Good day, and welcome to the SurgePays Incorporated Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I'd now like to turn the call over to Mr. Brian Prenoveau, Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to the SurgePays third quarter 2022 earnings webcast and conference call. Today's date is November 14, 2022. And on the call today from SurgePays are Brian Cox, President and Chief Executive Officer; and Tony Evers, Chief Financial Officer. 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. 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 SurgePays' 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. Also, during the course of today's call, the company will be discussing one or more non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release we issued this afternoon. Copies of today's press release are accessible on SurgePays' Investor Relations website, ir.surgepays.com. In addition, SurgePays' Form 10-Q for the quarter ended September 30, 2022, will also be available on the SurgePays' Investor Relations website. Now I'd like to turn the call over to President and Chief Executive Officer, Brian Cox.

Thanks, Brian. We were tremendously busy in the third quarter of this year, and the team's hard work is translating into not just growth but growth with a strategic direction. Revenue exceeded $36 million in the third quarter, a 2.5x increase compared to last year. In the first nine months of 2022, revenue increased by 131% compared to the first nine months of last year, and it's important to note, this was during a timeframe where sales were intentionally throttled by management in order to grow without dilution. We believe continuing along this disciplined growth plan that we've laid out earlier this year will be rewarded in shareholder value. We're thrilled with our progress and even more excited about where the company can go in the future. Last month, we announced that we had eclipsed 200,000 mobile broadband subscribers, our year-end target in our wireless business through the Affordable Connectivity Program, or ACP. We continue to grow our subscriber count in this huge long-term opportunity by providing subsidized broadband Internet access to low-income households. As we discussed previously, estimates vary, but it looks like there are 50 million households that qualify for ACP. And after almost a year and a half, only 14 million households have taken advantage of ACP, which puts the adoption of this benefit at around only 28%. We believe we've only scratched the surface of the program and there's significant room for growth, which is why we're so excited about being able to enroll and activate customers over our SurgePays' software platform inside convenience stores. We will be strategic and long-term in our decision-making and business operations, especially when it comes to leveraging existing synergies to accelerate sales using our competitive advantages. 150,000 mobile broadband subscribers was my benchmark for analyzing our efficiency and purchasing our wireless equipment, our ongoing recurring margins and customer retention. This evaluation has led to opportunities to expand gross margin in both our equipment and services. Additionally, we have implemented new protocols to enhance customer retention. One tool that will accelerate subscriber growth is the SurgePays' Fintech platform. While speaking with convenience store owners, they estimated 75% of their customers are actively using SNAP EBT to purchase things like energy drinks and food at their stores. Our platform enables the clerk at these stores to take prepaid wireless payments and can now initiate ACP customer enrollments at the checkout counter. As most of you know, receiving SNAP qualifies you to get ACP. We have created a way for the clerk to quickly enter the data we need at the time of purchase for our compliance team to work directly with the customer to enroll and activate them. The store owner is compensated for helping his customers gain access to this valuable benefit. This will help entice more store owners to sign on with SurgePays as well. Currently, almost all ACP companies, our competitors, get enrollments using pop-up tents outside and low-income neighborhoods. The weather is now changing and in most parts of the country where it's cold, things slow down. There is a huge opportunity for us here. To our knowledge, there is no other ACP company offering or even able to offer this opportunity to convenience store owners. This benefits both the consumer and the local convenience store owner while benefiting both of our SurgePays' core revenue channels. Until recently, the SurgePays' Fintech platform has taken a backseat to the intense subscriber land grab and ACP enrollments and growing SurgePhone. Now we can synergize the growth of both channels. We've begun adding bandwidth into growing the network of stores using our platform. Our recent announcement of hiring Jeremy Gies as President for SurgePays Fintech is an example of that new emphasis and should be a kick start for revenue growth. Jeremy has an extensive background in the telecom and fintech space and will be tasked with expanding SurgePays' Fintech revenue by increasing the number of stores on our network, the sales per store and margins per sale. We couldn't be more excited to add Jeremy to the team. In addition to adding Jeremy to the SurgePays' Fintech team, we've also inked a new master service agreement with GPO Plus, Inc. GPO Plus is a distribution company focused on independent regional retailers. Under the agreement, GPO will be considered a master agent and will be compensated for setting up stores to transact on our network. We're excited to start seeing the benefits of a 40-plus salesperson team pulling doors, bringing sales and with the impact of such a different sales pitch they have now when you can lead with enabling the store to offer ACP to their community. One area of focus that is always top of mind is managing our cash and cash flow and deploying that cash in the best manner possible. I'd like to look at current assets as a gauge of where we've been, where we are and where we want to be. Accounts receivable has steadily increased throughout the year from $3.2 million at the end of 2021 to $5.6 million at the end of the first quarter, and $8.3 million at the end of the second quarter and $9.5 million at the end of the third quarter with $7.5 million of cash. In the future, we will continue to balance the need for growth with the cash flow provided and the cash opportunities. I've walked the path of not diluting shareholders to finance growth. I'm the company's largest shareholder, and let me tell you, I'm not eager to see my share cut. To address our cash flow needs, we're at the finish line finalizing a significant financing backed by U.S. government receivable. This will help us ramp our wireless subscriber growth over a more extended period. I couldn't be more excited about the progress we’ve made as a company and how much more we can achieve. I’m incredibly proud of how much we’ve accomplished in a short time and the market that is going on around us that we’ve accomplished this in and the results are starting to be demonstrated in our financial results. Revenue growth is accelerating, and we have several programs to improve margins. We’re learning more and more about our subscriber base each month. We have more cash to fund growth and more tools at our disposal today than we did three months or six months ago to drive growth even further. As I’ve said, we are uniquely positioned to offer these products and services to the underbanked and underserved because giant corporations have overlooked these communities for a long time. The ACP program is a great government initiative that provides valuable Internet access to households who previously couldn’t afford it. We want to gauge success by growing revenue and profit, but we also believe we can do this by providing valuable services to households and communities that desperately need them. Being a licensed mobile broadband provider perfectly complements our existing business of providing products and financial services to the underbanked and underserved communities. We still aim to reach $1 billion in annual sales with profitable growth in communities that have not been adequately addressed. We are now scaling a business that can grow organically or through accretive acquisitions and better serve our customers. I’ll turn the call over to Tony to provide a brief review of our financial results before summarizing today’s call. Tony?

