SurgePays Q1 2025 Earnings Call Transcript

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May 13, 2025
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Operator

note this conference is being recorded.

Operator

I will now turn the conference over to your host, Mike McCormack, Managing Director of Investor Relations at Surg Pace. You may begin.

Mike Mccormack
Managing Director, Investor Relations at Water Tower Research LLC

Thank you, operator, and good afternoon, everyone. Welcome to the Surg Pays twenty twenty five First Quarter Financial Results Conference Call. Today's date is 05/13/2025. 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 forward looking statements as they are defined under the Private Securities Litigation Reform Act of 1995.

Mike Mccormack
Managing Director, Investor Relations at Water Tower Research LLC

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 Surgepay's most recent filings with the SEC. All forward looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call. Copies of today's press release are accessible on Surge Pays' Investor Relations website, ir.surgepays.com. In addition, Surge Pays' Form 10 Q for the quarter ended 03/31/2025, will also be available on Surge Pays' Investor Relations website.

Mike Mccormack
Managing Director, Investor Relations at Water Tower Research LLC

And now I'd like to turn the call over to President and CEO, Brian Cox.

Brian Cox
Brian Cox
President & CEO at Surgepays

Thank you, Mike. Good afternoon, and thank you for joining us. Our first quarter results were in line with expectations and closely mirrored Q4 of twenty twenty four. But today's call is less about the past and more about what lies ahead. Since our last update in mid March, we've made tremendous progress and closed a strategic financing to accelerate our next phase of growth.

Brian Cox
Brian Cox
President & CEO at Surgepays

Thanks to the long term investments we've made in our team, technology, distribution, and partnerships, we believe Surg Pays is now positioned for the most significant revenue and cash flow growth in our company's history. For the twelve month period, looking back to 04/01/2025, we're targeting $200,000,000 in revenue and expect to exit 2025 operating cash flow positive. We're gaining momentum across all areas of our wireless business, both as an MVNO through LinkUp mobile and our government subsidized brand Torch wireless, and also as an MVNE through our new wholesale platform, which offers the full suite of nationwide wireless to third party wireless providers. Despite the forward looking nature of this update, we did have certain major milestones in q one twenty twenty five. '1 such major milestone was the launch of our multi year partnership with AT and T.

Brian Cox
Brian Cox
President & CEO at Surgepays

We signed this agreement in November 2024 and completed full integration, including a network migration and SIM activation rollout by April 1. That's less than six months from handshake to execution. An incredible achievement, and I'm proud of the Surg Pace team for delivering flawlessly. 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. Since our soft launch, we've shipped over 210,000 SIM cards to customers and retail partners.

Brian Cox
Brian Cox
President & CEO at Surgepays

Another 290,000 SIMs are in inventory, with 250,000 more arriving before the May to meet demand for both retail and wholesale channels. 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. Our distribution model is local, efficient, and deeply integrated into the daily lives of our customers. The heart of this model is our point of sale 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.

Brian Cox
Brian Cox
President & CEO at Surgepays

On the wholesale side, we're building a new revenue engine. As an MBNE, we're providing billing, provisioning, SIMs, and eSIMs to other wireless companies. This is an expected high margin model with minimal incremental costs. Many MVNOs you see in the market today are actually sub MVNOs. We're one of the few with direct carrier access, putting us in a rare and powerful position.

Brian Cox
Brian Cox
President & CEO at Surgepays

To date, we've onboarded three MVNOs with two more in the integration pipeline. 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. In many ways, we believe we've built a uniquely powerful engine that blends technology, innovation, and distribution, and we're just getting started. We're in advanced talks with national distributors, each with footprints in tens of thousands of retail locations. One of those is HT Hackney, which services over 40,000 convenience stores.

Brian Cox
Brian Cox
President & CEO at Surgepays

We utilized the Hackney New Product Shows recently to roll out our latest concept for fast paced convenience stores, the Phone in a Box product. This is a retail ready grab and 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 To prove our concept, we brought in 2,600 smartphones already kitted with the SIM installed and custom box packaging and peg hook ready. We sold out in under thirty days. We will replenish these while continuing to monitor the feedback and what sells best at the store level.

