Earnings call transcript Q1 2023

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Operator

Welcome to the SurgePays First Quarter 2023 Earnings Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session.

I will now turn the call over to, Brian Prenoveau. Please go ahead, sir.

Brian M. Prenoveau

good and operator, you, afternoon, everyone. Thank the conference call. to SurgePays first and webcast earnings XXXX quarter Welcome Today's May date is XX, XXXX. Chief Officer; And SurgePays on Tony Executive are from Evers, and Brian Cox, the President and call Financial Officer. today Chief

results certain we could XXXX. this may differ that the subject These to are under statements contain remind Litigation cause Securities a they call the as are I'd Private those to risks statements Reform from Before that expressed begin, statements. defined forward-looking everyone actual and like uncertainties forward-looking Act materially to of in

uncertainties, For the see events that a statement discussion made expectations of such this forward-looking no after All occur we most risks today with any and obligation filings and reflect our update current please only to recent the statements call. reflect SurgePays’ SEC. undertake to

the discussing be this in of the of Also, SurgePays' press are GAAP Company today's measures. one today's afternoon. non-GAAP measures or of Investor most financial on during are the Reconciliations we non-GAAP release at issued measures press to ir.surgepays.com. release website financial comparable these call, will Relations accessible Copies course directly the more included

SurgePays' XX, SurgePays' the Relations addition, for available quarter Investor on ended will In website. XX-Q also March Form XXXX

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

Brian Cox

Brian. Thanks,

joining First I'd call. the for those and SurgePays all, of in like to shareholders thank interested our

to give and overview expanded have do our brief are I'd continuing a we and like who expand As market. what we to of target our we are, audience,

they shop. underserved States the products and of populations the live telecom where where financial and brings and they to SurgePays United underbanked

their distribution financial distribution of their of home. in these and underbanked country. goal to do these as convenience utilizes the closest at into to that the direct their network underbanked stores of products the trusted store services Our is SurgePays points build The the majority transactions local largest communities.

perform transactions Clerk banks, enable services financially of checking activation wireless accounts. enabling such and reloading to and to to that software as with platform, to other payments, lives at stores the store onboard we and we access credit, along prepaid traditional improve fintech the As cards debit without those daily

One of need to to directly most. the is many our tied provide how that we things those revenue essential services great it really is who

Connectivity sales Affordable been The profitability. cash with the driver us from two ACP Company In taking with over Program positive SurgePays $XXX the million are revenue or to roughly $XX in growth revenue has million in of breakeven guiding years, for XXXX, million with to XXXX in $XXX federal a The any XXXX, device to last broadband income-based the historically recipients pension, ACP subsidy Section service of and cellular other a the flow. but or food stamps goes now a called offers most EBT, such as SNAP. the by Medicaid, tablet program veterans benefit for X, name and government Internet notably, we a monthly

wireless There the several licenses companies to out to are there public. ACP offer the program with

AT&T own and software uniquely positioned relationship integrated with also FCC's database platform, only as Company the that's However, T-Mobile. customer its we owns that are management and ACP the

their brick the revenue earn and inside which Company connected. helping community can platforms Further, way the to to that advantage a by only us we're prepaid able be stores, underserved means few owners Company network the for do nationwide one only convenience ACT and competitive store paves This transaction mortar convenience that get ACP the sign-ups trifecta of stores. owns of has those

more is over ACP more to a build shop, program Company. know We is a one are With XX,XXX that stores these some than the pulls is bills customers same prepaid in surveys, these per In utilizing is our store this customer XX to presence months. our and launching to What's fantastic eligible for it's of to each out wireless with customers Every this through that ability in supermarkets pay now are on-boarded who these convenience wireless we household, great XX% monthly household even on later what our staging year. stores pad SNAP as of card and which is target be using the catalyst the benefit. the card, four stores the subscriber less for wireless enticing and limited store, areas, the smartphones their where for ACP prepaid prepaid to non-ACP at than a at ACP. transactions that, push another exciting has three government

where is business doing has have is maybe of I've facet order a a his helping are high. to other the interface a minimum from their from products impulse in-demand Not software this, that the manufacturer. areas store owners Directly for owner of we're never seen by owners navigation local transactions, that also upselling high because and does are rural can in to register have orders the These directly our just especially Another or in back-office reception warmer now the store this. products website obtaining store these margin money wholesale distributing distributors too Company marketplace and products platform the directly are our making the to it consumables difficulty a exciting only store. a community, partnership with similar enabling

our revenue grows stores the top-up of points into to of party tens is parlaying ACP for growth ACP products distribution force mindset driving other add third revenue, This our for other gives the or verticals. our into our the nationwide. payment network the success and of Using in thousands communities these program exponential us by selling base, the subscriber and to prepaid ACP

access by this piggybacking are offering. owners hot to to this We store have reception

