Earnings call transcript: Intelligent Protection Management Q4 2024 misses EPS forecast

Intelligent Protection Management Corporation (IPM) reported a loss per share of $0.19 for Q4 2024, significantly missing the forecasted $0.10 profit per share. Revenue reached $2.2 million, slightly below the forecast of $2.24 million. Following the earnings release, IPM’s stock showed a modest decline of 0.05% in after-hours trading, closing at $1.949. According to InvestingPro data, the company currently appears undervalued based on its Fair Value analysis.

Key Takeaways

• IPM’s Q4 earnings missed expectations, with a net loss increasing by 1840% year-over-year.
• Revenue for the quarter increased by 9.1% compared to the previous year.
• Successful litigation against Cisco WebEx resulted in a $65.7 million award.
• The company completed a strategic acquisition and divested non-core applications.
• IPM focuses on expanding in the cloud infrastructure and cybersecurity markets.

Company Performance

Intelligent Protection Management’s performance in Q4 2024 highlighted significant challenges despite some revenue growth. The company has been transitioning its focus towards cloud infrastructure and cybersecurity, which are seen as critical areas of growth. The acquisition of NewTek Technology Solutions and divestiture of non-core applications like Paltalk, CamFrog, and Vumbra reflect this strategic shift. However, the substantial increase in net loss indicates ongoing operational challenges.

Financial Highlights

• Q4 2024 Revenue: $300,000 (9.1% increase from previous year)
• Full Year 2024 Revenue: $1,100,000 (14% increase from previous year)
• Net Loss for Q4: $5,500,000 (1840% increase)
• Full Year Net Loss: $8,400,000
• Cash Position: $10,600,000 with no long-term debt
• Adjusted EBITDA Loss: $1,500,000 in Q4 (594% increase)

Earnings vs. Forecast

IPM’s earnings per share were -$0.19, falling short of the forecasted $0.10, marking a significant negative surprise. Revenue also came in below expectations at $2.2 million against a forecast of $2.24 million. This performance contrasts with the company’s historical trends of meeting or exceeding forecasts.

Market Reaction

In the aftermarket session, IPM’s stock price slightly declined by 0.05%, closing at $1.949. This movement reflects investor concerns over the substantial earnings miss and increased net loss. The stock remains significantly below its 52-week high of $5.5, indicating ongoing market skepticism. InvestingPro data shows the stock has fallen over 43% in the past six months, with a price-to-book ratio of 1.04x. Discover more insights and 8 additional ProTips with an InvestingPro subscription.

Outlook & Guidance

Looking ahead, IPM remains focused on expanding its managed technology solutions and exploring AI integration in its secure private cloud offerings. The company plans to continue defending its intellectual property and is actively seeking additional merger and acquisition opportunities to enhance its market position. InvestingPro’s comprehensive analysis, including detailed Fair Value metrics and growth forecasts, is available in the Pro Research Report, part of the extensive coverage of over 1,400 US stocks.

Executive Commentary

CEO Jason Katz emphasized the importance of cybersecurity, stating, "Cybersecurity is essential for all businesses, large and small, and truly a necessity in today’s world." Katz also highlighted the company’s differentiation through its expert IT staff and technical capabilities, which are crucial for its growth strategy.

Risks and Challenges

• Evolving cyber threats could impact IPM’s ability to maintain infrastructure security.
• The company faces challenges in integrating new acquisitions and divestitures.
• The increased net loss may raise concerns about long-term financial sustainability.
• Market competition in the cybersecurity and cloud sectors remains intense.
• Dependence on key clients like Newtek One could impact revenue stability.

Q&A

During the earnings call, analysts inquired about IPM’s patent portfolio review and its growth prospects in cybersecurity and cloud infrastructure. Executives expressed enthusiasm about these areas but acknowledged challenges in managing evolving cyber threats and maintaining infrastructure security.

Full transcript - Intelligent Protection Management Corp (IPM) Q4 2024:

Conference Operator: Greetings. Welcome to the Intelligent Protection Management Corporation Q4 twenty twenty four Results Conference Call. At this time, all participants are in a listen only mode. Please note this conference is being recorded. I will now turn the conference over to your host, Kara Geni, CFO.

You may begin.

Kara Geni, CFO, Intelligent Protection Management Corporation: Hello, everyone, and welcome to the IPM Operating and Financial Results Conference Call for the Fourth quarter and year ended 12/31/2024. By now, everyone should have access to the earnings results press release, which was issued earlier this afternoon at approximately four 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 are contained in our filings with the SEC, including our annual report on Form 10 K.

You should refer to and consider these factors 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 will be posted on the Investor Relations section of our website at www.ipm.com. And with that, I would like to introduce IPM’s Chief Executive Officer, Jason Katz.