Brian Cox
Brian Cox
President & CEO at Surgepays

We can offer a range of smartphone options from good to best and are excited to see the results as the LinkUp brand gains traction in the market, enabling store owners to generate revenue from both the retail phone sale and the monthly top ups for plan payments. Based on the feedback from the new product shows and its quick sellout, early results are promising. Here's the kicker. 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. This means each store becomes a new activation point, not just for wireless service, but for our entire product suite.

Brian Cox
Brian Cox
President & CEO at Surgepays

We believe this model unlocks exponential growth. We're watching closely and focusing on which product or service provides the fastest path to onboard stores. This is key to scaling to our near term goal of a hundred thousand locations operating on the Surg Pays platform. I wanna take a moment to recognize a key leadership move. We recently promoted Darren Winfrey to president of sales and operations.

Brian Cox
Brian Cox
President & CEO at Surgepays

Darren is a proven revenue driver and a veteran operator responsible for over a billion in sales in his prior roles. 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 about how we plan to fund this growth and whether we're considering issuing equity. Here's what I'll say. Our team holds significant equity in the company.

Brian Cox
Brian Cox
President & CEO at Surgepays

We're deeply aligned with long term shareholders and that guides every capital decision we make. We worked hard to structure the right financing, a non dilutive long runway and shareholder friendly solution. I'm pleased to share that our largest outside shareholder, Cable Car, stepped up with a $6,000,000 investment. Their support is a decisive vote of confidence in our vision and the execution we've demonstrated so far. The twenty four month convertible note amortizes at month eight, converts at $4 per share, and includes an option for the company to repay early.

Brian Cox
Brian Cox
President & CEO at Surgepays

We believe this capital provides us with the flexibility to move quickly and execute our rollout without delay. And based on our current trajectory, we expect to be cash flow positive by the December 2025. To sum it all up, surge pays is at a major inflection point. We've transitioned from a reseller to a platform, from a distributor to a telecom partner. We believe we're building something bigger, backed by strong fundamentals, and driven by a leadership team that knows how to execute.

Brian Cox
Brian Cox
President & CEO at Surgepays

We have the products, the partnerships, and now the capital. 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. I'll now turn it over to Tony for a detailed review of our Q1 financials. Tony?

Anthony Evers
Anthony Evers
CFO at Surgepays

Thank you, Brian, and good afternoon, everyone. For the first quarter of twenty twenty five, we reported revenue of 10,600,000.0 compared to $31,400,000 for the same period in 2024. The decrease was primarily due to the shutdown of the ACP federal funding, which ceased in June of twenty twenty four. In addition, we received no revenues from our lead generation services in twenty twenty twenty four and have discontinued that business as of December. Our platform service revenue growth was robust, generating $8,300,000 in the first quarter of twenty twenty five as compared to $2,500,000 in the first quarter of twenty twenty four.

Anthony Evers
Anthony Evers
CFO at Surgepays

This increase in part is a result of our new sales director hired earlier in the year. Gross profit was a loss of $2,900,000 for the first quarter of twenty twenty five compared to $8,200,000 of gross profit for the first quarter of twenty twenty four, due almost entirely 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 NVO product, Linkop Mobile, or into Lifeline and other subsidized program. SG and A expenses decreased by 28.6% year over year to $4,400,000 during the first quarter of twenty twenty five as compared to $6,100,000 for the first quarter of twenty twenty four. 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. Loss from operations was $7,600,000 in the first quarter of twenty twenty five, compared to $1,800,000 in operating profit in the first quarter of twenty twenty four.

Anthony Evers
Anthony Evers
CFO at Surgepays

Our reported net loss and loss per share were $7,600,000 and negative $0.38 per share. Our loss and loss per share were adversely impacted primarily by the ending of the federally funded ACP. Turning to the balance sheet. Our cash, cash equivalents and investment balances as of 03/31/2025 were $5,400,000 compared to $11,800,000 as of 12/31/2024. Subsequent to the quarter, and as Brian mentioned, we closed on a $6,000,000 financing.

Anthony Evers
Anthony Evers
CFO at Surgepays

The note carries an interest rate of 15% per annum and matures twenty four months from the date of closing. Amortization of the note begins at month eight with prepayment option in excess of amortization in whole or in part at any time with five days advance notice at a 2% premium to principal amount plus accrued interest. 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. Included in the note is a dilution offset clause in which the company will exchange 333,333 shares of Cable Car's existing equity position into $999,999 of principal at $3 per share. Additionally, the company will issue 700,000 five year cash warrants with an exercise price of $6 per share.

