Q4 2024 SurgePays Inc Earnings Call
Andrew: [music].
Operator: Greetings, welcome to SurgePays fourth quarter 2024 earnings conference call. At this time all participants are in a listen-only mode.
Greetings welcome to search page fourth quarter 2024 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note this conference.
Operator: A question and answer session will follow the formal presentation.
Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.
Operator: I will now turn the conference over to your host, Mike McCormick, Investor Relations at SurgePays. Mike, you may begin.
I'll now turn the conference over to your host Mike Mccormick Investor Relations at search base, Mike you may begin.
Mike Mccormick: Thank you, Operator, and good afternoon, everybody. Welcome to the SurgePays' fourth quarter 2024 earnings webcast and conference call. On the call today from SurgePays are Brian Cox, President and Chief Executive Officer, and Tony Evers, Chief Financial Officer.
Mike Mccormick: Thank you operator, and good afternoon, everybody welcome to the third phase fourth quarter 2024 earnings webcast and conference call on the call today from search phase or Bryan Cox, President and Chief Executive Officer, and Tony Everest, Chief Financial Officer before we begin I'd like to remind everyone that this call may contain forward looking statements.
Mike Mccormick: Before we begin, I'd like to remind everyone this call may contain forward-looking statements, as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For discussion of such risks and uncertainties, please see SurgePays' most recent filings of the SEC. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect events that occur after this call.
Mike Mccormick: As they are defined are the private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements for a discussion of such risks and uncertainties. Please see certain states. Most recent filings with the SEC.
Mike Mccormick: All forward looking statements made today reflect our current expectations only and we.
Mike Mccormick: We undertake no obligation to update any statements to reflect events that occur. After this call copies of today's press release are accessible on Thursdays Investor Relations website, IR that surveys dot com.
Mike Mccormick: Copies of today's press release are accessible on SurgePays' Investor Relations website, ir.surgepays.com.
Mike Mccormick: In addition, SurgePays Form 10-K for the year ended December 31, 2024, is also available on the SurgePays Investor Relations website.
Brian: In addition, third phase Form 10-K for the year ended December 31, 2024 is also available on the surge days Investor Relations website with that I'll turn the call over to Brian.
Brian Cox: With that, I'll turn the call over to Brian. Thank you, Mike. Good afternoon, everyone. Thank you for joining us.
Brian: Thank you Mike.
Good afternoon, everyone. Thank you for joining us.
Brian Cox: Today we will cover our 2024 results, but more importantly, I want to focus on where we're going and why we're competent. Investments over the last couple of years have positioned SurgePays for the most significant revenue acceleration in our history, with a clear path to sustainable positive cash flow in the next 12 months. From August 2021 through April 2024, we capitalized on the federally funded Affordable Connectivity Program, or ACP. During that period, we generated over $250 million in revenue, acquired more than 285,000 wireless subscribers, and built a retail distribution network of nearly 9,000 convenience and community stores nationwide.
Brian: Today, we will cover our 2024 results, but more importantly, I want to focus on where we're going and why we're confident.
Brian: Investments over the last couple of years have positioned surge pace for the most significant revenue acceleration in our history with a clear path to sustainable positive cash flow in the next 12 months.
Brian: From August 2021 through April 2024, we capitalized on the federally funded affordable connectivity program or ACP.
Brian: During that period, we generated over $250 million in revenue acquired more than 285000 wireless subscribers.
Brian: Built a retail distribution network of nearly 9000 convenience and community stores nationwide at.
Brian Cox: At the same time, we fortified our balance sheet, not just to sustain that momentum, but to build for what comes next. And make no mistake, we believe we have built and positioned our company for this next bigger and greater phase.
Brian: At the same time, we fortified our balance sheet, not just to sustain that momentum but to build for what comes next.
Brian: And make no mistake, we believe we have built and positioned our company for this next bigger and greater phase.
Brian Cox: Even with the advent and sunset of ACP, our mission hasn't changed. Connecting and Serving Underserved Communities Where They Live, Shop, and Work.
Brian: Even with the advent and sunset of ACP, our mission hasn't changed.
Brian: That game and serving underserved communities, where they live shop and work.
Brian Cox: The ACP experience sharpens two truths. First, seize opportunity. Second, never rely on a single revenue stream. Today, we're a more efficient and diversified company.
Brian: The ACP experience sharpens two truths first.
Brian: These opportunities second never rely on a single revenue stream.
Brian: Today, we're a more efficient and diversified company and we're entering a period when the revenue opportunities far exceeds what we generated previously.
Brian Cox: And we're entering a period when the revenue opportunity far exceeds what we generated previously. Let's talk about how.
Brian: Let's talk about how.
Brian Cox: SurgePays operates across two primary segments, wireless and our point-of-sale POS software platform. On the wireless side, we are a mobile virtual network operator, or MVNO, operating across three key channels. LinkUp Mobile is our prepaid brand. Torch Wireless is our government subsidized offering. and Wholesale Air. providing wireless access to third party companies through our MV&E platform.
Brian: Search page operates across two primary segments wireless and our point of sale.
Brian: S software platform.
Brian: On the wireless side, we are a mobile virtual network, operator, or <unk> operating across three key channels.
Brian: Mobile is our prepaid brand.
Brian: Torch wireless is our government subsidized offering.
Brian: And wholesale airtime, providing wireless access to third party companies through our M D and E platform.
Brian Cox: LinkUp Mobile is now launching nationwide, and we expect to share more updates soon as growth accelerates. Torch Wireless, supported by the Lifeline Program, continues to enroll new customers daily. When ACP ended, we chose to self-fund this transition, not only to preserve connectivity for our customers, but to retain the base we've built. This was both a responsible move and a strategic one.
Brian: Link up mobile is now launching nationwide and we expect to share more updates soon as growth accelerates.
Brian: Torch wireless supported by the Lifeline program continues to enroll new customers daily.
Brian: When ACP ended we chose to self fund this transition not only to preserve connectivity for our customers, but to retain the base we've built.
Brian: This was both a responsible move and a strategic one.
