Greetings and welcome to the SurgePays Inc. Fourth Quarter and 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you Brian Prenoveau with Investor Relations. Thank you, Brian. You may begin.

Thank you, operator. Good afternoon, everyone. Welcome to the SurgePays fourth quarter 2022 earnings webcast and conference call. Today's date is March 30, 2023, and on the call today from SurgePays are Brian Cox, President, Chief Executive Officer, and Tony Evers, Chief Financial Officer. Before we begin, we'd like to let everybody know that the press release is in queue. The wire service is a bit backed up, a bit of a log jam, but we have been notified that it should be out momentarily. So you should see anything necessary in the next few minutes. 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 a 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 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 and Form 10-K. Copies of today's press release will be accessible on SurgePays' Investor Relations website at ir.surgepays.com. In addition, SurgePays' Form 10-K for the year ended December 31, 2022 is also available on SurgePays' Investor Relations website. And now I'd like to turn the call over to President and Chief Executive Officer, Brian Cox.

Thanks, Brian. The fourth quarter of 2022 feels like a lifetime ago. So I want to remind our listeners of some important items announced in our last quarter. We announced that we had eclipsed 200,000 subscribers in our wireless business through the Affordable Connectivity Program, or ACP. We announced the addition of Jeremy Gies as President of SurgePays Fintech. Adding Jeremy has ignited our efforts to grow our convenience store network, which will take on increased importance in 2023 as I will discuss. Jeremy is playing the lead role in expanding store count as we build our business for sustained growth and expansion. We announced the closing of a senior credit facility on November 18. This dedicated financing allows us to move away from ordering tablets on the high cost secondary market and order directly from the manufacturer. Going direct reduces our per device cost by over 20% and allows us to utilize our financing facility more cost-effectively. I think it's important to state that switching from real-time spot buying devices on the secondary market to purchasing, manufacturing, and the shipping logistics of buying direct from the factory overseas, did force us momentarily to take our foot off the gas, no different than shifting gears in order to accelerate at a higher velocity. For example, we were faced with the decision of air versus ocean freight. The timing for ocean was an additional 35 days difference, but the cost savings averaged over $35,000 per staged shipment, of which there were 13 shipments. When forced to choose between optimizing the appearance of growth or maximizing the present value of current and future cash flows, we'll always choose the cash flows. I'm happy to say these shipments started arriving in March and are now in a rhythm. A dedicated staff of 40 people are now managing the activation, distribution, and fulfillment of our inventory. During this transition, we did grow our wireless base, but at a controlled and disciplined pace to minimize overpaying for devices simply to attain subscriber numbers, we believe we will ultimately achieve either way. In December, we announced the resignation of Jay Jones from our Board of Directors and the election of Lori Weisberg and Rich Sheffield. This announcement will be a boon to SurgePays, as we continue to scale the company. Jay resigned as an independent board member only to move into a closer advisory role where he will work with us and the company senior management. Lori and Rich are either current or former CEOs with extensive executive experience in the tech and telecom industries. In addition to operational expertise in their respective fields, Lori and Rich bring invaluable next-level familiarity with the critical legal and governance issues we expect as SurgePays continues to grow. Subsequent to year-end, in February 2023, we announced a new distribution agreement with Capital Candy, a family-owned wholesale distributor to convenience stores in New England. The agreement with Capital Candy will allow SurgePays to sell our prepaid telecom and financial products for the underbanked, including ACP signups into over 3,000 convenience stores. It's deals like these where we start to see the impact of adding someone like Jeremy Gies to our team. As a matter of fact, we recently added another 20-year veteran to the team as VP of Sales, directly reporting to Jeremy, to assist in working through a funnel of over 35 more partnerships, integrations, and similar agreements, with several of those being ten times the number of convenience stores. In the fourth quarter, revenue exceeded $36 million, a 1.5 times increase compared to last year, and we exited 2022 with a $144.8 million revenue run rate. 2022 revenue increased by 138% compared to 2021, and it's important to note that this was during the timeframe where sales were intentionally throttled by management to grow without dilution. The disciplined growth plan we laid out earlier this year will be rewarded with continued revenue growth, profitability, and increased shareholder value. As previously discussed, due to us taking our foot off the gas to shift to buying devices direct, the fourth quarter clarifies that SurgePays generates a lot of cash when it doesn't have to expense customer acquisitions fully upfront, and much more of our revenue reached the bottom line with a net gain of $3 million. Looking forward, we're excited about the earnings potential of SurgePays. I have been providing prepaid telecom products to the underbanked community through convenience stores for 20 years, and I've never seen a response like what we're seeing in our beta testing for in-store ACP signups; not just from the customer's response inside of a store that sees a poster or sticker, but from the store owner's willingness to sign on with us, which gives us access to offer all of our FinTech and prepaid wireless products for the underbanked through his store. If a customer is on SNAP or EBT, they qualify for ACP. In many cases, the SNAP benefits are used at the store closest to the residents, which is usually the convenience store. Our store owners already have a good idea of their subsidized customer base and immediately are realizing the potential. Also, by enrolling a customer from a brick-and-mortar store versus a pop-up tent, we anticipate retention will be higher if the customer knows where they can go to get help if needed, and the store owner is making a residual commission, so they have a vested interest to make sure these subscribers remain active and happy. Ultimately, it is our goal to utilize the ACP program to gain access to tens of thousands of convenience stores nationwide and maximize those relationships by deploying our entire suite of prepaid and FinTech products for the underbanked. The early data is really encouraging, and we anticipate this being a major revenue growth driver across several verticals. To further prepare for this growth, we've more than doubled our bilingual sales, support, and back office team at our operations center in El Salvador, where we now have over 200 people strong. As I sit back and visualize how I see the model unfolding, being able to watch both main revenue channels grow in synergy, spearheaded by experienced sales leaders, this is truly electric for me. Now is the time where we work aggressively to build the foundation for a multi-billion dollar revenue company, serving millions of subscribers and tens of thousands of convenience stores with operational excellence and value-minded efficiency. We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to add convenience stores to our network and leverage those stores as points of distribution into the underbanked community. The larger our national network of stores, the more powerful our economic model will be and a more viable platform for an M&A strategy in the near future. We believe increasing our network of stores can translate directly to higher revenue, higher profitability, and correspondingly stronger returns on invested capital. We continue to focus on managing our cash flow and deploying, excuse me, deploying that cash best. I generally look at current assets as a gauge of where we've been, where we are, and where we want to be. Accounts receivable have increased throughout the year from $3.2 million at the end of 2021 to $9.2 million at the end of 2022, with $7 million of cash. Turning to guidance for 2023, we believe leveraging new alignments with distributors and additional in-store ACP signups will allow SurgePays to generate revenues of at least $190 million. We expect first quarter revenues to be relatively in line with fourth quarter 2022, given that our devices started arriving in March. We anticipate growth speeding up quickly the remainder of the year. We expect 13,000 stores to be operating on the SurgePays network and expect to see positive operating cash flow during the year.