Thank you, Brian. Good afternoon, everyone. I’ll begin my overview of the third quarter’s financial results. For the quarter, we reported revenues of $36.2 million compared to $14.5 million in the third quarter of 2021, representing an increase of 149%. This was primarily attributable to the subscriber growth in our mobile broadband business. Gross profit increased 1% in the third quarter to $1.92 million compared to $1.90 million in the year-ago period. SG&A expenses increased less than 1% in the third quarter compared to the third quarter of last year. While we saw decreases in most categories, including compensation, the overall increase was due to additional insurance expense. Loss from operations remained essentially flat at a loss of $1 million for both 2021 and 2022 in the third quarter. Net loss for the third quarter was $1.5 million or a loss of $0.12 per share compared to a net loss of $1.7 million or a loss of $0.51 per share last year. Of the $1.5 million loss in the third quarter, approximately $1.4 million was due to accelerated expenses at LogicsIQ related to the advertising campaign. Additionally, the third quarter of 2022 included much lower interest rate, interest expense than the prior year quarter and certain non-recurring items, including a $52,000 loss on investment in Centrecom and a $58,000 loss from amortization of debt discount. Turning to the balance sheet, liquidity and cash flow. Our cash balance as of September 30 was $7.9 million compared to $6.3 million at the end of 2021. Accounts receivable has increased by over $6.2 million from year-end 2021 to $8.3 million. Receivables from the U.S. government for the mobile broadband subsidy. Payment usually occurs within 30 to 60 days after a new customer is verified and signed up. Given our strengthened financial position, higher cash balance, and capital structure, our cash allocation priorities are focused on investing in the business and maintaining ample liquidity for future growth. I will pass the call back to Brian for some closing remarks. Brian?

Thanks, Tony, and thanks for powering through there with the flu. I appreciate your determination. As a company, our North Star is building a successful organization that provides access to mobile broadband and essential financial services to households and communities where they aren’t readily accessible. We believe we are developing an ecosystem to serve this market, both at home, around their local communities and then the local stores where they shop. If we do this successfully, we will tap into a huge market with tremendous growth potential. The first nine months of this year have proved that the opportunity is there. We’ve increased revenue 131% so far compared to the first nine months of 2021. And we think the path to accelerating revenue growth is right in front of us. We couldn’t be more excited about the opportunities ahead, and we look forward to sharing our progress with our shareholders, employees, and partners. I want to thank all of the employees at SurgePays. I do consider them truly a team. Lastly, I greatly appreciate the support and interest of our shareholders as we continue this journey of growth. We will now open the call to questions. Operator?

At this time, we will begin the question-and-answer session. Our first question comes from Michael Diana of Maxim Group. Please go ahead.