Brian Cox: And we've unlocked an entirely new revenue engine as a mobile virtual network enabler, an MVNE. Thanks to our AT&T partnership, we can now provide wireless infrastructure, billing, provisioning, and SIMs to other wireless companies who don't have direct carrier access. These wholesale relationships are highly profitable and scale with minimal incremental costs. We expect this to be a significant cash flow driver.
Brian: And we've unlocked an entirely new revenue engine as a mobile virtual network enabler and M D and E.
Brian: Thanks to our AT&T partnership we can now provide wireless infrastructure billing provisioning and films two other wireless companies, who don't have direct carrier access.
Brian: These wholesale relationships are highly profitable and scale with minimal incremental costs. We expect this to be a significant cash flow driver.
Brian Cox: Our point of sale software platform is the core of our retail distribution and a major differentiator. Thousands of stores nationwide already use it for top-ups and product activation. Our top up platform saw over 300% revenue growth from Q1 to Q4 in 2024. That's not just strong revenue, it's activation readiness. Every store joining our POS platform becomes a distribution point for LinkUp Mobile. The synergy between wireless and POS is the power of our model.
Brian: Our point of sale software platform is the core of our retail distribution and a major differentiator.
Brian: Thousands of stores nationwide already use it for top ups and product Activations.
Brian: Our top platforms saw over 300% revenue growth from Q1 to Q4 and 2024.
Brian: That's not just strong revenue its activation readiness.
Brian: Every store joining our P. O S platform becomes a distribution point for linkup mobile.
Brian: The synergy between wireless and P O S.
Brian: Is the power of our model.
Brian Cox: It's a self reinforcing ecosystem that we believe no competitor in our space can replicate.
Brian: It's a self reinforcing ecosystem that we believe no competitor in our space can replicate.
Brian Cox: We're not just in wireless. We're not just in fintech. We are a platform.
Brian: We're not just in wireless where not just in Fintech. We are a platform built for underserved communities built to scale and built for growth.
Brian Cox: built for underserved communities, built to scale and built for growth.
Brian Cox: In November, we announced a multi-year agreement with AT&T, providing our customers with full access to the nation's largest wireless network, 4G LTE and 5G coverage coast to coast. This has been a decade-long goal. I'm proud to share that the integration is complete. We launch April 1st. Our soft launch in March exceeded expectations. Over 30,000 SIMs deployed. 200,000 more sims just arrived and another 250,000 sims are already on order.
Brian: In November we announced a multi year agreement with AT&T, providing our customers with full access to the nation's largest wireless network.
Brian: For G L T and five G coverage coast to coast.
Brian: This has been a decade long goal.
Brian: I'm proud to share that the integration is complete we launched April one.
Brian: Our soft launch in March exceeded expectations.
Brian: Over 30000 Sims deployed.
200000, more Sam's just arrived and another 250000 Sims are already on order.
Brian Cox: Based on current demand, we expect to ship 250,000 to 300,000 SIMs per month moving forward.
Brian: Just on current demand, we expect to ship 250000 to 300000 per month moving forward.
Brian Cox: We've strengthened our leadership team to drive this growth. Mark Garner was promoted to EVP. brings nearly 30 years of telecom experience to managing our software platform. Allison Seiler, now VP of Sales, is executing across direct, partner, and reseller channels. Our infrastructure, operations, and software stack are now in place.
We've strengthened our leadership team to drive this growth.
Speaker Change: Mark Garner was promoted to EVP.
Speaker Change: Brings nearly 30 years of telecom experience to managing our software platforms.
Speaker Change: Allison Siler now VP of sales is executing across direct partner and reseller channels.
Speaker Change: Our infrastructure operations and software stack are now in place.
Brian Cox: Now we scale.
Speaker Change: Now we scale.
Brian Cox: Tony will take you through the 2024 numbers in a moment. Looking ahead, we expect Q1 of 2025 revenue to track closely with Q4 2024. But starting in Q2, we turn the corner.
Speaker Change: Tony will take you through the 2024 numbers in a moment.
Speaker Change: Looking ahead, we expect Q1 of 2025 revenue to track closely with Q4 2024.
Speaker Change: But starting in Q2, we turned the corner.
Brian Cox: We expect over $200 million in revenue over the next 12 months, and with this ramp, we expect to exit 2025 cash flow positive and entering 2026 with momentum.
Speaker Change: We expect over $200 million in revenue over the next 12 months and with this ramp we expect to exit 2025 cash flow positive and entering 2026 with momentum.
Tony Evers: With that, I will turn it over to Tony. Thank you, Brian, and good afternoon, everyone. I will begin my overview of our 2024 financial results. In 2024, we reported revenues of $60.9 million compared to $137.1 million for the same period in 2023, representing a decrease of 56%. The decrease was primarily due to the shutdown of the ACP federal funding, which ceased as of June 2024. In addition, we received no revenues from our lead generation services in 2024 and have discontinued that business as of December 31st, 2024. Our platform service revenue growth was robust, generating $17.4 million in 2024, compared to $11.3 million in 2023.
Tony Everest: With that I will turn it over to Tony.
Tony Everest: Thank you, Brian and good afternoon, everyone I will begin my overview of our 2024 financial results.
Tony Everest: In 2024, we reported revenues of $60 9 million compared to $137 1 million for the same period in 2023, representing a decrease of 56%. The decrease was primarily due to the shutdown of the ACP federal funding, which ceased as of June 2024.
Tony Everest: In addition, we received no revenues from our lead generation services in 2024 and have discontinued that business as of December 31 2024.
Tony Everest: Our platform services revenue growth was robust generating $17 4 million in 2024 compared to $11 3 million. In 2023. This increase is a direct result of our new sales director hired earlier in the year.
Tony Evers: This increase is a direct result of our new sales director hired earlier in the year.
Tony Evers: Gross loss was $14.3 million in 2024, versus a $35.6 million gross profit in 2023, due to the shutdown of the ACP federal funding and our strategic decision to utilize our strong balance sheet to protect our previous ACP subscriber base and distribution network, while we transition the base over to either a non-subsidized MV&O business model, LinkUp Mobile, or into another subsidized program like Additionally, the de-emphasis of our lead generation business resulted in lower gross profits in that segment as well. SG&A expenses increased by 57% year over year. The increase was primarily due to additional non-cash stock compensation for Manor.
