SurgePays, Inc. Q2 FY2024 earnings call

• SurgePays is committed to providing financial technology and prepaid wireless services to the underbanked and underserved.
• The ACP program's funding ended, and Congress didn't renew it. SurgePays launched LinkUp Mobile in early June as a non-subsidized prepaid wireless brand.
• Hired Joe Gomez, a senior telecom executive, for MVNO operations to develop innovative products for the value market.
• Announced a stock buyback of up to $5 million over the next six months.
• Initiatives to achieve free cash flow positive by year-end include growing ACP revenue if funded, offering a sister subsidy program, scaling third-party wholesale transactions, expanding the ClearLine customer engagement platform, exploring partnerships for product distribution, and identifying market opportunities for short-term cash flow.

For the second quarter of 2024, SurgePays' revenues were $15.1 million, down from $35.9 million in the year-ago quarter. The MVNO segment contributed $12.5 million in Q2 2024, compared to $30.2 million in Q2 2023. This significant drop was due to the ending of ACP funding. Surge Logics lead generation services had $2.8 million in sales in Q2 2023 but contributed $0 in Q2 2024 due to operational changes. Gross profit in Q2 2024 was a loss of $3.4 million, compared to a $10 million profit in the year-ago quarter, driven by the ACP funding situation and the company's decision to maintain subscriber continuity.

• Aim to be free cash flow positive by the end of 2024.
• If ACP is funded, continue to grow that revenue stream.
• Offer a sister subsidy program and entice customers with LinkUp prepaid wireless plans.
• Scale up third-party wholesale transactions for prepaid wireless company payments at convenience stores.
• Expand offerings outside of wireless, including the ClearLine platform and exploring partnerships for product distribution in convenience stores.

• Uncertainty around Congress renewing the ACP program.
• Carriers reduced cost alleviation due to their certainty ACP would be funded.
• Dependence on successful transition to non-subsidized business models like LinkUp Mobile to maintain subscriber base and cash flow.

Q: What's your optimism regarding ACP funding renewal and timeline?

A: There's still talk of actions in Congress, but SurgePays had a threshold of August 1st to take action. They're positioning to transition customers to Lifeline or LinkUp Mobile.

Q: Initial reads on who will opt for Lifeline vs. LinkUp Mobile?

A: Most will stick with the free Lifeline program initially, then transition to a paid LinkUp plan over 3-4 months.

Q: Initial reads on ClearLine customer engagement platform?

A: ClearLine helps with ACP enrollments, transition to touch screen terminals, and has future opportunities like QR code transactions and digital payments at convenience stores.

Q: How to be free cash flow positive without ACP renewal?

A: Through transitioning customers to Lifeline, scaling third-party wholesale transactions, ClearLine platform growth, and LinkUp Mobile traction.

Q: Opportunities with carriers to mitigate costs for keeping ACP customers?

A: Carriers may offer discounted rates for Lifeline service, as they don't want to lose subscribers.

Q: Thoughts on acquisitions for growth?

A: SurgePays is constantly evaluating acquisitions to grow, focusing on aligning with their goals of distributing in convenience stores and not being just an ACP company.

Q: Economic outlook impact on underserved market and business?

A: Underserved market is stable, but feedback includes strengthening international offering and porting numbers. They're executing strategies to maximize these opportunities and be a top player in the prepaid convention.