Anthony Evers
Anthony Evers
CFO at Surgepays

I will now pass the call back to Brian for some closing remarks.

Brian Cox
Brian Cox
President & CEO at Surgepays

Thank you, Tony. 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. 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 Surg Pays, one that will define the next phase of our growth story. Thank you all for joining us today. Operator, we'll now open the call for questions.

Operator

Thank you. At this time, we'll be conducting a question and answer session. Session. And the first question today is coming from Kunal Madhukar from Water Tower Research. Kunal, your line is live.

Kunal Madhukar
Managing Director at Water Tower Research LLC

Great. Thank you. Thank you for taking the questions. A couple if I could. The first one on the MB and E opportunity, and you talked about three already integrated and two in the in the pipeline with hundreds of thousands of subscribers.

Kunal Madhukar
Managing Director at Water Tower Research LLC

So can you talk about the timeline over which we can start seeing, you know, revenues start flowing in from these MVNE partners that you have?

Brian Cox
Brian Cox
President & CEO at Surgepays

Yes. The revenue should start showing up in q two. Those three companies, I just got an update as early this morning, are all activating currently. And as they ramp up and they shift out of their old SIM card, inventory and start replenishing with ours, we'll see those, steadily rising. And, like I said, it's the the reoccurring revenue model for all of them, which we get to participate in even on the wholesale level.

Brian Cox
Brian Cox
President & CEO at Surgepays

So we're very excited, about the MB and E portion of our business, and it has got a lot of emphasis from our development team.

Kunal Madhukar
Managing Director at Water Tower Research LLC

Thank you. And then another one on the SIM card. So you you disclosed that by June, you should have about 800,000 SIM cards either distributed or within your inventory. How are you distributing it among your your subs your subscribers, existing subs, the retail network that you have, and the MVNEs that you're partnering with?

Brian Cox
Brian Cox
President & CEO at Surgepays

It's it's almost if you look at it like a triage across all facets of our company. We have to have inventory in stock because there's a, let's say, a four week turnaround from the time we order Sims till the time we get them. And once you've got folks heating up and selling, you've gotta be able to replenish those sales, distributors and sales teams or wholesale companies. You can't run out of of Sims. So this will stock us internally with our inventory.

Brian Cox
Brian Cox
President & CEO at Surgepays

This will give us inventory to activate on the government subsidized portion of our business lifeline and get that inventory out to folks that are doing activations in the field. It'll give us inventory for link up, get the hands of the distributors, master agents, the wireless stores, the convenience stores. It'll give us the Sims to do our next round, if you will, of our phone in the box concept, you know, based on the feedback we get and what type of phone and more offerings through the phone in the box program. And then it'll also give our initial inventories to the new companies that are coming on that are buying wholesale from us on the MD and E side. So by the end of that month, that's our projection by the June.

Brian Cox
Brian Cox
President & CEO at Surgepays

And then we should be in a constant replenishing mode where we keep a watermark of inventory to, you know, be able to absorb any bursts of sales that we have depending on the market. But that's the way we're gonna move forward, and that's where we feel like we've got that that'll get us a good baseline, and then we'll obviously ramp up our ordering of SIEMs as the the adoption of our product, you know, kicks off and scales up.

Kunal Madhukar
Managing Director at Water Tower Research LLC

Great. Actually, if if if I could, you know, one, you you on the MVME side, you talked about high margin, recurring revenue, from from the MVMEs. Can you talk about the economics and how, like, you know, we should model out in terms of if you get one MVNE subscriber, how many does it translate into? And then, ultimately, when we are thinking of these hundreds of thousands of subscribers, how should one think of, you know, adoption for your, part of the service for those subscribers?

Brian Cox
Brian Cox
President & CEO at Surgepays

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 MVNOs, 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 maybe a prepaid company that operates nationwide. And I say that because that's literally the variety of companies that we're engaged with right now. So I think every company, almost on an individual case basis, will have their performance, you know, based on what and also their funding of their company and what their goals are.

