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Paltalk, Inc. Reports 12% Revenue Growth to $3.0 Million in Second Quarter 2023

Reports Significant Improvements in Net Income and Adjusted EBITDA


JERICHO, NY- (NewMediaWire) - August 08, 2023 - Paltalk, Inc. (“Paltalk,” the “Company,” “we,” “our” or “us”) (Nasdaq: PALT), a communications software innovator that powers multimedia social applications, today announced financial and operational results for the second quarter ended June 30, 2023.

 

Key Financial Highlights for Second Quarter Ended June 30, 2023 Compared to Prior Year Period

 

·    Revenue increased 12% to $3.0 million

·    Subscription revenue increased over 12% to $2.9 million

·    Advertising revenue decreased 15% to $0.1 million

·    Net income was $0.1 million compared to a net loss of $1.1 million, a change of 112%

·    Adjusted EBITDA loss was $14,945 compared to Adjusted EBITDA loss of $0.9 million

 

Key Financial Highlights for Six Months Ended June 30, 2023 Compared to Prior Year Period

 

·    Revenue decreased slightly by 1% to $5.5 million

·    Subscription revenue remained relatively unchanged at $5.4 million

·    Advertising revenue decreased over 20% to $129,360

·    Net loss decreased almost 68% to $0.6 million compared to a net loss of $1.9 million

·    Adjusted EBITDA loss decreased over 50% to $0.7 million compared to Adjusted EBITDA loss of $1.4 million

·    Deferred revenue increased 18% to $2.2 million as of June 30, 2023

·    The Company had $13.7 million in cash and no long-term debt on its balance sheet as of June 30, 2023

 

Near Term Business Objectives

 

·    Leveraging our recently completed integration of the ManyCam product into our Paltalk product through upselling initiatives

·    Further optimizing marketing spend to effectively realize a positive return on our investment

·    Developing a user-friendly version of ManyCam that will be optimized for both consumer and enterprise applications

·    Continuing to implement several enhancements to our live video chat applications as well as the integration of card and board games and other features focused on retention and monetization, which collectively are intended to increase user engagement and revenue opportunities

·    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

·    Continuing to develop our consumer application platform strategy by seeking potential partnerships with large third-party communities to whom we could promote a co-branded version of our video chat products and potentially share in the incremental revenues generated by these partner communities

·    Continuing to defend our intellectual property

 

Management Commentary

 

Jason Katz, Chairman and CEO of Paltalk, commented, “We are very pleased with our return to revenue growth and profitability in the second quarter. All of our attention and efforts to optimize our platforms and streamline our costs have paid off and improved our foundation. Our infrastructure is capable of supporting additional business, so if we continue to expand revenue, we are confident that it would result in increased profitability. We believe that this business scalability, along with the $13.7 million in cash on our balance sheet at quarter’s end, puts us in an excellent position.”

 

Katz concluded, “We have already met one of our key objectives for 2023 with our return to increased revenue. Additionally, as we surpassed the one-year anniversary of our asset acquisition of ManyCam, and with the successful integration of ManyCam into Paltalk and our team’s effort in developing a new and easier version, we expect the one-year annual auto renewals of existing ManyCam subscriptions to help contribute to growth in subscription revenue in future periods. While our trial against Cisco was pushed back to an expected trial date late in the fourth quarter of 2023, the Court recently denied Cisco’s motion for summary judgement, and we look forward to continuing to defend our intellectual property.”

 

Patent Litigation

 

On July 23, 2021, a wholly owned subsidiary of the Company, Paltalk Holdings, Inc., filed a patent infringement lawsuit against WebEx Communications, Inc., Cisco WebEx LLC, and Cisco Systems, Inc. (collectively, “Cisco”), in the U.S. District Court for the Western District of Texas (the “Court”). The Company alleges that certain of Cisco’s products have infringed U.S. Patent No. 6,683,858, and that the Company is 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 1-10 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 judgement. The trial is expected to be scheduled for late in the fourth quarter of this year.

