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TMCNet:  KonaTel Reports Third Quarter 2022 Results

[November 14, 2022]

KonaTel Reports Third Quarter 2022 Results

Revenue Increased 63% Year-Over-Year to $5.9 Million as Mobile Services Continues to Scale

Company Expects Gross Profit to Improve in Fourth Quarter

DALLAS, Nov. 14, 2022 /PRNewswire/ -- KonaTel, Inc. (OTCQB: KTEL) (www.konatel.com), a voice/data communications holding company, today announced financial results for the third quarter and nine-month period ended September 30, 2022.

Third Quarter 2022 Financial Summary and Recent Business Highlights

  • Revenues of $5.9 million, up 62.8% compared to the third quarter last year and up 14.8% compared to the second quarter of this year.
  • Gross profit of $911,000, down 43.9% compared to the third quarter last year. Gross profit temporarily down due to increased customer acquisition costs (recognized at activation per U.S. accounting guidelines) during this period of planned rapid growth.
  • GAAP net loss of $(1.3) million, or $(0.03) per share, compared to GAAP net income of $320,000, or $0.01 per share, in the third quarter last year.
  • Non-GAAP net loss of $(995,000), or $(0.02) per diluted share, compared to non-GAAP net income of $599,000, or $0.01 per diluted share, in the third quarter last year.
  • Cash and cash equivalents of $2.2 million as of September 30, 2022, compared with $933,000 as of December 31, 2021.

D. Sean McEwen, Chairman and CEO of KonaTel stated, "Third quarter revenue grew 63% year-over-year and 15% sequentially to nearly $6.0 million. We ignited our growth earlier this year with strategic investments in the acquisition of new Mobil Services customers. As one of only a limited number of FCC approved national wireless resellers under recently expanded government programs, we are uniquely positioned to capture additional market share and are seizing the opportunity to do so. Scaling our business requires an upfront investment to acquire customers, which is already creating increasing recurring streams of revenue and cash. As previously discussed, the investment in our accelerated growth plan put pressure on our margins over the last two quarters as costs to acquire new customers are generally expensed at the start of service; however, the initiatives we are taking today are setting ourselves up for sustained profitable growth."

McEwen continued, "Looking ahead and because of the way we implement our growth strategy, we anticipate gross profit and cash flow to accelerate as we begin to recover customer acquisition costs. We are fortunate to have a business model that provides the flexibility to take a measured and stepped approached to growth."

McEwen concluded, "We also continue to develop our Hosted Services market segment and are experiencing an increase in overall SMS & MMS messaging, voice usage and LTE data volume across our national CPaaS cloud network. We recently executed a new three-year extension with one of our largest cloud services customers that doubles their monthly minimum revenue commitment.  Under the terms of the new contract, which has a minimum value of $7.2 million over the term, we will continue to provide our national cloud communications platform to support their network, which provides inmate communications services to prisons across the United States."

Quarterly Financial Summary (Q3 2022 vs. Q3 2021)

Revenue of $5.9 million, an increase of 62.8% compared to $3.6 million. This continued increase was directly related to growth in our Mobile Services segment through the delivery of mobile voice and high-speed mobile data service to low-income consumers under the Lifeline and ACP programs.

Gross profit was $911,000, or 15.5% gross profit margin, compared to $1.6 million, or 45.0% gross profit margin. The decline in gross profit was directly related to up-front costs booked as direct costs and incurred by accelerating growth to acquire new customers within our Mobile Services segment. Mobile customer acquisition costs are not amortized over the average life of the customer, but are generally recognized at the start of service and typically recovered within 120 days after activation. Mobile customer acquisition costs for the third quarter 2022 were $2.9 million compared to $283,000 for the third quarter of 2021.

Total operating expenses were $2.1 million, up 64.0%, compared to $1.3 million. This increase was primarily due to additions in payroll and related expenses resulting from the hiring of operations management and customer support positions in each of the Company's subsidiaries, Apeiron Systems and IM Telecom d/b/a "Infiniti Mobile."

GAAP net loss was $(1.3) million, or $(0.03) per diluted share (based on 41.9 million weighted average shares), compared to net income of $320,000, or $0.01 per diluted share (based on 43.6 million weighted average shares). The loss for the three months ended September 30, 2022, was impacted by an acceleration of growth in the Mobile Services segment that increased customer acquisition costs.

Non-GAAP net loss was $(995,000), or $(0.02) per diluted share, compared to Non-GAAP net income of $599,000, or $0.01 per diluted share.

Year-to-Date Financial Detail (First Nine Months of 2022 vs. First Nine Months of 2021)

Revenues increased 70.8% to $15.2 million, compared to $8.9 million, reflecting a 143.0% increase in Mobile Services revenues, which was partially offset by a 4.1% decline in Hosted Services.

Gross profit was $3.0 million, or 19.7% gross profit margin, compared to gross profit of $4.0 million, or 44.5% gross profit margin. The decline in gross profit directly related to up-front costs incurred by accelerating growth to acquire new customers within the Mobile Services segment. Mobile customer acquisition costs for the first nine months of 2022 were $6.6 million compared to $549,000 for the first nine months of 2021.

Total operating expenses were $5.5 million, up 61.9% compared to $3.4 million. This increase was due primarily to additions in payroll and related expenses resulting from the hiring of operations management and customer support positions in each of the company's subsidiaries, Apeiron Systems and Infiniti Mobile.