Brian Cox
Brian Cox
President & CEO at Surgepays

We're trying to align ourselves with people that wanna grow rapidly. There's a lot of little guys out there that, you know, are gonna have to wait in line. But, you know, from an economic standpoint, it's hard to say, hey. With every MVNO we bring on, it's gonna generate x. And even within the MVNO, you you know, when you're looking at a model where and I can't get off into the weeds of the the actual secret sauce of of of rates.

Brian Cox
Brian Cox
President & CEO at Surgepays

But when you're when we're selling our product, how an MVNO contracts with us, you're gonna have an, an MRC that they're they're gonna pay us every month, and that would keep that, SIM card active. And that would include an allotment of, of TalkText. And, then the commodity that's metered from there is data. So in the old days, you'd you'd have a charge for, you know, your your your minutes, your text messages, and data. Now your all of your unlimited text messages and minutes are included in the MRC, and the only thing that's that's measured is data.

Brian Cox
Brian Cox
President & CEO at Surgepays

So, again, if you have, let's say, a lifeline company that's primarily in 09/25, not gonna have a lot of data. But if our our margins you know, if we've if we've stabilized a good margin in the MRC and guaranteed ourselves a a a a good healthy 20 to 30% margin 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 gonna be one of those trickier ones to model out in your analyst 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 per MVNO or a blended average, blended margin per MVNO. But I think we're gonna have to wait and see how that that turns out in in the wash for you guys to start modeling.

Kunal Madhukar
Managing Director at Water Tower Research LLC

Great. Thank you so much.

Operator

Thank you. The next question is coming from Ed Woo from Ascendiant Capital. Ed, your line is live.

Edward Woo
Director of Research & Senior Analyst at Ascendiant Capital

Yes. Congratulations on the progress. My question is, obviously, you guys have a very broad distribution network in the communities of these underserved customers. Are you seeing any change in the outlook of these 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?

Brian Cox
Brian Cox
President & CEO at Surgepays

We obviously have our ear to the ground and our, you know, our neck deep in all of these communities. And and and whether it's a 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 wave break zone of the economy, there's normally not a whole lot of change based on craziness on the macroeconomics of the of the country. If anything, it's only going to increase our, you know, available market. It adds you know, as as things get a little tighter, you know, our our target that third of the third of the country that's our target customer doesn't normally have four zero one k's and mutual fund IRAs and investments. So stock market, GDP, tariffs, those types of things don't really directly affect them necessarily.

Brian Cox
Brian Cox
President & CEO at Surgepays

So but, you know, we we've said this a couple of times before. One thing about when the world gets a little more myopic and 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. We're presenting an alternative and a 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 the that that end subscriber, end customer gets to use, you know, or gets to keep in their wallet, or let's go ahead and spread that out to the NVMe side, if we can offer better rates at a more friendly partner to these other entrepreneurs in the prepaid wireless or wireless world, then we get a ear that's a little different than in times are good, and people are just not really caring about what they do tomorrow. They're just gonna repeat what they did yesterday because they're fine.

Brian Cox
Brian Cox
President & CEO at Surgepays

So we always find opportunities in moments where things are a little bit tight or dicey or stormy, and that's why I think it's great timing, all things considered, for the the product suite and the distribution mechanisms that we have in place right now.

Edward Woo
Director of Research & Senior Analyst at Ascendiant Capital

Great. That's a very good answer to my questions. I wish you guys good luck. Thank you.

Brian Cox
Brian Cox
President & CEO at Surgepays

Thank you.

Operator

Thank you. And next, we will have a follow-up from Kunal Madhukar from Water Tower Research. Kunal, your line is live.

Kunal Madhukar
Managing Director at Water Tower Research LLC

Hey. Great. Thank you. Quick one on the on the near term goal of a hundred thousand locations that you talked about. Now you're currently in about just about maybe 10,000 locations, so that seems quite ambitious at first glance.

Kunal Madhukar
Managing Director at Water Tower Research LLC

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?

Brian Cox
Brian Cox
President & CEO at Surgepays

Yes. And you you you you stole my you stole one of my my thunder words there with visibility. I use that word often. Because we do have visibility downrange, and we're able to look at the possibilities and the feedback that we're getting. So that number is definitely 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.