 

Financial Results for Three Months Ended June 30, 2023

 

·     Revenue for the three months ended June 30, 2023 increased by 11.8% to $3.0 million, compared to $2.6 million for the three months ended June 30, 2022. The increase in revenue was primarily attributed to an increase in virtual goods revenue and new subscribers as well as a full year of sales from ManyCam. These increases were partially offset by a decrease in advertising revenue of 15.2%;

 

·     Loss from operations for the three months ended June 30, 2023 decreased by 74.4%, or $0.8 million, to a loss of $0.3 million, compared to a loss of $1.1 million for the three months ended June 30, 2022. The decrease in loss from operations was attributed to increased revenue for the three months ended June 30, 2023;

 

·    Net income for the three months ended June 30, 2023 increased 112.0% to $0.1 million, compared to a net loss of $1.1 million the three months ended June 30, 2022. The increase in net income was due to the increase in subscription revenue, the reduction of operating expenses, and $0.3 million of other income recognized in connection with the Company’s recording of a refundable employee retention tax credit; and

 

·     Adjusted EBITDA loss for the three months ended June 30, 2023 decreased by 98.4%, to an Adjusted EBITDA loss of $14,945, compared to Adjusted EBITDA loss of $0.9 million for the three months ended June 30, 2022.

 

Financial Results for Six Months Ended June 30, 2023

 

·     Revenue for the six months ended June 30, 2023 decreased by 0.9% to $5.5 million, compared to $5.6 million for the six months ended June 30, 2022. The decline in revenue was attributed to a slight decrease in subscription revenue;

 

·     Loss from operations for the six months ended June 30, 2023 decreased by 34.0%, or $0.6 million, to a loss of $1.2 million, compared to a loss of $1.8 million for the six months ended June 30, 2022. The decrease in loss from operations was primarily attributable to reduced operating expenses in connection with the implementation of operating efficiencies;  

 

·     Net loss for the six months ended June 30, 2023 decreased by 67.7%, or $1.3 million, to $0.6 million, compared to a net loss of $1.9 million for the six months ended June 30, 2022. The decrease in net loss was attributed to decreases 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 six months ended June 30, 2023 decreased by 52.4%, or $0.7 million, to an Adjusted EBITDA loss of $0.7 million, compared to Adjusted EBITDA loss of $1.4 million for the six months ended June 30, 2022;

 

·    Cash and cash equivalents totaled $13.7 million at June 30, 2023, a decrease of $1.0 million compared to $14.7 million at December 31, 2022; and

 

·    The Company had no long-term debt on its balance sheet at June 30, 2023.


 

Key Financial and Operating Metrics from Operations:

(in thousands, except for percentages)


Three Months Ended

 

 

 

 

 

June 30, (unaudited)

 

Change

 

 

2023

 

 

 

2022

 

 

$

 

%

Subscription revenue

$

2,885

 

 

$

2,561

 

 

$

324

 

 

12.7

%

Advertising revenue

$

71

 

 

$

84

 

 

($

13

)

 

-15.5

%

Technology service revenue

$

0

 

 

$

0

 

 

$

0

 

 

0.0

%

Total revenues

$

2,956

 

 

$

2,645

 

 

$

311

 

 

11.8

%

Loss from operations

($

278

)

 

($

1,084

)

 

$

806

 

 

74.4

%

Net loss

$

136

 

 

($

1,129

)

 

$

1,264

 

 

112.0

%

Net cash used in operating activities

($

279

)

 

($

411

)

 

$

132

 

 

32.1

%

Adjusted EBITDA (a non-GAAP measure)

($

15

)

 

($

909

)

 

$

894

 

 

98.4

%


Six Months Ended

 

 

 

 

 

June 30, (unaudited)

 

Change

 

 

2023

 

 

 

2022

 

 

$

 

%

Subscription revenue

$

5,391

 

 

$

5,407

 

 

($

16

)

 

-0.2

%

Advertising revenue

$

129

 

 

$

164

 

 

($

35

)

 

-21.3

%

Technology service revenue

$

0

 

 

$

0

 

