Intelligent Protection Management Corp. (IPM) Q4 2024 Earnings Report, Transcript and Summary

Greetings. Welcome to the Intelligent Protection Management Corporation Q4 2024 Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Kara Jenny, CFO. You may begin.

Hello, everyone, and welcome to the IPM operating and financial results conference call for the fourth quarter and year-ended December 31, 2024. By now, everyone should have access to the earnings results press release, which was issued earlier this afternoon at approximately 4:00 p.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 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. These expectations and beliefs may not ultimately prove to be correct. A detailed discussion of such risks and uncertainties are contained in our filings with the SEC, including our 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, provide us and our investors with additional analytical tools to understand our operations. 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.ipm.com. And with that, I would like to introduce IPM's Chief Executive Officer, Jason Katz.

Thank you, Kara, and good afternoon, everyone. We greatly appreciate you taking the time to join us on today's call. As previously disclosed in January 2025, we completed our acquisition of Newtek Technology Solutions, or NTS from NewtekOne and the sale of our Paltalk, Camfrog and Vumber applications and certain assets and liabilities related to such applications to Meteor Mobile Holdings, Inc. The financial results for the three months and year-ended December 31, 2024, discussed throughout this call relate to our business prior to such transactions. We will also provide the rationale behind our transition into the cloud infrastructure and cybersecurity sectors and provide color on our new business objectives and strategies. 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, 2024, which again are reflective of our historic business prior to the transactions. Following our prepared remarks, we will move into the Q&A portion and answer any questions that were submitted prior to this call. With that, I would now like to walk you through our recent financial and operating highlights and near-term business objectives. With the closing of our acquisition of NTS and our divestiture of our communication software and multimedia social platforms in early January 2025, we have officially moved our company into the cloud infrastructure and cybersecurity sectors. We believe these transformational transactions will have a meaningful impact on our revenue will provide us with additional opportunities for growth and a strong value proposition for our stockholders. While we are focused on delivering growth and increasing profitability as a managed technology solutions provider, we believe we bolstered our value in 2024 by successfully defending our intellectual property. In addition, as a result of the divestiture, IPM is eligible to receive certain earn-out payments in the future based on Meteor Mobile's cash revenue attributable to the Paltalk, Camfrog and Vumber applications. We're very excited with the prospect of expanding our managed technology solutions business, particularly in the cloud infrastructure and cybersecurity sectors. Following the transactions, our team is reenergized and focused on the growth of our business. Additionally, we expect that the recently announced referral arrangement with NewtekOne, current client and a financial holding company with tens of thousands of its own business clients has great potential to help us find new customers. We believe that cybersecurity is a technology area that is top of mind for all companies, small and large and ripe for growth. Additionally, we believe there will be ample merger and acquisition opportunities to further scale growth. We look forward to growing the business and building a healthy pipeline of prospective and new customers. As a result of the transformative transactions, our near-term business objectives now include: continuing the integration of our comprehensive range of IT-related solutions; incorporating many cameras and offering for our new customers and seeking to optimize our cross-selling efforts with our other technology solutions; continuing to explore strategic opportunities, including, but not limited to potential mergers or acquisitions of other assets or entities that are synergistic to our businesses and continuing to defend our intellectual property. In regards to our patent litigation on July 23, 2021, our wholly-owned subsidiary Paltalk Holdings, Inc., filed a patent infringement lawsuit against WebEx Communications, Inc., Cisco Webex LLC and Cisco Systems, Inc. in the District Court for the Western District of Texas. We alleged that certain of Cisco's products infringed U.S. patent number 6,683,858 and then we were entitled to damages. On August 26, 2024, a jury trial commenced in the Western District of Texas before the Honorable Judge, Alan Albright. On August 29, 2024, after four days of trial, jury awarded us $65.7 million in the jury verdict in connection with the lawsuit. 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 our favor in the amount of the award and started the time for filing any post-trial motions or appeal. The exact amount of the award 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 estimate that we would receive no more than one-third of the gross proceeds in connection with the award subject to post-trial proceedings, including any potential appellate proceedings by Cisco. We have not recorded any game contingency in connection with the award. Now I'd like to pass it to Kara for a financial summary of the fourth quarter and year ended December 31, 2024.