$X energy over and focused lower million. EBITDA due at funding of periods net this to the we With of efficient most to first began tablets the on to pleased should We continues majority meantime, of the profitability infrastructure growth supply running term the them that our devices. in-place, end out income XXXX in consistent see to million in team's with I'm out of of of quarter Even model, we've XXXX, longer throttling built $X.X a the the secured our distribute announce trend growth of no a see and possible. we've longer the at means cost significantly delivering

in revenue future to ramp expect We higher quarters.

I shelf, our sales in subscribers, our more mentioned on going wireless the ACP last As fintech platform sign-ups, on quarter's key means the new platform transactions call, stores on and is more products over store. per prepaid More more the more individual our stores more metric forward. platform

growth. managing cash As our cash, always, our cash deploying while and flow focused that on to we're maximize

with realized quarter XXXX to has and align cash quarter the expected strong revenues, lending flow. positive the of end happened, anticipate but precisely benefit what the facility of revenues We fourth toward be expect operate second full with and first to accelerating our the with growth year, We of on quickly, a quarter by network opportunistic the stores flow raise capital see continuing defined year looking into and the to to and purpose. the the SurgePays the positive second still XX,XXX year. during only for half of end cash operating We

fruit a calls your mind I the bit, don't how my looks but for the now. has fruits labor minute stopping see to a enjoy changed normally of considering for preparing these

the we're to my will on smile, and think SurgePays shifting then, for a elevating I as daily gears next delivering continue forward couple our continue team able of out basis. Until thanks upward. calls pushing to go

review Tony, results call over today's I'll to turn briefly the Tony? call. financial to summarizing our before

Anthony Evers

Thank and you, results. of overview afternoon, everyone. will financial I Brian, first my good quarter's begin the

primarily XXXX, $XX.X of in an representing broadband For the XX%. compared the to attributable of in first million business. quarter sales quarter to growth quarter, were we our million $XX.X The subscriber increased reported the revenues increase mobile for

increased XXX% ago the compared million $X.X profit $X.X in to million quarter, Gross in period. the first year to

a gross the up driven versus first XX% was XXXX. to improvement the from last primarily significant this QX quarter to of margin quarter SG&A $XXX,XXX in showed expenses decrease in XX.X% year-over-year, expense decreased XXXX also compensation QX First year. by by XX.X%

basic gain Income per was Net a for compared the $X.XX for of of from net at for a quarter XXXX first XX% million Centrecom. share, or of gross $X.X Other million $X.X the or in a $X loss QX an included was a million in of increase of share XXXX. gain our the margin million over quarter ago per loss operations quarter showed year of $X.X compared of a XXXX basic income million the the investment XX% $X.XX on loss Of period. $X.X XXXX, in income QX. positive to to gain

to flow. balance liquidity and Turning sheet cash the

$X Our $X.X year-end compared million at March XX million receivable year-end $X.X of to the $XXX,XXX from have USAC. increased with end XXXX. the as mobile million. by XXXX Accounts -- new cash the The broadband to U.S. balance the of last verification a customer of is Payment for government from subsidy. in occurs usually of the receivable following month, day was the

the and financial liquidity position, strengthen structure, and allocation focus capital our investing balance our cash Given in growth. maintaining priorities for business, future in ample cash higher on

now back Brian, Brian? the remarks. I'll closing pass for call some to

Brian Cox

Tony. clear while best what Company succeeded Thanks, protect succeed of doing here SurgePays. to at profile continue making significant building the advances are in we shareholder in and it's We've to the Hopefully, financial interest. our

of tremendous growth to flow. we products the the delivering market do and We direct a proven create can with distribution in results positive networks services potential that These poised country, largest underbanked one while and are of vast have awaits. cash

for much so you Thank your time today.

questions. to open now up will Operator? We call the

Operator

from come Woo Instructions]. Thank Ascendiant our Ed Capital. question will with today you. And [Operator first

Ed Woo

Yes. change as My you get customer question convenience Congratulations any the the with economic partners weaker. your continues with to Have your noticed on either quarter. environment store base?

