Paltalk, Inc. (NASDAQ:PALT) Q1 2022 Earnings Conference Call May 10, 2022 4:30 PM ET Company Participants Jason Katz – Chief Executive Officer Kara Jenny – Chief Financial Officer Operator Good afternoon and welcome to the Paltalk First Quarter 2022 Earnings Call. [Operator Instructions] It is now my pleasure to show the ground over to your host, Jason Katz, Chief Executive Officer of Paltalk and Kara Jenny, Chief Financial Officer of Paltalk. Kara, the ground is yours. Kara Jenny Hello, everybody and welcome to the Paltalk first quarter 2022 working and monetary outcomes convention name for the three months ended March 31, 2022. By now, everybody ought to have entry to the earnings outcomes press launch, which was issued earlier at present after the market closed at 4:00 p.m. Eastern Time. This name is being webcast and might be obtainable for replay. In our remarks at present, we’ll embrace statements which might be thought-about ahead-trying inside the that means of the Private Securities Litigation Reform Act of 1995, together with ahead-trying statements about future outcomes of operations, enterprise methods and plans, {our relationships} with our prospects in addition to market and potential progress alternatives. In addition, administration could make further ahead-trying statements in response to your questions. Forward-looking statements are primarily based on administration’s present information and expectations as of at present and are topic to sure dangers, uncertainties and assumptions associated to elements that will trigger precise outcomes to vary materially from these anticipated within the ahead-trying statements. We provide no assurance that these expectations and beliefs will show to be appropriate. An in depth dialogue of such dangers and uncertainties are contained in our filings with the SEC, together with our most up-to-date annual report on Form 10-Okay for the 12 months ended December 31, 2021. You ought to refer and think about these elements when relying on such ahead-trying data. The firm doesn’t undertake and expressly disclaims any obligation to replace or alter our ahead-trying statements, whether or not because of new data, future occasions or in any other case, besides as required by relevant regulation. On this name, we’ll seek advice from sure non-GAAP measures, together with adjusted EBITDA that, when utilized in mixture with GAAP outcomes, offers us with further analytical instruments to grasp our operations. For every non-GAAP measure, we have now supplied a reconciliation to essentially the most instantly comparable GAAP monetary measure in our earnings press launch, which might be posted on the Investor Relations part of our web site at paltalk.com. And with that, I want to introduce Paltalk’s Chief Executive Officer, Jason Katz. Jason Katz Thank you, Kara and good afternoon everybody. We drastically respect you taking the time to affix us on at present’s name. We will talk about our working highlights and monetary outcomes for the primary quarter ended March 31, 2022. Additionally, we’ll present some colour on our progress initiatives, together with our ramp up in advertising and marketing spend and plan for strategic accretive acquisitions. After my opening assertion, our CFO, Kara Jenny, will give a abstract of our first quarter ended March 31, 2022 monetary outcomes. Following our ready remarks, we’ll transfer into the Q&A portion and reply questions that had been pre-submitted previous to this name. With that, I want to now stroll you thru the latest highlights. While we’re disillusioned with the decline in subscription income during the last quarter, we attribute this lower primarily to the easing of COVID-19 restrictions in sure of our goal markets. We imagine we have now began to put the groundwork for progress in subscription and promoting income. As beforehand disclosed, we lately started to execute our plan to extend advertising and marketing spend and put money into product growth. For instance, along with our latest advertising and marketing initiatives, we launched a cell backgammon sport, which is interactive with actual-time voice and video. Our money stability of greater than $20 million affords us the chance to make these investments, however we’ll proceed conservatively. Our measured method is mirrored in our first quarter’s elevated advertising and marketing bills of $200,000 and elevated product growth bills of $200,000. We are optimistic that our new advertising and marketing instruments and partnerships, with a spotlight on rising visibility, person engagement and subscribers, will allow us to return to progress. In addition, our group continues to establish and evaluation potential strategic acquisitions to bolster our progress even additional. We sit up for updating the market and our stockholders with our progress on each inside progress initiatives and potential strategic accretive acquisitions. I’ll now present some additional insights into among the particular progress initiatives and advertising and marketing spend we have now lately began. During the primary quarter, we engaged and began working with yellowHEAD, an AI-powered efficiency advertising and marketing firm that enhances progress with unified paid and natural methods, to steer our elevated advertising and marketing efforts for Camfrog. yellowHEAD makes a speciality of person acquisition, app retailer optimization, search engine marketing, inventive manufacturing and analytics expertise. yellowHEAD’s ASO and search engine optimization options have been instrumental in serving to many manufacturers enhance their site visitors, conversion and customers. One of the precise makes use of of the proceeds from the October 2021 capital raised final 12 months is to fastidiously ramp up our advertising and marketing spend to assist contribute to progress in customers and income. Also in the course of the first quarter, we partnered and began working with NoGood, a progress advertising and marketing agency that makes a speciality of person acquisition, to speed up person acquisition for our flagship Paltalk utility. yellowHEAD’s experience in search engine optimization, content material advertising and marketing, SEM, PPC, social labs, CRO, e-mail advertising and marketing, video advertising and marketing, SMS advertising and marketing and efficiency branding. NoGood has been instrumental in serving to many begin-ups and scale-ups to dramatically enhance their site visitors