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Paltalk, Inc. Reports Fourth Quarter and Full Year 2020 Financial Results

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 Positive Net Income for Q4 and Full Year and Cash Flow Positive for Full Year

JERICHO, NY, March 23, 2021 (GLOBE NEWSWIRE) — via NewMediaWire — Paltalk, Inc., formerly known as PeerStream, Inc., (“Paltalk,” the “Company,” “we,” “our” or “us”) (OTCQB: PALT), a leading communications software innovator that powers multimedia social applications, today announced financial and operational results for the fourth quarter and full year ended December 31, 2020.

During the fourth quarter and full year ended December 31, 2020, the Company executed key components of its business objectives, which resulted in the following:

2020 Fourth Quarter Financial Highlights:

  • Revenue for the three months ended December 31, 2020 was $3.4 million, an increase of 33{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} compared to the three months ended December 31, 2019. This growth was driven primarily by an increase in subscription revenue of $0.5 million, or 19{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}, compared to the same period in the prior year;
  • Achieved net income from continuing operations for the three months ended December 31, 2020 of $0.5 million, an increase of $8.4 million, or 107{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}, compared to the three months ended December 31, 2019; and
  • Reduced operating expenses by 72{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}, or $7.5 million, compared to the three months ended December 31, 2019. These reductions were a result of the Company’s streamlined operating plan, which eliminated costs associated with our secure communications business headcount as well as overall operating expenses.

2020 Full Year Financial Highlights:

  • Revenue for the year ended December 31, 2020 was $12.8 million, a decrease of 16{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} compared to revenue of $15.3 million for the year ended December 31, 2019. This decrease is primarily a result of the decrease in technology service revenue, which was associated with our secure communications business, and was offset by growth of our subscription revenue of approximately 5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3};
  • Net income from continuing operations for the year ended December 31, 2020 was $1.2 million compared to a loss of $8.6 million for the year ended December 31, 2019, an improvement of 114{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3};
  • Adjusted EBITDA, a non-GAAP measure, was $2.0 million for the year ended December 31, 2020 compared to Adjusted EBITDA of $135 thousand for the year ended December 31, 2019; and
  • Revenue per subscriber increased by approximately 5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} when compared to December 31, 2019, while our active subscribers were relatively unchanged at approximately 103,700.

2020 Business and Operational Highlights:

  • Launched private rooms, in beta;
  • Launched real time voice and video card games in the fourth quarter for our video-based communities that includes poker, blackjack, gin rummy, bridge, chess and backgammon;
  • Created new advertising partnerships to promote paid desktop advertising programs;
  • Launched Props rewards tokens into the Paltalk and Camfrog application;
  • Sold secure communications assets;
  • Changed corporate name to Paltalk, Inc.; and
  • Offered free video in certain countries hit hardest by the COVID pandemic in order to serve base customers.

Liquidity and Capital Resources:

  • Achieved positive cash flow from operations of $1.4 million for the year ended December 31, 2020, an improvement of $5.9 million compared to the year ended December 31, 2019;
  • Realized positive net cash flow of approximately $2.2 million for the year ended December 31, 2020, an improvement of $5.3 million compared to the year ended December 31, 2019; and
  • Cash and cash equivalents totaled $5.6 million at December 31, 2020, an increase of $2.2 million compared to December 31, 2019.

“I am gratified that our consistent and continued effort throughout the year to reduce expenses and grow subscription revenue has yielded positive results and enabled us to achieve profitability for the full year of 2020 for the first time in our history, as well as generate positive cash flow,” said Jason Katz, CEO of Paltalk, Inc. “This achievement was the result of many actions including our strategic decision early last year to refocus and unify our efforts on our core business and dispose of non-core assets. We also invested in new and creative functionality for our users, increasing their engagement and importantly, the profitability per user for the Company. We achieved these results against the backdrop of the global pandemic and I am proud that our team successfully met the challenges that the pandemic presented. Looking ahead, we are planning new innovation and functionality for our users, a greater revenue contribution from our new advertising partnerships and continued corporate discipline on costs and expenses. Taken together, we believe that these actions will result in a successful year for Paltalk in 2021.”

