Focus on California Lifeline and Hosted Services Expansion
DALLAS, TX / ACCESSWIRE / August 14, 2024 / KonaTel, Inc. (OTCQB:KTEL) (www.konatel.com), a voice/data communications holding company, today announced financial results for the three-month period ended June 30, 2024.
Second Quarter 2024 Financial Summary
Revenues of $4.3 million, down 5.6% compared to the second quarter last year.
Gross profit of $900,000, up 16.2% compared to the second quarter last year.
Operating loss of $(1.3) million compared to operating loss of $(1.0) million in the second quarter last year.
GAAP net loss of $(1.1) million, or $(0.03) per share, compared to $(1.2) million, or $(0.03) per share, in the second quarter last year.
Non-GAAP net loss of $(885,000), or $(0.02) per diluted share, compared to Non-GAAP net loss of $(900,000), or $(0.02) per diluted share, in the second quarter of last year.
Cash remained healthy at $3.7 million versus $1.1 million for the same quarter last year, and $3.9 million in Q1 2024.
Sean McEwen, Chairman and CEO of KonaTel stated, "In Q1 we were optimistic Congress would have taken swift action to preserve highspeed broadband internet service subsidies for the then 23 million low-income American families under the ACP program. Unfortunately, that did not occur."
McEwen continued, "Although we have no information regarding Congress' intentions to re-fund ACP, on a positive note, we have seen some recent ACP re-funding movement. On July 30, 2024, a bipartisan group of lawmakers in the House of Representatives introduced legislation proposing $6 billion to extend ACP. Additionally, on July 31, 2024, the Senate Commerce Committee approved advancement of the Plan for Broadband Act S.2238. The proposed Act includes $7 billion for ACP re-funding along with proposed funding for additional telecommunication projects."
Following are highlights of the quarter:
Despite the loss of ACP revenue, we have substantially maintained our Lifeline revenue from Q1 2024 to Q2 2024. After strengthening our balance sheet in Q1 2024 without diluting shareholders (i.e., without issuing additional shares), we have been redeploying capital to successfully accelerate our California Lifeline business where the subsidy (Federal plus California) is substantially higher, about 300%, than typical Lifeline states.
With substantially the worst behind us, regarding the lack of ACP re-funding, we have mostly realized the negative impact of Congress's failure to re-refund ACP. Our California Lifeline growth is beginning to replace the loss of ACP revenue. During Q2 2024, we reached a milestone, the largest number of active California Lifeline lines in the Company's history.
It is important to note that up to this point, our Lifeline growth has utilized our capital resources; however, in addition to our self-funded sales efforts, we are also deploying our "asset light" Lifeline expansion strategy (i.e., employing our distribution partners to cover customer acquisition costs and monthly recurring network costs). As of this release, we have already contracted with four (4) distribution partners to deploy service under our Asset Lite program.
While we remain hopeful Congress may re-fund ACP, we have already positioned the Company for growth across additional and expanded market segments, including California Lifeline expansion and growth within our hosted services division, supported by our private national network and CPaaS platform (i.e., SIP service, SIP service with Microsoft Teams Integration, Termination Services, wireless POTS replacement, SD-WAN, and wireless Messaging Services).
For example, we recently launched wireless-based wholesale POTS ("Plain Old Telephone Service") replacement service utilizing our national CPaaS network platform with deep integration to U.S. wireline and wireless carriers. We are employing a wholesale distribution strategy to support CLECs, ILECs and other resellers that are moving their legacy POTS customers to modern POTS solutions as directed by the FCC's POTS modernization objectives. There are approximately 30 million legacy POTS lines across the nation used in a variety of applications, including Elevator Call Boxes, Fax Machines, Fire & Burglar Alarms, and HVAC & Equipment Monitoring. Our wireless POTS solution provides stable, long-term recurring revenue, and so far, we have already signed six (6) wholesale POTS MSAs ("Master Service Agreements") for national distribution.
Quarterly Financial Summary (Q2 2024 vs. Q2 2023)
Revenue of $4.3 million, a decrease of 5.6% compared to $4.6 million for reasons discussed above. The decrease in revenue was primarily due to the loss of mobile services revenues under the ACP Program, which only partially funded in May of 2024, and ended on June 1, 2024.
