Earnings Transcript for PALT - Q4 Fiscal Year 2022

Operator: Good afternoon, and welcome to the earnings call for Paltalk's Fourth Quarter and Full Year ended December 31, 2022. At this time, all participants have been placed on a listen-only mode. It is now my pleasure to turn the floor over to your host, Jason Katz, Chief Executive Officer of Paltalk; and Kara Jenny, Chief Financial Officer of Paltalk. Kara, the floor is yours.

Kara Jenny: Hello, everyone, and welcome to the Paltalk operating and financial results conference call for the fourth quarter and full year ended December 31, 2022. By now, everyone should have access to the earnings results press release, which was issued earlier today after the market closed at 04

Jason Katz: Thank you, Kara, and good afternoon, 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 full year ended December 31, 2022. Additionally, we will provide an update on our business and highlight areas we are focused on as we target a return to growth. After my opening statement, our CFO, Kara Jenny, will give a summary of our financial results for the fourth quarter and full year ended December 31, 2022. 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 highlights. We are encouraged by our sequential quarterly growth, as our revenue reported for the fourth quarter of 2022 was 7% greater than what we reported for the third quarter of 2022. Our customers are adapting to ManyCam and enjoying their experience with it, as the feedback we have received has been positive. As we approach the one-year anniversary of the addition of the ManyCam product to our offering, we anticipate that subscription revenue related to ManyCam will increase in future quarters as deferred revenue generated from those subscriptions is recognized. We believe our efforts throughout 2022 to streamline expenses to better align with overall macroeconomic conditions and invest in a measured way that ensures responsible cash management have started to pay off. As a result, our revenue increased and our losses decreased from the third quarter of 2022 to the fourth quarter of 2022. Our operating expenses as a percentage of revenue declined to 129% for the fourth quarter of 2022 versus 140% for the third quarter of 2022, demonstrating our improved operating efficiencies. We're also continuing to work with our investment banking firm in exploring strategic opportunities including, but not limited to, potential mergers or acquisitions of other assets, or entities that are synergistic to our business, which we believe will increase shareholder value. Our team remains focused on user retention and monetization, which collectively are intended to increase user engagement and revenue opportunities. Additional technology enhancement and features and games, such as our gaming lobby, are all intended to increase retention, usage and revenue. I would also like to take this time to update everyone on our patent infringement lawsuit against WebEx Communications, Inc., Cisco WebEx LLC, and Cisco Systems, Inc. in the U.S. District Court for the Western District of Texas. As we have previously disclosed, 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 Number 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 one through ten of U.S. Patent Number 6,683,858. The trial is now scheduled for early third quarter of 2023. Our cash position as of December 31, 2022 remained strong at $14.7 million, which we believe puts us in a good position as we seek a return to profitability. We plan to continue to develop our consumer application platforms and defend our intellectual property, of which we will continue to provide updates when publicly available. Pursuant to our stock repurchase plan, that authorizes us to repurchase up to $1.75 million of the company's common stock, we repurchased 604,808 shares of the common stock during the year ended December 31, 2022 at an average price per share of $1.65, or an aggregate amount of approximately $998,000. I trust this gives you some insight into the company initiatives we have implemented in order to conserve cash as we look to increase our subscribers and user engagement and return to positive cash flow and profitability to build stockholder value. Now, I'd like to pass it to Kara for a financial summary of our fourth quarter and full year ended December 31, 2022.

Kara Jenny: Thank you, Jason. Our results of operations for the three months ended December 31, 2022 were as follows

Kara Jenny: The first question. Nice to see the sequential increase in quarterly revenue. Any color on the driving factors?

Jason Katz: As I mentioned, as we approach the one-year anniversary of the ManyCam product to our offering, we anticipate that subscription revenue related to ManyCam will increase in future quarters as deferred revenue generated from those subscriptions is recognized.

Kara Jenny: Our second question. With $14.7 million in cash still, will you renew or expand your share buyback program?

Jason Katz: Our current share buyback plan actually expires March 29, and at that time, the Board will re-evaluate the buyback.

Kara Jenny: Jason, back to you to close out the presentation.

Jason Katz: Thanks everyone for your support and for joining us today. We are very grateful for your interest in our business. We look forward to updating the market and our stockholders with our progress in our business initiatives, pending patent litigation against Cisco WebEx and potential strategic accretive acquisitions, which we continue to identify and analyze. Have a great day.

Operator: Thank you, everybody. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.