Q1 2025 SurgePays Inc Earnings Call
Speaker Change: Greetings. Welcome to SurgePays first quarter 2025 earnings conference call. At this time all participants are on a listen only mode. A question and an intercession will follow the formal presentation. Then you want to require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker Change: Please note this conference is being recorded. I will now turn the conference over to your host, Mike McCormick, Managing Director of Investor Relations at SurgePays.
You may begin.
Mike Mccormick: Thank you, operator, and good afternoon, everyone. Welcome to the SurgePays 2025 First School Earth and Edge Results Conference call.
Speaker Change: Today's date is May 13, 2025, and on the call today from the company are Brian Cox, President and CEO , and Tony Evers, CFO . Before we begin, I'd like to remind everyone that this call may contain four lucky statements as they're defined into the Private Security's litigation reform act of 1995.
Speaker Change: These statements are subject to certain risks and uncertainties that could cause actual results to different materially from those expressed in the floor of these statements.
Speaker Change: For discussions such risks and uncertainties, please see SurgePays' most recent filings to the FEC. All four looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect the event that occurred after this call.
Speaker Change: copies of today's press release are accessible on SurgePays's Investor Relations website, ir.surgepays.com. In addition, SurgePays Form 10Q for the quarter ended March 31st, 2025 will also be available on SurgePays's Investor Relations website.
Speaker Change: And now, I'd like to turn the call over to President and CEO Brian Cox.
Speaker Change: Thank you, Mike. Good afternoon, and thank you for joining us.
Speaker Change: Our first quarter results were in line with expectations and closely mirrored Q4 of 2024, but today's call is less about the past and more about what lies ahead.
Speaker Change: Since our last update in mid-March, we've made tremendous progress and closed the strategic financing to accelerate our next phase of growth.
Speaker Change: Thanks to the long-term investments we've made in our team, technology, distribution, and partnerships, we believe SurgePays is now positioned for the most significant revenue and cash flow growth in our company's history.
Speaker Change: For the 12 month period, looking back to April 1st, 2025, we're targeting 200 million in revenue and expect to exit 2025 operating cash flow positive.
Speaker Change: We're gaining momentum across all areas of our wireless business, both as an MVNO through link-up mobile and our government subsidized brand Torch Wireless.
Speaker Change: and also as an MVME through our new wholesale platform which offers the full suite of nationwide wireless to third party wireless providers.
Speaker Change: Despite the forward-looking nature of this update, we did have certain major milestones in Q1 2025.
Speaker Change: One such major milestone was the launch of our multi-year partnership with AT&T.
That's less than six months from handshake to execution.
Speaker Change: An incredible achievement and I'm proud of the SurgePays team for delivering flawlessly.
Speaker Change: This partnership gives us direct access to one of the most reliable networks in the country and critically positions us to provide back-end telecom infrastructure to MVNOs that don't have a direct carrier relationship.
Speaker Change: Since our soft launch, we've shipped over 210,000 SIM cards to customers and retail partners.
Speaker Change: Another 290,000 Sims are an inventory with 250,000 more arriving before the end of May to meet demand for both retail and wholesale channels.
Speaker Change: Our wireless services are sold and activated over our robust retail network, over 9,000 community-focused stores nationwide.
Serving as trusted transaction points for activations, payments, and top-ups.
Speaker Change: Our distribution model is local, efficient, and deeply integrated into the daily lives of our customers.
Speaker Change: The heart of this model is our Point of Cell software which powers transactions and drives reoccurring revenue from activations and replenishments. It's not just a tool, it's our ecosystem and it's a true differentiator.
On the wholesale side, we're building a new revenue engine.
Speaker Change: As an M-B-N-E, we're providing billing, provisioning, Sims and ethams to other wireless companies.
This is an expected high margin model with minimal incremental costs.
Speaker Change: Many MV&Os you see in the market today are actually sub-MV&Os.
Speaker Change: To date, we've onboarded three MBNOs with two more in the integration pipeline.
Speaker Change: These partners collectively serve hundreds of thousands of subscribers and they're looking to grow fast, giving us a path to rapidly scale our platform and reoccurring revenue base.
