PALTALK, INC. (PALT)·Q3 2024 Earnings Summary

Executive Summary

• Revenue declined 23.4% year over year to $2.12M as subscription revenue fell 23.9%; sequential revenue was down 4.7% from Q2, and net loss widened to $1.51M with operating loss driven by $0.8M in transaction-related professional fees .
• Company announced a transformational pivot: definitive agreement to acquire Newtek Technology Solutions (NTS) and agreed to divest Vumber plus Paltalk/Camfrog (and cease Tinychat); management expects the acquisition to have an “immediate and meaningful impact” as NTS 2023 revenue was ~3× Paltalk’s 2023 revenue .
• Legal milestone: final judgment entered for a $65.7M jury award against Cisco; company estimates it would receive no more than one-third of gross proceeds after fees, subject to post-trial and appellate processes .
• Liquidity remains solid with $12.06M cash and no long-term debt at quarter end; deferred subscription revenue increased to $2.07M, and Q3 operating cash use was $0.78M .
• Stock reaction catalysts: progress on closing the NTS acquisition/divestitures, clarity on Cisco post-trial/appeals, and proxy approvals for the transactions .

What Went Well and What Went Wrong

What Went Well

• Secured a $65.7M final judgment in patent case vs. Cisco, validating IP strategy and creating a potential cash inflow (net of fees/appeals) .
• Announced NTS acquisition and parallel divestitures to reposition the company toward managed IT/security/cloud hosting; management expects “immediate and meaningful” revenue impact post-close .
• Maintained solid liquidity with $12.06M cash and no long-term debt, supporting execution through the transition and legal processes .

What Went Wrong

• Core subscription revenue contracted 23.9% YoY, driving total revenue down 23.4% YoY and weighing on operating leverage .
• Operating loss widened to $(1.69)M, largely due to $0.8M of professional fees tied to the acquisition and divestiture workstreams .
• Adjusted EBITDA loss increased to $(1.45)M vs. $(0.13)M in Q3 2023, reflecting softer topline and elevated transaction costs .

Financial Results

Income Statement Summary (USD)

Margin Profile (calculated)

Revenue Mix (USD)

KPIs & Cash (USD)

Notes: Adjusted EBITDA is non-GAAP; see reconciliation and definition in company materials .

Guidance Changes

Management did not issue numerical revenue/EPS/margin guidance; messaging focused on transaction timing and strategic pivot .

Earnings Call Themes & Trends

Management Commentary

• “We are in midst of a transformational shift in our business strategy that we believe will enhance stockholder value… we were recently awarded a $65.7 million jury verdict [vs. Cisco].” – Jason Katz, CEO .
• “We expect that the Acquisition, once completed, will have an immediate and meaningful impact on our revenue, since NTS’s revenue in 2023 was approximately three times greater than Paltalk’s 2023 revenue.” – Jason Katz .
• “Loss from operations… increased… attributed to a decrease in revenue… as well as an increase in professional fees of $0.8 million related to the Acquisition and the Divestiture.” – Kara Jenny, CFO .
• “We have an ample cash balance of $12.1 million as of September 30, 2024, and we are excited to focus our attention on growing the cybersecurity, cloud hosting and technology solutions business.” – Jason Katz .

Q&A Highlights

• The transcript focused on prepared remarks outlining the NTS acquisition, divestitures, and the Cisco judgment; no detailed analyst Q&A was included in the published transcript beyond management’s prepared Q&A invitation .
• Management reiterated expectations for revenue uplift post-close of NTS and called out transaction-related professional fees as a key driver of Q3 operating loss .
• No additional quantitative guidance or changes to outlook were disclosed during the call .

Estimates Context

• We attempted to retrieve S&P Global consensus for Q3 2024 revenue and EPS; consensus was unavailable for PALT via our S&P Global interface (no CIQ mapping). As such, no estimate comparisons are included. Actuals are shown below for reference .
  | Metric | Q3 2024 Consensus | Q3 2024 Actual | |---|---|---| | Revenue ($) | N/A | $2,121,234 | | Diluted EPS ($) | N/A | $(0.16) |

Key Takeaways for Investors

• The story pivots from declining legacy subscription apps toward managed IT/security/cloud via NTS; closing risk and integration execution are now the primary drivers of the equity narrative .
• Near-term P&L will likely remain pressured by transaction costs until the acquisition/divestitures close; Q3 included ~$0.8M in professional fees and soft subscription revenues .
• The Cisco judgment is a significant positive optionality lever; timing and net proceeds (≤~1/3 after fees) remain uncertain given post-trial/appeal processes .
• Liquidity is adequate to bridge the transition ($12.06M cash, no LT debt), though operating cash burn increased in Q3; watch OpEx discipline and working capital as transactions progress .
• Legacy KPIs (subscription revenue, engagement) remain weak; continued declines could persist until the portfolio transition is complete and NTS consolidates .
• Potential re-rating catalysts: signed close and initial pro forma revenue cadence from NTS; proxy approvals; clarity on Cisco cash timing; and early signs of ManyCam enterprise traction .
• With no formal sell-side consensus available, price discovery may be more event-driven; monitor SEC filings, proxy materials, and 8-Ks for transaction milestones and post-trial developments .

Sources: Q3 2024 8-K/press release and financial statements ; Q3 2024 earnings call transcript ; Q2 2024 8-K/press release ; Q1 2024 8-K/press release .