Jason Katz, CEO, Intelligent Protection Management Corporation: 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 or NTS from NewTek One and the sale of our Paltalk, CamFrog and Vumbra applications and certain assets and liabilities related to such applications to Meteor Mobile Holdings Inc. The financial results for the three months and year ended 12/31/2024, discussed throughout this call relate to our business prior to such transactions. We will also provide the rationale behind our transition into the cloud infrastructure and cybersecurity sectors and provide color on our new business objectives and strategies.

After my opening statement, our CFO, Kara Geni, will give a summary of our financial results for the fourth quarter and year ended 12/31/2024, which again are reflective of our historic business prior to the transactions. Following our prepared remarks, we will move into the Q and A portion and answer any questions that were submitted prior to this call. With that, I would now like to walk you through our recent financial and operating highlights and near term business objectives. With the closing of our acquisition of NTS and our divestiture of our communication software and multimedia social platforms in early January twenty twenty five, we have officially moved our company into the cloud infrastructure and cybersecurity sectors. We believe these transformational transactions will have a meaningful impact on our revenue and will provide us with additional opportunities for growth and a strong value proposition for our stockholders.

While we are focused on delivering growth and increasing profitability as a managed technology solutions provider, we believe we bolstered our value in 2024 by successfully defending our intellectual property. In addition, as a result of the divestiture, IPM is eligible to receive certain earn out payments in the future based on Meteor Mobile’s cash revenue attributable to the Paltalk Camfrog and Bumper applications. We’re very excited with the prospect of expanding our Managed Technology Solutions business, particularly in the cloud infrastructure and cybersecurity sectors. Following the transactions, our team is reenergized and focused on the growth of our business. Additionally, we expect that the recently announced referral arrangement with Newtek 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 will be ample merger and acquisition opportunities to further scale growth. We look forward to growing the business and building a healthy pipeline of prospective and new customers. As a result of the transformative transactions, our near term business objectives now include continuing the integration of our comprehensive range of IT related solutions incorporating Medicam as an offering for our new customers and seeking to optimize our cross selling efforts with our other technology solutions continuing to explore strategic opportunities, including but not limited to potential mergers or acquisitions of other assets or entities that are synergistic to our businesses and continuing to defend our intellectual property. In regards to our patent litigation, on 07/23/2021, our wholly owned subsidiary, Paltalk Holdings Inc.

Filed a patent infringement lawsuit against WebEx Communications Inc, Cisco WebEx LLC and Cisco Systems Inc. And the District Court for the Western District of Texas. We allege that certain of Cisco’s products infringed U. S. Patent Number 6,683,858 and that we were entitled to damages.

On 08/26/2024, a jury trial commenced in the Western District Of Texas before the Honorable Judge Allen Albright. On 08/29/2024, after four days of trial, the jury awarded us $65,700,000 in the jury verdict in connection with the lawsuit. On 10/08/2024, an order granting a motion for final judgment was entered into in 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 Cara for a financial summary of the fourth quarter and year ended 12/31/2024.

Kara Geni, CFO, Intelligent Protection Management Corporation: Thank you, Jason. Revenue from continuing operations increased 9.1% to $300,000 from nearly $300,000 as a result of increased sales from Menicam, including revenue from discontinued operations of $1,900,000 and $2,400,000 for the three months ended 12/31/2024 and 2023 respectively, which is included in the loss from discontinued operations on the statement of operations, revenue decreased 21% to 2,100,000 from $2,700,000 primarily due to a decrease in subscription revenue and virtual gift revenue from PalTalk, Camfrog, partially offset by increased revenue from advertising. Net loss from continuing operations increased by 142% to $1,400,000 compared to a net loss from continuing operations of $600,000 and included $600,000 of increased professional fees incurred in connection with the transactions, as well as increased public company expenses and an increase in compensation expense related to the transactions. Loss from discontinued operations increased by 1449% to $4,100,000 compared to income from discontinued operations of $300,000 and included a one time impairment loss on divested assets of $3,800,000 as well as a decrease in virtual gift revenue from discontinued operations compared to the three months ended 12/31/2023. Net loss increased by 1840% to $5,500,000 compared to $300,000 Adjusted EBITDA loss was $1,500,000 compared to adjusted EBITDA loss of $200,000 an increase of 594% Net cash used in operating activities for the quarter was $1,500,000 Now turning to financial results for the year ended 12/31/2024.

