to and consider these factors when relying on such forward-looking information. The company does not undertake and expressly disclaims any obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. On this call, we will refer to Adjusted EBITDA, a non-GAAP measure that, when used in combination with GAAP results, provides us and our investors with additional analytical tools to understand our operations. For Adjusted EBITDA, we have provided reconciliation to the most directly comparable GAAP financial measure in our earnings press release, which will be posted on the investor relations section of our website at Paltalk.com. And with that, I would now like to introduce Paltalk's Chief Executive Officer, Jason Kapp. Thank you, Kara, and good morning, everyone.

A detailed discussion of such risks and uncertainties are contained in our filings with the SEC, including our most recent quarterly reports on Form 10-Q and annual report on Form 10-K, you should refer to and consider these factors when relying on such forward looking information the company does not undertake and expressly disclaims any.

Nation to update or alter our forward looking statements, whether result of new information future events or otherwise, except as required by applicable law on this call. We will refer to adjusted EBITDA, a non-GAAP measure that when used in combination with GAAP results.

US and our investors with additional analytical tools to understand our operation for adjusted EBITDA. We have provided a reconciliation to the most directly comparable GAAP financial measure in our earnings press release, which will be posted on the Investor Relations section of our website at <unk> Dot com and with that I would now like to introduce <unk>.

<unk>, Chief Executive Officer, Jason Cat.

Thank you Kara and good morning, everyone. We greatly appreciate you taking the time to join us on today's call.

Jason Katz: We greatly appreciate you taking the time to join us on today's call. We will discuss our operating highlights and financial results for the fourth quarter and year ended December 31st, 2023. Additionally, we will provide an update on our business and near-term business objectives. After my opening statement, our CFO, Kara Jenny, will give a summary of our financial results for the fourth quarter and year ended December 31st, 2023. Following our prepared remarks, we will move into the Q&A portion and answer any questions that were submitted prior to this call.

We will discuss our operating highlights and financial results for the fourth quarter and year ended December 31 2023.

Additionally, we will provide an update on our business our near term business objectives.

After my opening statement, our CFO Garett, Jenny will give a summary of our financial results for the fourth quarter and year ended December 31 2023.

Following our prepared remarks, we will move into the Q&A portion and answer any questions that were pre submitted prior to this call.

Jason Katz: With that, I would now like to walk you through the recent financial and operating highlights and near-term business objectives. We are very pleased with our continued efforts to bring down our costs and streamline our operations, which has resulted in a 69% improvement in net losses and a 62% reduction in adjusted EBITDA losses for 2023, despite our revenue remaining flat. We continue to shrewdly execute on our revenue growth plans and believe we are well positioned for profitability with our current expense infrastructure. On the sales side, our marketing efforts have become more efficient, and we have expanded ManyCam to the enterprise segment. We believe we are well positioned for organic and acquisitive growth as our current expense infrastructure can support additional revenue, and our cash position as of December 31st, 2023 remains strong at $13.6 million.

With that I would now like to walk you through the recent financial and operating highlights and near term business objectives.

We are very pleased with our continued efforts to bring down our costs and streamline our operations, which has resulted in a 69% improvement in net losses in the 62% reduction in adjusted EBITDA losses for 2023, despite our revenue remaining flat.

We continued to shrewdly execute on our revenue growth plans and believe we are well positioned for profitability with our current expense infrastructure.

On the sales side, our marketing efforts have become more efficient and we have expanded many game to the enterprise segment.

We believe we are well positioned for organic and acquisitive growth as our current expense infrastructure can support additional revenue and our cash position as of December 31, 2023 remains strong at $13.6 million.

On the strategic opportunities front, we have continued to actively identify and analyze potential mergers or acquisitions of assets or entities that are synergistic to our businesses, which we believe that the potential to increase shareholder value.

Jason Katz: On the strategic opportunities front, we have continued to actively identify and analyze potential mergers or acquisitions of assets or entities that are synergistic to our businesses, which we believe have the potential to increase shareholder value. Moving on to an update on our trial against Cisco, Webex. On July 23rd, 2021, a wholly owned subsidiary of the company, Paltalk Holdings, filed a patent infringement lawsuit against Cisco Systems, Inc., and the U.S. District Court for the Western District of Texas. We allege that certain of Cisco's products have infringed U.S. Patent No. 6683-858 and that we are entitled to damage it.

Moving onto an update on our trial against Cisco Webex.

On July 23, 2021, a wholly owned subsidiary of the company <unk> Holdings filed a patent infringement lawsuit against Cisco Systems, Inc. In the U S District Court for the Western District of Texas.

We alleged that certain of Cisco's products are infringed U S patent number 6683858 and that we are entitled to damages.

Jason Katz: A Markman hearing took place on February 24, 2022. On September 7th, 2022, the United States Patent Office issued a re-examination of U.S. Patent No. 6683858, and on January 19th, 2023, the examiner issued an ex parte re-examination certificate ending the re-examination and confirming the patentability of Claims 1 through 10 of U.S. Patent No. 668

<unk> been hearing took place on February 24, 2022.

