KonaTel, Inc. (KTEL) research, news, and more from GeoInvesting

Company description

Fri, 15 Jan 2021 17:07:39 GMT

KonaTel Inc is a reseller of U.S. wireless network service. It services agents, consumers, and businesses. The company generates revenue through its product Apeiron Systems' CPaaS channel which offers SIP/VoIP services, SMS/MMS, BOT integration, Machine Learning, mobile numbers, toll free numbers, DID landline numbers, SMS to Email, Database Dip and API driven services. The company's segments consist of Hosted Services, Mobile Services, Lifeline ETC and Lifeline VETC.

Research

Fri, 17 Apr 2026 04:00:00 GMT

KonaTel, Inc. (OTCQB:KTEL) ($0.26; $11.4M market cap) announced Q4 2025 results:

Q4 2025 sales of $1.9 million vs. $3.15 million in the prior year
Q4 2025 adjusted EPS of $0.01 vs. loss per share of ($0.00) in the prior year
Full year 2025 sales of $8.5 million vs $15.5 million in the prior year
Full year adjusted loss of $0.06 vs loss of $0.08 in the prior year

“Ending in late 2024 and throughout 2025, we dedicated substantial software development resources to expand our recurring revenue, hosted services telecommunications platform to include a variety of enhanced and new wholesale services. As previously discussed, we have focused our primary development effort on the expansion of our cellular-based wholesale POTS (“Plain Old Telephone Service”) solution.

“We continue to monitor the FCC’s Lifeline reform, which started to accelerate in Q1-2026. When complete, we will evaluate our Lifeline opportunities at that time. In the meantime, we spent 2025 on initial deployment of our POTS service, including the development of logistical processes and a national installation/deployment solution tailored specifically for the reseller market. After installation, we collect monthly recurring revenue which we expect to last for many years as these types of commercial communication lines have very little churn.

“We now support over 700 installations through our wholesale partner network. Now that we have validated our recurring revenue model, we plan to substantially expand our base throughout 2026 and beyond….

…Rather that pursuing end-user opportunities (i.e., one customer at a time), our wholesale POTS marketing approach is based on customized partnerships with national CLECs and wireline resellers who bring us large scale deployments. We believe this strategy gives a competitive advantage and the fastest path to growth.”

Our Quick Take:

Cash burn continued in the quarter
The shift to go all in on the POTS business is the right move in our opinion
However, we still need to understand the capital needs for the company to grow the POTS business given the cash burn. So, we need more clarification from management on the strategy to grow POTS.
From our research, the strategy the company is employing could fetch up to $30 per POTS line per month and would be very sticky revenue for 7 to 10 years minimally.
It's unfortunate that the company did not update its healthcare partnership related to the government subsidized Lifeline business. You can see more about that here.
If there is an encouraging takeaway, the COO Chuck Griffin has a strong telecom background so exploiting the POTS opportunity should be right in his wheelhouse.
Regardless of the POTS opportunity, this is a very risky setup, that being said if the company can secure favorable financing to execute POTS strategy we feel the upside is fairly large.
Regarding the telecom subsidized business, the FCC has begun implementing reform efforts to improve the program. We are watching that closely, as anything positive from that endeavor could offer interesting optimality to the story.

KonaTel, Inc. is a mobile virtual network operator that provides cloud-based communications services, mobile voice, text, and data solutions, IoT connectivity, and government-subsidized wireless services.

Research

Fri, 21 Nov 2025 15:33:27 GMT

Yesterday, KonaTel, Inc. (OTCQB:KTEL) ($0.29; $12.2M market cap) announced Q3 2025 results (10Q here):

Q3 2025 sales of $2.17 million vs. $3.15 million in the prior year
- Includes a one time gain from the cancellation of executive equity options that expired.
Q3 2025 adjusted loss per share: ($0.01) vs. loss per share of ($0.02) in the prior year

Comments from CEO:

“In concert with our IM Telecom d/b/a Infiniti Mobile Lifeline subsidiary, our healthcare partner, began to promote Lifeline service to their California Medicaid customers in October. We expect customer adoption to accelerate as our healthcare partner increases their marketing efforts. Through this relationship, we bear no financial burden for sales, marketing, or equipment (cell phone) costs.

We continue to invest in the expansion of our CPaaS (“Communications Platform as a Service”) cloud platform, including wholesale SMS and wireless POTS (“Plain Old Telephone Service”) wholesale cellular replacement service for telecommunications carriers and resellers.

As a newcomer to our CPaaS services, our wireless POTS product initially represents a small portion of our revenue. However, our wireless POTS installations, funded through cash flow, increased by 20% from Q2 to Q3. To meet the increasing wireless POTS demand and given our proven POTS installed base, we are developing a strategy to accelerate deployments. As our POTS installations grow, we are building a revenue stream expected to last for many years, and in fact, it is not uncommon for POTS lines to generate recurring revenue for decades. By the end of this decade, national copper-line based POTS infrastructure is expected to be decommissioned, which creates a substantial market opportunity as roughly 22 million copper-line based POTS lines will need immediate replacement. Our wireless-based POTS service fulfills this increasing demand with a proven solution.”

McEwen closed, “This quarter, we also trimmed remnant Lifeline costs through the reduction of approximately $600,000 in annualized recurring expenses. Additionally, through the end of this quarter, we have now received $850,000 of the $1,000,000 holdback related to the sale of a minority interest in our IM Telecom Lifeline subsidiary.

Looking forward, we remain focused on the expansion of our CPaaS business and derisking the Company through the addition of future, contracted, low attrition recurring revenue CPaaS services and supporting our healthcare partner’s Lifeline promotion to California Medicaid customers.”

Our Take:

Revenues have actually stabilized over the last three quarters However, the company is still losing money and has limited cash at the current burn rate. What we need to know is how deep the company’s expense cuts discussed in the 10Q and press release will be.

That said, the setup going forward is more interesting than the numbers, but in our opinion solely hinges on how fast the healthcare partnership scales. While it’s encouraging that the POTS business is a nice growth engine, it requires capital to really grow it.

The restructuring at IM Telecom (discussed in the 10-Q, page 19) simplifies the IM model, strips out a meaningful amount of operational cost, and still leaves KTEL in position to grow the Lifeline business if it chooses to pursue that path.

They are finally shifting into a structure where the core business and the IM Telecom unit aren’t tripping over each other. Hosted services are becoming the real engine here, which includes SMS growth, IoT/POTS replacement, and early traction on the wholesale wireless platform give them at least a few lanes with momentum.

Research

Wed, 20 Aug 2025 14:32:09 GMT

InfoArb Alert:

Yesterday during the trading day Konatel, Inc. (OTCQB:KTEL) released Q2 2025 results via a 10-Q filing. The financials continue to struggle as the company deals with the termination of the ACP program. However, buried in the filing we found the following quote:

"Additionally, we have a contract with one of the largest healthcare providers in the United States to provide mobile voice service to their qualified Medicaid recipient base of over several million subscribers. We are currently awaiting regulatory approval from the state of California to potentially launch this program before the end of this year."

We issued an InfoArb alert (stating the same) following the filing.

xxx

Shares surged 50% late in yesterday’s trading session, presumably due to investors reacting to the passage.

The company then issued a press release for the second quarter results after hours. While the release did mention this…

“We continue to aggressively pursue third-party relationships to expand our Lifeline operation, and we are currently awaiting regulatory approval in the state of California to potentially launch a new partnership before the end of 2025”.

…the 10-Q information was more specific and seemed quite bullish.

KonaTel, Inc. (OTCQB:KTEL) ($0.49; $21.1 market cap) InfoArb Alert, announced Q2 2025 results:

Q2 2025 sales of $2.2 million vs. $4.3 million in the prior year
Q2 2025 adjusted loss per share: ($0.02) vs. loss of ($0.02) in the prior year
Revenue down 50.3% due to the termination of the ACP Program
Awaiting regulatory approval in California for a new Lifeline partnership

"Sean McEwen, Chairman and CEO of KonaTel stated, 'As previously stated in our 2024 10K filing, congress' failure to re-fund the ACP Program has negatively impacted our business. We continue to aggressively pursue third-party relationships to expand our Lifeline operation, and we are currently awaiting regulatory approval in the state of California to potentially launch a new partnership before the end of 2025.'

As part of our ongoing revenue diversification/derisking efforts, we continue to invest in the expansion of our CPaaS ("Communications Platform as a Service") cloud platform, including wholesale SMS and POTS ("Plain Old Telephone Service") wholesale cellular replacement service, specifically designed for telecommunications carriers and resellers.'

McEwen closed, 'The unpredictable behavior of Congress during 2024 negatively impacted our business, but we shifted our development and sales efforts into new areas of expansion. We continue to believe one of our strong advantages comes from our established wholesale cloud CPaaS platform, that supports a variety of services, including termination/origination, VoIP/SIP, SMS, POTS, Mobile Data, and Mobile Voice solutions.

Management's focus on our CPaaS business is providing a foundation to derisk the Company through the addition of future, low attrition recurring revenue services, and if we are successful with new distribution partnerships within our government subsidized Lifeline cellular service, we expect to see additional revenues.'"

Key Takeaways:

The company is not out of the woods yet, but this seems like a great step in the right direction and in line with their stated goals of pursuing asset light opportunities for its government subsidized telecom business. We still have to understand the economics of their relationship. We suspect investors will remain skeptical until more clarity is offered around this new development.

–

Research

Fri, 16 May 2025 14:37:16 GMT

Konatel Inc (NASDAQ:KTEL) ($0.29; $13.0M market cap) announced Q1 2025 results:

Sales of $2.2 million vs $5.6 million in prior year
Non GAAP loss of $0.02 vs non-GAAP net loss of $0.02 (company had erroneously published 2024 Non-GAAP Q1 earnings as $0.19, where that should have been reported as only the GAAP results).

Our Quick Take:

The most interesting news of the quarter was the 49.9% of Infiniti Mobile withdrawing its intent to purchase a majority stake.

“As previously stated in 2024, Management decided to sell a minority 49% non-controlling and non-refundable interest in our subsidiary, IM Telecom, for $10 million dollars. As reported in our 2025 Q1 10Q, on May 9, 2025, the 49% IM Telecom stakeholder withdrew their request to acquire 100% of IM Telecom. We continue to retain a majority 51% controlling interest in that subsidiary. This cash sale allowed us to pay off all long-term debts and begin an accelerated investment in the expansion of our CPaaS (Communications Platform as a Service) cloud platform to include both new and expanded services.”

Stay tuned for a PodClip on the slightly positive ramifications of this development.

"The challenges and unpredictable behavior of Congress during 2024 certainly negatively impacted our business, but we have been able to shift our development and sales efforts into new areas of expansion, and related to the loss of ACP, we continue to believe the worst is behind us. We believe that one of our strong advantages is that from our proven wholesale cloud (CPaaS) platform, we are able to provide a wide variety of services including termination/origination, SIP, SMS, POTS, Mobile Data, and Mobile Voice solutions, now with a fully integrated reseller billing system.

We have already entered into wholesale agreements with a group of carriers/resellers who have over 35,000 existing POTS lines, which they plan to migrate. Our new wholesale POTS service provides a stable, sticky (very low churn), predictable recurring revenue line of business.