Tony Everest: Gross loss was $14 3 million in 2024 versus a $35 6 million gross profit in 2023 due to the shutdown of the ACP federal funding and our strategic decision to utilize our strong balance sheet to protect our previous ACP subscriber base and distribution network, while we transition.
Tony Everest: The base over to either a non subsidized business model linked up mobile or into another subsidize program largely <unk>.
Tony Everest: Additionally, the de emphasis of our lead generation business resulted in lower gross profits in that segment as well.
Tony Everest: SG&A expenses increased by 57% year over year. The increase was primarily due to additional noncash stock compensation for management. This stock compensation relates to the vesting of restricted share awards granted by employment agreement signed in late 2023, we also had <unk>.
Tony Evers: This stock compensation relates to vesting of restricted share awards granted via employment agreements signed in late 2023. We also had additional expenses for contractor and consultant fees. The company continued to engage several contractors to overhaul the financial platform to allow for the conversion to a tablet-based transaction at the store level from the outdated Verifone terminal. The company also engaged with consultants to provide advisory services specifically in the area of investment relations to identify opportunities to increase our shareholder value.
Tony Everest: <unk> expenses for contractor and consultant fees the.
Tony Everest: The company continued to engage several contractors to overhaul the financial platform to allow for the conversion to a tablet based transaction at the store level from the elevated Verifone terminal.
Tony Everest: The company also engage with consultants to provide advisory services, specifically in the area of investment relations to identify opportunities to increase our shareholder value.
Tony Evers: loss from operations was $41.8 million in 2024 compared to $18.9 million profit in 2023. Our reported net loss and loss per share were $45.7 million and $2.39 negative per share. Our loss and loss per share were adversely impacted primarily by the ending of the federally funded ACP.
Tony Everest: Loss from operations was $41 8 million in 2024 compared to $18 9 million profit in 2023.
Tony Everest: Our reported net loss and loss per share.
Tony Everest: $45 7 million in 2019 negative per share.
Tony Everest: Our loss and loss per share were adversely impacted primarily by the ending of the federally funded a C. P.
Tony Evers: Turning to the balance sheet liquidity and cash flow, our cash, cash equivalents and investment balances as of December 31, 2024 were collectively $12.8 million, compared to $23.7 million at the end of the third quarter. Our cash from operations was $21.3 million use in 2024 versus a $10.3 million source in 2023. A large negative swing due to the winding down of the federally funded ACP and our continued servicing of the subscribers for the fourth quarter of 2022. Accounts receivable decreased by $3 million at December 31, 2024 from $9.5 million at the end of 2023. Given our cash balance and capital structure, our cash allocation priority is in financing the transition of our subscribers to either LinkUp Mobile or Lifeline and the continued emphasis of establishing our LinkUp Mobile brand.
Tony Everest: Turning to the balance sheet liquidity and cash flow, our cash cash equivalents and investment balances as of December 31, 2024 were collectively $12 8 million compared to $23 7 million at the end of the third quarter.
Tony Everest: Cash from operations was $21 3 million use in 2024 versus a $10 3 million source in 2023.
Tony Everest: A large negative swing due to the winding down of the federally funded ACP and our continued servicing of the subscribers for the fourth quarter of 'twenty 'twenty four.
Tony Everest: The accounts receivable decreased by $3 million at December 31, 2024 from $9 5 million at the end of 2023.
Tony Everest: Given our cash balance and capital structure, our cash allocation priority is and financing the transition of our subscribers to either linkup mobile or lifeline and the continued emphasis of establishing their linker mobile brand.
Brian Cox: I will now pass the call back to Brian for some closing remarks. Thank you, Tony. I've never been more confident in the SurgePays team, our strategy, and the value we're building for shareholders.
Brian: I will now pass the call back to Brian for some closing remarks.
Brian: Thank you Tony.
Brian: I've never been more confident in the search space team our strategy and the value. We're building for shareholders. We've built the platform. We've made the investment now comes to the return.
Brian Cox: We've built the platform, we've made the investment, now comes the return.
Brian Cox: Thank you so much for your time today.
Brian: Thank you so much for your time today, we will now open the call to questions operator.
Operator: We will now open the call to questions. Operator. Thank you.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start Once again, please press star one on your phone at this time. If you wish to ask a question. One moment, please.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star one on your phone at this time, if you wish to ask a question one moment. Please while we poll for questions.
Kunal Madhukar: While we pull for Our first question today is coming from Kunal Madhukar from Water Tower East. and Alya Linus. Great. Thank you for taking my questions. A couple, if I could. One, basically, you know, just on the SIM card itself and the SIM card orders that you are, that you have already placed, wanted to get a sense of like, you know, when is it that you place the orders? How soon does it get delivered? And does it have to be physically present in the stores for you to be able to convert subscribers or potential customers into subscribers?
Speaker Change: And our first question today is coming from Kunal <unk> from water Tower Research Kunal. Your line is live.
Kunal: Great. Thank you for taking my questions a couple if I could one basically.
Speaker Change: On the Sim card itself and the <unk>.
Kunal: Sim card orders that you are.
Kunal: You are already placed wanted to get a sense of like when is it that you placed the orders how soon does it get delivered and does it have to be physically present in the stores for you to be able to convert.
Kunal: Subscribers.
Kunal: Custom potential customers into subscribers.
Brian Cox: Yes. Good question. The SIM cards are say historically, you know, completely, the activation is completely dependent on the SIM card up until April 1st. We've added a new capability now. One of the things that our guys have been working really hard on in the integration with AT&T, and one of the other benefits of going direct is to be able to do eSIMs, where you can bypass the actual physical SIM card for newer phones, and the network is able to connect directly to the device without SIMs. But you're right, the SIMs need to be in the stores.
Kunal: Yes.
Kunal: Good question.
Kunal: Sim cards are.
Kunal: Let's just say historically completely.
