KonaTel reports second quarter 2022 results

KonaTel, Inc. a voice/data communications holding company, today announced financial results for the second quarter and six-month period ended June 30, 2022.

Second quarter 2022 financial summary and recent business highlights

• Revenues of $5.1 million, up 75.8% compared to the second quarter last year and up 21.2% compared to the first quarter of this year.
• Gross profit of $443,000, down 69.2% compared to the second 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 intentional rapid growth.
• GAAP net loss of $(1.5) million, or $(0.04) per share, compared to GAAP net income of $341,000, or $0.01 per share, in the second quarter last year.
• Non-GAAP net loss of $(1.2) million, or $(0.03) per diluted share, compared to non-GAAP net income of $592,000, or $0.01 per diluted share, in the second quarter last year.
• Secured $3.2 million in debt financing to accelerate growth of Mobile Services.

D. Sean McEwen, Chairman and CEO of KonaTel stated, “We grew our second quarter revenue by 76% year-over-year and 21% sequentially, which demonstrates accelerating momentum in the scaling of our business. Since the first quarter of this year, we increased our mobile customer base 130% by investing in the acquisition of new customers and additional management and support infrastructure to accommodate a substantial increase in our customer base without a significant future increase to general and administrative costs. We have a highly attractive business model with a diverse revenue base and a high degree of operating leverage. Each new mobile customer brings additional revenue and margin contribution and serves as a lever for future cash flows. The strength of our business is further reinforced by government support and the critical role wireless data and voice services play in our lives. As one of only a limited number of FCC approved national wireless resellers under recently expanded government programs, we are moving aggressively to leverage our first mover advantage and capture new customers at a rapid pace.”

McEwen continued, “As we expected and discussed with our first quarter report, second quarter margins were impacted by the significant acceleration of our Mobile Services business as upfront costs to acquire new customers are expensed as incurred under U.S. accounting guidelines. We expect our margins to improve through the remainder of this year and into next year as we begin to recover customer acquisition costs that were incurred at the start of our growth cycle. There is a natural tension in our business between growth, profitability and customer churn, and we are committed to striking a balance that does not sacrifice one for another. We are fortunate to operate a business model that allows us to scale rapidly and with our stepped approach to growth, recover customer acquisition costs quickly and manage our churn rate. New term financing of $3.2 million strengthened our balance sheet and serves as a working capital bridge during this period of exponential growth. The economics of our business are solid, and the investments we are making today are a catalyst for accelerating growth and increasing shareholder value.”

Quarterly financial summary (Q2 2022 vs. Q2 2021)
Revenue of $5.1 million, an increase of 75.8% compared to $2.9 million. The increase was due to growth in the Mobile Services segment. Mobile Services expansion continued under the Lifeline and Affordable Connectivity Program (ACP). The revenues were derived as a result of delivering high-speed mobile data service to low-income consumers.

Gross profit was $443,000, or 8.6% gross profit margin, compared to $1.4 million, or 49.3% gross profit margin. The decline in gross profit was due to up-front costs incurred by accelerating growth to acquire new customers in the 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 second quarter 2022 was $2.7 million compared to $45,000 for the second quarter of 2021.

Total operating expenses were $1.8 million, up 72.2% compared to $1.1 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 the Apeiron Systems and IM Telecom subsidiaries.

GAAP net loss was $(1.5) million, or $(0.04) per diluted share (based on 41.6 million weighted average shares), compared to net income of $341,000, or $0.01 per diluted share (based on 44.2 million weighted average shares). The loss for the three months ended June 30, 2022, was impacted by an acceleration of growth in the Mobile Services segment that increased customer acquisition costs, which are recorded in full at the time of customer activation.

Non-GAAP net loss was $(1.2) million, or $(0.03) per diluted share, compared to Non-GAAP net income of $592,000, or $0.01 per diluted share.

Year-to-Date dinancial detail (First Six Months of 2022 vs. First Six Months of 2021)
Revenues increased 76.2% to $9.4 million compared to $5.3 million, reflecting a 1.8% increase in Hosted Services revenues and a 159.0% increase in Mobile Services revenues.

Gross profit was $2.1 million, or 22.4% gross profit margin, compared to gross profit of $2.3 million, or 44.3% gross profit margin. The decline in gross profit was due to up-front costs incurred by accelerating growth to acquire new customers in the 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 first six months of 2022 were $3.5 million compared to $123,000 for the first six months of 2021.

Total operating expenses were $3.4 million, up 60.7% compared to $2.1 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 Apeiron Systems and IM Telecom subsidiaries.

GAAP net loss was $(1.5) million, or $(0.04) per diluted share (based on 41.6 million weighted average shares), compared to net income of $108,000, or $0.00 per diluted share (based on 44.2 million weighted average shares).

Non-GAAP net loss was $(1.1) million, or $(0.03) per diluted share, compared to non-GAAP net income of $624,000, or $0.01 per diluted share.

CT Bureau