Management's focus on our CPaaS business has put us well on our way derisking the Company through creating multiple streams of stable, high margin, low attrition recurring revenue services."

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

Research

Wed, 16 Apr 2025 14:59:16 GMT

KonaTel, Inc. (OTC: KTEL) ($0.30; $12.84M market cap) announced Q4 2024 and full year 2024 results:

Q4 sales of $2.4 million vs. $4.9 million in the prior year
Q4 Non-GAAP EPS of ($0.01) vs. Non-GAAP EPS of ($0.03) in the prior year
Full year sales of $15.5 million vs. $18.2 million in the prior year
Full year Non-GAAP EPS of ($0.08) vs. Non-GAAP EPS of ($0.07) in the prior year
Appears that the “bleeding” in the government subsidized telecom business is contained, as the company waits for funding mechanisms to return and/or to be restructured.
SMS and new POTS businesses are beginning to show traction. These are both sticky businesses, especially POTS.

Management Quotes:

"There is no doubt 2024 was a challenging year for our Company, our employees and our shareholders; however, we feel the worst is behind us as we stabilized the impact from the government's unwillingness to re-fund the ACP in 2024."

"That being said, we are prepared to take advantage of the ACP, if it returns, or an enhanced (more profitable) Lifeline program."

"We have grown our national Lifeline license from our original eleven (11) states to forty (40) states over the past twelve (12) months."

"Additionally, we have paid down all our long-term debt accumulated during our ACP/Lifeline growth period. With a cash balance of 1,679,345 and net working capital of $2,006,701, we have been growing our hosted cloud service platform focusing on enhanced and new product offerings."

"Our expansion efforts have already resulted in an increase in our monthly SMS service revenue from $20,000 to $110,000 over the last twelve (12) months."

"In addition to our SMS expansion, we have added a new wholesale POTS service… designed to support the wholesale market… This allows us to grow at scale versus selling to individual retail customers."

"As of Q1-2025, we have already entered into wholesale agreements with a group of resellers who have over 35,000 existing POTS lines, which they plan to migrate. Our new wholesale POTS service provides a stable, sticky ('very low churn'), predictable recurring revenue line of business."

POTS stands for plain old telephone lines. Basically, telecom companies are replacing old school copper line services with cheaper internet solutions.

It appears that there are about 30 or 40 million POTS lines still out there that need to be converted. The FCC is encouraging telecom companies to accelerate these conversions.

The POTS business entails working with telecom companies to install special boxes at end customer sites (for example, an elevator phone) to complete the conversion.

So, there are probably some upfront costs for KTEL related to buying boxes and installing them. Then, KTEL would receive a low churn, monthly recurring fee for each line they’ve converted.

KonaTel Inc is a reseller of U.S. wireless network service and distributes government subsidized voice/broadband services to low income households under the Lifeline program.

Research

Thu, 13 Mar 2025 15:36:36 GMT

Konatel Inc (NASDAQ:KTEL) ($0.34; $16.3M market cap) 8K/A from its Excess Telecom agreement provides additional liquidity for the company. KTEL Is set to receive $150,000 of a $1 million holdback related to the potential sale of Infiniti Mobile to Excess Telecom, upon approval from the Federal communication commission (FCC). Excess had already paid KTEL $9 million.

The 8K also disclosed that Excess has already made a payment of $150,000. Keep in mind the Excess is currently renting KTEL lifeline license, as it waits for approval from the FCC to purchase Infiniti Mobile

From our research, the approval process for acquisitions that require FCC approval usually takes about 9 months vs. 14 months from the signing of the original acquisition agreement. It’s Important to understand that if the FCC does not approve the transaction that KTEL still keeps the $10 million.

Research

Fri, 15 Nov 2024 17:31:55 GMT

Konatel Inc (NASDAQ:KTEL) ($0.37; $16.3M market cap) announced Q3 2024 results:

Sales of $3.1 million vs $4.6 million in prior year
Non GAAP loss of $0.03 vs a loss of $0.00

As of now the results are via 10-Q only and are as expected given the termination of the ACP program. For those who may have missed yesterday’s email, we issued the following alert on KTEL:

“Growth efforts were paused as the affordable connectivity program (ACP) has yet to receive funding needed to keep the plan going. Recall, the ACP expired earlier this year, as previous government money set aside to fund the program was drawn down.

We still believe Congress will find a way to revive ACP which will be a very positive development that we think will send shares sharply higher. For now, it’s just a wait-and-see game. In the meantime, we don’t expect financials to be impressive.

Something to keep in mind is that JD Vance is a proponent of ACP. So, we think now that the Republicans have control of the entire legislative process from the Senate, to the House to the Presidency, they’ll be able to get an ACP plan through and take credit for providing low income households with affordable mobile and broadband services. Outside ACP, the management team brought into the company in late 2021 and early 2022 is more than capable of building a telecom business over time.

We still think KTEL is a worthwhile speculative bet, especially at the current prices.”

KonaTel Inc is a reseller of U.S. wireless network service. It services agents, consumers, and businesses

Call to Action

Thu, 14 Nov 2024 05:00:00 GMT

Portfolio Action: Removing KTEL from Top 5 Favorite Model Portfolio

Closing from the Top Five Favorites Model Portfolio at $0.38 with a final return of -51.32% and high return of 140.24%.

For KTEL, growth efforts were paused as the affordable connectivity program (ACP) has yet to receive funding needed to keep the plan going. Recall, the ACP expired earlier this year, as previous government money set aside to fund the program was drawn down. We still believe Congress will find a way to revive ACP which will be a very positive development that we think will send shares sharply higher. For now, it’s just a wait-and-see game. In the meantime, we don’t expect financials to be impressive. Something to keep in mind is that JD Vance is a proponent of ACP. So, we think now that the Republicans have control of the entire legislative process from the Senate, to the House to the Presidency, they’ll be able to get an ACP plan through and take credit for providing low income households with affordable mobile and broadband services. Outside ACP, the management team brought into the company in late 2021 and early 2022 is more than capable of building a telecom business over time. We still think KTEL is a worthwhile speculative bet, especially at the current prices. Closing from the Top Five Favorites Model Portfolio at $0.38 with a final return of -51.32% and high return of 140.24%.

Research

Thu, 15 Aug 2024 16:10:10 GMT

Konatel Inc (NASDAQ:KTEL) ($0.40; $17.4M market cap) announced Q2 2024 results:

Sales of $4.3 million vs $4.6 million in prior year
Non GAAP loss of $0.02 vs a loss of $0.02

Following are highlights of the quarter: (per the release)

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.

Research

Mon, 20 May 2024 16:01:36 GMT

Konatel Inc (NASDAQ:KTEL) ($0.70; $30.5M market cap) - Last week KTEL reported strong Q1 2024 results which we highlighted here. While reviewing the filings over the weekend, we found something in the company’s 10-K filed April 1, 2024 that we wanted to point out:

“Mr. Beaty has been appointed the interim President of Sales and Marketing Apeiron Systems for the oversight and growth of VIVA-US Telecommunications, Inc. (“VIVA”). Viva is expected to have substantial growth, potentially in excess of 100,000 cellular customers to Apeiron under its “Mobile Reseller Agreement” with Apeiron dated November 10, 2023, on or before November 29, 2024. Mr. Beaty will provide his services for purpose of expediting the growth curve for the VIVA agreement and other significant growth initiatives. Also see the “Outstanding Equity Award” Table in Part III, Item 11, below, and specifically, Note (1) thereof.”

While we had pointed out that Beaty is highly incentivized to quickly grow the VIVA relationship, we thouht it is important to note that KTEL potentially expects VIVA to onboard 100,000 customers on or before November 2024. This could help drive 2024 sales as the company continues to diversify revenue and reduce its risk profile.

–

Research

Thu, 16 May 2024 18:36:41 GMT

Konatel Inc (NASDAQ:KTEL) ($0.66; $28.6M market cap) announced Q1 2024 results:

Sales of $5.6 million vs $4.0 million in prior year
GAAP EPS of $0.19 vs a loss of $0.02
Non-GAAP net loss of $0.02 vs Non-GAAP loss of $0.01

"First quarter revenue increased 40% year-over-year, and just as important, we delivered sequential revenue growth in each of the last four quarters partially due to our strategy to diversify beyond government subsidized services. Within our Hosted Services segment, we increased revenue by 17% to record levels due to the addition of new customers and new revenue from existing customers. While there is uncertainty surrounding the government's re-funding of the ACP program, our legacy Lifeline business is not impacted by government funding, and I am excited by our progress and the opportunities within our Hosted Services operation, given the attractive economics and stickiness of the customer base."

McEwen continued, "We completed the sale of a minority position of our interest in IM Telecom in the first quarter, which resulted in cash proceeds of $9.0 million. We used a portion of the proceeds to pay off all outstanding debt obligations. With $3.9 million in cash, we ended the quarter with a much stronger balance sheet and additional, non-dilutive capital. We are using the additional capital to fund our growth and revenue diversification strategy through the addition of experienced sales and operations personnel within our Hosted Services business, which is now driving an expansion of that segment. And as previously disclosed, we secured a multi-million-dollar financing option which helps us fund our partners in pursuit of an ‘asset light' strategy within the government subsidized (Lifeline and ACP) market."

McEwen concluded "Our growth in revenue demonstrates that with the right amount of working capital, our management team has the experience and capability to rapidly accelerate growth in both our Hosted Services and Government Subsidized (Lifeline and ACP) operations. Looking forward, we have several pending projects within our Hosted Services business, including the upcoming five-year exclusive agreement to provide wholesale cellular service to Viva-USA. Viva-USA is part of the Viva Group of companies, an international MNO/MVNO with over three million customers in Mexico and Bolivia."

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.

Research

Mon, 29 Apr 2024 18:58:29 GMT

Last week, we evaluated three potentially significant regulatory solutions that would save the government subsidized affordable connectivity program (ACP). Konatel Inc (OOTC:KTEL) ($0.58, $25.4m market cap), specializes in voice/data communications and distributing voice and broadband services to low income households through Lifeline, and ACP. In our opinion, these solutions could lead to very favorable outcomes for KTEL.

You can see the article here

A weekend update points to additional optimism.

A Senate committee (Democrats) is making a push to fund the program through May so the House and Senate can come up with a permanent fix by the end of the month. However, more importantly, it appears that the committee has set a goal to have the proposed bill ready for inspection by May 1

The full article can be read here, and an excerpt about the plan says:

“A commitment to fully fund the month of May would give Congress time to provide new money for the Affordable Connectivity Program.”

“With both the Senate and House of Representatives in sessions for four weeks in May, this extra time would give lawmakers a critical window to work on and pass a legislative solution,” the lawmakers said.

As Broadband Breakfast previously reported, Senate Commerce Committee Chair Maria Cantwell, D-Wash., is aiming to introduce a bill that would restore the Federal Communications Commission’s spectrum auction authority for five years, as well as provide funding for the Affordable Connectivity Program and the rip and replace program. The committee is planning to vote on the bill May 1.”

Recall that in our update last week on the subject, we mentioned that House Communications Subcommittee Chairman Bob Latta, R-Ohio believes a “bicameral Universal Service Fund revamp working group’s effort” would give ACP permanency, whereby the funding mechanism would occur at the FCC level. However, that’s going to take a little time to formalize. Specifically,Latta mentioned that the bill needs to be ready for vote by the end of May.