 

$

0

 

 

0.0

%

Total revenues

$

5,520

 

 

$

5,571

 

 

($

51

)

 

0.9

%

Loss from operations

($

1,187

)

 

($

1,797

)

 

$

594

 

 

34.0

%

Net loss

($

603

)

 

($

1,868

)

 

$

1,350

 

 

67.7

%

Net cash used in operating activities

($

997

)

 

($

1,644

)

 

$

562

 

 

34.2

%

Adjusted EBITDA (a non-GAAP measure)

($

663

)

 

($

1,393

)

 

$

730

 

 

52.4

%


ABOUT PALTALK, INC. (Nasdaq: PALT)

 

Paltalk, Inc. is a communications software innovator that powers multimedia social applications. Our product portfolio includes Paltalk and Camfrog, which together host a large collection of video-based communities. Our other products include ManyCam, Tinychat and Vumber. The Company has an over 20-year history of technology innovation and holds 10 patents. For more information, please visit: http://www.paltalk.com.

 

To be added to our news distribution list, please visit: http://www.paltalk.com/investor-alerts/.

 

FORWARD-LOOKING STATEMENTS:

 

This press release contains "forward-looking statements." Such statements may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential," or similar words.  Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company's control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, any economic recession and the overall inflationary environment on our results of operations and our business; our ability to effectively market and generate revenue from our applications; our ability to generate and maintain active users and to effectively monetize our user base; our ability to improve, market and promote the ManyCam software; the Company’s ability to retain the listing of its common stock on The Nasdaq Capital Market; our ability to release new applications or improve upon or add features to existing applications on schedule or at all; risks and uncertainties related to our increasing focus on the use of new and novel technologies to enhance our applications, and our ability to timely complete development of applications using new technologies; our ability to effectively compete with existing competitors and new market entrants; our ability to effectively secure new software development and licensing customers; our ability to protect our intellectual property rights; the use of the internet and privacy and protection of user data; our ability to consummate favorable acquisitions and effectively integrate any companies or properties that we acquire; and our ability to manage our partnerships and strategic alliances. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission ("SEC"), including the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC's website at www.sec.gov.

 

All forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement was made, except to the extent required by applicable securities laws.

 

Investor Contacts:

IR@paltalk.com

ClearThink

nyc@clearthink.capital

917-658-7878


PALTALK, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, (Unaudited)

 

 

June 30, (Unaudited)

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Reconciliation of net income (loss) to Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

135,629

 

 

$

(1,128,706

)

 

$

(602,669

)

 

$

(1,867,651

)

Interest (income) expense, net

 

 

(171,341

)

 

 

1,595

 

 

 

(292,508

)

 

 

3,457

 

Other (income) expense

 

 

(343,045

)

 

 

38,772

 

 

 

(343,045

)

 

 

46,658

 

Income tax expense

 

 

101,059

 

 

 

4,753

 

 

 

51,505

 

 

 

20,784

 

Impairment loss on digital tokens

 

 

--

 

 

 

7,262

 

 

 

 

 

 

 

7,262

 

Depreciation and amortization expense

 

 

205,583

 

 

 

108,176

 

 

 

411,167

 

 

 

184,440

 

Stock-based compensation expense

 

 

57,170

 

 

 

59,149

 

 

 

112,311

 

 

 

211,620

 

Reported Adjusted EBITDA

 

$

(14,945

)

 

$

(908,999

)

 

$

(663,239

)

 

$

(1,393,430

)


Non-GAAP Financial Measures and Key Metrics

The Company has provided in this release Adjusted EBITDA, a non-GAAP financial measure, to supplement the consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). Adjusted EBITDA is defined as net income (loss) adjusted to exclude interest (income) expense, net, other (income) expense, income taxes (benefit) expense, impairment loss on digital tokens, depreciation and amortization expense, and stock-based compensation expense.