Kunal: The activation is completely dependent on the Sim card up until April one we've added a new capability now one of the things that our guys have been working really hard on in the integration with AT&T and one of the other benefits of going direct is to be able to do E films, where you can bypass the actual physical Sim card for newer phones in the network.
Speaker Change: He was able to connect directly to the device without Sims, but youre right in terms need to be in the stores and that's why we referred to the soft launch.
Brian Cox: And that's why we referred to the soft launch last month of getting in 30,000 SIMs, getting them out there, and that was at the request of AT&T. You know, we both wanted to test and pressure test both sides of the platform, their platform and network and our platform. Got those out. The 200,000 came in last week. Those are being triaged out and really more throttled and parsed out to folks because the demand was higher than 200,000. So, you know, we've got our management team making the decisions on where those go. And then another PO for 250,000.
Speaker Change: The last months of getting in 30000 sounds getting them out there and that was at the request of AT&T. We both wanted to test and pressure test both sides of the platform their platform and network in our platform.
Speaker Change: Those out the 200000 came in last week, those are being triaged out and really.
Speaker Change: More throttled and parsed out to folks because the demand was higher than 200000.
Speaker Change: So we've got our management team, making the decisions on where those go and then another P. O for 250000, and so whether it's a convenience store wireless store, whether it's in the hands of our fulfillment center, sending out direct orders to customers, whether it be on lifelong or link up.
Brian Cox: So, you know, whether it's a convenience store, a wireless store, whether it's in the hands of our fulfillment center, sending out direct orders to customers, whether it be on Lifeline or LinkUp, you know, your activation is dependent on the SIM. And so, you can almost indirectly, kind of poor man's math, look at the SIM orders as representative of backfilling and fulfilling and replacing as activations happen. Thanks.
Speaker Change: Your activation is dependent on the film and so you can.
Speaker Change: Almost indirectly kind of poor man's math look at the Sim orders as representative of back filling in fulfilling and replacing as Activations happened.
Speaker Change: Oh, thanks, so effectively one could one could assume that when you are talking about 250 to 300000 Sims that you expect to order on a monthly basis to be probably a reflection of the gross adds that you expect.
Brian Cox: So effectively, one could one could assume that when you're talking about 250 to 300,000 sims that you expect to order on a monthly basis, to be probably a reflection of the gross ads that you expect for link up mobile. Yes, across the three channels and we've looked this up and down. You know, I hope to, you know, give some some updates here soon as we start to see how this shakes out for the wholesale channel, the MV&E channel, as we talked about, that's actually gaining a tremendous amount of momentum. And by the way, you know, these companies who will access the network through us, that's what we've done the past 10 years.
Speaker Change: Linkup mobile.
Speaker Change: Yes across the three channels and we've looked this up and down.
Speaker Change: I hope to give some.
Speaker Change: Yeah.
Speaker Change: Some updates here as soon as we start to see how this shakes out for the wholesale channel the M D and E channel as we talked about.
Speaker Change: Thats actually gaining a tremendous amount of momentum.
Speaker Change: And by the way no. These companies who will access the network through us that's what we've done in the past 10 years, that's the way I'd, we'd never my team has never had a direct carrier relationship. So you would be surprised most of the M. B a nose you see out there are actually sub <unk>, there's not a whole lot of people that.
Brian Cox: That's the way I've, we've never, my team has never had a direct carrier relationship. So you would be surprised most of the MVNOs you see out there are actually sub MVNOs. There's not a whole lot of people that have direct access. So you could look at that 250,000 to 300,000 yes and know that those are going to the three channels. They're going out to LinkUp Mobile distributors and LinkUp Mobile customers. Those are being allocated to Lifeline customers and those are being allocated to third parties for their activations through our interconnectivity on the AT&T network.
Speaker Change: Direct access so you could look at that the 250 to 300000, yes, and know that those are going to the three channels, they're going out to linkup mobile distributors.
Speaker Change: And we've got mobile customers those are being allocated to lifeline customers and those are being allocated to third parties for their activations through our interconnectivity on the AT&T network.
Kunal Madhukar: Great. Thank you.
Speaker Change: Great. Thank you and one last one before I, let you go up.
Kunal Madhukar: And one last one before I let you go. The 200 million or over 200 million of revenue that we're talking about for the next 12 months. Is that from 2Q25 through 1Q26 or is that for 2025?
Speaker Change: The 200 million.
Speaker Change: Over 200 million of revenue.
Speaker Change: But for the next 12 months.
Speaker Change: Is that all.
Speaker Change: From <unk> 25 through $1 26.
Speaker Change: For 2025.
Yeah.
Speaker Change: Okay.
unknown: Hello? Standby.
Speaker Change: Hello.
Speaker Change: Standby.
Speaker Change: Yes.
unknown: Go to Beadaholique.com for all of your beading supplies needs! I'll answer the question. It is for 12.
Speaker Change: Brian are connected.
Speaker Change: I'll answer the question. It is for 12, Hey, guys, Hey, guys, sorry about that sorry about that guys.
Brian Cox: Hey, guys. Sorry about that. No, sorry about that, guys. I you know what, I was reeling off a phenomenal answer. It was almost poetic. And it can't be recreated. Sorry about that. I had I tapped mute on the device here. But no, that the way I would look at that is We don't get to choose when we were able to go full throttle on the AT&T network. Obviously, when you're dealing with a somewhat of a trillion dollar company, we're on their timeline. And so if you look at it as April 1, That's the full launch of everything we've been putting together over the last few years, the millions of dollars of development, all the backbones, building the team, building the distribution.
Speaker Change: You know what I was rolling off a phenomenal answer it was almost poetic.
Speaker Change: And.
Speaker Change: And then they can't be recreated sorry about that I had I tapped a mute on the device here.
Speaker Change: But no that the way I would look at that as well.
Speaker Change: We don't get to choose when we were able to go full throttle on the AT&T network, obviously, when youre dealing with a somewhat of a trillion dollar company where on their timeline and so if you look at it is April one.
Speaker Change: That's the full launch of everything we've been putting together over the last few years the millions of dollars of development all the backbones building the team building the distribution.