Financial Overview (in thousands, except for percentages and active subscriber counts)

Current quarter compared to same quarter last year:

  Three Months EndedDecember 31, Change
GAAP Results (unaudited) 2020 2019 $ {14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Subscription revenue $ 2,981 $ 2,504 $  477  19.0{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Advertising revenue 126 119 7    5.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Technology service revenue 316 (44) 360  
Total revenue $ 3,423 $  2,579 $  844   32.7{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Income (loss) from continuing operations $    532 $(7,846) $ 8,378  
Net income (loss) $    531 $(7,896) $ 8,427  
Net cash provided by (used in) operating activities $    523 $   (178) $  701  
         
Financial Metrics (unaudited)        
Active subscribers (at period end)        103,700 103,800 (100) (0.1){14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Adjusted EBITDA (a non-GAAP measure) $    750 $  (783) $1,533  

Full year compared to same period last year:

  Year EndedDecember 31, Change
GAAP Results (unaudited) 2020 2019 $ {14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Subscription revenue $ 11,966 $ 11,406 $   560 4.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Advertising revenue 325 439 (114) (26.0){14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Technology service revenue 541 3,439 (2,890) (84.3){14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Total revenue $ 12,832 $  15,284 $(2,452)  (16.0){14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Income (loss) from continuing operations $   1,243 $ (8,615) $  9,858  
Net income (loss) $   1,371 $ (8,380) $  9,751  
Net cash provided by (used in) operating activities $   1,435  $ (4,465) $  5,900  
         
Financial Metrics (unaudited)        
Active subscribers (at period end)        103,700 103,800 (100) (0.1){14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}
Adjusted EBITDA (a non-GAAP measure) $  1,956 $   135 $ 1,821 1,348.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}

ABOUT PALTALK, INC. (OTCQB: PALT)

Paltalk, Inc. is a communications software innovator that powers multimedia social applications. Our product portfolio includes Paltalk and Camfrog, which together host one of the world’s largest collections of video-based communities. Our other products include Tinychat and Vumber. The Company has an over 20-year history of technology innovation and holds 18 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, the impact of the recent coronavirus outbreak on our results of operations and our business; our ability to effectively market and generate revenue from our applications; 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, such as Props tokens, to enhance our applications, and our ability to timely complete development of applications using new technologies; our ability to effectively integrate Props tokens into our existing applications; our ability to effectively secure new software development and licensing customers; the use of the internet and privacy and protection of user data; risks related to our holdings of digital tokens, including risks related to the volatility of the trading price of digital tokens and our ability to convert digital tokens into fiat currency; 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.

CONTACTS:

[email protected]

Stephanie Prince PCG Advisory[email protected]646-863-6341

PALTALK, INC.RECONCILIATION OF GAAP TO NON-GAAP RESULTS(Unaudited)

  Three Months Ended December 31, Year Ended December 31,
  2020 2019 2020 2019
Reconciliation of net income (loss) to Adjusted EBITDA:        
Net income (loss) $531,257 $(7,896,139) $1,371,262 $(8,380,060)
Interest expense (income), net 1,899 (82,740) (7,119) (156,423)
Net loss from discontinued operations 104,880
Gain on sale of dating applications (826,770)
Income tax expense (benefit) from continuing operations (1,313) 11,074 387 17,672
Depreciation and amortization expense 129,861      151,145 571,725 605,415
Gain on office lease termination (141,001)
Impairment loss on goodwill 6,760,222 6,760,222
Gain from sale of secured communications assets (250,000)
Loss on disposal of property and equipment 39,238 39,238
Other expense 128,165
Impairment loss on digital tokens   121,904 625,368
Stock-based compensation expense 49,101 151,156 243,197 1,385,118
Adjusted EBITDA $750,043 $(783,378) $1,955,854 $135,422