GAAP net loss was $(2.9) million, or $(0.07) per diluted share (based on 41.7 million weighted average shares), compared to net income of $428,000, or $0.01 per diluted share (based on 43.4 million weighted average shares).

Non-GAAP net loss was $(2.1) million, or $(0.05) per diluted share, compared to non-GAAP net income of $1,223,000, or $0.03 per diluted share.

About KonaTel

KonaTel provides a variety of retail and wholesale telecommunications services including mobile voice/text/data service supported by national U.S. mobile networks, mobile numbers, SMS/MMS services, IoT mobile data service, and a range of hosted cloud services. KonaTel's subsidiary, Apeiron Systems (www.apeiron.io), is a global cloud communications service provider employing a dynamic "as a service" (CPaaS/UCaaS/CCaaS/PaaS) platform. Apeiron provides voice, messaging, SD-WAN, and platform services using its national cloud network. All Apeiron's services can be accessed through legacy interfaces and rich communications APIs. KonaTel's other subsidiary, Infiniti Mobile (www.infinitimobile.com), is an FCC authorized wireless Lifeline carrier with an FCC approved wireless Lifeline Compliance Plan, authorized to provide government subsidized cellular service to low-income American families. KonaTel is headquartered in Plano, Texas. 

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this press release. This press release should be considered in light of the disclosures contained in the filings of KonaTel and its "forward-looking statements" in such filings that are contained in the EDGAR Archives of the SEC at www.sec.gov.

-- Tables Follow –

 






KonaTel, Inc.

Consolidated Balance Sheets



September 30, 2022


December 31, 2021

Assets






Current Assets






Cash and Cash Equivalents

$

2,243,195


$

932,785

Accounts Receivable, net


1,503,055



1,274,687

Inventory, Net


297,393



566,839

Prepaid Expenses


7,443



79,467

Other Current Asset


164



164

Total Current Assets


4,051,250



2,853,942







Property and Equipment, Net


39,624



48,887







Other Assets






Intangible Assets, Net


1,224,790



807,775

Other Assets


127,864



154,297

Investments


10,000



10,000

Total Other Assets


1,362,654



972,072

Total Assets

$

5,453,528


$

3,874,901







Liabilities and Stockholders' Equity






Current Liabilities






Accounts Payable and Accrued Expenses

$

1,445,975


$

930,449

Loans Payable, net of origination fees


3,027,564



-

Right of Use Operating Lease Obligation - current


115,653



50,672

Total Current Liabilities


4,589,192



981,121







Long Term Liabilities






Right of Use Operating Lease Obligation - long term


495,385



136,445

Note Payable - long term


-



150,000

Total Long Term Liabilities


495,385



286,445

Total Liabilities


5,084,577



1,267,566

Commitments and contingencies






Stockholders' Equity






Common stock, $0.001 par value, 50,000,000 shares authorized, 42,215,406
outstanding and issued at September 30, 2022 and 41,615,406 outstanding and
issued at December 31, 2021


42,215



41,615

Additional Paid In Capital


8,540,557



7,911,224

Accumulated Deficit


(8,213,821)



(5,345,504)

Total Stockholders' Equity


368,951



2,607,335

Total Liabilities and Stockholders' Equity

$

5,453,528


$

3,874,901

 

KonaTel, Inc.

Consolidated Statements of Operations



Three Months Ended

September 30,


Nine Months Ended

September 30,


2022


2021


2022


2021

Revenue

$

5,880,333


$

3,612,861


$

15,231,288


$

8,919,573

Cost of Revenue


4,969,251



1,988,624



12,230,378



4,946,786

Gross Profit


911,082



1,624,237



3,000,910



3,972,787













Operating Expenses












Payroll and Related Expenses


1,348,152



636,329



3,719,446



1,817,200

Operating and Maintenance


5,321



461



6,681



1,211

Bad Debt


-



-



29,133



427

Professional Services


381,340



77,335



675,987



206,671

Utilities and Facilities


60,083



39,726



135,118



110,523

Depreciation and Amortization


3,088



213,552



9,264



640,657

General and Administrative


71,545



32,668



251,778



93,994

Marketing and Advertising


15,542



37,350



100,570



50,073

Application Development Costs


142,237



179,427



391,930



396,715

Taxes and Insurance


26,729



35,784



150,389



60,479

Total Operating Expenses


2,054,037



1,252,632



5,470,296



3,377,950













Operating Income/(Loss)


(1,142,955)



371,605



(2,469,386)



594,837













Other Income and Expense












Interest Expense


(161,977)



(2,573)



(233,153)



(12,328)

Other Expenses


(40,582)



(49,197)



(165,778)



(154,310)

Total Other Income and Expenses


(202,559)



(51,770)



(398,931)



(166,638)













Net Income (Loss)

$

(1,345,514)


$

319,836


$

(2,868,317)


$

428,199













Earnings (Loss) per Share












Basic

$

(0.03)


$

0.01


$

(0.07)


$

0.01

Diluted

$

(0.03)


$

0.01


$

(0.07)


$

0.01

Weighted Average Outstanding Shares












Basic


41,912,145



40,899,569



41,715,406



40,758,495

Diluted


41,912,145



43,565,835



41,715,406



43,434,761

 

Cision View original content:https://www.prnewswire.com/news-releases/konatel-reports-third-quarter-2022-results-301677431.html

SOURCE KonaTel, Inc.


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