Brian Cox: So you can look at that. That will not be 2025. That will be starting April. Thank you so much.
Speaker Change: So you could look at that that will not be 2025 that will be starting April one.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you. The next question will be from Anya So to shop from Sidoti I know your line is live.
Anja Söderström: The next question will be from Anja Soderstrom from Sidoti. Anja, your line is live. Hi, thank you for taking my question. And congrats on the progress here. It looks like you have a lot of exciting things going on. I'm just curious about the SCM cards. Can you talk about the economics behind these and sort of the margin profile of it? Sure, would you anything specific you'd like me to focus on or I don't want to just tell me what you'd like me to clarify. No, just what your spread will be on them in terms of gross margins.
Speaker Change: Great. Thank you for taking my question and congrats on the progress here and it looks like you have a lot of exciting things going on I'm, just curious about that as Tim casket death.
Speaker Change: That makes behind this.
Speaker Change: So does the margin profile of it.
Speaker Change: Sure would you add anything specific you'd like me to focus on ore Ida.
Speaker Change: I don't want to just.
Speaker Change: Tell me, what you would like to move it up.
Speaker Change: Brad well beyond that in terms of gross margin.
Brian Cox: Yeah, okay. And that, you know, know that For example, even in LinkUp, your various plans have different margins, the higher the plan, the higher the margin. We think the blended average on LinkUp Mobile, which is our prepaid brand, will be very similar to the ACP. You know, you're going to be anywhere from $8 to $15, depending on the plan. So those are really good plans for us. Those are definitely some meat on the bone there. Very excited about that. And we've got that allocating about 37%. of that $200 million, if you wanted to just make some notes there.
Speaker Change: Yeah Okay.
Speaker Change: No.
Speaker Change: For example, even in link up your various plans have different margins the the higher the plan the higher the margin. We think the blended average on linkup mobile, which is our prepaid brand with very similar to the ACP.
Speaker Change: Youre going to be anywhere from eight to $15 depending on the plan. So those are those are really good plans for us those are deaths.
Speaker Change: Definitely some meat on the bone there very excited about that and that's we've got that allocating about 37%.
Speaker Change: Of that $200 million. If you wanted to just make some notes there on the lifeline side of things.
Brian Cox: On the Lifeline side of things, you know, various states, we're going to start focusing on the states that have additional money. There's some states out there that have, again, similar to the ACP world, of that $12 to $13 a month. We're going to pinpoint our focus on those states. So that would be about the same as ACP as well. You're going to be looking at about 24% of the $200 million through there.
Speaker Change: You know various states, we're going to start focusing on the states that have additional money.
Speaker Change: There are some states out there that have again similar to the ACP world.
Speaker Change: Of that 12 to $13 a month, we're going to pinpoint our focus on those states. So that would be about the same as ACP as well youre going to be looking at about 24% of the $200 million do there on the wholesale M. B a knee the goal is to make a buck or two <unk>.
Brian Cox: On the wholesaling B&E, the goal is to make a buck or two per subscriber per month. Again, that's, you know, there's no cost to us. We're purely providing access. We're wholesaling to other people. That's why that's really exciting to me, being able to make money off other folks' sweat. You're going to be looking at about somewhere around 13% there.
Speaker Change: Per subscriber per month again that there is no cost to us were purely providing access we're wholesaling to other people. That's why that's really exciting to me being able to make money off politicals sweat youre going to be looking at about somewhere around 13%. There and then the rest of the percentage that goes towards that top up.
Brian Cox: And then the rest of the percentage that goes toward that top-up, you've got your Clearline, some other ancillary channels that will hopefully be kick-started this year. And then the top-up is going to be around 24%. That's the third-party transactions doing top-ups and reloads for all of our competitors in the prepaid wireless world.
Speaker Change: You've got your clear line. Some other ancillary channels that will hopefully be kick started this year and then the top up is going to be around 24%. That's the third party transactions.
Speaker Change: During top ups and reloads for all of our competitors in the prepaid wireless world.
Brian Cox: Okay, thank you. And then in terms of your sort of revenue target or for the next 12 months, How should we think about the composition for that? A majority from SIM cards or what else are you expecting to contribute to that? The majority of it will be from the wireless segment. Let me do some quick math here. Over 50% of that will be from our wireless and our most profitable highest margin products. That would come from LinkUp Mobile prepaid and from the Lifeline. You're looking at about 60% of that coming directly from those two. You'll have another 13% coming from the wholesale side.
Speaker Change: Okay. Thank you and Dan touched on you asked about revenue target for the next 12 months.
Speaker Change: Yeah.
Speaker Change: How should we think about the competition for that is that.
Speaker Change: A majority from Sim cards.
Speaker Change: What I will say you're expecting to contribute to that.
Speaker Change: The majority of it will be from the wireless segment.
Speaker Change: Let me do some quick math here over 50% of that will be from our wireless and our most profitable highest margin products that would come from link up mobile prepaid now from the lifeline.
Speaker Change: Youre looking at about 60% of that come in directly from those two you'll have another 13% coming from the wholesale side.
Brian Cox: Still on the wireless, still relating to SIM cards, but that would sum up the wireless segment.
Speaker Change: Still on the wireless still relating to the Sim cards, but you know that would sum up the wireless segment.
Brian Cox: Looking at around 25% to 26% in the lower margin point of sale platform transactions. But the point of sale transaction is critical to us being able to do activations. That's what makes us so unique is we're able to use our own platform to do our own transactions. and our own activations and our own payments. Everything closed loop with our platform.
Speaker Change: Looking at around 25% to 26% and the lower margin point of sale platform transactions, but the point of sale transaction is critical to us being able to do activation. That's what makes us. So unique is we're able to use our own platform to do our own transactions.
Speaker Change: Our own activations in our own payments everything closed loop with our platforms.
Brian Cox: Okay, and it seems like you're partnering up with a couple of companies here in terms of rolling that out.
Speaker Change: Okay, and it seems like you're partnering up with a couple of our companies Santos now rolling that out.
