Q3 2024 Paltalk Inc Earnings Call
XXXTENTACION OUT!
Greetings, and welcome to the Paltalk 3rd Quarter 2024 Results Conference Call.
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Please note, this call is being recorded.
Speaker Change: I will now turn the conference over to your host, Cara Jenny, CFO of Paltalk.
Cara, the floor is yours.
Speaker Change: Hello, everyone, and welcome to the Paltalk Operating and Financial Results conference call for the third quarter ended September 30, 2024. By now, everyone should have access to the earnings results press release, which was issued earlier this afternoon at approximately 4 p.m. Eastern time.
Speaker Change: This call is being webcast and will be available for replay.
Speaker Change: 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 our plans.
Speaker Change: 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 questions.
Speaker Change: 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.
Speaker Change: will prove to be correct. A detailed discussion of such risks and uncertainties
Speaker Change: are expressly disclaims any obligation to update or alter our forward-looking statements.
Okay.
Speaker Change: For adjusted EBITDA, we've 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 www.paltalk.com. And with that, I would like to introduce PalTalk's Chief Executive Officer, Jason Katz.
Jason Katz: Thank you, Cara, and good afternoon, everyone. We greatly appreciate you taking the time to join us on today's call.
Jason Katz: We will discuss our operating highlights and financial results for the third quarter ended September 30, 2024. We will also provide an update on our business objectives and strategies.
Jason Katz: After my opening statement, our CFO Cara Jenny will give a summary of our financial results for the third quarter ended September 30th, 2024. Following our prepared remarks, we will move into the Q&A portion and answer any questions that were 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.
Bye.
Speaker Change: Our team had a very busy and productive end to the summer, highlighted by the signing of a merger agreement to acquire NewTek Technology Solutions from NewTek One through a two-step merger process.
Speaker Change: Pursuant to the merger agreement at closing, we will pay $4 million in cash to NewTek and will issue to NewTek 4 million shares of newly created series of PalTalk's preferred stock.
Speaker Change: We also recently announced our entry into an asset purchase agreement with Meteor Mobile Holdings, Inc., pursuant to which we agreed to sell our telecommunications services provider, Vumber,
Speaker Change: as well as its Paltalk and Camfrog applications and all assets related to such services provider and applications to Meteor Mobile in exchange for a cash payment of 1.35 million dollars.
Speaker Change: The assumption of all our liabilities and obligations arising out of or relating to the transferred assets on or after the closing of the divestiture.
Speaker Change: The sale of our Paltalk and CAMFROG applications is required under the terms of the merger agreement with NewTekOne.
Speaker Change: Following the divestiture, Paltalk will retain all patents, patent applications, any rights or causes of actions related to such patents and patent applications, including the patent litigation against Cisco.
Speaker Change: and any assets, including intellectual property, that are not exclusively related to such applications.
Speaker Change: We are also entitled to receive the six-month period beginning July 1, 2025, and each subsequent annual period beginning on January 1, 2026.
Speaker Change: 2027 and 2028, certain cash earn out payments based on a percentage of cash revenue net of refunds received by Meteor Mobile that is attributable to the businesses of the transferred assets that we are selling.
Speaker Change: We believe the acquisition of new tech technology solutions will provide excellent value for our stockholders.
Speaker Change: We expect the acquisition, once completed, will have an immediate and meaningful impact on our revenue, since NTS revenue in 2023 was approximately three times greater than Paltalk's 2023 revenue.
Speaker Change: We also expect the acquisition to provide enhanced opportunities for future growth and optimization.
Speaker Change: We are extremely excited upon closing of the acquisition to enter the cloud infrastructure and cybersecurity sectors with the acquisition of a business we deem ripe for growth, both organically and through potential accretive acquisitions in the future.
Speaker Change: Given our management team's extensive technology expertise that has been demonstrated throughout the years, we are confident in our ability to integrate, operate, and grow this business and enhance stockholder value.
Speaker Change: We have an ample cash balance of $12.1 million as of September 30, 2024, and we are excited to focus our attention on growing the technology solutions business.
Speaker Change: As a result of the entry into the acquisition agreement and the divestiture agreement, our near-term business objectives now include
The consummation of the acquisition and divestiture
Speaker Change: Integration of the business of NTS following the closing of the acquisition, continuing our efforts to improve user experience with our ManyCam software and optimize features for both consumer and enterprise applications, and continuing to defend our intellectual property.
Speaker Change: On August 29th, 2024, a jury in the District Court for the Western District of Texas awarded Paltalk $65.7 million in a verdict against Cisco Systems for infringing U.S. Patent Number 683858.