conversion and customers. We are very excited to work with NoGood to assist us as we search to speed up person progress and income progress. Because each of those advertising and marketing initiatives are of their early levels, it’s too quickly to report any significant traction of information. We are fastidiously monitoring the outcomes of our market initiatives and tweaking our plan for optimization and resolution-making going ahead. On the product growth aspect, we’re excited concerning the latest launch of our cell backgammon sport, which allows Paltalk customers to play with pals, different customers or privately with actual-time voice and video. As a part of our natural progress plan to extend subscribers, promoting and income, we imagine that offering further interactive choices and content material on our platform, akin to cell backgammon, will result in elevated person engagement. We imagine that current subscribers could introduce cell video games to potential new subscribers as properly. Our latest launch of cell backgammon demonstrates our capability to develop further functions and content material, to supply our subscribers and using our actual-time voice and video capabilities. We’re all the time seeking to enhance our subscribers’ utilization inside our platform and count on to launch a 3rd cell sport as we additional construct out our providing of our thoughts video games. In addition to those natural progress efforts, we proceed to establish and analyze potential strategic accretive acquisitions of each companies and property. Our group continues to discover alternatives that may very well be accretive and complementary to our current enterprise. As true with all of our progress initiatives, we’ll transfer prudently and thoroughly measure our incremental return on funding to assist guarantee any acquisition would end in enhancing our price and efficiency. I belief this offers you a way of among the firm initiatives we lately carried out as a way to enhance our subscribers and person engagement, and we count on to result in elevated income and profitability as we glance to construct stockholder worth. Now I’d wish to move it off to Kara for a monetary abstract of our first quarter ended March 31, 2022. Kara Jenny Thank you, Jason. Our outcomes of operations for the three months ended March 31, 2022, had been as follows. Revenue for the three months ended March 31, 2022 decreased by 13% to $2.9 million in comparison with $3.4 million for the three months ended March 31, 2021. This decline was primarily attributable to a lower in expertise service income because of the termination of our partnership with Open Props Inc., previously YouNow, in addition to a lower in subscription income of 9.3% or roughly $300,000, which was primarily attributable to the easing of COVID-19 restrictions in sure of our goal markets. Advertising income elevated 4.6% to roughly $100,000. Loss from operations for the three months ended March 31, 2022, totaled roughly $700,000, a rise of $1.1 million in comparison with working revenue of roughly $400,000 for the three months ended March 31, 2021. The lower is primarily as a result of lower in subscription income of roughly $300,000, coupled with elevated advertising and marketing bills of roughly $200,000 or 60% in reference to our funding in advertising and marketing, elevated product growth bills of roughly $200,000 or 18% in reference to implementation of newly bought software program included in different revenue for the three months ended March 31, 2021, with one-time cost of roughly $0.5 million associated to the forgiveness of the proceeds from the Paycheck Protection Program mortgage the corporate acquired in 2020. The ensuing internet loss per share of widespread inventory for the three months ended March 31, 2022, was a lack of $0.08 per share as in comparison with internet revenue per share per widespread inventory of $0.13 for the three months ended March 31, 2021. Adjusted EBITDA for the three months ended March 31, 2022, decreased by roughly $1 million to roughly $0.5 million loss in comparison with adjusted EBITDA of constructive $0.5 million for the three months ended March 31, 2021. Cash and money equivalents totaled $20.4 million at March 31, 2022, a lower of $1.2 million in comparison with $21.6 million at December 31, 2021. Currently, the corporate has no lengthy-time period debt on its stability sheet. We will now transfer on to the questions that had been beforehand submitted. Question-and-Answer Session A – Kara Jenny The first query, how are yellowHEAD and NoGood performing versus your earlier expectations, Jason? Jason Katz yellowHEAD and NoGood each simply began to implement their methods firstly of the second quarter. So, there’s not sufficient knowledge but to report on. Kara Jenny The subsequent query, is there any colour you may present on the impression of Hive Automated Content Moderation Solutions, your new message board feed and newly revised reward level system? Jason Katz Sure. The Hive answer screens very giant numbers of images, movies and actual-time video with glorious accuracy, which provides us confidence that customers are having fun with our software program inside the phrases of service. As for the feeds and reward level techniques, we’re always working on each of them and we’ll proceed to enhance every of them with each replace. Kara Jenny And the ultimate query we acquired, with reference to M&A, are there any funding bankers aiding you along with your search or are you doing all of it internally? Should we count on one thing by 12 months finish? Are you in discussions or negotiations for something but? Jason Katz Well, we can’t remark particularly about that, however we have now been working very laborious to search out appropriate acquisitions. As we have now acknowledged beforehand, making an accretive acquisition is a transparent aim for 2022. Kara Jenny Thank you. Jason, now again to you to shut out the presentation. Jason Katz Thanks everybody on your assist and for becoming a member of us at present. We are very grateful on your curiosity in our enterprise. We sit up for updating the market and our stockholders with our progress on our progress initiatives organically and potential strategic accretive acquisitions, which we proceed to establish and analyze. We plan on having our subsequent quarterly outcomes name in mid-August. Have an awesome day.
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