Non-GAAP Financial Measures and Key Metrics

The Company has provided in this release certain non-GAAP financial measures, including Adjusted EBITDA, and other key metrics, including active subscribers and subscription bookings, to supplement the consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company defines Adjusted EBITDA as net income (loss) adjusted to exclude net loss from discontinued operations, interest expense (income), net, gain from the sale of secured communications assets, other expense, gain on the sale of dating applications, income tax expense (benefit) from continuing operations, gain on office lease termination, impairment loss on goodwill, loss on disposal of property and equipment, depreciation and amortization expense, impairment loss on digital tokens and stock-based compensation expense. Active subscribers means users of the Company’s consumer applications that have prepaid a fee, redeemed credits or received an upgrade from another user as a gift for current unlocked application features such as enhanced voice and video access, elevated status in the community or unrestricted communication on our applications and whose subscription period has not yet expired. The Company calculates subscription bookings as subscription revenue recognized during the period plus the change in deferred subscription revenue recognized during the period.

Management uses these financial metrics 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 these financial metrics in assessing our performance and when planning, forecasting and analyzing future periods. The Company believes these financial metrics are 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:

  • Adjusted EBITDA does not reflect cash capital expenditures for assets underlying depreciation and amortization expense that may need to be replaced or for new capital expenditures;
  • Adjusted EBITDA does not reflect our working capital requirements;
  • Adjusted EBITDA does not reflect the impairment loss on goodwill or digital tokens;
  • Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation;
  • Adjusted EBITDA does not consider the gain from the office lease cancellation;
  • Adjusted EBITDA does not reflect the gain on the sale of our dating applications or our secured communications business or our loss from discontinued operations or any income tax (benefit) from continuing operations; and
  • 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 these financial metrics 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.CONSOLIDATED BALANCE SHEETS

    December 31,  
    2020     2019  
Assets            
Current assets:            
 Cash and cash equivalents   $ 5,585,420     $ 3,427,058  
Accounts receivable, net of allowances of $3,648 and $23,832, as of December 31, 2020 and 2019, respectively     71,410       130,686  
 Prepaid expense and other current assets     236,704       167,441  
Total current assets     5,893,534       3,725,185  
Digital tokens receivable     210,000        
Operating lease right-of-use asset     68,967       685,042  
Property and equipment, net     255,777       620,059  
Goodwill     6,326,250       6,326,250  
Intangible assets, net     381,210       627,891  
Digital tokens     439,145       148,229  
Other assets     13,937       86,876  
Total assets   $ 13,588,820     $ 12,219,532  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Accounts payable   $ 742,141     $ 1,007,851  
Accrued expenses and other current liabilities     254,084       434,739  
Operating lease liabilities, current portion     68,967       178,479  
Digital tokens payable     123,397        
Term debt, current portion     338,792        
Deferred subscription revenue     2,058,721       1,829,493  
Total current liabilities     3,586,102       3,450,562  
Operating lease liabilities, non-current portion           583,075  
Term debt, non-current portion     167,708        
Total liabilities     3,753,810       4,033,637  
Commitments and contingencies                
Stockholders’ equity:                
Common stock, $0.001 par value, 25,000,000 shares authorized, 6,916,404 and 6,878,904 shares issued and 6,906,454 and 6,877,004 shares outstanding as of December 31, 2020 and 2019, respectively     6,917       6,879  
Treasury stock, 9,950 and 1,900 shares, at par as of December 31, 2020 and 2019, respectively     (10,859 )     (2,015 )
Additional paid-in capital     21,568,041       21,281,382  
Accumulated deficit     (11,729,089 )     (13,100,351 )
Total stockholders’ equity     9,835,010       8,185,895  
Total liabilities and stockholders’ equity   $ 13,588,820     $ 12,219,532  