Brian Cox

I've with years convenience -- question -- delivering Ed. for thanks for We've in. good the products involved Thanks stores been now. for Yes, seen and dialing XX underbanked

are is their there. to more ways macro I've their rather looking ways to the income. of obviously efficient two consumers noticed, that The looking stores for the with get things more capital. from it are environment, And to is their then there's proportionate for be and components capital, One

value-based about, opportunity always presents a the best that this where we us, product we're cost and like unique really talked to delivering them. value, the -- considering we the we're because for at directly the have normally competitive best advantage deliverable the So,

time moments are financially, have for back the they of rut this you instead evaluate in where that same product. us, step in always better the good and companies things road in they a it's aware, just like people value-based take delivering a and When cost like staying

a rent. see an into pretty sudden all usually much Those so underserved not typically you not of of houses more neighborhoods it's there's whole underbanked, lot moving people neighborhood packed a already. that because are So, for

think make owner put it's more out explosion store's It's changes. money capital don't that have way this the are that of And there's just awareness for products I that our store a awareness, for the to most of So to inventory, having a customer's sudden all of we without if customers. because transaction.

the number, He money for ACP. down takes just didn't that out owner he put store helps us made example, $XX. earn enroll money. for So someone That any to

So money going it's our XX, have of he doesn't that's products, upsell the lay XX with And sit on then such inventory other a product the risk products for why shelf wait that to product hot and days to transaction the out him. bad.

for and better, because when one a really it's think really have we're So still to there be that time those take are going of we these time times us. of still relationships. get it's products And of want windows these to going I to and strategic advantage

opportunity related macroeconomic for and time us the window that's that's think I situation. of the the to So,

Ed Woo

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

Brian Cox

Ed. Thanks,

Operator

with Waldo Your next Adam question from Lismore Partners. will come

Adam Waldo

much very I Hi. you me taking hear Thanks can Good day, my gents. for okay. hope questions.

Brian Cox

Yeah. We hear you. Adam. Hey,

Adam Waldo

Brian. Thanks, Great.

growth to on So guidance free margins what provide little improving wanted business extent see cash the balancing one could the to profitability bit through EBITDA to by hand of hyper and the other. just on the of guys a of little ACP a the on I flow continued get bit you and

the very that a So in quarter in had obviously, regard. here first you nice quarter

was Some of device the due timing that delivery to around cadence.

be a but full-year over like given talk subscribers margin little you and guidance try release, flow to would and operating and to can You've your positive scaling for bit guidance the haven’t cash in and looking press for up cash what progression improving to of the you balance both you margin to given cash year as profitability see flow? the structures flow continue

Brian Cox

CFO, average No. say obviously, well, probably have from a question the the That's mindset methodical need day, our I It's and jailbreak and get astute to to our is and forth debate on it's hour this we appreciate minutes money so money are back We're a we really on much now. making Tony sales. is come just The and strategy we're XX that that there not executives laying Because way. by make out, as call go of margins our expand what possible. Sure. kind of making we're I'd an I core Company get and right call make the of just that. goal when entrepreneurial, done sure in the a it because, where it hey, Company. to as public right money I, those

using and of the -- have that at the all and little thing the about But of distribution margins then open products off talked the us. the for really just – and stores challenging. release script, into the subscribers as ACP, a bit of is So the golden point I what pave we sell you to so things that color and why that as more and look door we release the our little add us for getting want press own ACP and MVNO ticket to all I to why are a a press and that to for add other for way bit in advantageous

It's When of set and out income. we're tents, only up folks They're ACP up the the not the is that that's program. there income cost. only the in gas, that just traveling their tents out their hotels, go of source source paying and it's pop doing model,

at the our those quick end the much require get where The people the this telephone at to through day, of software activation number subscriber that for store lifting customer chat them call know, spiff, is simple our then can that So people. engage where it a higher, the so a way using of of that. a you the by store, let's by heavy payment bounty, transaction simply is the done that SMS we're a

So that quick. store owner is

store field someone paying $XX in $XX we're opposed the to as to Now the $XX. paying

or more and to it So and okay, borrowing capital up access saying, $XX utilizing base staring to we trying look Just squeeze we the important when looking happy really again, our two at end simple that that days? end a to of make XX at Are to and want every devices certain do you what's be people of and to there year in? put at used math globally at $XX, they're the numbers here? ballpark. out And, years, our a year, at now

store sales us field $XX. cost that us a $XX. Our costs At

four field math, If you run customers store three the I get can for sales. every

why but that's been from you our not talk you the a energy standpoint and when think focus So, that, and bandwidth that's know, our about our margins, about this. pushed has also that only on of