Brian Cox
Brian Cox
President & CEO at Surgepays

And all that that one product, whether you wanna call it a door jam or a Trojan horse, doesn't matter. That gets our entire product suite, our entire Surge Page network platform into that store at the register. So looking at the, to use your word again, evaluating the visibility, looking downrange at the folks like HT Hackney, quite a few others that I I won't mention because we're in negotiations. There HT Hackney is regional. There's plenty of HT Hackneys.

Brian Cox
Brian Cox
President & CEO at Surgepays

There's also other products on the the top up side of things. There's huge networks that we're in discussions with on LinkUp. There's huge networks in the lifeline space that deal with EBT redemption, specifically out west in the the tens and tens of thousands. So there's a lot of other companies we're talking to actively right now that are the merchant processing, credit card processing, ISOs, that have 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 squeeze a few more bucks per location out and enhance their portfolios. So all of these are on the table. We have various high level sales folks on in our company who are each focused independently on their own category. So that is 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.

Kunal Madhukar
Managing Director at Water Tower Research LLC

Got it. So by end of twenty twenty six is what you're kind of thinking of. And we would be we would be remiss to not talk about the, you know, the at least on the lifeline side, the opportunity that exists in, like, higher revenue states and regions and and and demographics. So, like, California, for instance. What's the progress that you're seeing on that side?

Brian Cox
Brian Cox
President & CEO at Surgepays

Progress is full steam ahead nationwide. We're you know, after this financing, you know, I wanted to also look. Let's be careful. I'm I'm definitely a hard charger, a Viking, if you will. But at the same time, we all have everybody on our team has their life's work invested in what we're doing.

Brian Cox
Brian Cox
President & CEO at Surgepays

So we're not gonna go willy nilly with our eyes closed. So we've been methodically plotting forward pending this financing with the financing being really growth capital targeted toward Lifeline and some of these other front loaded ROI investments in the reoccurring revenue subscriber, like the Lifeline subscriber. So, yes, your your states that have the the higher, whether it be $15, 20 1 dollars, 30 4 dollars, 30 dollars, numbers similar to the old ACP world, Those will be targeted first. And then we're also we're not going to forget about $9.25 because we believe, based on the feedback that we're getting coming from Washington, that there's going to be an enhanced lifeline product where the government is now well aware that it's very difficult to provide a usable phone service for $9.25. So I believe they're gonna look at doubling that, and they're gonna open that up to folks like us.

Brian Cox
Brian Cox
President & CEO at Surgepays

So we're we're we're hopefully again, I'm not 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 the goal right now of the coalitions related to subsidized telecom is to get an enhanced lifeline, ballpark $20, give the consumer an actual usable product so there would no longer be nine twenty five 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.

Kunal Madhukar
Managing Director at Water Tower Research LLC

Got it. Great. Thank you so much.

Operator

Thank you. This concludes today's Q and A session. And also this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Analysts
    • Mike Mccormack
      Managing Director, Investor Relations at Water Tower Research LLC
    • Brian Cox
      President & CEO at Surgepays
    • Anthony Evers
      CFO at Surgepays
    • Kunal Madhukar
      Managing Director at Water Tower Research LLC
    • Edward Woo
      Director of Research & Senior Analyst at Ascendiant Capital
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Key Takeaways

  • SurgePays secured a $6 million non-dilutive 24-month convertible note from Cable Car at 15% interest, convertible at $4/share with an early-repayment option, extending its runway without issuing equity.
  • Management is targeting $200 million in revenue over the next 12 months and plans to exit 2025 operating cash-flow positive.
  • The company’s wireless business is gaining traction both as an MVNO (LinkUp Mobile & Torch Wireless) and an MVNE via its new wholesale platform, highlighted by a fully integrated AT&T partnership and over 210,000 SIMs shipped since launch.
  • SurgePays’ “Phone in a Box” grab-and-go concept sold 2,600 pre-kitted smartphones in under 30 days, converting each convenience-store location into a new activation and payment point and supporting a goal of 100,000 total outlets.
  • Financially, Q1 revenues fell to $10.6 million (vs. $31.4 million yoy) due to the federal ACP program shutdown, but platform service revenue surged to $8.3 million and SG&A declined by nearly 29% year-over-year.
AI Generated. May Contain Errors.
Earnings Conference Call
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