Speaker Change: In many ways, we believe we've built a uniquely powerful engine that blends technology, innovation and distribution and we're just getting started.
Speaker Change: We're in advanced talks with national distributors, each with footprints in tens of thousands of retail locations.
Speaker Change: One of those is HT Hackney, which services over 40,000 convenience stores.
Speaker Change: We utilized the Hackney new product shows recently to roll out our latest concept for fast-paced
The Phone In A Box Product
Speaker Change: This is a retail-ready, grabbing-go solution that allows stores to sell and instantly activate wireless service by scanning at the register.
The phone and plan combined retail for under $100.
Speaker Change: To prove our concept, we brought in 2600 smartphones already kidded with the sim installed and custom box packaging and peg hook ready.
We sold out in under 30 days.
Speaker Change: We will replenish these while continuing to monitor the feedback and what sells best at the store level.
Speaker Change: We can offer a range of smartphone options from good to best and are excited to see the results as the link up brand gains traction in the market enabling store owners to generate revenue from both the retail phone sale and the monthly top ups for plant payments.
Speaker Change: Based on the feedback from the new product shows and its quick sell-out early results are promising.
Here's the kicker.
Speaker Change: Every store that sells the phone in a box joins our network because they will need to accept top-up payments for the monthly wireless plans.
Speaker Change: This means each store becomes a new activation point, not just for wireless service, but for our entire product suite.
We believe this model unlocks exponential growth.
Speaker Change: We're watching closely and focusing on which product or service provides the fastest path to onboard stores.
Speaker Change: This is key to scaling to our near-term goal of 100,000 locations operating on the SurgePays platform.
Speaker Change: I want to take a moment to recognize the key leadership move.
Speaker Change: We recently promoted Darren Winfrey to President of Sales and Operations.
Speaker Change: Darren is a proven revenue driver and a veteran operator responsible for over a billion in sales in his prior roles.
Speaker Change: His effective leadership gives me the freedom to stay focused on the big picture, building value, scaling the business, and driving stock performance.
Many of you have asked.
Speaker Change: Here's what I'll say. Our team holds significant equity in the company. We're deeply aligned with long-term shareholders, and that guides every capital decision we make.
Speaker Change: We worked hard to structure the right financing, a non-dilutive long runway and shareholder friendly solution.
Speaker Change: I'm pleased to share that our largest outside shareholder cable car stepped up with a $6 million dollar investment.
Speaker Change: Their support is a decisive vote of confidence in our vision and the execution we've demonstrated so far.
Speaker Change: The 24-month convertible note amortizes at month eight converts at $4 per share and includes an option for the company to repay early.
Speaker Change: We believe this capital provides us with the flexibility to move quickly and execute our rollout without delay.
Speaker Change: and based on our current trajectory, we expect to be cash flow positive by the end of December 2025.
Speaker Change: To sum it all up, SurgePays is at a major inflection point.
We've transitioned from a reseller to a platform.
from a distributor to a telecom partner.
Speaker Change: We believe we're building something bigger, backed by strong fundamentals and driven by a leadership team that knows how to execute.
We have the products, the partnerships, and now the capital.
Speaker Change: We're entering a phase of high growth and high impact and we're doing it the right way, with discipline, with purpose, and with our shareholders in mind.
Thank you for your support and belief in our mission.
Speaker Change: I'll now turn it over to Tony for a detailed review of our Q1 financials.
Tony.
Tony Evers: Thank you, Brian , and good afternoon, everyone. For the first quarter of 2025, we reported revenue of 10.6 million compared to 31.4 million for the same period in 2024.
Tony Evers: Our platform service revenue growth was robust, generating 8.3 million in the first quarter of 2025 as compared to 2.5 million in the first quarter of 2024. This increase in part is a result of our new sales director hired earlier in the year.
Tony Evers: Gross Profit was a loss of 2.9 million for the first quarter of 2025 compared to 8.2 million of gross profit for the first quarter of 2024 due almost entirely to the shutdown of the
Tony Evers: 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-subdued MBO product link of mobile or into Lifeline and other subsidized programs.
Tony Evers: SGNA expenses decreased by 28.6% year over year to 4.4 million during the first quarter of 2025 as compared to 6.1 million for the first quarter of 2024.