In light of the fact that it will take some time to get such a bill formalized, it appears the Senate is trying to propose an ACP funding stop gap so that can be accomplished. Our assumption is that the stop gap will include some type of stipulation that, in order for funding to be released, Congress has to work on a permanent funding solution that would not rely on government funds.

Research

Tue, 02 Apr 2024 14:44:48 GMT

Konatel Inc (NASDAQ:KTEL) ($0.55; $24.0M market cap) announced Q4 2023 results:

Sales of $4.9 million vs $4.8 million in prior year
Q4 sales slightly sequentially higher than Q3, but up 20% from Q1
Our due diligence suggests Q1 2024 will be sequentially higher than Q4 and an overall strong quarter. To be clear, this was not communicated in the company’s press release.
Non-GAAP net loss of $0.03 vs Non-GAAP EPS of $0.01

“At the end of 2022, we initiated our strategy and began geographically emphasizing sales of our government-subsidized mobile service where the product mix yielded higher reimbursement products and services. While this action resulted in transitional elements and more challenging year-over-year comparisons in 2023, we have stabilized our distribution efforts and since the end of 2023 substantially improved our balance sheet. All these items combined will position the company for growth in 2024."

Growth avenues moving forward:

Continue to grow higher margin government-subsidized business, with a focus on California and Tribal land areas
Implementing strategies to aggressively grow hosted services business through Viva partnership and newly announced partnership with ATGN, to provide advanced voice and messaging services in support of the Altigen network.

It was nice to see the company talk about its relationship with Altigen Communications Inc (OOTC:ATGN). This had actually been a business development opportunity that our co-founder, Maj, suggested they should explore over two years ago.

Growing the non-government subsidy part of the business is important because it will end up being a higher valuation multiple business and introduce recurring revenue streams with less churn. This is why we are also excited about the company's contract with Viva, an under-the-radar relationship that we believe investors are under-appreciating.

It was good to see that the company stressed its government subsidy business using its legacy Lifeline license. It’s a point we’ve been trying to stress for the last few weeks, that although it will be nice to have ACP refunded, we don’t believe it’s necessary for the company to grow, as it can probably grow aggressively using its Lifeline license in high subsidy states like California and Oklahoma.

It’s also good to see that the company is still pursuing ways to potentially license its Lifeline license to other companies who would incur all the capital expense burden to acquire customers, phones and tablets. We believe that many ACP companies who have built a big revenue base could view renting a Lifeline license as a way to retain some revenue by selling those services into their ACP customer base, or else face the possibility of losing tons of revenue from those customers.

That being said, ultimately, we still believe the ACP will get refunded, or potentially lumped in with Lifeline, so that the FCC can administer both programs as opposed to having Congress have to continually pass bills to fund the program.

In this scenario, the FCC would have the authority to levy fees on a wider net of communication companies than it does right now to fund Lifeline. But, even if we are wrong, we think that Lifeline, combined with the growth opportunities in the non-government subsidy business, offers tremendous growth opportunities.

One last thing to point out is that the 2023 year end balance sheet does not include the $10 million cash infusion the company received from potentially selling its license that we discussed in this update

If ACP does not end up getting refunded, or if ACP and Lifeline are combined into one program, the sale of the license with the right to use it for at least 10 years will end up looking like a genius move. Remember, the $10 million cash infusion is nonrefundable, whether or not the buyer of the license gets approved to buy the license, which will take at least a year.

KTEL is a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division.

Research

Wed, 31 Jan 2024 15:15:36 GMT

Konatel Inc (NASDAQ:KTEL) ($0.83; $36.0M market cap) filed an 8k with new business agreement with Excess Telecom. Reading through the 8k, there is a lot to decipher, here is our quick summary of what we feel is a very good deal for KTEL:

KTEL sells membership interest of IM Telecom to Excess for $15 million, $10 million upfront and $5 million to come with if/when ACP gets refunded.
KTEL will remain 51% equity owner for at least 1 year until the FCC approval process is complete.
KTEL and Excess also entered into a master distribution agreement, upon closing of the membership agreement where KTEL will CONTINUE TO RECEIVE 100% OF THE REVENUE FROM LIFELINE AND ACP FOR AT LEAST 10 YEARS.

“KonaTel’s compensation under the Distribution Agreement is 100% of the amount of funds (revenue) collected from the Lifeline and ACP reimbursement funds each month for each customer acquired by the KonaTel less the IM Telecom flat monthly fee amounts for the applicable number of customers for the applicable calendar month period and expenses incurred by IM Telecom in the provision of IM Telecom products and wireless services to the customers acquired by KonaTel.”

Infinite Mobile has applied for a Lifeline license in an additional 26 states (currently operating only in 11 states).

So in quick summary, it appears this deal gives KTEL a nice cash infusion of possibly $15 million, while it continues to operate the business and collect the revenues and profits for at least 10 years, and potentially entering 26 additional states.

Think of this as a sale lease-back transaction. Except in this case, KTEL pays nothing after the sale of its license to continue using it… as if nothing ever happened. While the initial reaction of the market may be negative, because the 8K is confusing, we think it’s potentially a brilliant deal.

Best case: KTEL receives $15M & still has the right to use the licenses it just sold.
Worst case: if ACP doesn’t get refunded, KTEL receives $10M & still has the right to use the licenses it just sold.

Let’s also not forget about the $4.5 million in cash KTEL should be getting from the close of the sale of Tempo.

Research

Fri, 22 Dec 2023 15:06:16 GMT

Konatel Inc (NASDAQ:KTEL) ($0.79; $35.6M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division, announced the closing of non-dilutive financing to help accelerate growth.

“Approximately $1.5 million of financing was provided at closing to purchase equipment, with potentially up to $25 million available to support the growth of IM Telecom.”

"ACP Finance maintains strict requirements for minimum revenue and monthly activations to qualify for this credit facility. We are pleased that in the fourth quarter of this year, Infiniti Mobile reached those minimum requirements. So, we are excited to partner with ACP Finance, which have provided other Lifeline and Affordable Connectivity Program ("ACP") providers with capital to substantially grow their revenues while improving their cash flow. As stated in prior Securities and Exchange Commission ("SEC") filings, our team has been working for many months to prepare the infrastructure for accelerated growth. Now with this credit facility, we will have the additional capital to expand our distribution without incurring term debt or diluting our shareholders' ownership. Through this agreement, we will be able to purchase mobile devices (cell phones and tablets) at an overall cost (equipment and financing) lower than existing sources. We believe the impact on our cash management and revenue will be positive with this credit instrument as we continue to expand our Lifeline and ACP customer base."

Research

Tue, 05 Dec 2023 18:46:31 GMT

Konatel Inc (NASDAQ:KTEL) ($0.83; $35.6M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division, showed a Form 4 filing from Robert Beaty on November 29, 2023 that, at first glance, looked like a typical options related Form 4 However, there is a bit of InfoArb if you read the explanation section.

The options are tied to the performance in the amount of customers VIVA-US telecommunications (new recently announced service agreement) brings to KTEL. The options vest provided 100,000 customers are brought on and stay on.

“These 650,000 ISO's vest at one-third (1/3rd) per year, conditioned on Apeiron Systems, Inc., a wholly owned subsidiary of the Company ("Apeiron"), having been provided 100,000 simultaneous cellular customers by VIVA-US telecommunications, Inc. ("VIVA") under Apeiron's "Mobile Reseller Agreement" with VIVA dated November 10, 2023, and VIVA being fully paid and current with all outstanding amounts owed to Aperion, within one (1) year of the date of grant and with at least 100,000 of such simultaneous customer cellular contracts then being in full force and effect, or the grant of these ISO's shall expire.”

It will be interesting to see if this new arrangement brings some more attention to the potentially large revenue opportunity from the contract with Viva announced with the company’s Q3 numbers.

Research

Tue, 21 Nov 2023 15:42:34 GMT

Konatel Inc (NASDAQ:KTEL) ($0.70; $30.0M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division reported Q3 2023 results:

Sales of $4.7 million vs $5.9 million in the prior year
Non-GAAP net loss of $0.00 vs a loss of $0.02 in the prior year
Entered into a 5-year exclusive hosted services agreement with an international telecommunications group, currently serving over three million customers.

On the quarter:

“We continue to execute our strategy of scaling to achieve sustainable, profitable growth. Over the past several quarters, we invested in additional infrastructure and expansion of our service area (licenses), which we expect will allow us to begin an expansion of our market share. In Q2 of 2023, we started to shift our government-subsidized product mix towards higher reimbursement (revenue) products/services resulting in increased gross margins in Q3, 2023. Sequentially, revenue was up slightly compared to the second quarter of 2023 and well above our lows of $4.0 million in the first quarter 2023, despite the year-over-year decline, which was primarily the result of a challenging comparison given the large number of lower-margin activations in the prior year period.”

On new service agreement:

“Subsequent to quarter end, our wholly owned subsidiary, Apeiron Systems, entered into a five-year agreement with Viva-US Telecommunications, Inc. ("Viva-US"), as the exclusive supplier of wholesale cellular voice & data, messaging, international call termination, smart SIM (Subscriber Identity Module) and other telecommunications services. Viva-US is a new U.S. Mobile Virtual Network Operator (MVNO) and part of the Balesia Technologies group of companies currently supporting over three million cellular customers in Bolivia, Mexico, and Argentina. We believe the Viva-US opportunity has the potential to diversify our revenues by substantially expanding our hosted services business in the coming quarters."

The quarter was in line with what we expected. Regarding the government subsidy business, until the company gains access to more capital or executes more third party arrangements like it did with Equiva Health, we anticipate the growth in this business will be slow and steady.

Some investors might question KTEL’s liquidity position, but have likely not read the company’s flings deep enough to understand these details.

However, we are approaching the nine month time frame where the company’s purchase (and subsequent sale) of Lifeline provider, Tempo Telecom could close. The $4.5 million gross proceeds from this deal would allow the company to pay off all its $3.6 million in debt and still leave some capital for growth. Furthermore, KTEL’s lender has also extended additional credit to the company.

“The Company sourced short-term financing in June, 2022 of $3,150,000. In June, 2023, the Company agreed to additional financing with CCUR, up to an additional $2,000,000 in delayed draw allocations. As of June, 2023, the Company has received an initial delayed draw in the amount of $500,000 to help facilitate its growing Mobile Services segment and support higher customer acquisition costs (sales).”

But the big news in the quarter, which we think might be underappreciated by investors until management provides more color, is the “5-year exclusive hosted services agreement.”

This deal seems to have the potential to materially diversify KTEL’s revenue and probably come with a much lower churn than the subsidy business. While we don’t have details on how KTEL will earn revenue from this new contract, this type of arrangement would typically entail KTEL getting a set fee per line per user that would use KTEL’s network (some portion of the 3 million users).

Hopefully, KTEL can provide more details soon, including Viva-US’s relationship with the 3 million customers of the telecom group it belongs to. The major significance of this development is that the revenue that can potentially come from the non-subsidy business could be substantial and alleviate the fear some investors may have that the company is solely dependent on the Lifeline Program and Affordable Connectivity Program (ACP), which both require capital to grow and continued funding from the government.

