Intelligent Protection Management Corp. (IPM) Q4 2023 Earnings Report, Transcript and Summary

Good morning, and welcome to the Earnings Results Call for Paltalk's Fourth Quarter and Year Ended December 31, 2023. [Operator Instructions] It is now my pleasure to turn the floor over to your hosts, Jason Katz, Chief Executive Officer of Paltalk; and 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 opened at 7:30 a.m. Eastern Time. This call is being webcast and 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 growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. 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. A detailed discussion of such risks and uncertainties are contained in our filings with the SEC, including our most recent quarterly report 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 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 paltalk.com. And with that, I would now like to introduce Paltalk's Chief Executive Officer, Jason Katz.

Thank you, Kara, and good morning, everyone. 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 31, 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 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. 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 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 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 have the potential to increase shareholder value. Moving on to an update on our trial against Cisco WebEx. On July 23, 2021, a wholly owned subsidiary of the company, Paltalk Holdings, filed a patent infringement lawsuit against Cisco Systems, Inc. in 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. 6,683,858, and that we are entitled to damages. A Markman hearing took place on February 24, 2022. On September 7, 2022, the United States Patent Office issued a reexamination of U.S. Patent No. 6,683,858, and on January 19, 2023, the Examiner issued an Ex Parte Reexamination Certificate, ending the reexamination and confirming the patentability of claims 1 through 10 of U.S. Patent No. 6,683,858. 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 8, 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. For the foregoing reasons, we are unable to predict the outcome of this litigation and its ultimate cost. Now I'd like to pass it to Kara for a financial summary of our fourth quarter and year ended December 31, 2023.

Thank you, Jason. Revenue for the 3 months ended December 31, 2023 decreased by 4% to $2.7 million, compared to $2.8 million for the 3 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 3 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 3 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 3 months ended December 31, 2023. Net loss for the 3 months ended December 31, 2023 improved by over 42% to $0.3 million, compared to a net loss of $0.5 million for the 3 months ended December 31, 2022. The decrease in net loss was due to the reduction of operating expenses. Adjusted EBITDA loss for the 3 months ended December 31, 2023 improved by over 52% to $0.2 million, compared to adjusted EBITDA loss of $0.5 million for the 3 months ended December 31, 2022. Now turning to the year ended December 31, 2023. Revenue for the year ended December 31, 2023 and 2022 remained 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 Vumber and ManyCam. 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. 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 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. We will now move on to questions that were previously submitted.

The first question. Can you provide any color on how ManyCam renewals 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 value such that they will want to continue to renew with us.

Next, are you working on any new features and/or product launches for 2024? 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 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.

Next question. Is international growing, slowing or staying flat?

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 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, and 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 the matrix of criteria, including being accretive to our revenue, being positive contributor to our bottom line as well as representing a good value for our shareholders.

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 with 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. 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.