On September seven 2022, the United States Patent office issued a reexamination of U S. Patent number 6683858 and on January 19th 2023, the examiner issued an ex parte reexamination certificate ending the reexamination and confirming the patents ability of.

Claims one through 10 of U S patent number 6683858.

On June 29th 2023 the court held a pretrial conference with the parties and denied Cisco's motion for summary judgment.

Jason Katz: On June 29, 2023, the court held a pretrial conference with the parties and denied Cisco's motion for summary judgment. The trial is expected to begin on April 8th, 2024. If we receive a jury verdict in our favor or receive settlement proceeds in connection with the foregoing litigation, the exact amount of such proceeds to be received by us will be determined based on a number of factors and will reflect the deduction of significant litigation-related expenses, including legal fees. Consequently, we will not receive the majority of any gross proceeds resulting from any potential verdict or settlement.

Trials is expected to begin on April eight 2024.

If we receive a jury verdict in our favor or received settlement proceeds in connection with the foregoing litigation. The exact amount of such proceeds to be received by us will be determined based on a number of factors and will reflect the deduction of significant litigation related expenses, including legal fees.

Consequently, we will not receive the majority of any gross proceeds resulting from any potential verdict a settlement for the foregoing reasons, we are unable to predict the outcome of this litigation and its ultimate costs.

Kara B. Jenny: For the foregoing reasons, we are unable to predict the outcome of this litigation and its ultimate cost. Now, I'd like to pass this to Kara for a financial summary of our fourth quarter and year ended December 31st, 2023. Thank you, Jason.

Now I'd like to pass it to Cara for a financial summary of our fourth quarter and year ended December 31 2023.

Thank you Jason revenue for the three months ended December 31st 2023 decreased by 4% to $2 7 million compared to $2 8 million for the three months ended December 31, 2022 the <unk>.

Kara B. Jenny: Revenue for the three months ended December 31, 2023 decreased by 4% to $2.7 million compared to $2.8 million for the three months ended December 31, 2022. The decrease in revenue was primarily attributed to a decrease in subscription and virtual gift revenue from Paltalk and Camfrog, partially offset by increased revenue from Vumber and ManyCam. Loss from operations for the three months ended December 31, 2023, improved by 38% to a loss of $0.5 million, compared to a loss of $0.8 million for the three months ended December 31, 2022. The improvement in loss from operations was attributed to a decrease in sales and marketing, product development, and general and administrative expenses for the three months ended December 31, 2022. The net loss for the three months ended December 31, 2023, improved by over 42% to 0.3 million compared to a net loss of 0.5 million for the three months ended December 31, 2022. The decrease in net loss was due to a reduction in operating expenses.

Decrease in revenue was primarily attributed to a decrease in subscription and virtual gift revenue and Pal tuck in Cannes, France, partially offset by increased revenue from Zimbra and then he can last.

Loss from operations for the three months ended December 31, 2023 improved by 38% to a loss of <unk> 5 million compared to a loss of <unk> 8 million for the three months ended December 31st 2022 the improvement in loss from operations is attributed to a decrease in sales and marketing product development.

And general and administrative expenses for the three months ended December 31st 2023.

Net loss for the three months ended December 31st 2023 improved by over 42% to point 3 million compared to a net loss of point 5 million for the three months ended December 31, 2022. The decrease in net loss was due to the reduction of operating expenses.

Kara B. Jenny: Adjusted EBITDA loss for the three months ended December 31, 2023 improved by over 52% to 0.2 million compared to an adjusted EBITDA loss of 0.5 million for the three months ended December 31, 2022. Now turning to the year-ended December 31st, 2023, revenue for the year-ended December 31st, 2023 and 2022 remain relatively unchanged at $11 million. Decreases in subscription and virtual gift revenue in the Paltalk and CAMFrog applications were offset by increases in revenue from Bumber and ManyCats. Loss from operations for the year ended December 31, 2023 improved by 43% to a loss of $2.1 million compared to a loss of $3.7 million for the year ended December 31, 2022. The improvement in loss from operations was primarily attributable to an increase in revenue and reduced operating expenses in connection with the implementation of operating efficiencies.

Adjusted EBITDA loss for the three months ended December 31st 20, twenty-three improved by over 52% to point 2 million compared to adjusted EBITDA loss <unk> 5 million for the three months ended December 31st 2022.

Now turning to the year ended December 31st 2023 revenue for the year ended December 31st 2023 and 2022 remained relatively unchanged at $11 million decreases in subscription and virtual gift revenue in the Pal talk in camera applications were offset by increases in revenue from.

Lumber and many can.

Loss from operations for the year ended December 31, 2023 improved by 43% to a loss of $2 1 million compared to a loss of $3 seven for the year ended December 31, 2022 the improvement in loss from operations was primarily attributable to an increase in revenue and reduced off.

Reading expenses in connection with the implementation of operating efficiencies net loss for the year ended December 31st 2023.