It and ask You tent If that, goes of rid of kind town. back. its customer through and you with town it's That of kind -- in line it's all and next that devices retention didn't gets the gone, come rolls of attrition. gone. doesn't this, to but salesperson

they or except an you most tablet If don't Company. breaks there's go store If that the there, of residual their store go a and to very go know nobody times that town. the just they to can these comes the staying the on an for next people small customer that back to three ever to customer that to there's, in it's that week, has payment know, five issue, product. that has owner If tent and issue, a

you what, customer hey, They vested care you interest text take tell Hey, I me, to man, man. SURG, that Well, service, a problem got has to man. know, help say, the Adam. owner of you. Hey, you store They'll out. your they'll

email address got We We back. number. They you help can anything me need know. let and your got If else, an telephone you.

that cost, about keep completely and too, specifically right device we mind for permanently asked being $XX as different We're the retention, customer that you engagement lower cost in mindset now So, realizing $XX in for community to of margins. it's a lower speak. for

seeing you're realizing we're some flow. So margins that's these this and why of cash

Adam Waldo

does on digits margins as growth, that unit into margin up unit the posting even improving you target mid-teens EBITDA Right. exit drivers towards the to we and and subscribers here see rate a scale you year. with – your that be really fourth you first. as the could XXXX double That million are obviously to And the X.X EBITDA the we -- did in of of sort economics that the exit nice all mean of in that's quarter

Brian Cox

about Are the or per year? for you quarter talking

Adam Waldo

Oh, fourth margin given I quarter could Brian. here did I'm sorry. year mid-teens the about should an for been the you that, that exit have you year could clear exit with Fourth Where quarter, in you the first? EBITDA EBITDA?

Brian Cox

I and is think to would You It's be to necessarily to I put I guidance. it's what reason that give know, hesitate at the I EBITDA and, -- know don't laugh I not going out you think the I what skew. you guys did the crazy. conservatively, take that quarter and would same upward in first I'm extrapolate a there at we basically that time, because could But think as want

customer skew I in fourth the heavily more third growth and of skewed quarter. will the and think be quarter growth store

on a components as bringing are, the gas that card sticker, the the people that, got pump of you're all out, door point materials chain stores awareness are government cash the of Well, you this hey, one sale well. for of to your or you've register starburst, entitled little now, these as up the get on poster, sits the that Right benefits? by of creates stores to rack

Ask important. register. That's at very, the very

because had are all Simple to pipeline. that training development of these we we've our found the quickly stores manpower not the team do train create the out in store, videos, we've have of

understand and of it two and very So or get and where can simple certified owners store we created if you people, our one Clerks call platform. want minute training, videos to basically modules watch

start grow can of that. as And the look, way. that can, we have built components been but So the we're fast best that there's seeing as to fruition as doing we will all the those right well

where going where have efficient with of different see did training. quarter, you're than at every we're the transaction a each store. that of now last stores and at So that's types store an need, the has compounding is obviously what on in interest to a store a and increase training bodega those Clerks of stores who quarter we A more what mindset types supermarket multiple a are stores learning because we're has owner what vested

benefits software a card, independently other some got interesting now, to I that where government their steam able swipes with are but to kind that of it let's that you We've we're -- see ATM. eight debit able things that’s wheels wheeler and hold think mobile some somebody going working and Company be going on reloadable integrations really every the type that customer the secure then to turn. be pretty given is benefit. they're have household ATM screen time to government likely ground, owned ask to we're quarter. powerful checking through fourth the where pick account, doesn't anyone they're call They a of that being most Being to number third There's if right the traction the the on able starting ATM, in their XX some up them in of going on

Adam Waldo

attrition levels? that quick update a Is helpful give me on been helpful. improving, is you've can That's average Brian. months? one in monthly That's seeing an more that permit And in color. you if us appreciate, pretty your one? will, stable very of bit around of recent customer terms historical I what little you Will you

