Reports Significant Improvements in Net Income andAdjusted EBITDA

JERICHO, NY, Aug. 08, 2023 (GLOBE NEWSWIRE) -- via NewMediaWire – 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 AdjustedEBITDA 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  $25,431,608 
         

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   895,615895,615
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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Source: Paltalk, Inc.

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