Research

Thu, 26 Oct 2023 14:36:04 GMT

Regarding Konatel Inc (NASDAQ:KTEL) ($0.92; $39.4M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division, we think it is important to note that The White House is finally asking congress to construct and pass a bill that will add an additional $6 Billion to fund Affordable Connectivity Program (ACP) for another year to provide over 21 million American households internet services.

We will watch the progress of this proposal closely to monitor the next move from the House/Senate. This topic and our belief that Congress will act to extend ACP is one we addressed in our research update report on KTEL last month, KonaTel, Inc.: A Few Catalysts Away From Getting Back On Growth Track.

The key takeaway is that if a bill is passed it gives congress enough time to pass a more encompassing bill giving the FCC the authority to collect fees from telecom and broadband companies to fund ACP, essentially making the program permanent, which will avoid periodic instances of Congress having to replenish funding. This is similar to how the FCC currently funds the Lifeline program.

Here are a few other articles you can reference that cover this development:

Research

Tue, 15 Aug 2023 18:49:40 GMT

Konatel Inc (NASDAQ:KTEL) ($0.95; $40.3M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division reported Q2 2023 results:

Sales of $4.6 million vs $5.1 million in the prior year
Non-GAAP net loss of $0.02 vs a loss of $0.03 in the prior year

Management also provided forward-looking commentary that most notably referenced its growing base of customers. Subscriber activations were up 50% versus the previous first quarter, and company projections are for that base to grow significantly. Recurring revenue will get a boost from the growing number of customers, which the company sees trending up significantly going forward despite macroeconomic trends. KTEL is one stock that we view as a recession proof stock due to the nature of their business.

"For the second quarter, our gross profit increased, and our operating and net losses narrowed despite lower revenue. Lower delivery and lower operating costs, as well as the addition of higher ARPU activations in our Mobile Services segment, are the primary factors driving the improvement in profitability. Demand for our government subsidized services remains robust, and the investments we have made in infrastructure in recent quarters will enable us to scale our business at a pace that is both manageable and sustainable over the long term."

McEwen continued, "Our infrastructure improvements are largely complete and customer acquisition is accelerating with second quarter subscriber activations up 50% versus the previous first quarter. We are positioned to support a significantly larger customer base. We continue to believe that the economics of our business model are highly attractive and will yield sustainable profitability and positive cash from operations as our customer base grows. At the core of our business, we have an economic engine that is self-sustaining and scalable, regardless of fluctuations in macroeconomic conditions."

While some investors may view the Q2 performance negatively because revenues were down, the results were in line with our expectations, given the commentary in the Q1 2023 press release indicated that activations from their subsidized mobile and broadband communication business were picking up from the weak first quarter performance. So in fact, on a sequential basis, revenue increased from around $4 million. Recall that management stated that the reason for the slowdown in growth over the last couple of quarters was due to more money being spent to get the infrastructure ready for the rapid growth it expects to occur in coming quarters, as opposed to using capital to acquire customers in the subsidized telecommunications business.

Research

Tue, 16 May 2023 14:45:39 GMT

Konatel Inc (NASDAQ:KTEL) ($0.72; $30.3M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division reported Q1 2023 results:

Sales of $4.0 million vs $4.2 million in the prior year
Non-GAAP net loss of $0.01 vs $0.00 in the prior year

Key takeaways:

Last year’s first quarter benefited from favorable pricing from Emergency Broadband Program which was paying $50/user vs the ACP program which pays $30
Company is currently “experiencing a 50% increase in subscriber activations vs. previous quarter”
Infrastructure to grow substantially with minimal expansion in G&A

Management comments:

We are set to support a significantly larger customer base with minimal expansion of general and administrative expenses. Additionally, we continue to add distribution partners to broaden our growth across the United States, while also adding a new customer retention program in May and affinity partnerships to serve vertical markets such as healthcare. In addition to our current sales model, we expect to complete alternative "asset-light" growth relationships, like our Equiva partnership, that will enable us to expand our customer base without the need for substantial amounts of capital, generating additional cash flow to expand further.

As we invest in our business and look towards substantive growth, we believe the economics of our business remain attractive and will yield profitability and positive cash flow as we expand our customer base. With our veteran leadership team in place, we are energized by the number of significant opportunities for expansion. We are creating a company to substantially grow predictable revenues, earnings and cash flow, even during weaker economic conditions."

The 10-Q offered additional detail on the company’s outlook and recent business decisions:

“As previously discussed in our filings during 2022 (including our 10-K Annual Report for the year ended December 31, 2022, we began to accelerate growth opportunities within our Mobile Services market segment through our wholly owned subsidiary, IM Telecom. In Q4 2022, activity slowed as we repositioned distribution channels to higher profit territories. Through March 31, 2023, we have seen increasing activations and ARPU (“Average Revenue Per User”) within these channels”

“We received $3,150,000 in capital financing during the year ended December 31, 2022, to help grow the Mobile Services base in IM Telecom. Our business gained additional distribution channels as a result, and at its peak more than tripled our subscriber base. High growth phases require immediate expense recognition, and as a result, management expected net operating losses during this high growth phase. Following this initial high-growth phase, management slowed the acceleration, and our business had an immediate (and expected) return to positive cash flow and recorded net operating profit of $301,135 in Q4 2022. In Q4 2022, management shifted our distribution channels towards the highest profit areas, and has seen Average Revenue Per User (“ARPU”) increase as a result. Management also gained additional equipment suppliers, and has been able to leverage terms on device purchases, moving from prepayments up to thirty (30) days. We expect terms to become more favorable and offer greater use of our cash resources in 2023.”

Research

Tue, 18 Apr 2023 17:28:43 GMT

Konatel Inc (NASDAQ:KTEL) ($0.72; $30.3M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division reported Q4 2022 results:

Sales of $4.8 million vs $3.9 million in the prior year
Non-GAAP EPS of $0.01 vs $0.02 in the prior year

“We delivered $20 million in revenue in 2022, a 56% increase over last year and invested in key business areas and partnerships that we believe will further drive customer growth and future profitability," stated KonaTel Chairman and CEO Sean McEwen. "Contrary to other market segments, our business model continues to provide investors with a strong defensive moat against recessionary headwinds, as demand for our government subsidized services typically increases during worsening economic conditions...

We remain committed to growth, but more importantly, growth at a pace that is manageable and sustainable for the long-term...

...We intend to resume aggressive growth in 2023, commensurate with the expanded infrastructure (personnel, distribution, and systems) we created in 2022. We are laser focused on creating shareholder value, strengthening our competitive position and identifying niche markets and strategies to promote customer loyalty, such as our partnership with Equiva, while we build a stable, scalable and profitable enterprise."

While the results were in line with our expectations, the acquisition news from yesterday is the major takeaway of recent developments in the KTEL story that can significantly accelerate growth. ICYMI, here is our note from yesterday.

Research

Mon, 17 Apr 2023 17:33:42 GMT

Konatel Inc (NASDAQ:KTEL) ($0.67; $28.2M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division. filed an 8K showing the company has entered into two separate definitive agreements:

On January 24, 2023 KTEL entered into a non-material membership interest purchase agreement to acquire 100% of Tempo Telecom that hold Lifeline licenses in 21 states.
On April 6, 2023 KTEL entered into an agreement with Insight Mobile Inc;
- KTEL is to receive $4.5 million for contract rights given to Insight for what appears will allow Insight to activate Lifeline lines using KTEL’s licenses (Master Distribution Agreement).

Our takeaways:

KTEL will be receiving a material amount of cash upon closing, which should assist in lighting up more lines under its government subsidy communication services business. Lack of capital has been a large impediment, limiting KTEL from growing faster. It also reduces the risk of dilution related to raising equity capital to grow the business.
It appears that KTEL may be entering into an agreement with Insight Mobile (master distribution agreement), allowing insight to activate Lifeline and ACP lines using KTEL’s licenses. Depending on the capital Insight is capable of deploying and the terms of “rental” arrangement, this could be an interesting source of revenue for KTEL, without any needed capital commitment from KTEL.
Based on publicly available information on the FCC website, it appears that the Tempo acquisition would add 15 additional Lifeline states to KTEL’s current approved states (10), after taking into account overlap in the states that Tempo and KTEL have common licenses in.

The closing of both transactions requires FCC approval. Additionally, Insight has a 60 day due diligence period to notify KTEL to terminate their agreement.

Research

Fri, 31 Mar 2023 19:56:15 GMT

Konatel Inc (NASDAQ:KTEL) ($0.74; $31.4M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division.

Yesterday we published a PodClip discussing some positive developments surrounding the industry in which KTEL operates. Maj covers a favorable industry legal update as well as some new legislation that could solidify the continued long term funding of the subsidy programs that KTEL is involved in.

We view these developments as very significant as we don’t think the market has picked up on them yet. We believe that this significantly reduces the risk profile of companies operating within the subsidy programs that provide low income households voice, data and broadband services.

The legal victory for the Federal Communications Commission (FCC) (discussed in the PodClip) is a huge win that should alleviate any uncertainty about the longevity of KTEL’s bread and butter Lifeline revenue (Voice), the legislation surrounding funding the subsidy programs should ensure that the Affordable Connectivity Program (ACP) program (broadband) becomes permanent.

For a little more color on what’s going on, recall that Lifeline was a program passed by Congress that gave the FCC the duty to collect fees levied against telecommunication companies to fund the program.

The legal battle we previously discussed last week challenging the FCC’s ability to set and collect fees was a huge win for Lifeline.

Regarding ACP, recall that the program went live as a result of a bill that was passed alongside the COVID relief bill that also set aside the funding amount for the program. Thus, the funding would eventually run out.

Now, the new bipartisan legislation being proposed will give the FCC the ability to charge fees to telecom companies as well as broadband companies and other communication operators. So it seems, the FCC would also be in charge of funding the ACP.

You can view the details of the dismissal of the lawsuit against the FCC here and details regarding the new legislation being proposed here.

Ultimately, we think these developments could significantly expand the valuation multiples of related stocks.

For example, the ACP developments could also be very positive for Surgepays, Inc. (NASDAQ:SURG) because the company only holds a license to operate in the ACP subsidy program. The funding for the ACP was forecast to run out by mid-2024. We were mentioning this because we know some of you follow SURG

PodClips

Thu, 30 Mar 2023 18:23:23 GMT

In this PodClip, Maj talks about some positive developments surrounding the industry in which KTEL operates.

Research

Tue, 28 Mar 2023 13:48:10 GMT

KTEL court rules in favor

Konatel Inc (NASDAQ:KTEL) ($0.83; $35.4M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division, should see a risk factor diminish as an important court ruling validates the mechanism used to fund Lifeline.

New GeoInvesting premium subscribers can get caught up on the KTEL story by viewing the following research:

February 8, 2021 - Konatel (OOTC:KTEL) Impromptu Chat with Maj Soueidan
March 30, 2021- Original Report - Recent Acquisitions Set The Stage For KonaTel (KTEL) Inflection to Sustained Growth
June 24, 2022 - Management Briefing with Sean McEwen, CEO, and Charles Griffin, President, KonaTel Inc. (KTEL)
December 3, 2022 - KonaTel, Inc. Presents at Inaugural C-Suite Executive Summit Hosted By GeoInvesting a& MS Microcaps

As a reminder you can find all of our video content on all our companies and interviews with investors here.