Tony Evers: This decrease was primarily due to a reduction in contractors and consultants, professional services, compensation and insurance, partly offset by an increase in computer and internet advertising and marketing and other expenses.
Tony Evers: Loss from operations was $7.6 million in the first quarter of 2025 compared to $1.8 million in operating profit in the first quarter of 2024.
Tony Evers: Our reported net loss and loss per share were 7.6 million and negative 38 cents per share. Our loss and loss per share were firstly infected primarily by the ending of the federally funded ACP.
Tony Evers: Turning to the balance sheet, our cash, cash equivalence and investment balances as of March 31, 2025, were 5.4 million compared to 11.8 million as of December 31, 2024. Sublet into the quarter, and as Brian mentioned, we closed on a $6 million financing.
Tony Evers: The note carries an interest rate of 15% per annum, and matures 24 months from the date of closing. Amortization of the note begins at month 8 with prepayment option and excess
Tony Evers: of Emeritization in Whole, or in part, at any time with five days advanced notice, at a 2% premium to principal amount, plus of your interest.
Tony Evers: The note has a fixed conversion price of $4 per share beginning at month eight from the date of issuance, subject to monthly conversion limits.
Tony Evers: Included in a note is a dilution offset clause in which the company will exchange $333,333 shares of cable cars existing equity position into $999,999 a principle at $3 per share.
Tony Evers: Additionally, the company will issue 700,000 five-year cash warrants with an exercise price of $6 per share.
Brian Cox: I will now pass the call back to Brian for some closing remarks.
Thank you, Tony.
Speaker Change: I've never been more confident in our team, our strategy, and the long-term value we're creating for both our customers and shareholders.
Speaker Change: The Foundation is built, the investments are in place. Now it's time to execute and deliver. I truly believe we're entering a transformational chapter for SurgePays. One that will define the next phase of our growth story.
Speaker Change: Thank you all for joining us today. Operator, we'll now open the call for questions.
Speaker Change: Unknown Speaker 0. . . . . . . . .
Speaker Change: Thank you. At this time, we'll be conducting a question and answer session. If you would 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.
Speaker Change: Once again that's star one if you wish to ask a question, and one moment please while we pull for questions.
Speaker Change: The first question today is coming from Kunal Madhukar, from Water Terror Research. Kunal, your line is life.
Speaker Change: with hundreds of thousands of subscribers. So can you talk about the timeline over which we can start seeing, you know, revenues start flowing in from these MVME partners that you have?
Speaker Change: Yes, the revenues should start showing up in Q2. Those three companies just got enough data as early as this morning are all activating currently and as they ramp up and they shift out of their old.
Speaker Change: Sim card inventory and start replenishing with hours. We'll see those steadily rising and
Speaker Change: The reoccurring revenue model for all of them, which we get to participate in, even on the whole cell level. So we're very excited about the MB&E portion of our business and it has got a lot of emphasis from our development team.
Speaker Change: Thank you, and then another one on the SIM card, so you disclose that
Speaker Change: By June , you should have about 800,000 SIM cards either distributed or within your inventory. How are you distributing it among your subscribers, existing subs, the retail network that you have and the MBA needs that you are partnering with?
Speaker Change: It's almost if you look at it like a triage across all facets of our company.
Speaker Change: We have to have inventory and stock because there's a year to say a four week turnaround from the time we order Sims to the time we get them. And once you've got folks heating up and selling you've got to be able to replenish those sales distributors and sales teams or wholesale companies, you can't run out of the Sims.
So this will stalk us.
Internally, with our inventory.
Speaker Change: This will give us inventory to activate on the government subsidized portion of our business lifeline and get that inventory out the folks that are doing activations in the field.
It'll give us inventory for link up.
Speaker Change: Get the hands of the distributors, master agents, the wireless stores, the convenience stores.
Speaker Change: give our initial inventories to the new companies that are buying wholesale from us on the MD&E side.
Speaker Change: So by the end of that month, that's our projection by the end of June . And then we should be in a constant replenishment mode where we keep a watermark of inventory.
Speaker Change: to be able to absorb any bursts of sales that we have, depending on the market. But that's the way we're going to move forward. And that's where we feel like we've got them. That'll get us a good base fund. And then we'll obviously ramp up our ordering of SIMS as the adoption of our product, you know, kicks off and scales up.