Thank you, Jason. Revenue from continuing operations increased 9.1% to $0.3 million from nearly $0.3 million as a result of increased sales from ManyCam, including revenue from discontinued operations of $1.9 million and $2.4 million for the three months ended December 31, 2024 and 2023, respectively, which is included in the loss from discontinued operations on the statement of operations, revenue decreased 21%, to $2.1 million from $2.7 million, primarily due to a decrease in subscription revenue and virtual gift revenue from Paltalk, Camfrog, partially offset by increased revenue from advertising. Net loss from continuing operations increased by 142% to $1.4 million compared to a net loss from continuing operations of $0.6 million and included $0.6 million of increased professional fees incurred in connection with the transactions, as well as increased public company expenses and an increase and compensation expense related to the transactions. Loss from discontinued operations increased by 1,449% to $4.1 million compared to income from discontinued operations of $0.3 million and included a one-time impairment loss on divested assets of $3.8 million as well as a decrease in virtual gift revenue from discontinued operations compared to the three months ended December 31, 2023. Net loss increased by 1,840% to $5.5 million compared to $0.3 million. Adjusted EBITDA loss was $1.5 million compared to adjusted EBITDA loss of $0.2 million, an increase of 594%. Net cash used in operating activities for the quarter was $1.5 million. Now turning to financial results for the year ended December 31, 2024. Revenue from continuing operations increased 14% to $1.1 million from $1 million as a result of increased sales from ManyCam. When including the revenue from discontinued operations of $8 million and $10 million for the year ended December 31, 2023, respectively, which is included in the loss from discontinued operations on the statement of operations, revenue decreased 17% to $9.1 million from $10.9 million, primarily due to a decrease in subscription and virtual gift revenue from Paltalk and Camfrog, partially offset by increased revenue from advertising. Net loss from continuing operations increased by 59% to $4.3 million compared to net loss from continuing operations of $2.7 million and included $1.8 million of increased professional fees incurred in connection with the transactions, as well as increased public company expenses and an increase in compensation expense related to the transactions. Loss from discontinued operations increased by 357% to $4.2 million compared to income from discontinued operations of $1.6 million for the year ended December 31, 2024, and included a one-time impairment loss on divested assets of $3.8 million, as well as a decrease in virtual gift revenue from discontinued operations compared to the three months ended December 31, 2023. Net loss increased by 690% to $8.4 million compared to a net loss of $1.1 million. Adjusted EBITDA loss was $4.4 million compared to adjusted EBITDA loss of $1 million, an increase of 338%. The company had $10.6 million in cash and no long-term debt on its balance sheet as of December 31, 2024. We will now move on to the questions we received for Jason.

First question. Should we expect to see additional patent infringement lawsuits filed by you?

Intellectual property is a very important asset for the company, and we continuously review our patent portfolio in order to protect our intellectual property.

Next question. Since you've now owned cybersecurity and cloud infrastructure business for more than two months, are you more or less enthusiastic about its growth prospects.

I remain very enthusiastic about the managed hosted cloud and managed cybersecurity businesses and its prospects for growth. Cybersecurity is essential for all businesses, large and small, and truly a necessity in today's world.

Next question. What are the biggest challenges with the cybersecurity and cloud infrastructure business?

Well, the cybersecurity and cloud infrastructure business, one of our main priorities is to deliver secure compliant and resilient technology to customers operating in highly regulated industries such as banking and finance. With the growth of AI and increased sophistication of cyber related threats, one of our greatest challenges is remaining proactive and responsive in fortifying our infrastructure against the spectrum of potential risks that are continuously evolving.

Do you disclose any significant customers by name? And can you be more specific about what you do for your customers, narrowing it down within cybersecurity or cloud infrastructure?

As mentioned above, NewtekOne is currently our largest customer, we serve a diverse customer base across various industries, including, among others, finance, legal, health care and manufacturing. As far as our offered services, we provide managed IT security services, professional services, procurement services, secure private cloud hosting, managed backup and disaster recovery and web hosting, each of which is discussed in greater detail in our annual report.

Are there opportunities to further expand and grow with existing customers?

We think there are numerous opportunities to expand and grow with both existing and new customers. In addition to managing client relationship, our sales force is focused on expanding the number of solutions our customers purchase from us by introducing them to additional solutions. We believe our proactive high touch service model ensures long-term client relationships and sustained competitive advantage in a rapidly evolving market. Additionally, in the future, we plan to make arrangements with third parties to incorporate AI features into our secure private cloud offerings, which we believe will have the potential to expand our service offerings with our existing customers.

The last question. Can you discuss your product suite in a little more detail?

Well, sure. IPM provides managed hosting, managed cybersecurity, backup and disaster recovery, procurement and web hosting. The global managed services market is projected to grow to over $875 billion by 2032 according to Forbes Business Insights, which we believe creates an enormous opportunity. We differentiate ourselves with our expert IT, staff and technical capability, including our 24/7 NOK. There are myriad tools and software available for all of these functions, but they are only as good as the people running them. Our goal is to provide the most reliable secure environment possible for our customers.

Thank you. Jason, back to you to close out the presentation.

Thanks again, 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 and reporting our first full quarter as IPM in early to mid-May. Have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.