Brian Cox: How many more opportunities are there? How many of these companies are out there that you could partner up with?
Speaker Change: Oh I'm in tomorrow opportunities arent ammonal, there's companies that are out there that you could partner up with.
Brian Cox: See this is what gets exciting and this is why my team as a whole is almost walking on air right now and let me create a little bit of the backstory and then answer your question. We've got three or four people on our team right now who have started from scratch companies that launched MVNOs, other MVNOs. It's always been the other MVNO on strictly top-up platforms. Matter of fact we're just having a conversation a little while ago where there's three people on our team who've built 10 million plus. a month, 10 million plus a month in revenue, top up businesses, independent of each other at the same time.
Speaker Change: See this is what gets exciting.
Speaker Change: And this is why my team as a whole is almost walking on air right now and let me create a little bit of the backstory and then answer your question.
Speaker Change: We've got three or four people on our team right now who have started from scratch companies that launched <unk>. Other <unk>, it's always been the other and D&O on strictly top-up platforms matter of fact, we were just having a conversation a little while ago, where there's three people on our team who built 10 million plus.
Speaker Change: A month 10 million plus a month in revenue top up businesses independent of each other at the same time, we know different people you put all that together, there's a lot of people that our team has helped over the years.
Brian Cox: We know different people. You put all that together, there's a lot of people that our team has helped over the years. A lot of master agents, you think about the country, and then you branch that into master agent, territorial agents, and they have sub agents. And ultimately, those sub agents go down to the people that actually go pull the doors and call in the stores, kind of that traditional distribution model. There's distributors that we have downrange on our hit list, if you will, that we haven't even talked to yet, because we want to get three, 400,000 subscribers under our belt first, to make sure that we've got all the tools.
Speaker Change: A lot of Master agents, when you think about the country and then your branch that into Master agent territorial agents and they have sub agents and ultimately those sub agents go down to the people that actually go pull the doors and calling the stores kind of a traditional distribution model.
Speaker Change: Theres distributors that we have down range on our hit list. If you will that we havent even talked to yet because we want to get three or 400000 subscribers under our belt first to make sure that we've got all the tools all the tools Theres still some development going on that will allow us to talk to the biggest distribute.
Brian Cox: All the tools, there's still some development going on that will allow us to talk to the biggest distributors in the country.
Brian Cox: I'll give you an example, eSIM that I just mentioned. That's a very important thing because a lot of people in the prepaid business now, it's not the $50 phone that you see. A lot of folks have Galaxies, iPhones, and they need the ability to do eSIM. You've got number portability. One of the biggest changes in the prepaid industry over the past five or six years, now, there was a period of time where people wanted to change their number for various reasons. Now, people want to keep their number for all the 2FA and the other things that are really important to keep your number.
Speaker Change: And the country I'll give you example, E mail that I just mentioned that's a very important thing because a lot of people in the prepaid business now it's not the 50 dollar phone that you see a lot of folks have galaxy's iphones and then you have the ability to do some <unk> got number portability one of the biggest changes in the prepaid industry over the past five years.
Speaker Change: Six years now.
Speaker Change: A period of time, where people wanted to change their number.
Speaker Change: For various reasons now people want to keep their number for all the TSA and the other things that are really important to keep your number it's become more of an identity for our customer base. So the number portability is important also device compatibility look up.
Brian Cox: It's become more of an identity for our customer base. So, number portability is important. Also, device compatibility lookup. Now that we're direct with AT&T, they have certain criteria. It needs to be approved or certified AT&T phone. It can't be a $40 piece of junk. It won't activate. And all of these tools that I just mentioned are significant time and investment into those tools, and we've got those now. So, those will enable us to go talk to more people than we've already talked to, Anja. I mean, it's exciting.
Speaker Change: Now that were direct with AT&T, they have certain criteria needs to be approved or certified AT&T phone it can't be.
Speaker Change: A 40 dollar piece of junk it won't activate.
Most all of these tools that I, just mentioned are significant time and investment into those tools and we got those now so those will enable us to go talk to more people than we've already talked to Anja I mean, it's it's it's exciting as a matter of fact, I think our one of our biggest challenges is going to be to.
Brian Cox: As a matter of fact, I think one of our biggest challenges is going to be to ride and control the growth, stay focused, stay under control, manage the cash and monetize the opportunity.
Speaker Change: Ride and control the growth stay focus stay under control manage the cash flow as we grow and be able to maximize and monetize the opportunities.
Speaker Change: Thank you. The next question will be from <unk> from <unk> capital Ed Your line is live.
Ed Woo: The next question will be from Ed Woo from Ascendian Capital. Ed, your line is Yeah, congratulations on all the progress you made this year. My question is, you know, you guys have a very unique relationship with the working class. What are you guys hearing in terms of the economic outlook? How are they doing? And how will you think that that will help or hurt, you know, your businesses?
Speaker Change: Congratulations on all the progress you made this year. My question is you guys have a very unique relationship with the working class. What are you guys hearing in terms of the economic outlook. How are they doing how would you think that that will help or hurt your businesses.
Brian Cox: Thank No, Ed, hey, good, thanks for the question. Our market, you know, I've just said for those of you that are new to SurgePays, you know, most of our team has been in this specific market. Let's just call it the the overlooked market, the underserved, the third of our country, it's still going to be the same market, no matter what happens with GDP or tariffs or other things. Now, obviously, if gas skyrockets, your other, you know, macroeconomic things happen, it affects them. But what we have found is when things are tight, that's when people subconsciously and consciously look for value.
Speaker Change: Yeah.
Speaker Change: Hey, good thanks for the question.
Speaker Change: Our market.
Speaker Change: I've just said for those of you that are new to search page now most of our team has been in this specific market.
Speaker Change: Let's just call it the overlooked market the underserved the third of our country.
Speaker Change: It's still going to be the same market no matter, what happens with GDP or tariffs or other things now obviously if gas skyrockets your other.
Speaker Change: Macroeconomic things happen it affects them.
Speaker Change: But what we have found is when things are tight.
Speaker Change: That's when people subconsciously and consciously look for value.