Correct. Actually, if I could, you know, one, on the NVMe side, you talked about high margin regarding revenue from the NVMe.
Speaker Change: Can you talk about the economics and how we should model out in terms of if you get one MVN subscriber, how many does it translate into and then ultimately when we are thinking of these hundreds of thousands of subscribers?
Speaker Change: How should one think of adoption for your part of the service?
for those subscribers.
Speaker Change: You know, that's a, that's a, that's a tricky question because
It's you're trying to
put the, you know, the, the same.
T-shirt on multiple MV and O's.
Speaker Change: and that MVNO may be a prepaid regional MVNO, it may be a lifeline MVNO that only operates in four or five states. It may be a big lifeline MVNO that operates nationwide, or it may be a pre-paid company that operates nationwide.
Speaker Change: literally the variety of companies that we're engaged with right now. So I think every company you almost on an individual case basis.
We'll have their performance.
Speaker Change: You know, based on what, and also their funding of their company and what their goals are. We're trying to align ourselves with people that want to grow rapidly. There's a lot of little guys out there that, you know, we're going to have to wait in line. We're going to have to wait in line.
Speaker Change: But from an economic standpoint, it's hard to say, hey, with every MV and O, we bring on, it's going to generate X.
Speaker Change: and even within the MV&O. You know, when you're looking at a model where, and I can't get off into the weeds of the actual secret sauce of rates, but when you're, when we're selling our product, how an MV&O.
Contracts with us. You're going to have an MRC.
Speaker Change: that they're going to pay us every month, and that would keep that SIM card active, and that would include an allotment of talk text, and then the commodity that's metered from there is data.
Speaker Change: So again, if you have, let's say, a Lifeline company that's primarily in 925, not going to have a lot of data, but if our
Speaker Change: Our margins, you know, if we've stabilized the good margin in the MRC and guaranteed
a good, healthy 20 to 30% margin.
Speaker Change: Per subscriber they sign up, whether it's a $10 customer or a $30 customer, it won't matter too much to us even though we do incrementally make more profit based on how much data they consume. So I think that's going to be one of those.
Speaker Change: Trickier ones to model out in your analyst's mind and something that we'll probably be looking at good ways that we could message that out to you as this unfolds and you guys can start doing a blended average Prambino or a blended average blended margin. But I think we'll have to wait and see how that that turns out in the wash for you guys to start modeling. We'll see you guys in the next video.
Grace, thank you so much.
Speaker Change: Thank you, and once again, it will be star one if you wish to ask a question today. The next question is coming from Ed Woo from Asendian Capital. Ed, your line is live.
Speaker Change: Customers. Are you seeing any change in the outlook of these, you know, convenience store owner of whether they're really concerned about the economy or whether they see any change in their consumer, their customers economic activities?
Speaker Change: I don't know what you're talking about. I don't know what you're talking about. I don't know what you're talking about.
Speaker Change: We obviously have our ear to the ground and our neck deep.
Speaker Change: in all of these communities, and it whether it's a traditional gas station convenience store or a corner store or a community market, that community that really falls underneath that, let's just call it the the wave break zone of the
Speaker Change: There's normally not a whole lot of change based on craziness and the macroeconomics of the country. If anything, it's only going to increase our...
Speaker Change: Available Market. It adds, you know, as things get a little tighter, you know, our target, that third of the country, that's our target customer.
Does it normally have 401k's and mutual fund IRA's and
investments.
Speaker Change: So stock market GDP, tariffs, those types of things, don't really directly affect them necessarily so but you know we've said this a couple of times before. One thing about.
Speaker Change: When the world gets a little more myopic and more paying attention to value, that's great for us because we're presenting an alternative to whatever people are using now for wireless.
Speaker Change: We're presenting an alternative and a new revenue possibility for that store owner. So if we can enhance that store owner's bottom line and we can also increase the amount of money that that end customer gets to use.
Speaker Change: You know, it gets to keep in their wallet, or let's go ahead and spread that out to the NBA side. If we can offer better rates and a more friendly partner to these other entrepreneurs and the prepaid wireless or wireless world.