 

Management uses Adjusted EBITDA internally in analyzing the Company’s financial results to assess operational performance and to determine the Company’s future capital requirements. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. The Company believes that both management and investors benefit from referring to Adjusted EBITDA in assessing its performance and when planning, forecasting and analyzing future periods. The Company believes Adjusted EBITDA is useful to investors and others to understand and evaluate the Company’s operating results and it allows for a more meaningful comparison between the Company’s performance and that of competitors. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that Adjusted EBITDA does not reflect, among other things: interest (income) expense, net, income tax (benefit) expense, depreciation and amortization expense, other (income) expense, net, and stock-based compensation. Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

 

Because of these limitations, you should consider Adjusted EBITDA along with other financial performance measures, including total revenues, subscription revenue, deferred revenue, net income (loss), cash and cash equivalents, restricted cash, net cash used in operating activities and our financial results presented in accordance with GAAP.


PALTALK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

June 30,

 

 

December 31,

 

 

 

2023 (Unaudited)

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,650,942

 

 

$

14,739,933

 

Accounts receivable, net of allowances of $3,648 as of March 31, 2023 and December 31, 2022

 

 

126,654

 

 

 

122,297

 

Employee retention tax credit receivable, net

 

 

246,629

 

 

 

 

 

Prepaid expense and other current assets

 

 

789,099

 

 

 

543,199

 

Total current assets

 

 

14,813,324

 

 

 

15,405,429

 

Operating lease right-of-use asset

 

 

118,330

 

 

 

159,181

 

Goodwill

 

 

6,326,250

 

 

 

6,326,250

 

Intangible assets, net

 

 

3,321,227

 

 

 

3,526,811

 

Other assets

 

 

13,937

 

 

 

13,937

 

Total assets

 

$

24,387,485

 

 

$

25,431,608

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

679,082

 

 

$

1,013,637

 

Accrued expenses and other current liabilities

 

 

211,225

 

 

 

225,193

 

Operating lease liabilities, current portion

 

 

83,367

 

 

 

82,176

 

Contingent Consideration

 

 

 

 

 

 

85,000

 

Deferred subscription revenue

 

 

2,169,454

 

 

 

2,257,452

 

Total current liabilities

 

 

3,143,128

 

 

 

3,663,458

 

Operating lease liabilities, non-current portion

 

 

34,963

 

 

 

77,005

 

Deferred tax liability

 

 

732,723

 

 

 

716,903

 

Total liabilities

 

 

3,910,814

 

 

 

4,457,366

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 25,000,000 shares authorized, 9,864,120 shares issued and 9,222,157 and 9,227,349 shares outstanding as of March 31, 2023 and December 31, 2022, respectively

 

 

9,864

 

 

 

9,864

 

Treasury stock, 641,963 and 636,771 shares outstanding as of March 31, 2023 and December 31, 2022, respectively

 

 

(1,199,337

)

 

 

(1,192,124

)

Additional paid-in capital

 

 

36,086,046

 

 

 

35,973,735

 

Accumulated deficit

 

 

(14,419,902

)

 

 

(13,817,233

)

Total stockholders’ equity

 

 

20,476,671

 

 

 

20,974,242

 

Total liabilities and stockholders’ equity

 

$

24,387,485

 

 

$

25,431,60


PALTALK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 

 

Three Months Ended

 

Three Months Ended

 

June 30,

June 30,

 

 

2023

 

 

2022

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Subscription revenue

 

$

2,884,989

 

 

$

2,560,706

 

$

5,390,659

 

 

$

5,407,045

 

Advertising revenue

 

 

71,013

 

 

 

83,762

 

 

129,360

 

 

 

164,124

 

Total revenues

 

 

2,956,002

 

 

 

2,644,468

 

 

5,520,019

 

 

 

5,571,169

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

774,028

 

 

 

661,548

 

 

1,576,503

 

 

 

1,313,644

 

Sales and marketing expense

 

 

220,512

 

 

 

484,133

 

 

475,380

 

 

 

895,615

895,615

Product development expense

 

 

1,163,640

 

 

 

1,521,764

 

 

2,412,222

 

 

 

3,051,905

 

General and administrative expense

 

 

1,075,520

 