In the February 2023 Open Forum (100:06), we reviewed KTEL’s business structure and discussed a lawsuit challenging the Universal Service Fund (USF) contributions that assist in paying for low income families telephone and internet connectivity through the Lifeline government subsidy program.

The USF is funded by a quarterly fee structure (based on landline usage) set by the Federal Communications Commission (FCC) that it applies to telecom companies (passed on to the consumer).

A key fact to this arrangement is that Congress originally approved the Lifeline program and granted the FCC a generous latitude on how to set the fee structure to fund the program..

In the 5th Circuit Court of Appeals, Petitioners challenged the revenue-raising guidelines the USF and FCC follow, calling the mechanism unconstitutional. However, it appears that on March 24, 2023, the court dismissed the case, ruling that there is no violation in the practices.

To be clear, the Petitioners were never challenging the Lifeline program, but only the way the program was funded. However, a few people on social media were making assumptions based on imperfect information.

We believe that this case played a primary role on why KTEL shares have been so weak lately.

Research

Thu, 16 Feb 2023 16:43:56 GMT

Konatel Inc (NASDAQ:KTEL) ($0.78; $32.9M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division.

Yesterday, Equiva Health, a health relationship management platform company issued a press release stating they partnered with Infiniti Mobile to serve as a catalyst in helping hospitals, nursing homes, insurers and other healthcare organizations advance enrollment in the Affordable Connectivity Program (ACP) and in helping these entities engage digitally with individuals for targeted population health initiatives.

“Via Equiva ACP Connect, healthcare organizations benefit from an easy-to-use, highly affordable, turnkey service to quickly configure tablets and aggregate the display of population-targeted educational resources and care management tools. Additionally, Equiva provides full service to distribute these tablets to enrollees via healthcare facilities or direct to individual homes.

The ACP is open to households in which at least one member is already enrolled in Medicaid, SNAP, SSI, WIC, Tribal-specific programs, and other government assistance programs. While a White House press release indicates that 48 million households – nearly 40% of U.S. households – are eligible for the Affordable Connectivity Program, according to the FCC only 15.4 million households had subscribed as of January 2023, and less than 15% of eligible Medicaid patients had enrolled.”

We believe this development is widely unknown as the press release did not mention Konatel or have the stock symbol KTEL in the release. We have encouraged management to issue its own press release on this development.

We hope to find more about this relationship in terms of how big it can be and how many customers Equiva is targeting.
Our main takeaway here is that this development coincides with a goal of management to find new ways to reduce churn in the tablet ACP business. This goal was expressed by the Company at the golf event GeoInvesting and MS Microcaps hosted - An inaugural C-Suite Executive Summit with Konatel Inc in December 2022 in Fort Lauderdale. A replay of the event can be found here.

Research

Tue, 15 Nov 2022 19:08:19 GMT

Konatel Inc (NASDAQ:KTEL) ($1.20; $49.9M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division announced Q3 2022 results:

Sales of $5.9 million vs $3.6 million in the prior year
Non-GAAP net loss of $0.02 vs Non-GAAP EPS of $0.01

"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 Mobile 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.

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 approach to growth.

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."

Our major takeaway is management’s emphasis on its commentary to grow profitably. It was also nice to see that the company may be getting in position to experience growth momentum in its hosted service segment.

Research

Tue, 16 Aug 2022 04:00:00 GMT

Konatel Inc (NASDAQ:KTEL) ($1.74; $72.4M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division announced Q2 2022 results:

Sales of $5.1 million vs $2.9 million in the prior year
Non-GAAP net loss of $0.03 vs Non-GAAP EPS of $0.01

"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."

"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."

As the company mentioned in prior communication with investors, in the short term, earnings will take a hit as the company accelerates revenue growth. Still, we’re not sure how investors will react to the sticker shock EPS loss.

Regardless, investors who understand how the model works will hopefully realize that the reason for the loss is strictly due to accounting standards that need to be adhered to for customers that are on-boarded as part of the subsidized government telecom services business.

Specifically, the standard dictates that the company has to recognize all the costs incurred thttps://twitter.com/marco_fcf/status/1559489128974012416?s=21&t=w1MAIQ2Sl8C7_RrhRtnGrwo acquire the customer, with the subsidies not being recognized until the company actually receives the money from the government. This tweet from one of our members does a great job in expressing what the quarter would have look like on an adjusted basis:

We are going to suggest to management that they publish his type of disclosure in future press releases if they are permitted to do so.

PodClips

Mon, 27 Jun 2022 13:28:23 GMT

KTEL 6/24/2022 Morning Managememt Briefing Recap

Research

Wed, 22 Jun 2022 04:00:00 GMT

Konatel Inc (NASDAQ:KTEL) ($1.13; $47M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division, filed an 8k showing it has secured financing to help with its accelerated growth plans.

The company has entered into a note purchase agreement with CCUR Holdings for an amount of $3.15 million. KTEL intends to use the load to pay off the remainder of its EIDL Loan ($150,000) and use the remaining $3 million to allocate to the acceleration of their mobile services growth strategy, which was partially discussed in the first quarter release:

“We believe the long-term economics of our business are highly attractive and will result in increasing profitability and cash flow beyond this current period of substantial growth,” McEwen continued. “With a new, top-notch management team in place we are energized by the emerging opportunities for expansion and to level up our business as we reach critical mass in our customer base.”

McEwen concluded, “Furthermore, the additional $3 million in working capital will enable us to activate an additional 30,000 new lines of service each quarter. We can typically recoup customer acquisition costs in less than 120 days after activation, turning our cash resources at least three times every 12 months. As stated in our Q4 earnings press release, we are creating a company to substantially grow predictable revenues, earnings and cash flow, even during weaker economic conditions.”

–

Research

Mon, 23 May 2022 14:26:51 GMT

Konatel Inc (NASDAQ:KTEL) ($0.85; $35.3M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division, announced Q1 2022 results:

Sales of $4.2 million vs $2.4 million in the prior year
Gross profit was $1.6 million vs $911,000
Non-GAAP EPS of $0.01 vs EPS $0.00

“As one of only a limited number of approved national wireless resellers under expanded government programs, we are moving aggressively to make new wireless voice and data services available to underserved households across the nation."

"Accompanying this exponential growth is an increase in investment in infrastructure as well as an increase in upfront customer acquisition costs, which are expensed as incurred and typically recovered within 120 days," McEwen continued. "In order to effectively scale our business, we more than doubled our line count to approximately 23,000 lines over the past 90 days, the first significant increase in capacity in our history, with additional capacity to continue our growth. Importantly, investment in infrastructure and the acquisition of new customers enables new, sticky recurring revenue streams that provide an attractive return on invested capital."

"We believe the long-term economics of our business are highly attractive and will result in increasing profitability and cash flow beyond this current period of substantial growth," McEwen continued. "With a new, top-notch management team in place we are energized by the emerging opportunities for expansion and to level up our business as we reach critical mass in our customer base."

McEwen concluded, Furthermore, the additional $3 million in working capital will enable us to activate an additional 30,000 new lines of service each quarter. We can typically recoup customer acquisition costs in less than 120 days after activation, turning our cash resources at least three times every 12 months. As stated in our Q4 earnings press release, we are creating a company to substantially grow predictable revenues, earnings and cash flow, even during weaker economic conditions."

We anticipate that earnings and cash flow will experience significant gains after the company deploys $3 million debt financing proceeds to purchase inventory and recoups initial costs within around 120 days

We intend to immediately examine the filing more closely to give us an idea where revenues are heading.

Research

Mon, 18 Apr 2022 04:00:00 GMT

Konatel Inc (NASDAQ:KTEL) ($0.99; $40.8M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division announced Q4 2021 results:

Sales of $3.9 million vs $2.6 million
Mobile service revenue of $2.5 million vs $1.0 million
Non-GAAP EPS of $0.02 vs $0.00

Business highlights:

Accelerating sustainable and profitable recurring revenue growth, with the addition of new and enhanced services.
Except for an FCC license, all intangible assets are fully amortized as of December 31, 2021, eliminating amortization expense going forward. Full-year 2021 amortization expense was approximately $850,000.

"Looking ahead, we expect our bottom-line earnings to benefit from reduced amortization expense beginning in the first quarter of 2022 since the majority of our intangible assets, about $850,000, were fully amortized as of December 31, 2021. More importantly, we expect cash generated from operations will be positively impacted by our growing Mobile Services business and an increase in sales from online channels, which command higher gross margins. As our business scales, we anticipate net earnings growth will outpace revenue growth given the operating leverage in our business. Our balance sheet continues to strengthen as we grow our business, expand our margins, generate positive cash from operations and avoid shareholder diluting debt. Going forward, we expect growth from new service offerings will provide additional liquidity for our business enabling reinvestment in our cloud offerings and potentially pursuing strategic transactions that would expand our Mobile and Hosted Services coverage…

…As our current growth continues, we will explore additional accretive acquisition opportunities and anticipate qualifying for a Nasdaq up list this year. Furthermore, our diversified and profitable recurring revenue portfolio of Hosted Services and Mobile Service provides a defense against economic downturn. Considering current investor sentiment, we believe predictable and profitable growth is more important than revenue growth alone. Lastly, the addition of new members to our management team in the first quarter of 2022, including Chuck Griffin President/COO of KonaTel, Jason Welch President of IM Telecom and Todd Murcer EVP of Finance, who have all worked together previously, bring significant telecom management and M&A experience."

Research

Fri, 25 Mar 2022 04:00:00 GMT

3/25/2022 Research "Skull Session" Clip - Konatel (KTEL)

Research

Tue, 04 Jan 2022 16:34:46 GMT

Konatel Inc (NASDAQ:KTEL) ($1.75; $72.2M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division, announced the hire of seasoned Telecom executive Chuck Griffin as President and Chief Operating Officer.

Background:

“Prior to joining KonaTel, Mr. Griffin served as Chairman and Chief Executive Officer of Lingo Communications, a provider of IP-based Cloud voice and data solutions, following its merger with Impact Telecom in 2018.

As one of the original founders of Impact Telecom, Griffin led Impact from a start-up to a company with annual revenues of over $290 million and more than 300 employees servicing 250,000 customers worldwide. He ultimately guided the company to a successful exit in 2020.”

Comments:

"I am energized by the emerging opportunities for KonaTel. The Infrastructure Investment and Jobs Act that was signed into law in November significantly increases the company's addressable market and serves as a tremendous catalyst for its next level of growth. The company is well-positioned to capture a meaningful share of this government-funded spending, which is directed towards providing access to communications infrastructure for all U.S. residents. It's an exciting time in the industry, and I am eager to work with Sean and the team to help lead the company through this next phase."

Research

Thu, 11 Nov 2021 18:00:58 GMT

Konatel Inc (NASDAQ:KTEL) ($1.43; $58.1M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division, reported Q3 2021 results on Wednesday which we highlighted in yesterday's email.

Now that we had time to digest the 10-Q, we wanted to highlight what we feel is significant InfoArb from the filing.

IM Telecom, prior to being acquired by KTEL, used to provide California Lifeline service through a reseller agreement it had with a licensed Lifeline telecom provider. At its peak, the company distributed over 10,000 new lines of service per month. Due to the low margin nature of a reseller arrangement, the company ceased its Lifeline business in CA.