Speaker Change: Then we get an ear that's a little different than in times are good and people are just...
Speaker Change: Not really caring about what they do tomorrow, they're just going to repeat what they did yesterday because they're fine.
Speaker Change: So, we always find opportunities in moments where things are a little bit tighter, dicey, or storming. And that's why I think it's great timing. All things considered for the product suite and the distribution mechanisms that we have in place right now.
Speaker Change: Great, that's a very good answer for my questions. I wish you guys good luck. Thank you.
Thank you.
Speaker Change: Thank you, and next we will have a follow-up from Kunal Madhukar from Walter Tower Research, Kunal
Agree, thank you.
Speaker Change: Quick one on the near-term goal of 100,000 locations that you talked about. Now, you're currently in about just about maybe 10,000 locations.
So, that seems quite ambitious.
Speaker Change: at first glance. But, you know, if you have a near-term goal, you must have a lot of visibility into how you're going to get there. So can you please talk about, you know, how you intend to get to a hundred thousand distribution locations. So, you're going to have a lot of visibility into how you intend to get there.
Speaker Change: Yes, and you stole one of my thunder words there with visibility. I use that word often because we do have visibility down range.
Speaker Change: and we're able to look at the possibilities and the feedback that we're getting. So, that number is definitely...
Speaker Change: What I would consider a conservative compilation of folks at some level in the pipeline of sales, whether it be direct distributors, whether it be, again, one of the things I touched on on my script was we have probably four products that can get us in the door.
Speaker Change: and all that one product, whether you want to call it a door jam or a Trojan horse, doesn't matter, that gets our entire product suite, our entire SurgePays Network platform into that store at the register. So, looking at the
to use your word again, evaluating the visibility.
Looking down range.
Speaker Change: at the folks like H.T. Hackney. Quite a few others that I won't mention because we're in negotiations. H.T. Hackney is regional. There's plenty of H.T. Hackney's. There's also other products on the top upside of things.
Speaker Change: There's huge networks that we're in discussions with on link up. There's huge networks in the lifeline space that deal with EBT Redemption, specifically out west in the tens and tens of thousands.
Speaker Change: So there's a lot of other companies we're talking to actively right now that are the merchant processing, critical processing ISOs.
that have-
Speaker Change: Tens of thousands of stores in their network where they're making that small fraction of a percent on all those credit card transactions and they're looking for ways to upsell their existing base so that they can make a squeeze a few more bucks per location out and enhance their portfolios.
Speaker Change: So all of these are on the table. We have various
High-level sales folks in our company.
who are each focused independently on their own category.
Speaker Change: So there's definitely some stock that went into that and that is my goal by the end of next year is to get at that hundred thousand mark. I hope we get there sooner, but that is our goal collectively that we've been talking about amongst the management team.
Speaker Change: Goddard. So by end of 2026 is what you're kind of thinking of. And we would be remiss to not talk about the, you know, the case on the lifeline side, the opportunity that exists in like higher revenue states and regions and and and and demographics. So like California for instance, what's the progress that you're seeing on that side?
Speaker Change: Progress is full steam ahead nationwide. We're after this financing.
Speaker Change: You know, I wanted to also look, let's be careful, I'm definitely a hard charger, a biking, if you will.
Speaker Change: Really growth capital targeted toward Lifeline and some of these other front-loaded ROI investments in the reoccurring revenue subscriber like the Lifeline subscriber.
Speaker Change: So, yes, your states that have the higher, whether it be $15, $21, $34, $30, number similar to the old ACP.
Speaker Change: where the government is now well aware that it's very difficult to provide a usable phone service for $9.25.
Speaker Change: and they're going to open that up to folks like us. So we're hopefully, again, I'm not projecting that, not putting my name on that, because we all know things that come from Washington could change with the wind. But that is the goal right now of the coalitions related to subsidize telecom.
Speaker Change: is to get an enhanced lifeline, ballpark $20, give the consumer an actual usable product, so there would no longer be 9.25 states, there would be $20 states, and then you still have your other states with tribal and California and Kansas and Kentucky that had extra money.
Got it. Great. Thank you so much.
Speaker Change: Thank you. This concludes today's Q&A session and also this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.