Paltalk(PALT) - 2024 Q4 - Annual Results

Business Overview and Strategic Transformation Corporate Actions and Strategic Refocus IPM completed a strategic transformation in January 2025 by acquiring NTS and divesting applications, refocusing on cybersecurity and cloud infrastructure solutions - Completed the acquisition of Newtek Technology Solutions, Inc. (NTS) in January 2025[2] - Simultaneously sold its 'Paltalk', 'Camfrog', and 'Vumber' applications and related assets[2] - The company's new business focus is on server hosting, cloud hosting, data storage, managed security, and backup/disaster recovery services[3] Management Commentary CEO Jason Katz expressed optimism about the company's strategic shift to cloud and cybersecurity, anticipating growth from new partnerships and M&A - The acquisition of NTS and divestiture of communication platforms officially moves the company into the cloud infrastructure and cybersecurity sectors[7] - A new referral arrangement with NewtekOne is expected to be a significant source of new customers[7] - The company sees ample merger and acquisition (M&A) opportunities to further scale growth in the technology sector[7] Financial Performance Fourth Quarter 2024 Financial Highlights Q4 2024 revenue from continuing operations rose 9.1% to $0.3 million, but net loss significantly widened to $5.5 million due to impairment Q4 2024 vs Q4 2023 Financial Results (in thousands) | Metric | Q4 2024 | Q4 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue from continuing operations | $280 | $256 | +9.1% | | Net loss from continuing operations | $(1,415) | $(585) | +141.8% | | (Loss) income from discontinued operations | $(4,075) | $302 | -1448.5% | | Net loss | $(5,491) | $(283) | +1839.5% | | Adjusted EBITDA loss | $(1,549) | $(223) | +593.9% | - The increase in net loss from continuing operations was driven by $0.6 million in professional fees and increased compensation expenses related to the NTS acquisition and asset sale[4] - Loss from discontinued operations included a one-time impairment loss of $3.8 million on the divested assets (Paltalk, Camfrog, Vumber)[6] Full Year 2024 Financial Highlights Full year 2024 revenue from continuing operations grew 14% to $1.1 million, but net loss expanded to $8.4 million due to impairment Full Year 2024 vs 2023 Financial Results (in thousands) | Metric | FY 2024 | FY 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue from continuing operations | $1,098 | $962 | +14.2% | | Net loss from continuing operations | $(4,269) | $(2,687) | +194.6% | | (Loss) income from discontinued operations | $(4,157) | $1,620 | -356.7% | | Net loss | $(8,426) | $(1,067) | +689.5% | | Adjusted EBITDA loss | $(4,432) | $(1,013) | +337.5% | - The company ended 2024 with $10.6 million in cash and no long-term debt on its balance sheet[6] - Total revenue, including discontinued operations, decreased by 17% to $9.1 million from $10.9 million in 2023, mainly due to lower subscription and virtual gift revenue from the divested Paltalk and Camfrog applications[6] Balance Sheet and Cash Flow Analysis As of Dec 31, 2024, total assets decreased to $15.9 million, with cash at $10.6 million; net cash used in operations rose to $3.0 million Key Balance Sheet Items (as of Dec 31, in millions) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $10.6 | $13.6 | | Total current assets | $11.2 | $14.8 | | Total assets | $15.9 | $23.9 | | Total current liabilities | $3.5 | $3.1 | | Total liabilities | $4.0 | $3.8 | | Total stockholders' equity | $11.9 | $20.1 | Key Cash Flow Items (Year Ended Dec 31, in millions) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3.0) | $(1.1) | | Net cash used in investing activities | $0.0 | $(0.085) | | Net cash provided by (used in) financing activities | $0.04 | $(0.007) | Future Outlook and Other Developments 2025 Business Objectives IPM's 2025 objectives include integrating IT solutions, incorporating ManyCam, optimizing cross-selling, exploring M&A, and defending IP - Key business objectives for 2025 include: * Continuing the integration of IT-related solutions * Incorporating ManyCam as an offering for new customers and optimizing cross-selling * Exploring strategic opportunities, including potential mergers or acquisitions * Continuing to defend the company's intellectual property[6] Patent Litigation Update A jury awarded IPM's subsidiary $65.7 million in a patent lawsuit against Cisco, with net proceeds estimated at one-third after fees - A jury awarded the company $65.7 million in a patent infringement lawsuit against Cisco Systems, Inc[9] - The company estimates it will receive no more than one-third of the gross proceeds after deducting litigation expenses and legal fees[10] - No gain contingency related to the award has been recorded in the financial statements[10] Potential Earn-Out from Divestiture IPM is eligible for future earn-out payments from the divestiture of its applications, contingent on revenue generated through 2028 - IPM is eligible for earn-out payments based on cash revenue from the assets sold to Meteor Mobile Holdings, Inc[12] - The earn-out is structured across four periods, from July 1, 2025, to December 31, 2028[13][15] - Payments are calculated as a percentage (30% or 40%) of revenue generated above specified thresholds during each period[15] Financial Statements and Non-GAAP Reconciliation Reconciliation of GAAP to Non-GAAP Financial Measures Adjusted EBITDA, a non-GAAP measure, reconciles net loss by excluding non-cash and one-time items to assess operational performance - Adjusted EBITDA is a non-GAAP measure defined as net loss excluding stock-based compensation, depreciation, amortization, impairment loss, net interest income, other income, and taxes[23] Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(5,491) | $(283) | $(8,426) | $(1,067) | | Stock-based compensation | $27 | $65 | $151 | $235 | | Depreciation and amortization | $205 | $206 | $822 | $822 | | Impairment loss | $3,850 | $0 | $3,850 | $0 | | Interest income, net | $(115) | $(177) | $(569) | $(640) | | Other income, net | $0 | $0 | $(146) | $(343) | | Income tax benefit | $(25) | $(34) | $(113) | $(20) | | Adjusted EBITDA | $(1,549) | $(223) | $(4,432) | $(1,013) | Consolidated Financial Statements This section presents IPM's detailed consolidated financial statements, including Balance Sheets, Statements of Operations, and Cash Flows for 2023-2024 - The report includes the full Consolidated Balance Sheets as of December 31, 2024 and 2023[27] - The report includes the full Consolidated Statements of Operations for the years ended December 31, 2024 and 2023[29] - The report includes the full Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023[31]