PALTALK, INC.CONSOLIDATED STATEMENTS OF OPERATIONS

    Years Ended December 31,  
    2020     2019  
Revenues            
Subscription revenue   $ 11,966,497     $ 11,405,787  
Advertising revenue     325,475       438,503  
Technology service revenue     540,700       3,439,327  
Total revenue     12,832,672       15,283,617  
Costs and expenses                
Costs of revenue     2,573,083       3,174,453  
Sales and marketing expense     825,069       1,056,967  
Product development expense     5,025,482       6,563,449  
General and administrative expense     3,166,343       6,343,859  
Impairment loss on goodwill           6,760,222  
Total costs and expenses     11,589,977       23,898,950  
Income (loss) from continuing operations     1,242,695       (8,615,333 )
Interest income, net     7,119       156,423  
Gain from sale of Secured Communications Assets     250,000        
Other expense     (128,165 )      
Impairment loss on digital tokens           (625,368 )
Income (loss) from continuing operations before provision for income taxes     1,371,649       (9,084,278 )
Income tax (expense) benefit     (387 )     141,593  
Net income (loss) from continuing operations     1,371,262       (8,942,685 )
Discontinued Operations:                
Gain on sale from discontinued operations           826,770  
Loss from discontinued operations           (104,880 )
Income tax expense from discontinued operations           (159,265 )
Net income from discontinued operations           562,625  
Net income (loss)     1,371,262       (8,380,060 )
                 
Basic net income (loss) per share of common stock:                
Continuing operations   $ 0.20     $ (1.30 )
Discontinued operations           0.08  
Net income (loss) per share of common stock   $ 0.20     $ (1.22 )
Diluted net income (loss) per share of common stock:                
Continuing operations   $ 0.20     $ (1.30 )
Discontinued operations           0.08  
Net loss per share of common stock   $ 0.20     $ (1.22 )
Weighted average number of shares of common stock used in calculating net loss per share of common stock:                
Basic     6,884,690       6,873,652  
Diluted     6,887,808       6,873,652  

PALTALK, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS

    Years Ended December 31,  
    2020     2019  
Cash flows from operating activities:            
Net income (loss)   $ 1,371,262     $ (8,380,060 )
Less: Income from discontinued operations           562,625  
Income (loss) from continuing operations     1,371,262       (8,942,685 )
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) operating activities of continuing operations:                
Depreciation of property and equipment     325,044       349,082  
Amortization of intangible assets     246,681       256,332  
Amortization of operating lease right-of-use assets     104,083       178,158  
Gain on lease termination     (141,001 )      
Loss on disposal of property and equipment     39,238        
Write-off of note receivable     56,042        
Stock-based compensation     243,197       1,385,118  
Common stock issued for consulting services     43,500       29,015  
Bad debt expense     4,015        
Impairment loss on goodwill           6,760,222  
Impairment loss on digital tokens           625,368  
Realized (gain) loss from the sale of digital tokens     72,823       (70,995 )
Changes in operating assets and liabilities:                
Credit card holdback receivable           83,175  
Accounts receivable     55,261       196,100  
Digital tokens     (439,145 )      
Digital tokens receivable     (210,000 )      
Operating lease liability     (107,674 )     (101,647 )
Digital tokens payable     123,397        
Prepaid expense and other current assets     (219,263 )     113,550  
Other assets     16,897       29,891  
Accounts payable, accrued expenses and other current liabilities     (378,285 )     (2,138,302 )
Deferred subscription revenue     229,228       360,922  
Deferred technology service revenue           (3,379,435 )
Net cash provided by (used in) continuing operating activities     1,435,300       (4,266,131 )
Net cash used in discontinued operating activities           (199,232 )
Net cash provided by (used in) operating activities     1,435,300       (4,465,363 )
Cash flows from investing activities:                
Payment for property and equipment, including website development, net           (391,230 )
Proceeds from Secured Communications Assets     150,000        
Proceeds from the sale of digital tokens     75,406       130,290  
Net cash provided by (used in) continuing investing activities     225,406       (260,940 )
Net cash provided by discontinued investing activities           1,600,000  
Net cash provided by investing activities     225,406       1,339,060  
Cash flows from financing activities:                
Borrowings of term debt     506,500        
Purchase of treasury stock     (8,844 )     (2,015 )
Net cash provided by (used in) financing activities     497,656       (2,015 )
Net increase (decrease) in cash and cash equivalents     2,158,362       (3,128,318 )
Balance of cash and cash equivalents at beginning of period     3,427,058       6,555,376  
Balance of cash and cash equivalents at end of period   $ 5,585,420     $ 3,427,058  

  

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Source: Paltalk, Inc.

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