However, now that KTEL has a license to provide lifeline in California, it will capture the entire government subsidy by selling Lifeline services in CA. Equally as important is that the company has put the same management team in place that led IM Telecom’s distribution efforts in 2017, when it was lighting up CA Lifeline revenues.

With over 3.6 million eligible customers and a limited number of eligible providers, 10,000 lines per month certainly seems like an achievable goal. If KTEL can capture 3% to 5% of the 3.6 million eligible Lifeline households in CA, the revenue generation from CA alone could be massive ( 65 million to 115 million assuming $55 per line subsidy).

Research

Wed, 10 Nov 2021 16:06:29 GMT

Sales of $3.6 million vs $2.5 million in the prior year
EPS of $0.01 vs $0.00

"In our higher-margin Mobile Services business, which includes retail and wholesale cellular and IoT mobile device services, revenue is up 50.4% year-to-date on increased volumes driven by new agent distribution and recent approvals for participation in government subsidized cellular and broadband data distribution programs. Specifically, the Federal Communications Commission's (FCC) Emergency Broadband Benefit (EBB) program was opened for enrollment and as an approved provider of program services in several states, we have seen a marked uptick in the number of customers we serve under the program. In addition, expansion of our Lifeline mobile services into the state of California was approved earlier this year and accordingly, we expect distribution of essential voice and data services to California residents under our Infiniti Mobile brand to begin as planned later in the fourth quarter. According to the FCC, there are an estimated 3.6 million Lifeline eligible households in the state of California with nearly 2.4 million currently unserved. As one of only a handful of approved national wireless Lifeline providers to hold an FCC approved Compliance Plan, we are well positioned to provide basic cellular and wireless broadband data services to millions of eligible new customers.

Furthermore, we recently contracted with two new master agencies with national distribution to further expand our channels and reach many more EBB and Lifeline eligible households across several states. Distribution through these new channels is on schedule to commence later this year.

The Infrastructure Bill that was approved this past weekend provides for $65 billion1 in new investment for broadband internet to advance government efforts to ensure all U.S. residents have access to reliable, high-speed internet," continued McEwen. "If signed, this legislation will significantly increase our total addressable market and serve as an additional catalyst for future growth."

Research

Wed, 25 Aug 2021 04:00:00 GMT

Konatel Inc (NASDAQ:KTEL) ($0.79; $32.1M market cap), a voice/data communications holding company, including providing government subsidized services to low income households through its Infiniti Mobile division, should meaningfully benefit from The Affordable Connectivity Fund (ACF) which is part of the new infrastructure bill.

While Infiniti has begun to benefit from the Emergency BroadBand (EBB) bill that kicked off in Q2 2021, one of the uncertainties surrounding the EBB was that once the $3.2 billion in funds allotted for the program were exhausted, it would end.

Well, the ACF will give a shot to Infiniti Mobile since, if it passes the house (already passed the Senate), the ACF will be funded with $14.2 billion and expand the amount of households that would qualify for the program.

KTEL is already a high conviction Model Portfolio holding and this news only strengthens that conviction. We think this development is incredibly positive for the company and should allow investors to place higher valuation multiples on Infiniti Mobile’s cash flow.

Excerpts surrounding the ACF:

“The trillion-dollar infrastructure bill that passed the Senate earlier this month includes $14.2 billion for the Affordable Connectivity Fund and will become law if also passed by the House and signed into law by President Biden. It would essentially replace the Emergency Broadband Benefit (EBB) program, the current but temporary program designed to help low-income Americans afford broadband during the COVID-19 pandemic.

Households currently eligible for the FCC Lifeline program would be eligible for the Affordable Connectivity Fund, making at least 33.2 million households eligible for the proposed fund, the S&P authors note. In comparison, the EBB program had just under 4.7 million enrolled households as of August 15, according to the authors.

Enrollment in the Affordable Connectivity Fund likely would exceed EBB enrollment for another reason as well: Service providers would be required to promote the offering – a requirement that doesn’t exist for the EBB program.”

We need to stress again that

See our initial article on KTEL here.

Research

Fri, 20 Aug 2021 16:29:36 GMT

Konatel Inc (NASDAQ:KTEL) ($0.80; $32.5M market cap) - GeoInvesting contributor Tim Heitman had a chance to speak with KTEL CEO Sean McEwen after the company’s recent Q2 results. KTEL is a voice/data communications holding company that we’ve covered at great lengths and is currently one of our higher conviction plays. Catch up on all of our coverage here.

We highly encourage you to read the conversation notes here, which covers the EBB program, state expansion catalyst, acquisition strategy, new hires and more color on the overall business strategy.

PodClips

Tue, 10 Aug 2021 12:10:52 GMT

KTEL Q2 Earnings Update PodClip

Research

Mon, 09 Aug 2021 14:21:53 GMT

Konatel Inc (NASDAQ:KTEL) ($0.91; $41.0M market cap), a voice/data communications holding company announced Q2 2021 results:

Sales of $2.9 million vs $2.2 million in the prior year
EPS of $0.01 vs $0.00 in the prior year

During the second quarter, we drove significant revenue growth of nearly 30% capturing a meaningful share of the increasing demand for telecommunications and data services and delivered positive net income of more than $340,000," stated KonaTel Chairman and CEO Sean McEwen. "Increasingly, we are emphasizing the importance of a sales-oriented approach towards the market with continued investment in our sales organization including the recent launch of our expanded agent platform to support our indirect channel."

McEwen continued, "At the same time, recent approvals for participation in federal and state subsidized cellular programs expands our opportunities and provides a natural revenue hedge against market volatility that can result from changing economic conditions. Most recently, we were unanimously approved as a provider of cellular services by the California Public Utilities Commission (CPUC) under the Federal Communications Commission's (FCC) LifeLine program. The CPUC approval process is rigorous, and approval has been granted to only a select number of providers with the most recent approval prior to KonaTel dating back to 2017. We are eager to serve eligible California families with essential voice and data services."

We believe at least $500,000 of the increase was tied to the new government subsidy rates from the new EBB program that substantially increase the subscription fees telecom companies (like KTEL’s Infiniti Mobile segment) receive for providing telecom services to low income households.

It is important to understand that this increase in revenue primarily came from the subsidies being applied to the company's current lifeline customers in Oklahoma. Moving forward, we expect the company to continue to benefit from the increased subsidies as it penetrates its other eligible states, which now include California, the largest market for low income households.

We’ve bolded a section of a quote from the press release to point you to what particularly interests us:

"Increasingly, we are emphasizing the importance of a sales-oriented approach towards the market with continued investment in our sales organization including the recent launch of our expanded agent platform to support our indirect channel."

We also believe the extra cash flow generated from the Infiniti Mobile will be used to help accelerate growth in its Hosted communication division (CPaaS). We still see shares going much higher from current levels and the stock remains one of our highest conviction plays.

You can see full details on how the EBB program will benefit KTEL here.

PodClips

Thu, 08 Jul 2021 14:22:18 GMT

PodClip - .@majgeoinvesting expands on why $ATGN $CXDO and $KTEL would make for an interesting cloud communication model portfolio and why he is very excited about these 3 stocks being timely selections.

Research

Tue, 22 Jun 2021 17:14:30 GMT

Konatel Inc (NASDAQ:KTEL) ($0.90; $36.6M market cap), a voice/data communications holding company issued an 8K filing yesterday showing updated merger agreement disclosures with the Apeiron acquisition. With the recent strength in share price, the company met its obligation of obtaining a stock price average of over $1.00 for 10 days. In doing so, the company avoids any further dilution that could have come had the stock not achieved these levels.

“in the event that the KonaTel common stock does not reach an average closing price equal to or exceeding $1.00 per share (the ‘Guaranteed Value’) over any period of ten (10) consecutive Trading Days (the ‘Calculated Value’) during the period commencing on December 31, 2020 and ending on December 31, 2021 (the ‘Valuation Period’) as quoted by the applicable Trading Market on which the KonaTel Shares are listed or quoted for trading, KonaTel shall issue to the Apeiron Shareholders for each such share of the KonaTel Shares continuously owned and held of record in the respective names of the Apeiron Shareholders (the ‘Qualifying Shares’) during the Valuation Period the number of shares of KonaTel common stock that is equal to the number of Qualifying Shares multiplied by the difference between the Guaranteed Value and the highest Calculated Value achieved during the Valuation Period”

Research

Mon, 21 Jun 2021 04:00:00 GMT

Apeiron vs Twilio

Many small and medium size businesses have limited IT resources compared to larger enterprise organizations, so Apeiron designed its platform to be more accessible for small and medium size businesses than Twilio. Apeiron’s platform and support tools focus heavily on user experience and ease of integration with the Apeiron network. You do not need to be a developer to use the Apeiron platform, but Apeiron still has the same capabilities and APIs as Twilio.

Thousands of organizations still require legacy communication interfaces (PRIs, T1s, and POTS lines) for their systems (i.e., a company’s internal PBX phone system). In addition to supporting Voice over IP (VoIP), Apeiron also supports a wide array of legacy services. Apeiron’s legacy interfaces allow companies to engage with Apeiron now while providing an upgrade path to SIP and other VoIP solutions as they upgrade their internal systems.

Apeiron generally has lower entry price points than Twilio for the products where we compete. Apeiron provides IP network services where Twilio does not, and Apeiron has a greater emphasis on mobility and wireless communications (4G, 5G, and IoT) in its overall product strategy.

Apeiron vs Sangoma

VoIP Innovations provided voice services via SIP Trunks and was a competitor of Apeiron prior to its acquisition by Sangoma. VoIP Innovations’ CPaaS platform was created by stitching together a series of disparate technologies, obtained through multiple acquisitions. Now these VoIP Innovations components are all part of Sangoma's service provider division.

Apeiron’s platform has been completely developed by Apeiron’s internal engineering team from the ground-up starting in 2014. Apeiron’s systems, user interfaces, and network are all part of a seamless multi-year product development plan versus a product acquisition strategy. Apeiron’s highly efficient platform is the result of this cohesive design (i.e., the operational cost to support Apeiron’s platform is substantially less than platforms cobbled together through technology acquisition).

Apeiron's pricing is generally lower than VoIP Innovations, and Apeiron’s product suite includes IP network services not offered by Sangoma. Apeiron has also placed an emphasis on mobility with 4G & 5G wireless communications and IoT (Internet of Things) solutions well integrated into its platform, services not available from Sangoma.

Research

Fri, 18 Jun 2021 12:04:01 GMT

GeoTeam · KonaTel, Inc. (KTEL) Price Weakness GeoInvesting PodClips

Research

Tue, 08 Jun 2021 18:05:54 GMT

Konatel Inc (NASDAQ:KTEL) ($1.01; $41.0M market cap), a voice/data communications holding company, announced its subsidiary, Infiniti Mobile, has been approved to offer Lifeline in California. On Friday, we listened to the California Public Utilities Commission hearing, and that the vote had passed. Today’s press release offers comments from management on this development:

“By unanimous consent, we are now authorized to deliver expanded network choices from all three national cellular providers to eligible California families under the FCC and CPUC LifeLine Program," stated KonaTel Chairman and CEO Sean McEwen. "This approval expands our addressable market by nearly two million eligible households and provides us with an opportunity to deliver basic cellular service to many underserved and forgotten communities, particularly in rural areas of the state. The LifeLine program is essential to ensuring that all Americans have the opportunities and security that basic phone and internet service provide, and we appreciate California's confidence in our ability to offer additional options for its residents."