Brian Cox

it itch it's looking to I'm once that. about we've make I you that of make to always still because a ways I'm definitely but maniac my skin keep for scratch on kind about almost that -- want it. earned customer me stable, thinking It's a because

that ever revenue to my always done do wanted of subscriber reoccurring All was I've that a model ever to business as base. I income

over types offer deploying for even are reimburses the a we SIM definitely about customer And things the Obviously, the put also so stay customers Well of a a that tablet device, can if well, that smartphone? We longer have access the use to at can the of And that deploying But use their they customer it's we're If they that can testing be the the entice We're only, end but it. reward systems Because card then to term a you'd day, program phone. all for longer and device, we customer? as reimbursed our is purchased in especially wireless. don't right for there them the get we we prepaid simply elevated subscribers. being mobile we're over all now. product. to talked that term valuation what smartphone. million They've X for net billion watched $X on definitely smartphones. consider just subscriber with

my coffee with I the the their week. us five not customer that almost I their It's that a kind her. They time. from, that got them That's buying. I a that to and something see encouraging, juiced, from to through reduce business some because go was need tent. continue I service three I at of, cigarettes with in we're stores definitely business their So because or that are to to do But I random them. going perception It's jazz got Company times of to look guy from, And and that said, to him them And all of a us. guy. there I'm Doritos. it's really kind all going they that does the attrition their that's store. That's help think like buy

personally. the work people that that data of focus intelligence keep of – feel industry. one it help at I in something us that's we're the that's the we like that try it going whole historically. But So to component that really of really grow. business it’s continue to definitely is it's have definitely of at mine and again, But and But a help to better on do a team where reduce right constantly analysts

Adam Waldo

much. the of Okay. Best rest Thanks the very year. wishes for

Brian Cox

Adam. Thanks,

Operator

Michael question our And Maxim next with Group. Instructions]. will from Diana come [Operator

Brian Cox

Michael. Hey,

Michael Diana

And So numbers. being important here. I've you've as focused extremely on heard few you stores a mention

stores XX many and XX,XXX mid-year program, like, release you months. tell the by, it that us, have by of year? XX,XXX year and said over end I the end do within And Could next active XX,XXX XX,XXX is then the how think says the of by year, the now? you you the like

Brian Cox

what that's exactly the But not who's It's time word set I -- to allowing with Jeremy, definitely I and want want talked no. -- us slow to to about roll. always the right every Yeah do use like We growing have way. that talk night. him making to president the And of right talked subsidiary, stores fintech way the material. is the the our sure

could through if store have the going You register XX,XXX is that a week, products. about awareness but material zero up not a at your the transactions to in the ask there's store, need our customers

that the able bill being their for prepaid just And that register. they ability Cricket, MetroPCS, Boost, to Track even products, matter, the can pay up other now pay their the at on,

So store making only store, the of that out that it's the not material in the importance the sure shipped is sale utmost point put up at it's to of store.

store those XX up We they the and distribution and that an distributor the little have across the get of that point of out picture sale and picture and regions store, of salespeople some Hackney send get set per extra relationships in materials to companies per set hundreds the southeast of warehouses spiff operate up and store. us salespeople incentivizing a with have H.T. like Midwest,

what's where are we're best. What's and working? and best XXX the we're example, to that testing, for things implementing So right now, store we're saying, the things hey, have those doing signing chain, guy Little all a store what's yielding sales like that, ownership trying, we're results? is responsible the then don't a that it from learning up, and we comparing

the to now, X,XXX we wanted stores, So was But with put your that answer network. very, estimate quickly. believe, that out XX,XXX the I like by stores to end our change the got Right definitely I we'll year, of there. question, on be feel you've conservative very over can

their did has meaning networks Those basically testing we're can to our suite people we that animal. then that the looking relationship as just we simply stores, where to stores are am doing may products I at taking networks XXX than Company. that convenience as where of XXXX over, well. There's a that XXXX know, higher pre-existing us certain a are it stores, XXX, testing look products that acquiring store, one-off to we're that to deploy buy Company one-off out product there of network and on that are ways grow value much a entire to You

XX,XXX do we'll months XX,XXX the but I by we'll what year. exceed believe the end So go over staged the right of that's with now. next and, that, XX

Michael Diana

Okay. That's great. Thank you very much.

Brian Cox

talking you Sure. Thanks. Good to Mike.

Operator

no And at questions time. there this are further

have We today's conclude now will day. pleasant for you conference. joining, Thank and a

SurgePays (SURG) 11 May 232023 Q1 Earnings call transcript