Paltalk Reports $65.7 Million Patent Verdict Against Cisco Amid Revenue Decline

Communications software company Paltalk, Inc. (Nasdaq: PALT) reported mixed financial results for the third quarter of 2024, highlighted by a major legal victory but also declining revenues and widening losses. The company announced it was awarded a $65.7 million jury verdict in August in its patent infringement lawsuit against Cisco Systems.

Paltalk's Q3 revenue decreased 23.4% year-over-year to $2.1 million, while its net loss expanded to $1.5 million compared to a $0.2 million loss in Q3 2023. The company attributed the revenue decline primarily to a 23.9% drop in subscription revenue. For the first nine months of 2024, revenue fell 16.2% to $6.9 million and net loss grew to $2.9 million.

Despite the financial challenges, Paltalk maintained a solid cash position of $12.1 million as of September 30, 2024, with no long-term debt. The company is undergoing a strategic transformation, having signed agreements to divest its core Paltalk, Camfrog and Vumber assets while planning to acquire Newtek Technology Solutions in a deal valued at up to $13 million including potential earnouts.

The $65.7 million patent verdict against Cisco represents a potentially significant windfall for Paltalk, though the company cautioned it expects to receive no more than one-third of the gross proceeds after legal fees and other expenses. The award is also subject to potential appeals by Cisco.

Paltalk Chairman and CEO Jason Katz said the company is amid a "transformational shift in our business strategy that we believe will enhance stockholder value." He noted the planned acquisition of Newtek Technology Solutions is expected to have an immediate impact on revenue, as NTS's 2023 revenue was approximately triple Paltalk's.

The strategic moves come as Paltalk faces headwinds in its core social media and communications software business. The company said it will now focus on growing its cybersecurity, cloud hosting and technology solutions offerings following the planned divestiture and acquisition.

While the patent verdict and strategic shift offer potential upside, Paltalk faces near-term challenges as it works to stabilize its financial performance and execute on its transformation plans. The company's ability to successfully integrate new assets and return to growth will be key factors for investors to monitor in the coming quarters.