Speaker Change: On October 8, 2024, an order granting a motion for final judgment was entered into in the court in connection with the lawsuit. The final judgment was entered in favor in the amount of the award and started the time for filing any post-trial motions.
Speaker Change: Consequently, we estimate that we would receive no more than one-third of the gross proceeds in connection with the award subject to the post-trial proceedings, including any potential appellate proceedings by Cisco.
Cara Jenny: Now I'd like to pass it to Cara for a financial summary of our third quarter ended September 30, 2024.
Thank you Jason
Cara Jenny: of point four million for the three months ended September 30th, 2023.
Cara Jenny: The increase in loss from operations was attributed to the decrease in revenue for the three months ended September 30, 2024, as well as an increase in professional fees of $0.8 million in connection with the acquisition agreement and the divestiture.
Cara Jenny: Net loss for the three months ended September 30th, 2024 increased
Cara Jenny: by 731.2% or $1.3 million to a net loss of $1.5 million compared to net loss of $0.2 million for the three months ended September 30, 2023.
Cara Jenny: adjusted EBITDA loss for the three months ended September 30, 2024, increased by approximately 1,046.2%, or $1.3 million to an adjusted EBITDA loss of $1.4 million.
Cara Jenny: compared to adjusted EBITDA loss of $0.1 million for the three months ended September 30, 2023.
Cara Jenny: Now, turning to our financial results for the nine months ended September 30th, 2024. Revenue for the nine months ended September 30th decreased by 16.2% to $6.9 million compared to $8.3 million for the nine months ended September 30th, 2023.
Cara Jenny: This decrease was attributed primarily to a decrease in subscription revenue of 17.5%.
Cara Jenny: Loss from operations for the nine months ended September 30, 2024, increased by 129.9% or $2 million, to a loss of $3.6 million, compared to a loss of $1.6 million for the nine months ended September 30, 2023.
Cara Jenny: The increase in loss from operations was attributed to the decrease in revenue for the nine months ended September 30, 2024, as well as an increase in professional fees of $1.1 million in connection with the acquisition agreement and the divestiture.
Cara Jenny: Net loss for the 9 months ended September 30, 2024 increased by 274.3%, or $2.2 million to a loss of $2.9 million, compared to a loss of $0.8 million for the 9 months ended September 30, 2023.
Cara Jenny: Adjusted Ividel loss for the nine months ended September 30, 2024, increased by approximately 265.1% or $2.1 million to an adjusted Ividel loss of $2.9 million, compared to adjusted Ividel loss of $0.8 million for the nine months ended September 30, 2023.
Cara Jenny: Cash and cash equivalents totaled $12.1 million at September 30th, 2024, a decrease of $1.5 million compared to $13.6 million at December 31st, 2023, and we had no long-term debt on our balance sheet at September 30th, 2024.
We will now move on to questions.
Speaker Change: The first question, congratulations on winning the trial against Cisco WebEx, can you provide any color on when you would expect to see any money from that judgment and a date range of when that might be?
Speaker Change: On October 8, 2024, an order granting a motion for final judgment was entered into by the court and signed by Judge Alan D. Albright in the amount of $65.7 million in connection with the lawsuit.
Speaker Change: The final judgment was entered in our favor and started the time for filing any post-trial motions or appeal.
Speaker Change: Next question. In regards to the new technology solutions acquisition, can you please explain and give some detail as to what the business specifically does and perhaps give an example of a client and what it does for them?
Speaker Change: NTS provides a range of IT related services including managed IT, managed security, managed backup and disaster recovery, secure private cloud hosting, professional services consulting, product procurement services, web hosting and e-commerce solutions.
Speaker Change: as well as implementing technology solutions for enterprise and commercial clients across the United States.
Speaker Change: NTS delivers secure and compliant services to customers within heavily regulated industries including financial services and health care.
Thank you.
Speaker Change: Final question. As a follow-up to new tech technology solutions, it appears to generate significantly more revenue than your prior PalTalk business.
Speaker Change: but what gives you the confidence it's a business with growth prospects and Are there additional likewise businesses you feel you can also acquire?
Speaker Change: Well, managed cybersecurity and managed cloud hosting are growing rapidly worldwide.
Speaker Change: We believe the acquisition of NTS gives us the ability to enter the cloud infrastructure and cyber security sectors, both business-themed ripe for growth, both organically and through potential accretive acquisitions in the future.
Speaker Change: Thank you. Jason, back to you to close out the presentation.
Jason Katz: Thanks 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 proposed acquisition of NewTek Technologies Solutions, Inc., a wholly owned subsidiary of NewTek One.
Jason Katz: which is expected to close by the end of the first quarter of 2025. Have a great day.
Speaker Change: Thank you. This concludes today's conference. You may disconnect at this time, and we thank you for your participation.