Intelligent Protection Management - Earnings Call - Q1 2025

Executive Summary

• Transformational first quarter post-NTS acquisition: revenue reached $5.52M vs $0.27M last year; operating loss was $(1.33)M; net income was $0.81M aided by a $2.06M tax benefit. Management emphasized focus on enterprise cybersecurity and private cloud, with integration on track and no long-term debt.
• Versus S&P Global consensus, IPM delivered an EPS beat ($0.066 vs $(0.08) est.) on a tax benefit, while revenue modestly missed ($5.52M vs $5.77M est.); adjusted EBITDA was slightly better than expected (−$0.65M vs −$0.80M est.). Values marked with * are from S&P Global.
• Strategic catalysts: HPE Private Cloud AI accreditation; NewtekOne referral arrangement; initiation of a $400K repurchase plan; and a $1.0M secured revolving LOC availability (no debt drawn).
• Key narrative: pivot to high-touch managed IT, secure private cloud, and cybersecurity with cross-sell into ManyCam/web hosting bases and NewtekOne’s client network; management flagged M&A as a potential accelerant.

What Went Well and What Went Wrong

• What Went Well

  • Top-line step-change from NTS: revenue to $5.52M (+~20x YoY), with diversified streams (Managed IT $3.56M; Procurement $0.95M; Professional Services $0.73M; Subscription $0.28M).
  • Capital strength and capital returns: $9.68M cash, no long-term debt; $400K repurchase authorization approved May 8, 2025; groundwork for sales/marketing systems laid.
  • Strategic positioning and partnerships: HPE Private Cloud AI accreditation; NewtekOne referral arrangement; CEO: “transformational… focused on rapidly growing cloud infrastructure and cybersecurity”.

• What Went Wrong

  • Revenue modestly below consensus, indicating softer-than-expected contribution timing from new bookings ($5.52M vs $5.77M est.)*.
  • Operating loss widened YoY on integration/one-time costs and higher opex (operating loss $(1.33)M vs $(1.01)M YoY; ~$0.3M one-time transaction costs; $0.9M non-cash D&A and SBC).
  • EPS beat was non-operational: $2.06M tax benefit drove net income; adjusted EBITDA remained negative (−$0.48M).

Transcript

Operator (participant)

Good afternoon, and welcome to the earnings results conference call for Intelligent Protection Management Corporation. First quarter ended March 31st, 2025. At this time, all participants have been placed on a listen-only mode, and it is now my pleasure to turn the floor over to your hosts, Jason Katz, Chief Executive Officer of Intelligent Protection Management Corp, which we refer to as IPM, and Kara Jenny, Chief Financial Officer of IPM. Kara, the floor is yours.

Kara Jenny (CFO)

Hello, everyone, and welcome to the IPM Operating and Financial Results Conference Call for the first quarter ended March 31st, 2025. 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 questions.

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 is contained in our filings with the SEC, including our annual report on Form 10-K for the year ended December 31st, 2024. 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, provides 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 has been posted on the investor relations section of our website at www.ipm.com. With that, I'd like to introduce IPM's Chief Executive Officer, Jason Katz.

Jason Katz (CEO)

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 Inc, or NTS, from Newtek One Inc, and the sale of our Paltalk Camp, Frog, and Vumber applications and certain assets and liabilities related to such applications to Meteor Mobile Holdings, which are referred to as the transferred assets. The first quarter of 2025 was transformational for IPM following the closing of our acquisition of NTS, which focused our business on the rapidly growing cloud infrastructure and cybersecurity sectors. Today, more than ever, cloud infrastructure and cybersecurity are critical to protecting sensitive data, ensuring business continuity, and securing a digital economy in an era of growing cyber threats.