While it is nice to see the release, in our opinion, many investors are still unaware of the significance of this development. Also flying under the radar is the huge increase in subsidies paid to companies participating in the Lifeline program from the new Emergency Broadband Benefit program.

This lack of awareness exists because the company has yet to address the subsidy rates and overall potentially positive impacts these developments will have on revenue.

Research

Fri, 04 Jun 2021 14:47:20 GMT

Konatel Inc (NASDAQ:KTEL) ($0.93; $37.8M market cap), a voice/data communications holding company, has been approved to become an eligible Lifeline provider in the state of California. Yesterday, the California Public Utilities Commision held a meeting to vote on the approval for Infiniti Mobile to become a California Lifeline provider.

Please refer to our May 11, 2021 note that showed how KTEL, given California’s estimated 3.6 million eligible Lifeline customers, stood to gain from the approval. This marks the second significant development in the KTEL story, as the recent Emergency Broadband Benefits Program has doubled the reimbursements KTEL was receiving in Oklahoma, where most of Infiniti Mobile customers reside. It also opens the door for the company to market its services to a much larger customer base beyond its current tribal land customer focus in the states it's already approved to operate in.

Research

Tue, 25 May 2021 14:44:41 GMT

Konatel Inc (NASDAQ:KTEL) ($0.80; $32.5M market cap) a voice/data communications holding company, announced Q1 2021 results:

Sales of $2.39 million vs $1.96 million in the prior year
Loss of $0.01 vs loss of $0.01 (after adjusting for PPP loan forgiveness)

The company issued a press release this morning with the following comments from management:

“Demand for telecommunications and data services continues to be robust as work-from-home trends persist, IoT (Internet of Things) wireless data opportunities increase and consumers seek faster, more reliable connectivity from the accelerating deployment of smart devices," stated KonaTel Chairman and CEO Sean McEwen. "We are increasing our internal infrastructure, primarily employed and contracted personnel, to expand our sales channel strategy to meet this growing demand and pursue additional opportunities to further scale the higher margin, Hosted Services segment of our business."

The 10-Q filing offers more details on the company’s outlook and significant developments. We feel it is yet another significant Information Arbitrage opportunity. Late in the day yesterday, we issued the following tweet:

“In addition, IM Telecom has been approved to participate in the Emergency Broadband Benefit Program (“EBB”), which began on May 12, 2021. We anticipate an overall Lifeline/EBB revenue increase of approximately 105% current month over month revenues as we begin to market the EBB program in the eight (8) states in which we are approved as an ETC. We also anticipate being able to expand into the state of California in Q4 of 2021.”

While we recently highlighted both of these developments before, this is the first acknowledgement from the Company on the impact to sales growth from the EBB as well as the first mention of obtaining the California license.

You can see full details on how the EBB program will benefit KTEL here, as well as our initial take on KTEL being on the doorstep of a huge opportunity in California

Even though the stock has approximately doubled over the last few weeks, on the heels of our research, we still believe there is significant upside and that most investors have not connected all the pieces to this puzzle.

Research

Tue, 18 May 2021 17:17:42 GMT

Konatel Inc (NASDAQ:KTEL) ($0.73; $26.4M market cap) a voice/data communications holding company, announced its wholly-owned subsidiary, Infiniti Mobile, has been approved as a provider of broadband services as part of the Federal Communications Commission's (FCC) new Emergency Broadband Benefit (EBB) program.

"Like transportation, energy, utilities and many other basic systems, internet connectivity is vital to nearly everything we do," stated Nick Metherd, COO of Infiniti Mobile. "Through this important program, millions of families that previously lacked broadband services will now have access to the internet, an essential service in today's economy. We applaud the move to bring broadband service to millions more in our country and look forward to being a part of the solution to narrow the digital divide."

We highlighted this development back in mid April in what was our first of two major InfoArb opportunities. You can see full details on how the EBB program will benefit KTEL here.

Last week, we highlighted what we believe is another major development in the KTEL story. The state of California will be holding its Public Utilities Commission meeting on June 3, 2021. The purpose of the meeting will be to vote on the approval for KTEL to become a lifeline provider in the state of California, which has the largest number of eligible lifeline customers by far. You can see that full InfoArb note here.

Research

Tue, 11 May 2021 12:54:44 GMT

**We’ve Found Yet Another Significant Info Arb Opportunity With Regards To KTEL**

Now, we’ve come across another significant development in the KTEL story. In our March 30, 2021 article, we discussed how KTEL has 8 active Federal Communication Commission mobile Lifeline Compliance Plan licenses. One avenue of additional growth would be obtaining new licenses in other states. On June 3, 2021 the Public Utilities Commission of The State of California Board will be voting on Resolution T-17729 that would designate KTEL to be a LifeLine provider in the state of California which has the largest number of eligible LifeLine customers by far than any other state.

Please see the full update here.

As of 2019, California had an estimated 3.6 million eligible customers, with about 51% participation rate. Below shows a screenshot from the Public Utilities Commission of The State of California:

This designation is for non-tribal lands (which is a larger segment of eligible customers) and KTEL is eligible to receive a $39 per line activation fee, plus additional reimbursements (over which the federal government will chip in) for the plans below.

Basic Plan – Unlimited voice and text with 4.5 GB data for $0 per month (Free new handset) Retail price: $24.10.
Standard Plan - Unlimited voice and text with 6 GB data for $0 per month (Free new handset) Retail Price: $28.10.

This largely coincides with a conversation that GeoInvesting contributor Glenn Bloxhan-Mundy had with Sean McEwen, CEO of Konatel, when addressing how the state of California

“...And then I would also mention that there are some states like California that contribute an additional level of reimbursement above and beyond the federal government. I think California..I believe it's around $24.25, or almost $25…”

These plans will supersede the prior rate of around $9.25 a line prior to the new Emergency Broadband Benefit program.

To receive an Eligible Telecommunications Carrier (ETC) provider designation to offer services in Tribal lands, the company will be required to file additional submissions that are carefully procured to the Public Utilities Commission Of The State Of California.

“IM Telecom shall file a Tier 2 Advice Letter to request approval for any future changes to its approved designated service areas, or any request to serve Tribal Lands. This request shall include a description of the areas to be served; a list of the geographic areas; and a map(s) in Shapefile format of the proposed service area.”

This is so they can eventually take advantage of California’s Tribal population, which as of 2010, was the largest in the United States at 362,801, eeking out Oklahoma (a market KTEL already serves) and Arizona, housing the second and third largest populations, respectively.

“California’s Native American communities include descendants or members of 108 California Based federally recognized tribes (about 20 percent of all tribes in the United States). As of 2008, an additional 74 tribes in California are petitioning for federal recognition.”

As noted before, KTEL might qualify to receive more per household on these federal lands (up to $85 per line vs. $34.25 before the new EBB program).

Caveats.

While we see these development as a very bullish, there is no guarantee that the board will approve the recommendation for KTEL to be a LifeLine provider in the state of CA
It's possible there will be delays in the approval process due to other factors (administrative, revisions, etc.)
The timeline for the additional revenue stream, should KTEL be approved, could be protracted while the company gets up to speed on the requisite actions and qualifications laid out in the proposal
Requirements stated in the proposal are strict and KTEL is subject to scrutiny should they fail to execute

Interviews

Mon, 19 Apr 2021 12:10:19 GMT

Summary of 4/17/2021 conversation between Glenn Bloxham-Mundy and KonaTel CEO Sean McEwen

What does KonaTel do?

KonaTel Inc (NASDAQ:KTEL), through its subsidiaries, provides a variety of retail and wholesale telecommunications services including mobile voice/text/data service, mobile numbers, SMS/MMS services, SD-WAN and IoT mobile data service.
KonaTel operates two subsidiary businesses: Infiniti Mobile and Apeiron Systems.
The former is an FCC authorized national wireless Lifeline carrier with an FCC approved wireless Lifeline Compliance Plan, certified to provide government subsidized mobile phone service to low-income Americans.
The latter is a global cloud communications service provider employing a dynamic "as a service" (CPaaS/UCaaS/CCaaS/PaaS) platform.

The InfoArb explained:

During our research, we felt that we had unearthed a valuable piece of InfoArb revolving around the Infiniti Mobile business line, specifically in relation to their FCC-approved Lifeline Compliance Plan.
This plan licenses a finite number of companies in the US (Infiniti being one of the select few – we believe 12 in total own such licenses) to provide mobile phone and data (internet) services to low-income Americans and, in turn, these businesses receive a government subsidy for providing the service. This was originally brought in during the Regan-era but has received bi-partisan support ever since.
To date, KTEL (through Infiniti Mobile) is licensed to market and distribute this service across 8 states but generates most of its revenue from the program in Oklahoma. The reason for this is that the program provides two tiers of subsidy: $34.25 if the individual is living on Tribal land and up to $9.25 in all other instances.
Oklahoma has a high density of Tribal land homes and hence KonaTel has focused most of its efforts here and currently generates around $2MM of revenue from this alone.
However, in conjunction with the US’s most recent stimulus package, the Emergency Broadband Benefit (EBB) Program has been initially funded with $3.2B, substantially increasing subsidies for the distribution of unlimited broadband service.
At GeoInvesting, we identified that development has the potential to immediately impact KonaTel’s revenues materially, as well as provide substantial future upside to the Infiniti business.

What did we learn on the call?

Infiniti’s serves around 6,000 customers with this program currently, generating around $2MM annually.
We are unsure as of yet as to what the split is between Tribal vs Non-Tribal revenue.
Customers are won through both online advertising, as well as field agents who visit relevant neighborhoods seeking qualified customers. Agents work on an exclusive basis with the ETCs such as Infiniti and typically Infiniti targets underserved areas, such as rural communities.
Infiniti’s focus to date has been mostly on Tribal land customers in rural areas, as the non-tribal subsidy has not supported an economically viable unlimited data solution.
Due to the recent changes with the EBB program, the subsidy will increase from $34.25 to approximately $85 for Tribal land customers and from $9.25 to approximately $55 per month for non-Tribal land customers.
As a newly authorized participant of the EBB program, Infiniti will upgrade its current customer base to include unlimited EBB data service.
Due to the increased subsidy, it is now economically-viable for Infiniti to market and distribute unlimited data plans to non-tribal land customers, in turn significantly increasing its TAM across all 8 states.

Closing thoughts

Extrapolating this across the current 6,000 customers alone, revenue could rise from $2MM p/y to as much as $6MM+ simply through the subsidy increase across their current customers.
This is without considering the opportunity that exists across the non-tribal land customers within Oklahoma, as well as all customers across all 8 states in which Infiniti currently holds a license.
The EBB program was initially funded with $3.2B and will eventually end. Whilst the hope is that this program would be refreshed and continued (which may be helped when considering the size of it in the context of the total federal budget), it would be naive not to flag the limitation to this revenue. However, management did suggest that if the EBB subsidy was to end, Infiniti would work to move customers from the EBB program onto an economically viable Lifeline option through Infiniti.