Brian Cox: Otherwise, when things are great and everything is just flowing, you're not really paying attention to saving that dollar. It has a different value when there's extra dollars, but when it's tight, that's when you are more willing to make a change. Change your cell phone vendor, change your number if need be, change over to a different carrier. If you're a store, if you're a convenience store, I've never taken wireless payments before, but you know what? I could use a couple extra 100 bucks a month. Yeah, let me try this. Let me try it. Bring it in.
Speaker Change: Otherwise when things are great and everything is just flow on youre, not really paying attention to save in that dollar.
Speaker Change: It has a different value when theres extra dollars, but when its tight.
Speaker Change: That's when you are more willing to make a change change your cellphone vendor change. Your your your number if need be changed over to a different carrier through a store if you're in.
Speaker Change: Youre a convenience store.
Speaker Change: Never taken wireless payments before but you know what I could use a couple of extra hundred Bucks a month, yeah. Let me try this let me try to bring it in.
Brian Cox: Some of the in-store marketing, let's try that. So I think it's not only from our actual consumer, if you will, look at it as a subscriber and the people who are on our network, on our wireless network, our customers. The store The bodega owners, that community store entrepreneur, that's a client. That's what's really unique about our model. And they're in the same community. They're in the same neighborhoods. They fit together. So I think it gives us a really, really unique opportunity to make that cold door handle a little warmer when we're coming in to help the store owner, the client, and allowing him to help the customer, the folks living in his neighborhood.
Speaker Change: Some of the in store marketing, let's try that so I think it's not only from our actual consumer if you will look at it as a subscriber and the people who are on our network on our wireless network our customers do.
Speaker Change: The store owners the bodega owners.
Speaker Change: That community store entrepreneur, that's a client that's what's really unique about our model and they're in the same community. During the same neighborhoods. They fit together. So I think it gives us a really really unique opportunity to make that cold door handle a little warmer when we're coming in to help the store owner the client.
Speaker Change: And allowing him to help the customer the folks living in his neighborhood.
Ed Woo: Great.
Speaker Change: Great well, thanks for answering my questions and I wish you guys. Good luck for sure. Thank you.
Ed Woo: Well, thanks for answering my questions, and I wish you guys good luck this year. Thank you.
Ed: Thanks, Ed.
Speaker Change: Thank you. The next question will be from Michael Diana from Maxim Group, Michael airline as life. Okay. Thank you Hey, Brian.
Michael Diana: The next question will be from Michael Diana from Maxim Group. Michael, your line is live. Okay, thank you. Hey, Brian.
Michael Diana: First of all, just to clarify, when you were talking about the percentages of each program, 37%, 24, 13, that was a percentage of your $200 million of projected revenue. Is that right or wrong? Yes, you're correct. Okay, good. Okay, then you, you you exited ACP with about 280,000 customers, who are obviously your most likely targets. I understand you're going after much bigger base than that. But the strategy for those 280 I mean, you want to sign them all link up and not torch, but somehow we can't afford link up. Have you gone after the more likely torch people yet?
Ed: Uh huh.
Ed: First of all just to clarify when you were talking about the percentages of each program, 37% 24 at <unk> that was a percentage of your 200 million of.
Ed: Projected revenue is that right or wrong.
Ed: Yes, Youre correct.
Speaker Change: Good Okay, then Hugh Hugh you exited.
Speaker Change: C. P was about a 280000 customers who are obviously, you're most likely targets I understand you're going after much bigger based on that but the strategy for those 280.
Speaker Change: Uh huh.
Speaker Change: I mean, do you want to sign them, all linkup and not torch, but some of them you can't afford linkup, how have you gone after the more likely towards people yet or are you just waiting for April one to judge.
Brian Cox: Or are you just waiting for April 1 to just hit everyone and try to get them on link. No, we actually were able to convert about a third of those over to life. One of the challenges that we had on getting a much higher number than that was keeping in mind Lifeline has to do with voice and talking and requires a smartphone for, you know, Lifeline is literally the old Reagan program, verbal communication. We had a percentage of our customers that had tablets that were very difficult to get a hold of, so we've already made the run.
Speaker Change: Everyone and try to get them on link up.
Speaker Change: No, we actually were able to convert about a third of those over to lifeline.
Speaker Change: One of the challenges that we had on getting a much higher number than that was keeping in mind lifeline has to do with voice and talking and requires a smartphone for lifeline is literally build Reagan program verbal communication.
Speaker Change: We had a percentage of our customers that had tablets.
Speaker Change: They were very difficult to get a hold of so we've already made the run.
Brian Cox: If you look at the expense in Q4 specifically, a majority of that expense was covering the airtime for the customers as we worked really hard, had our team, every communication mechanism that we could do to reach out to them, so we were pretty happy with what we were able to get over the lifeline, but those are no longer on our network. We didn't want to carry the expense any further, so we salvaged what we could from that, and now we're looking forward.
Speaker Change: That's if you look at the expense in Q4, specifically a majority of that expense was covering the airtime for the customers as we worked really hard had our team.
Speaker Change: Every communication mechanism that we could do to reach out to them. So we were pretty happy with what we're able to get over to Lifelock, but those are no longer on our network. We didn't want to carry the expense any further.
Speaker Change: So we salvaged what we could from that and now we're looking forward.
Brian Cox: Okay, that was sort of my next question. So of the 280,000, you've converted roughly one third to Lifeline. And you're not supporting the rest of them now. Is that right? You're correct. Okay, so they're going to be your first call, though, for link up, right, the ones that aren't on live. Any customer that we have today, we're always going to incentivize referrals. So yes, we'll constantly use that as a growth channel. Right. Okay.
Speaker Change: Okay that was sort of my next question so.
Speaker Change: The 280000, you've converted roughly one third to lifeline.
Speaker Change: And you're not supporting the rest of it is that right.
Speaker Change: You are correct.
Speaker Change: So they're gonna be your first call, though for link out right the ones that aren't on lifeline.
Speaker Change: Any customer that we have to date, we're always going to incentivize referrals. So yes, we'll constantly use that as a growth channel.
Speaker Change: Alright.