So Brian, it sounds like you really ramped up the sales potential here in the quarter. Could you give us some more background on Jeremy Gies and also talk a little more about EPO Plus?

Yes, sure. Thanks for the question, and thanks, Michael. Jeremy, we’ve been waiting for about a year. As you know, I’m very open about the 100% focus on the ACP program. Number one, it wasn’t just the land grab of profitability and revenue growth for us. It was also learning the customer base, the habits and being able to analyze how to maximize and scale this growth without ever plateauing. So we do feel like we’ve got a great trajectory right now, a great understanding of the program, compliance. We bought ShockWave as a software platform and several other things that we’ve done to make sure we can put guardrails up to our growth. I guess about four or five months ago, when I saw this coming, okay, we want to be able to do this through our stores. That’s the big picture, long-term play is being able to provide products and financial services to folks where they shop in the community, getting as many stores as we can on our network transacting, and ultimately, that’s the way we’ll evolve our technology, if you will. We’ll just be able to add new products. The problem is there’s only one me, and running two channels was just not going to work time-wise. So I called in all the favors with folks I’ve worked with now for 20 years in the financial services prepaid under bank market, I’ll be able to leverage those connections. And came across a great candidate, a highly recommended individual, and I hit it off with. The guy has some of the same DNA that I do. He’s a 2.0 version of me that wakes up every day thinking about adding stores and sales. So it’s going to be a huge boost for us to grow that without taking any focus off my plate or my team’s plate and being able to build and leverage our existing infrastructure that we already have supporting these stores while now building from a more concurrent standpoint to go add more stores, adding sales per store, and really focus on those margins per sale. So Jeremy was a great hire for us, and we’re already seeing as he’s adding folks to his team. And we’re already seeing the results of hiring him with these contracts coming in, one of them being the GPO. GPO is a very unique company. GPO Plus operates on the OTC, with their primary, let’s call it, tip of the spear growth product being really cool CBD products that they’ve acquired. They are already dealing with independently owned community stores. I think there are some solutions that we’ll actually work with on these guys on both sides of the business because I like to offer some of their products as well soon at our stores. But the biggest partnership with them is that they already have 40 people actively pulling doors. When you’re pulling doors, for those of you who don’t know, that’s one of the ways I got my start. I’ve pulled thousands of convenience store doors. You have a couple of seconds to grab that store clerk's attention and work your sales pitch. And to anybody that has taken EBT or SNAP at their store, they see the sign out front and the stickers around the store of products you can buy. Anyone on that program or platform to service that customer base providing Internet with this benefit can really become that technology hub for the community. And it completely changes the sales pitch from simply buying my stuff to saying I want to help you help your base. We want to do that, and here’s what we need to engage together, and now they're on our platform. They’re able to do this, and that same platform enables them to do prepaid wireless top-ups. Oh, by the way, we also have these products here. So that's what the GPO is just – I mean the first domino to fall with Jeremy coming on board and having someone working 40-plus hours a week just solely intent on growing the store count.

All right. That sounds great. Also, you mentioned you were 'at the finish line' on your financing agreement. Can you tell us a little more about that? Or is it premature?

I don't want to say it's premature; I'm lapping because I've given a deadline of this call and I just watched that deadline slip a little bit. I think keep an eye out, it’s all the last-minute acronyms and components where the attorneys are finalizing things. But one of the things I want to clarify for people who have asked, well, why did it take this long? Why did you hold out? I want to make sure people know this is not a factoring deal. Factoring does not allow you to grow at a 3% to 4% rate. It does not allow us to solve for the land grab we want to accomplish. So it's important to be clear; the borrowing base uses a factor of the receivable, but also a factor of the inventory. It’s more of an installment sale financing, where we pay back the money we pulled down over nine months. This is not debt. So for those of you out there who understand balance sheets, there's a great chance for us to leverage this to hopefully, by next year, middle of the year, be not only profitable but debt-free. So it’s a unique tool that we've put a tremendous amount of time and energy into, and we're really excited about it. We’re not on the one-yard line anymore; I mean, Michael, the nose of the football is right at the line. We just need to sneak this across, and I do expect it to happen here shortly.

All right, thanks, Brian.

Our next question comes from Ed Woo of Ascendiant Capital. Please go ahead.

Yes. Congratulations on crossing that 200,000 mobile broadband subscribers. My question is, obviously, you guys have done very well and there's a lot of big opportunity. Have you noticed any new entrants or any changes in competition in the field?