We have an exciting opportunity to build upon NTS's historical achievements moving forward as a standalone integrated service company. After my remarks, our CFO, Kara Jenny, will give a summary of our financial results for the first quarter ended March 31st, 2025. Following our prepared remarks, we'll move into the Q&A portion and answer any questions that were submitted prior to this call. Since the closing of the transactions in the beginning of the year, we have successfully integrated our operations and serviced our existing customers without an interruption. Moving forward, we believe we are now well-positioned to grow the company through the expansion of our services offerings to existing legacy NTS customers while cross-selling our ManyCam software and varying new services to our historical web hosting customer base. This should lead to further growth and enhancement of operational efficiencies, all focused on driving stockholder value.

I would now like to provide an overview of our IT and cloud-based solutions to give you more insight into our new business. Our managed IT security services provide clients with ongoing management and support of their IT systems and services under a subscription or contract-based model. Such services include, among other things, proactive monitoring, regular system maintenance, comprehensive cybersecurity management, data backup and disaster recovery, as well as help desk support for users. We sell and provide a range of services across five core areas. Professional services. Our professional services include the design and implementation of a wide range of IT products and services such as cybersecurity, software planning, IT infrastructure, data center design and configuration, designing and implementing on-premises, hybrid, or cloud computing solutions, website development, developing or integrating systems and software, and IT cost management. Procurement services. We offer two types of procurement services to our customers.

We can either, one, obtain software and hardware products on behalf of our customers, in which case our vendors dropship the products to our end customer, or two, obtain the hardware or software on behalf of our customers and perform additional configuration and or add additional inputs to the products before the products are shipped to our customer. In the instance where we sell hardware and software products as a solution bundled with services, we typically obtain the products or software from our vendors, add the additional input configuration as detailed in the customer contract, and then ship the products to the end customer. Secure Private Cloud Hosting. Our secure private cloud hosting offerings include a digital infrastructure which consists of dedicated and fully isolated cloud environments designed to deliver security, control, and compliance for the business-critical applications and client data.

We operate a secure private cloud from private suites and completely isolated areas that are leased within two Tier 3 data center facilities located in Phoenix, Arizona, and Edison, New Jersey, pursuant to license agreements that extend until 2027 and 2026, respectively. Although we do not own or operate the data centers, we aim to use the high-level operations and standards provided by the data centers through our license agreements to provide our customers with secure and flexible cloud services. We leverage state-of-the-art security measures, including data encryption, network segmentation, advanced firewalls, multi-factor authentication, and continuous monitoring to safeguard against unauthorized access and cyber threats. We believe our secure private cloud hosting provides our clients with strong availability, data integrity, and reliable performance while meeting stringent compliance requirements.

Our private cloud hosting solutions are backed by 24/7 support from our expert team with the goal of delivering secure, flexible, and resilient infrastructure tailored to each client's unique business needs. In the future, we plan to make arrangements with third parties to incorporate AI features into our secure private cloud offerings. Managed backup and disaster recovery. Our managed backup and disaster recovery solutions provide comprehensive protection for customers' critical data and IT infrastructure, which is intended to ensure business continuity and rapid recovery in the event of data loss, cyber attacks, or system failures. We utilize advanced backup technologies with automated regular data backups, off-site replication, and secure storage to prevent data corruption or loss. Web hosting. Our web hosting services consist of several advanced security measures, including secure sockets layer and transport layer security, SSL/TLS, encryption, firewall, distributed denial of service protection, malware scanning, and secure server configurations.

Our web hosting services include features such as regular data backups, web application firewalls, strict access control policies, and continuous monitoring and expert support, all of which are intended to ensure our customers' compliance with industry standards and provide a reliable and secure environment for our customers' online presence. We are very excited with the prospect of expanding our managed technology solutions business, particularly in the cloud infrastructure and cybersecurity sectors. We expect that the recently announced referral arrangement with Newtech One, a 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 is potential for merger and acquisition opportunities to further scale our growth.

We look forward to growing the business and building a healthy pipeline of prospective and new customers. We enter this new chapter for IPM with a strong balance sheet highlighted by $9.7 million in cash and cash equivalents and no long-term debt, which, when coupled with the potential earnout from the sale of the transferred assets, puts us in a strong position to execute on our business plans and further transform IPM. Additionally, effective May 8th, 2025, our board of directors approved a stock repurchase plan for up to $400,000 of the company's outstanding common stock, which plan expires on the one-year anniversary of such date.

Shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in accordance with the federal securities laws, including Rule 10b5-1 programs, and the stock repurchase plan may be suspended or discontinued at any time. The actual timing, number, and value of shares repurchased will be determined by a committee of the board of directors at its discretion and will depend on a number of factors, including the market price of the company's common stock, general market and economic conditions, alternative investment opportunities, and other corporate considerations. In regards to our patent litigation, on August 29th, 2024, a jury awarded us $65.7 million in a jury verdict in connection with the lawsuit against Webex Communications, Cisco Webex, and Cisco Systems in the U.S. District Court for the Western District of Texas.

On October 8th, 2024, an order granting a motion for final judgment was entered into by 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 gain contingency in connection with the award. Now I'd like to pass it to Kara for a financial summary of the first quarter ended March 31st, 2025.

Kara Jenny (CFO)

Thank you, Jason. Total revenue for the three months ended March 31st, 2025, was $5.5 million compared to $0.3 million for the three months ended March 31st, 2024. This increase was primarily driven by new revenue streams as a result of the acquisition of NTS, which closed on January 2nd, 2025. Loss from continuing operations for the three months ended March 31st, 2025, was $1.3 million compared to a loss from continuing operations of $1.0 million for the three months ended March 31st, 2024. During the first quarter of 2025, the company incurred approximately $0.3 million of one-time expenses in connection with the transactions.

The loss from continuing operations for the three months ended March 31st, 2025, also included $0.9 million of non-cash expense consisting of amortization and depreciation of $0.7 million, $0.4 million of which represents amortization on newly acquired intangible assets, as well as $0.2 million of non-cash share-based compensation. The loss from continuing operations for the three months ended March 31st, 2024, included subscription sales from our ManyCam software, as well as all general and administrative expenses for the company, which included all professional fees and public company expenses. Net income for the three months ended March 31st, 2025, was $0.8 million compared to a net loss of $0.5 million for the three months ended March 31st, 2024. Net income included a tax benefit of $2.1 million in connection with the recognition of tax benefits recorded in connection with the transactions for the three months ended March 31st, 2025.

Adjusted EBITDA remained relatively unchanged at negative $0.5 million for the three months ended March 31st, 2025, and 2024, respectively. Net cash generated from operating activities for the quarter was $1.7 million. Cash and cash equivalents totaled $9.7 million at March 31st, 2025, a decrease of $0.9 million compared to $10.6 million at December 31st, 2024, as a result of $4 million cash payment as part of the acquisition of NTS, partially offset by $1.4 million of cash inflow from the divestiture of the transferred assets and cash flow from operations of $1.7 million. The company reported no long-term debt on its balance sheet as of March 31st, 2025. We will now move on to questions. Since you have now owned this business for four-plus months, can you discuss what you have done or put in place to grow and expand this business?

Have you made additional sales and marketing hires?

Jason Katz (CEO)

Sure. We hired a company that focuses on marketing, search engine optimization, pay-per-click advertising, branding, and email marketing management. In addition, we have allocated marketing spend to enable a CRM system that allows us to email our customer database of approximately 40,000 current and former customers and track their open rates and response to our email.

Kara Jenny (CFO)

Next question. Can you tell us roughly how many of your clients currently utilize just one of your managed technology offerings? As a follow-on to that, have you begun to cross-sell additional offerings to your clients?

Jason Katz (CEO)

Yeah, we have started to email and cross-sell our managed technology offerings to the ManyCam user base, as well as offering our web hosting customers all of our additional solutions.

Kara Jenny (CFO)

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

Jason Katz (CEO)

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 on our progress as we continue to execute on our business plan. We expect to report our second quarter and first half 2025 results in early to mid-August. Have a great day.

Operator (participant)

Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.