Gross profit was $900,000, or 20.7% gross profit margin, compared to $774,000, or 16.8% gross profit margin. This increase primarily resulted from adding higher ARPU activations in our Mobile Services segment, and sourcing lower compensation and network costs.
Total operating expenses were $2.2 million, compared to $1.8 million. This increase was primarily due to higher payroll and related expense associated with the addition of headcount in our Apeiron subsidiary.
GAAP net loss was $(1.1) million, or $(0.03) per diluted share (based on 43.4 million weighted average shares), compared to a net loss of $(1.2) million, or $(0.03) per diluted share (based on 42.5 million weighted average shares).
Non-GAAP net loss was $(885,000), or $(0.02) per diluted share, compared to Non-GAAP net loss of $(900,000), or $(0.02) per diluted share.
Balance Sheet
The Company ended the quarter with $3.7 million in cash, compared to $777,000 on December 31, 2023.
Year-to-Date Financial Detail (First Six Months of 2024 vs. First Six Months of 2023)
Revenues increased 15.6% to $10.0 million compared to $8.6 million, reflecting a 22.1% increase in Hosted Services revenues and a 13.0% increase in Mobile Services revenues.
Gross profit was $2.0 million, or 20.3% gross profit margin, compared to gross profit of $1.8 million, or 20.6% gross profit margin. This increase primarily resulted from adding a higher percent of activations in the California market in our Mobile Services segment, and sourcing lower per subscriber equipment and network costs.
Total operating expenses were $4.1 million, up 18.9% compared to $3.5 million. This increase was primarily due to higher payroll and related expense associated with the addition of headcount in our Apeiron subsidiary, as well as higher common stock expense from ISO grants provided in Q4 2023.
GAAP net income was $7.0 million, or $0.16 per diluted share (based on 43.3 million weighted average shares), compared to net loss of $(2.1) million, or $(0.05) per diluted share (based on 42.5 million weighted average shares). This increase was a result of the gain on sale recognized as part of our sale of 49% interest in IM Telecom.
Non-GAAP net loss was $(1.6) million, or $(0.04) per diluted share, compared to non-GAAP net loss of $(1.5) million, or $(0.04) 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 national wireless ACP and Lifeline carrier with an FCC approved wireless Lifeline Compliance Plan, licensed to provide government subsidized cellular service to low-income American families across thirty-six (36) states. 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.
Contacts
D. Sean McEwen
(214) 323-8410
[email protected]
-- Unaudited Balance Sheets and Statements of Operations Follow -
KonaTel, Inc.
Consolidated Balance Sheets
(unaudited)
| June 30, 2024 | December 31, 2023 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and Cash Equivalents | $ | 3,681,162 | $ | 777,103 | ||||
Accounts Receivable, Net | 1,840,237 | 1,496,799 | ||||||
Inventory, Net | 554,859 | 1,229,770 | ||||||
Prepaid Expenses | 106,688 | 129,706 | ||||||
Other Current Assets | 1,010,797 | - | ||||||
Total Current Assets | 7,193,743 | 3,633,378 | ||||||
Property and Equipment, Net | 19,285 | 24,184 | ||||||
Other Assets | ||||||||
Intangible Assets, Net | 323,468 | 634,251 | ||||||
Right of Use Asset | 382,426 | 443,328 | ||||||
Other Assets | 74,543 | 74,543 | ||||||
Total Other Assets | 780,437 | 1,152,122 | ||||||
Total Assets | $ | 7,993,465 | $ | 4,809,684 | ||||
Liabilities and Stockholders' Equity (Deficit) | ||||||||
Current Liabilities | ||||||||
Accounts Payable and Accrued Expenses | $ | 3,139,243 | $ | 3,709,691 | ||||
Loans Payable, Net of Loan Fees | - | 3,655,171 | ||||||
Right of Use Operating Lease Obligation - Current | 131,787 | 127,716 | ||||||
Total Current Liabilities | 3,271,030 | 7,492,578 | ||||||
Long Term Liabilities | ||||||||
Right of Use Operating Lease Obligation - Long Term | 274,457 | 330,511 | ||||||
Total Long Term Liabilities | 274,457 | 330,511 | ||||||
Total Liabilities | 3,545,487 | 7,823,089 | ||||||
Commitments and Contingencies | ||||||||
Stockholders' Equity (Deficit) | ||||||||
Common stock, $.001 par value, 50,000,000 shares authorized, 43,472,954 outstanding and issued at June 30, 2024 and 43,145,720 outstanding and issued at December 31, 2023 | 43,473 | 43,146 | ||||||
Additional Paid In Capital | 9,669,809 | 9,182,140 | ||||||
Accumulated Deficit | (5,265,304 | ) | (12,238,691 | ) | ||||
Total Stockholders' Equity (Deficit) | 4,447,978 | (3,013,405 | ) | |||||
Total Liabilities and Stockholders' Equity (Deficit) | $ | 7,993,465 | $ | 4,809,684 | ||||
KonaTel, Inc.