Research

Wed, 14 Apr 2021 16:35:49 GMT

Konatel Inc (NASDAQ:KTEL) ($0.41; $16.6M market cap) - We came across what we believe will be a very significant development in the KTEL story that will result in a material increase in revenues. KTEL is a provider of a variety of retail and wholesale telecommunications services including mobile voice/text/data service, mobile numbers, SMS/MMS services, SD-WAN and IoT mobile data service. One of these solutions includes marketing phone services to low income Americans through its Infiniti Mobile product line, where the government subsidizes the cost of the services. The development is related to the recently passed $3.2 billion Emergency Broadband Benefit program by the Federal Communications Commission (FCC).

If you have not had a chance to see our research report on KTEL we recently published in collaboration with GeoInvesting contributor Glenn Bloxham-Mundy, you can read it here.

The article highlights two recent acquisitions that we believe have set the stage for sustained growth for the company in the coming years.

Today, we want to focus on the Infiniti Mobile acquisition. Infiniti Mobile is an FCC authorized national wireless Lifeline carrier with an FCC approved wireless Lifeline Compliance Plan, certified to provide government subsidized phone service to low-income Americans.

So far, KTEL is licensed to sell this service in 8 states, but appears to generate most of its revenue from the program in one state, Oklahoma. Why only Oklahoma? Well, it's because the government subsidy has been $34.25 if an living address is or has been in Tribal land, compared to up to $9.25 in all other instances related to the program. Oklahoma is rich in Tribal land:

Indian Territory, which occupied all Oklahoma minus the panhandle, was almost 44 million acres of fertile rolling prairies, rivers and groves of enormous trees. Several Indian nations already lived in the area, including the Apache, Arapaho, Comanche, Kiowa, Osage and Wichita

While we were continuing to conduct research on KTEL, we came across the Universal Service Administrative Co. website (USAC), which says:

"With the guidance of policy created by the FCC, we collect and deliver funding through four programs focused on places where broadband and connectivity needs are critical. These programs serve people in rural, underserved, and difficult-to-reach areas."

The website disclosed information about the new development in reference to the Emergency Broadband Benefit Program:

The Emergency Broadband Benefit (EBB) Program will provide a discount of up to $50 per month for broadband services for eligible consumers. Consumers who live on qualifying Tribal lands can receive enhanced support of up to $75 per month toward broadband services.

KTEL’s Lifeline business segment was generating roughly about $2 million a year for providing phones to what we assume to be Tribal land addresses in Oklahoma.

With the new Emergency Broadband Program, the company will basically automatically double its existing Lifeline revenue, as the subsidy for Tribal lands will be up to $75 per line vs. the current $34 per line. In addition to that, the program opens the door to a much wider market since it was not financially prudent for KTEL to provide its lifeline services to non-Tribal low-income Americans at under $10 per line, but it would be prudent at near $50 per line.

While it is unclear what traction the company will gain from this development, it seems like a financially significant development that could lead to meaningful growth. Not only does the company get a lift in revenues from its existing Lifeline customers, but it also gives KTEL an incentive to heavily market to the other 7 States in which it is approved to sell the service. It should also motivate the company to apply for licenses in the remaining 42 U.S. states.

In all, there are roughly 39 million potential customers in the United States that could qualify for the lifeline program, while only 7 million are currently being served. This works out to a low side untapped market opportunity of around $1.6 billion based on a $50 per month assumption. As we have explained, it now makes sense for KTEL to pursue this opportunity.

There is one caveat to the new EBB subsidy limits. It is unclear if the $3.2 billion currently allocated to the program will be re-upped once the funding is exhausted. However, we highly doubt the government will not continue to support the program. If they were to discontinue it, this would burden a slew of low income households who benefit from the new EBB program. This in light of the assumption that companies like KTEL would cease to offer phone services to these customers if it does not make financial sense.

Stay tuned for more details as we attempt to further our understanding of the EBB program, through conversations with KTEL management.

Research

Fri, 09 Apr 2021 15:50:25 GMT

Konatel Inc (NASDAQ:KTEL) ($0.45; $18.3M market cap) provides a variety of retail and wholesale telecommunications services including mobile voice/text/data service, mobile numbers, SMS/MMS services, SD-WAN and IoT mobile data service. On Wednesday we highlighted the Q4 2020 results which were issued in the 10-K filing. Today the company issued a press release with its year end results:

Sales of $9.35 million vs $9.17 million in the prior year
EPS of $0.01 vs a loss of $0.04
Cash and short term assets up 103%

“We are pleased to report our first full year of positive net income as a public company as we exhibited strong year over year growth in revenues, gross profit, and operating income," stated KonaTel Chairman and CEO Sean McEwen. "As we indicated last quarter, we are extremely focused on high margin, sustainable business that can drive scale and cash flow. To that end, we enjoyed strong growth in our CPaaS hosted services business, and emphasized its performance over retaining legacy mobile services revenues that contribute little to our bottom line. Going forward we will continue to grow our Hosted Services business through a combination of strong organic sales and potential commercial partnerships."

Uplist Update:

“The Company successfully completed its uplisting to OTC Markets Group Inc.'s OTCQB® Venture Market ("OTCQB") in December of 2020. "Our recent OTCQB uplisting was an important milestone in our efforts to increase investor awareness, visibility, and trading liquidity around our public shares," stated Sean McEwen. "Our ultimate goal is a further uplisting to a major exchange such as NASDAQ or NYSE which we will continue to pursue."

Research

Wed, 07 Apr 2021 17:29:59 GMT

Konatel Inc (NASDAQ:KTEL) ($0.40; $16.2M market cap) provides a variety of retail and wholesale telecommunications services including mobile voice/text/data service, mobile numbers, SMS/MMS services, SD-WAN and IoT mobile data service. The company filed its 10-K, below is a breakout of the Q4 2020 results as we await a press release with more details and comments:

Sales of $2.6 million vs $1.9 million in the prior year
EPS of $0.00 vs a loss of $0.01 in the prior year

Recall, we recently published a research report on KTEL in collaboration with GeoInvesting contributor Glenn Bloxham-Mundy. You can see the full report here.

Research

Wed, 31 Mar 2021 15:37:48 GMT

In case you missed it, yesterday late in the day we published a research report on Konatel Inc (NASDAQ:KTEL) in collaboration with GeoInvesting contributor Glenn Bloxham-Mundy. Recall that the company entered our research pipeline when Geoinvesting member Chris Plahm pitched the idea to us.

KTEL, through its subsidiaries, provides a variety of retail and wholesale telecommunications services including mobile voice/text/data service, mobile numbers, SMS/MMS services, SD-WAN and IoT mobile data service. One of KonaTel's subsidiaries, Infiniti Mobile, https://www.infinitimobile.com/, is an FCC authorized national wireless Lifeline carrier with an FCC approved wireless Lifeline Compliance Plan, certified to provide government subsidized phone service to low-income Americans.

KonaTel's other subsidiary, Apeiron Systems (www.apeiron.io), is a global cloud communications service provider employing a dynamic "as a service" (CPaaS/UCaaS/CCaaS/PaaS) platform. Using its own national network, Apeiron provides voice, messaging, data, SD-WAN network, and other platform services using innovative network and software designs. All of Apeiron's services can be accessed through both legacy interfaces and rich communications APIs (application programming interface).

You can see the full research report here.

Contributor Articles

Mon, 15 Feb 2021 22:17:40 GMT

KonaTel’s story begins in 1983, when their Chairman/Founder, Sean McEwen, started a software company called ‘TriTech Software Systems’ at the ripe age of 22 years old. Hailing from a Software Engineering background, McEwen leaned on his technical expertise to invent the modern-day 911 emergency dispatch system; an iteration of the emergency dispatch system invented in the 1970s but based solely on Microsoft technology with integrated GPS based tracking and predictive routing technology. Over 17 years, he evolved TriTech into an enterprise application and systems integration company, specializing in mission critical enterprise software solutions for public safety (Police, Fire, EMS). Over this period, McEwen successfully scaled the business from just 1 employee to 130 at the time of his exit, generating around $40MM in annual revenue. Today, TriTech has over 4,000 employees and brings in around $500MM in revenue annually. It was during this period that McEwan discovered his love of building and scaling software companies in a financially sustainable manner, with the business being fully self-funded up until reaching positive cash flow. An integral part of his success at TriTech was in the transformation from a group of software engineers creating a great product into a fully-functioning sales and marketing-oriented business - an experience that he would have to lean on down the line.

Following his exit to West View Capital Partners in 2005, McEwen spent 9 years out of the business, using his time to work on an array of diﬀerent projects: VC work (specifically post Angel/ early VC rounds), setting up one of the first ever ETFs (ONEF, which he sold to Russell Investments) and taking on various global consulting roles within the software and telecommunications industry. However, over this period he realized that being a passive investor did not align with his personality and the entrepreneurial itch grew. By 2014, he had had enough and so took $2.6MM of his own cash and purchased the assets of a dying telecommunications company called ‘Coast to Coast’ - a cellular reseller. This business would lay the foundations for what would become KonaTel as we know it today.

Initially, KonaTel began as a virtual cellular reseller but, after 2 years and getting it to a point of profitability, McEwen’s software instincts kicked in and he realized that ultimately, if he were to be successful with KonaTel and avoid the telecommunications’ race to the bottom, he needed to pivot the business model away from re-selling (which ultimately had a ceiling to its upside) into a platform business. McEwan’s thinking was that by building this platform through software, KonaTel would have true intrinsic value and would be able to sell a multitude of valuable services on top of this layer, much in the ilk of Amazon with AWS - in software, the source-code and software is everything.

It was around this time that, when exploring accretive acquisition opportunities for KonaTel, McEwen decided that he wanted to take KonaTel public. During his time setting up and exiting the ETF business, he realized the value of being a public company, particularly in the sense that it positioned you strongly versus private companies when undertaking acquisitions, as you eﬀectively have currency for acquisitions through your stock. So, in 2017, KonaTel went public on the OTC market under the ticker KTEL. Shortly thereafter, KonaTel completed its first two acquisitions. First, the company acquired ‘Apeiron Systems’ - a platform company that complemented KonaTel’s long-term strategy well, and true to McEwen’s thinking, the transaction was made easier by now being a public company and in turn allowing them purchase the business exclusively through stock. Their second acquisition was a cellular reseller known as Infinity Mobile.

McEwen spent the next year and a half tidying these businesses up - for example, ‘Infiniti Mobile' was sitting on around $700k in debt which needed to be paid down. However, McEwen purchased the business in part for its cashflow and hence used this to reduce debt materially and as it stands today, they are almost entirely debt-free, with positive cashflow and strong revenue growth. What’s interesting here, though, is the fact that this was done without a sales team - something that we will come onto shortly and believe is key to the KonaTel growth story.

As it stands today in 2021, KonaTel operates as national telecommunications carrier, with multiple subsidiaries (namely Appeiron and Infini) providing innovative communication solutions across diverse segments: mobile voice, lifeline, mobile data (IoT), and cloud services PaaS and CPaaS.

Research

Fri, 15 Jan 2021 17:06:10 GMT

Established starter positions in $KTEL, $MSLP and $TGEN. More to come as due diligence progresses. Impressed with all 3 interviews conducted with respective management teams. https://t.co/UQeAt2nS0j