Not really. I think the strong get stronger because we're all learning. All of us – and we do talk amongst ourselves and share vendors and consultants. That’s the unique thing about the low penetration in this market. We're not fighting each other right now. There's plenty of yields for all of us. Also keep in mind that we bought the ShockWave software platform, so we can see market trends, and some interesting data there. But there's not necessarily new folks getting into the game; it’s folks trying to figure out better ways to add more customers, working on their margins and equipment costs. It’s very similar to what we’re doing. That’s why I think that adding a layer of in-store enrollment or in-store sales is so unique. All of the ACP companies out there are prepaid wireless companies. That’s what they are. They’re wireless carriers. We have a completely different perspective on servicing this underserved, underbanked market. My goal was never just to be a wireless carrier, a wireless MVNO, that’s just one of our products to penetrate the market, and then we bring in our suite of products. So with that said, we own the CRM ShockWave, which integrates us into the National Verifier and the National Accountability Database of the FCC. It also integrates us into the AT&T and T-Mobile backbones, which is what we use to provide the wireless service and mobile broadband. So we’re one of the only companies that offers ACP while owning our own CRM. Adding to that, we own the SurgePays platform, which does payments at the store level. None of the other transaction companies out there are carriers. They all only do third-party transactions. So we have a significant competitive advantage here, and I plan on maximizing it to really grow that base. I don’t see competition as a threat; I want to sprint and do things these others may not be thinking of, but they can't do.

That sounds great. I really appreciate the color. My last question is, obviously, there have been headlines about weakening macro, high inflation, and its impact on the people at the bottom of the social ladder. How does that help or hurt your business?

Yes, that's a good question. And it always puts me in a unique position because I want to be clear: I never hope for affliction or demise or folks to be in situations that would benefit me or us as a company. But the fact of the matter is we are a safety net for those who've had life throw them curveballs. And right now, there’s a lot of collateral damage from what’s going on in our country, and most of it falls on our target market. Most who are on this call, whether gas is $3 or $5, it doesn’t affect where we drive today; many of us throw things at the store on our credit card without thinking. But that's not our base. What it does is motivate me and our team to figure out not just how we can sell wireless products and maximize margins. We want to make margins and profits, absolutely, but can we do this by cutting costs for our customers? Whoever they're getting service from now, whether it's Track on Boost, MetroPCS, they can benefit from our software being in that convenience store where they already shop. They can get Internet from us through the ACP program. The store owners are incentivized to talk to that customer and bring them over to our prepaid wireless, too. We look to roll out aggressively in Q1 of next year additional financial products and other prepaid offerings, and we can do so while helping folks as much as we can. I'm excited about the potential to partner with telehealth companies, too, putting their apps on our tablets or phones. Those who cannot use telehealth need credit cards; we can package it with top text data and allow them to face time their doctor as a plan they can pay cash for at the convenience store. That’s something I definitely want to roll out as another service, providing help to those who have been hit hard by inflation, food costs, and gas prices.

Well, congratulations. I'm sure everybody appreciates all that you've done, especially all the people on your mobile broadband program? So thank you, and I thank you for answering my questions. I wish you guys good luck.

Thanks, Ed.

Our next question comes from Jeff Kone of The Wall Street Resource. Please go ahead.

Hello, you guys delivered some very nice top-line growth. But from a headline standpoint, on the bottom line, it reads that it missed considerably. Did you guys have higher expenses in something or miss internal projections? Or was it just due to some rogue analyst numbers?

Yes. I don't think I would say rogue analyst numbers. I appreciate the analysts following us. And obviously, that's going to be part of the ecosystem for me to accomplish the goals for this company. When a lot of this was laid out, there were two factors to consider: there’s an upfront cost to every mobile broadband subscriber. There's the commission or payment made to the salesperson, and then there's also the device cost. That’s entirely expensed upfront in month one. So I look at this with a rule of numbers. If you accelerate growth faster than anticipated, you’ll have more upfront expense, considering that we’re expensing more than we're making in the first two months. If we had more steady, slow growth, expenses would be more aligned with what the analysts projected. Our sales acceleration has been successful from a business perspective; we’re high-fiving from a reporting perspective. But in actual real business terms, there’s no one on my team that looks at quarterly reporting factoring this into their decision-making; we’re focused on reaching 0.5 million subscribers as fast as possible. I think that there are things we don’t take into account in growing the business. And clearly, we’re not burning money; we’re using our cash flows to grow, so how this reports will take care of itself in the next months once our customer base grows to a level that the profit from our existing recurring customers absorbs the upfront costs of our growth.

Okay, thank you. That was very helpful.

Thank you.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Brian Prenoveau for any closing remarks.

Thank you everyone. That concludes today's call. You may now disconnect.