Consolidated Statements of Operations
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
Revenue | $ | 4,343,179 | $ | 4,601,426 | $ | 9,979,016 | $ | 8,633,145 | ||||||||
Cost of Revenue | 3,443,472 | 3,827,374 | 7,951,804 | 6,857,214 | ||||||||||||
Gross Profit | 899,707 | 774,052 | 2,027,212 | 1,775,931 | ||||||||||||
Operating Expenses | ||||||||||||||||
Payroll and Related Expenses | 1,341,046 | 1,107,303 | 2,793,146 | 2,246,849 | ||||||||||||
Operating and Maintenance | 1,421 | 1,621 | 2,965 | 3,321 | ||||||||||||
Bad Debt | - | - | 1,448 | 14 | ||||||||||||
Professional and Other Expenses | 231,302 | 204,023 | 341,525 | 463,418 | ||||||||||||
Utilities and Facilities | 59,332 | 52,030 | 110,118 | 109,075 | ||||||||||||
Depreciation and Amortization | 2,449 | 3,088 | 4,899 | 6,176 | ||||||||||||
General and Administrative | 44,573 | 43,259 | 105,968 | 83,492 | ||||||||||||
Marketing and Advertising | 27,031 | 46,490 | 61,027 | 84,008 | ||||||||||||
Application Development Costs | 387,800 | 299,629 | 593,883 | 443,158 | ||||||||||||
Taxes and Insurance | 59,115 | 16,907 | 113,550 | 33,163 | ||||||||||||
Total Operating Expenses | 2,154,069 | 1,774,350 | 4,128,529 | 3,472,674 | ||||||||||||
Operating Loss | (1,254,362 | ) | (1,000,298 | ) | (2,101,317 | ) | (1,696,743 | ) | ||||||||
Other Income and Expense | ||||||||||||||||
Gain on Sale | - | - | 9,247,726 | |||||||||||||
Interest Expense | - | (179,630 | ) | (104,329 | ) | (341,132 | ) | |||||||||
Other Income/(Expense), net | (4,763 | ) | (42,792 | ) | (68,693 | ) | (99,542 | ) | ||||||||
Total Other Income and Expenses | (4,763 | ) | (222,422 | ) | 9,074,704 | (440,674 | ) | |||||||||
Income Before Income Taxes | (1,259,125 | ) | (1,222,720 | ) | 6,973,387 | (2,137,417 | ) | |||||||||
Income Tax Expense (Benefit) | (149,428 | ) | - | - | - | |||||||||||
Net Income (Loss) | $ | (1,109,697 | ) | $ | (1,222,720 | ) | $ | 6,973,387 | $ | (2,137,417 | ) | |||||
Earnings (Loss) per Share | ||||||||||||||||
Basic | $ | (0.03 | ) | $ | (0.03 | ) | $ | 0.16 | $ | (0.05 | ) | |||||
Diluted | $ | (0.03 | ) | $ | (0.03 | ) | $ | 0.16 | $ | (0.05 | ) | |||||
Weighted Average Outstanding Shares | ||||||||||||||||
Basic | 43,412,602 | 42,520,720 | 43,301,670 | 42,539,672 | ||||||||||||
Diluted | 43,412,602 | 42,520,720 | 43,301,670 | 42,539,672 | ||||||||||||
SOURCE: KonaTel
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