Revenue from continuing operations increased 14% to $1,100,000 from $1,000,000 as a result of increased sales from Menycam. When including the revenue from discontinued operations of $8,000,000 and $10,000,000 for the year ended 12/31/2023 respectively, which is included in the loss from discontinued operations on the statement of operations, revenue decreased 17% to $9,100,000 from $10,900,000 primarily due to a decrease in subscription and virtual gift revenue from PalTalk and Camfrog, partially offset by increased revenue from advertising. Net loss from continuing operations increased by 59% to $4,300,000 compared to net loss from continuing operations of $2,700,000 and included $1,800,000 of increased professional fees incurred in connection with the transactions as well as increased public company expenses and an increase in compensation expense related to the transactions. Loss from discontinued operations increased by 357% to $4,200,000 compared to income from discontinued operations of $1,600,000 for the year ended 12/31/2024, and included a one time impairment loss on divested assets of $3,800,000 as well as a decrease in virtual gift revenue from discontinued operations compared to the three months ended 12/31/2023. Net loss increased by 690% to $8,400,000 compared to a net loss of $1,100,000 Adjusted EBITDA loss was $4,400,000 compared to adjusted EBITDA loss of $1,000,000 an increase of 338%.

The company had $10,600,000 in cash and no long term debt on its balance sheet as of 12/31/2024. We will now move on to the questions we received for Jason. First question, should we expect to see additional patent infringement lawsuits filed by you?

Jason Katz, CEO, Intelligent Protection Management Corporation: Intellectual property is a very important asset for the company and we continuously review our patent portfolio in order to protect our intellectual property.

Kara Geni, CFO, Intelligent Protection Management Corporation: Next question. Since you’ve now owned the cybersecurity and cloud infrastructure business for more than two months, are you more or less enthusiastic about its growth prospects?

Jason Katz, CEO, Intelligent Protection Management Corporation: I remain very enthusiastic about the managed hosted cloud and managed cybersecurity businesses and its prospects for growth. Cybersecurity is essential for all businesses, large and small, and truly a necessity in today’s world.

Kara Geni, CFO, Intelligent Protection Management Corporation: Next question. What are the biggest challenges with the cybersecurity and cloud infrastructure business?

Jason Katz, CEO, Intelligent Protection Management Corporation: Well, as the cybersecurity and cloud infrastructure business, one of our main priorities is to deliver secure, compliant and resilient technology to customers operating in highly regulated industries such as banking and finance. With the growth of AI and increased sophistication of cyber related threats, one of our greatest challenges is remaining proactive and responsive and fortifying our infrastructure against the spectrum of potential risks that are continuously evolving.

Kara Geni, CFO, Intelligent Protection Management Corporation: Do you disclose any significant customers by name and can you be more specific about what you do for your customers narrowing it down within cybersecurity or cloud infrastructure.

Jason Katz, CEO, Intelligent Protection Management Corporation: As mentioned above, Newtek One is currently our largest customer. We serve a diverse customer base across various industries, including among others finance, legal, healthcare and manufacturing. As far as our offered services, we provide managed IT, security services, professional services, procurement services, secure private cloud hosting, managed backup and disaster recovery and web hosting, each of which is discussed in greater detail in our annual report.

Kara Geni, CFO, Intelligent Protection Management Corporation: Are there opportunities to further expand and grow with existing customers?

Jason Katz, CEO, Intelligent Protection Management Corporation: We think there are numerous opportunities to expand and grow with both existing and new customers. In addition to managing client relationship, our sales force is focused on expanding the number of solutions our customers purchase from us by introducing them to additional solutions. We believe our proactive high touch service model ensures long term client relationships and sustained competitive advantage in a rapidly evolving market. Additionally, in the future, we plan to make arrangements with third parties to incorporate AI features into our secure private cloud offerings, which we believe will have the potential to expand our service offerings with our existing customers.

Kara Geni, CFO, Intelligent Protection Management Corporation: The last question. Can you discuss your product suite in a little more detail? Well,

Jason Katz, CEO, Intelligent Protection Management Corporation: sure. IPM provides managed hosting, managed cybersecurity, backup and disaster recovery, procurement and web hosting. The global managed services market is projected to grow to over $875,000,000,000 by 02/1932 according to Forbes Business Insights, which we believe creates an enormous opportunity. We differentiate ourselves with our expert IT, staff and technical capability, including our 20 fourseven NOC. There are myriad tools and software available for all of these functions, but they are only as good as the people running them.

Our goal is to provide the most reliable secure environment possible for our customers.

Kara Geni, CFO, Intelligent Protection Management Corporation: Thank you. Jason, back to you to close out the presentation.

Jason Katz, CEO, Intelligent Protection Management Corporation: Thanks again everyone for your support and for joining us today. We’re very grateful for your interest in our business. We look forward to updating the market and our stockholders with our progress and reporting our first full quarter as IPM in early to mid May. Have a great day.

Conference Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.

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