Kara B. Jenny: The net loss for the year ended December 31, 2023, improved by over 68% to $1.1 million compared to a net loss of $3.4 million for the year ended December 31, 2022. The improvement in net loss was attributed to a decrease in operating expenses as well as an increase in other income in connection with the company's recording of a refundable employee retention tax credit. Adjusted EBITDA loss for the year ended December 31, 2023, improved by over 61%, or $1.6 million to $1 million, compared to an adjusted EBITDA loss of $2.6 million for the year ended December 31, 2022. Cash and cash equivalents totaled $13.6 million at December 31, 2023, a decrease of $1.1 million compared to $14.7 million at December 31, 2022. The company had no long-term debt on its balance sheet as of December 31, 2023.

Improved by over 68% to $1 1 million compared to a net loss of $3 4 million for the year ended December 31 2022.

Proven and net loss was attributed to a decrease in operating expenses as well as an increase in other income in connection with the company's recording of a refund of all employee retention tax credit.

Adjusted EBITDA loss for the year ended December 31, 2023 improved by over 61% or $1 6 million to $1 million compared to adjusted EBITDA loss of $2 6 million for the year ended December 31st 2022, cash and cash equivalents totaled $13 six.

Million at December 31, 2023, a decrease of $1 1 million compared to $14 7 million at December 31st 2022.

The company had no long term debt on its balance sheet as of December 31st 2023.

We will now move on to questions that were previously submitted.

Kara B. Jenny: We will now move on to questions that were previously submitted. The first question: Can you provide any color on how many camera newels are tracking? Sure. While we do not comment on the metrics of the individual products, we're continuing to focus on ways to streamline the renewal process for our users and to provide users with values such that they will want to continue to renew with us. Next, are you working on any new features or product launches for 2024? If so, can you discuss?

The first question.

Can you provide any color on how many cam renewals are tracking.

Sure well, we do not comment on the metrics of the individual products.

We're continuing to focus on ways to streamline the renewal process for our users.

And to provide users values such that they will want to continue to renew with us.

Next are you working on any new features and or product launches for 'twenty 'twenty four and if so can you discuss.

Part of our business strategy is to continue working on application functionality of note. We're excited about the launch of mini Cam version nine which is currently scheduled for release during Q2 2024.

Kara B. Jenny: Part of our business strategy is to continue working on application functionality. Of note, we're excited about the launch of ManyCam version 9, which is currently scheduled for release during Q2 2024. ManyCam provides a multitude of tools to help customize your video experience, and we hope that our new version will allow users to start working with ManyCam's powerful video features faster than ever.

Many can provides a multitude of tools to help customize your video experience and we hope that our new version will allow users start working with many cams powerful video features faster than ever.

Next question is international growing slowing or staying flat.

Kara B. Jenny: Next question: Is international tourism growing, slowing, or staying flat? Well, we're continuing to see new users register from emerging markets such as Africa and India, and we're investigating ways to help grow and monetize these new user bases. Finally, the last question. Do you expect to close on an acquisition in 2024, as you have been looking now for 12 to 18 months? While we're continuing to look for accretive acquisitions, we obviously cannot comment on when or if we expect to close a transaction. We reiterate that consummating an accretive acquisition remains a top priority for the company. I want to stress that we're very thoughtful in our process as we evaluate targets against a matrix of criteria, including being accretive to our revenue, a positive contributor to our bottom line, as well as representing good value for our shareholders.

Well, we're continuing to see new users registering from emerging markets, such as Africa, and India, and we're investigating ways to help grow and monetize these new user basis.

Finally, the last question do you expect to close on an acquisition in 'twenty 'twenty four as you have been looking now for 12 to 18 months.

Well, we're continuing to look for accretive acquisitions, we obviously cannot comment on when or if we expect to close the transaction.

We reiterate the consummating an accretive acquisition remains a top priority for the company.

Want to stress that we're very thoughtful on our processes, we evaluate targets against the matrix of criteria, including being accretive to our revenue being positive contributors to our bottom line as well as representing a good value for our shareholders.

Great Jason back to you to close out the presentation.

Jason Katz: Great. Jason, back to you to close out the presentation. Thank you everyone for your support and for joining us today. We're very grateful for your interest in our business. We look forward to updating the market and our stockholders on our progress on our business objectives, pending patent litigation against Cisco Webex with the trial now scheduled to start on April 8, 2024, and potential strategic accretive acquisitions, which we continue to identify and analyze.

Thank you everyone for your support and for joining US today, we're very grateful for your interest in our business. We look forward to updating the market and our stockholders with our progress on our business objectives pending patent litigation against Cisco Webex with the trial now scheduled to start on April eight 2024 and.

<unk> strategic accretive acquisitions, which we continue to identify and analyze.

Operator: Have a great day. Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time and have a wonderful day. We thank you for your participation.

Have a great day.

Thank you ladies and gentlemen, this does conclude todays event you may disconnect at this time and have a wonderful day, we thank you for your participation.