 

 

1,053,347

 

 

2,242,631

 

 

 

2,099,495

 

Impairment loss on digital tokens

 

 

 

 

 

 

7,262

 

 

 

 

 

 

7,262

 

Total costs and expenses

 

 

3,233,700

 

 

 

3,728,054

 

 

6,706,736

 

 

 

7,367,921

 

Loss from operations

 

 

(277,698

)

 

 

(1,083,586

)

 

(1,186,717

)

 

 

(1,796,752

)

Interest income (expense), net

 

 

171,341

 

 

 

(1,595

)

 

292,508

 

 

 

(3,457

)

Other expense

 

 

343,045

 

 

 

(38,772

)

 

343,045

 

 

 

(46,658

)

Loss from operations before provision for income taxes

 

 

236,688

 

 

 

(1,123,953

)

 

(551,164

)

 

 

(1,846,867

)

Income tax benefit (expense)

 

 

(101,059

)

 

 

(4,753

)

 

(51,505

)

 

 

(20,784

)

Net loss

 

$

135,629

 

 

$

(1,128,706

)

$

(602,669

)

 

$

(1,867,651

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$

(0.12

)

$

(0.07

)

 

$

(0.19

)

Diluted

 

$

0.01

 

 

$

(0.12

)

$

(0.07

)

 

$

(0.19

)

Weighted average number of shares of common stock used in calculating net loss per share of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

9,222,256

 

 

 

9,771,608

 

 

9,222,256

 

 

 

9,801,715

 

Diluted

 

 

9,222,256

 

 

 

9,771,608

 

 

9,222,256

 

 

 

9,801,715


PALTALK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

 

Six Months Ended

 

June 30,

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(602,669

)

 

$

(,1867,651

)

Adjustments to reconcile net loss from operations to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

-

 

 

 

51,918

 

Amortization of intangible assets

 

 

411,167

 

 

 

135,522

 

Amortization of operating lease right-of-use assets

 

 

40,851

 

 

 

39,924

 

Impairment loss on digital tokens

 

 

-

 

 

 

7,262

 

Deferred tax expense

 

 

15,820

 

 

 

-

 

Stock-based compensation

 

 

112,311

 

 

 

211,620

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(4,357

)

 

 

46657

 

Operating lease liability

 

 

(40,851

)

 

 

(39,924

)

Prepaid expense and other current assets

 

 

(245,900

)

 

 

(120,686

)

Accounts payable, accrued expenses and other current liabilities

 

 

(381,523

)

 

 

(29,932

)

Employee retention tax credit receivable, net

 

 

(213,629

)

 

 

-

 

Deferred subscription revenue

 

 

(87,998

)

 

 

(75,644

)

Net cash used in operating activities

 

 

(996,778

)

 

 

(1,643,934

)

Cash flows from investing activities activities:

 

 

 

 

 

 

 

 

Acquisition of ManyCam assets

 

 

-

 

 

 

(2,700,000

)

Acquisition related costs of ManyCam assets

 

 

-

 

 

 

(228,928

)

Payment of contingent consideration

 

 

(85,000

)

 

 

-

 

Net cash used in investing activities

 

 

(85,000

)

 

 

(2,928,928

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Purchase of treasury stock

 

 

(7,213

)

 

 

(213,180

)

Net cash used in financing activities

 

 

(7,213

)

 

 

(213,180

)

Net decrease in cash and cash equivalents

 

 

(1,088,991

)

 

 

(4,786,042

)

Balance of cash and cash equivalents at beginning of period

 

 

14,739,933

 

 

 

21,636,860

 

Balance of cash and cash equivalents at end of period

 

$

13,650,942

 

 

$

16,850,818

 

Supplemental disclosure of cash flow information: Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Interest

 

$

512

 

 

 

-

 

Taxes

 

$

18,551

 

 

$

-

 

Write-off of property and equipment

 

$

-

 

 

$

1,475,649

 

Deferred tax liability associated with the acquisition of ManyCam assets

 

$

 

 

 

$

806,493

 

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