Michael Diana: And last quarter, you're talking about a much lower margin for torch. But I guess you're saying state by state, the margin varies, and you're just focused on the higher margin states. Is that the idea? I think a good way to word it is we peeled the onion back and we looked at the opportunities. The margins with LinkUp were so significant and knowing that we don't have, you know, $100 million in the bank to just slam the gas in all three channels. It made sense for us to focus our revenue where we get the highest return, but also we don't want to do this for 20 years.
Speaker Change: Okay.
Speaker Change: Last quarter, you were talking about.
Speaker Change: How much lower margin for torch, but I guess, you're saying state by state the margin varies and you're just focused on the higher margin states sadly.
Speaker Change: Okay.
Speaker Change: I think a good way to word as we Peel the onion back and we looked at the opportunities.
The margins with link up were so significant and knowing that we don't have.
Speaker Change: $100 million in the bank to just slammed the gas in all three channels. It made sense for us to focus our revenue where we get the highest return but also we don't want to do this for 20 years, we want to get it now I'm impatient. We've we've been revenue fasting for eight months. This is not our our teams normal M. O. So what we did was.
Brian Cox: We want to get it now. I mean, I'm impatient. We've been revenue fasting for eight months. You know, this is not our team's normal MO. So what we did was like, you know, let's not, you know, the Lifeline program is a great program, and we've already built a significant platform for enrolling customers compliantly, all the federal guidelines. Let's focus on the states that have higher margins. Let's put this out there in the states where the it's you know, it's not just 925, but where it's 15 16 bucks where it's 26 bucks, give or take. So that's where you hear the bigger margin.
Speaker Change: That's not the Lifeline program is a great program and we've already built a significant platform for enrolling customers compliant Leigh all the federal guidelines, let's focus on the states that have higher margins.
Speaker Change: Let's put this out there in the states where the.
Speaker Change: It's not just 925, but where it's 15 16 Bucks, where it's 26 bucks give or take so that's where you hear the bigger margin. We're just going to put the money, where we get the most bang for the Buck.
Brian Cox: We're just going to put the money where we get the most bang for the buck. It just, and it's a scenario where we could actually grow. Bigger numbers, faster. And what's unique about these models, Michael, is the link-up model is prepaid. I think this is important for everybody as you're visualizing. prepaid, we get paid up front, it's prepaid. link up prepaid customers pay up front then we pay in arrears for the air. So you have that counterbalanced with your Lifeline, where we provide the service, we file to the federal government what we've done, and then we get paid 30 days later.
Speaker Change: And it's a scenario, where we could actually grow.
Speaker Change: Bigger numbers faster and what's unique about these models Michael is the linkup model is prepaid and I think this is important for everybody to as you're visualizing us.
Speaker Change: Prepaid we get paid upfront it's prepaid linker.
Speaker Change: Linkup prepaid customers pay upfront than we pay in arrears for the airtime.
Speaker Change: So you have that counter balanced with your lifeline, where we provide the service we filed to the federal government. What we've done and then we get paid 30 days later, so there's a juggled triage that you have to do with cash flow to minimize that cost per acquisition dip.
Brian Cox: So there's a juggle triage that you have to do with cash flow to minimize that cost per acquisition dip, but to make sure that you can realize the margins there in Lifeline, which are good. And it's also a great way to differentiate from other prepaid wireless companies. When we can offer a convenience store owner the ability to do activations, but also to give service away every time someone pulls out that SNAP, you know, EBT food stamp card, it's a differentiator for us. So we're going to look to maximize that, and that's the thought process that went into these projections.
Speaker Change: But to make sure that you can realize.
Speaker Change: The margins are in lifestyle, which are good and it's also a great way to differentiate from other prepaid wireless companies. When we can offer a convenient store owner the ability to do activations, but also to give service away every time someone pulls out that snap.
Speaker Change: EBT food stamps cart.
Speaker Change: It's a differentiator for us so we're going to look to maximize that and that's the thought process that went into these projections.
Michael Diana: Okay, thanks. And then on your, your platform services, your top up. So in 2023. You made $11 million doing that, and in 2024, $17 million. But that's, I take it that's before you really started or about to ramp up. Is that right? The if you were looking at month over month that top up services continued to fall during 2024 until we put things together and started growing as I was saying earlier growing it with the anticipation of the coming link up mobile activations. That was the trigger, the catalyst that allowed us to get this in front of master agents who then went and got stores.
Speaker Change: Okay. Thanks.
Speaker Change: And then on your.
Speaker Change: Your platform services or top up.
Speaker Change: So in 2023.
Speaker Change: You made 11 million doing that 'twenty 'twenty $417 million.
Speaker Change: But that I'd take it that's before you really started well.
Speaker Change: Bad to ramp up is that right.
Speaker Change: The if you were looking at month over month.
Speaker Change: Top ups services continued to fall during 2024 until we put things together and started growing.
Speaker Change: As I was saying earlier.
Speaker Change: Growing it with the anticipation of.
Speaker Change: The coming link up mobile Activations that was the trigger the catalysts that allowed us to get this in front of Master agents, who then went and got stores, yes. So 'twenty 'twenty 'twenty four continue to dip, but then it's significantly started skewing up in Q3 and Q4 in anticipation of the.
Michael Diana: Yes. So, you know, 2024 continued to dip. But then it significantly started skewing up in Q3 and Q4, in anticipation of the link up mobile. Yeah, it's almost like, you know, that was the sales pitch of it. Hey, we have this coming. You have to be on our network to be able to activate. Why not go ahead and do it now? Okay, great.
Speaker Change: <unk> mobile, yes, it was almost like a.
Speaker Change: That was the sales pitch of it hey, we have this timing you have to be on our network to be able to activate why not go ahead and do it now.
Speaker Change: Okay great.
Michael Diana: Okay. Thanks a lot, Brian. Thank you, Michael. Thank you.
Speaker Change: Thanks, a lot.
Speaker Change: Thank you Michael.
Speaker Change: Thank you. This concludes today's Q&A session and also concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Operator: This concludes today's Q&A session and it also concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.