Thank you, Brian, and good afternoon, everyone. I'll begin my overview of the fourth quarter and full year's financial results. For the quarter, we reported revenues of $36.2 million compared to $23.3 million in the fourth quarter of '21, representing an increase of 155%. During 2022, we reported revenues of $121.5 million, an increase of 138% over the prior 12-month period. The increased sales for the year were primarily attributable to subscriber growth and our mobile broadband business. Gross profit increased 272% in the fourth quarter to $6.7 million compared to $2.5 million in the same period a year ago. Gross profit for the year increased 118% to $13.5 million compared to $11.4 million in the prior year. SG&A expenses increased by 4.4% during the year. The increase was primarily driven by one-time bonuses paid to various management personnel and increased insurance expenses related to the NASDAQ uplifting. Income from operations was positive for the year at $0.6 million compared to a loss of $6 million in the prior year. Net loss for the year was $0.7 million, or a loss of $0.05 per share, compared to a net loss of $13.5 million, or a loss of $3.09 per share last year. Of the $7 million loss, 2022 included much lower interest expenses than the prior year and certain non-recurring items including an $89,000 loss in the investment in Centrecom, a $336,000 gain on the PPP loan, and a $115,000 loss from amortization of debt discount. EBITDA for the year was $2.5 million compared to a negative $5.1 million in 2021. In the fourth quarter, EBITDA was positive $4.1 million compared to $3.5 million in the fourth quarter of 2021. Turning to the balance sheet, liquidity and cash flow, our cash balance as of December 31 was $7 million compared to $6.3 million at the end of '21. Accounts receivable have increased by over $7 million from year-end '21 to $2.92 million. The receivable is from the US Government for the mobile broadband subsidy. Payment usually occurs approximately 30 to 60 days after a new customer is verified and signed up. Given our strength in financial position, higher cash balance, and capital structure, our cash allocation priorities focus on increasing the business, investing in the business, and maintaining ample liquidity for future growth. I'll now pass the call back to Brian for some closing remarks.

Thanks, Tony. We couldn't be more excited about the opportunities ahead. It's encouraging to know we have a value differentiating business model that has only begun to show its true potential. The foundation we are building today could set the company on a trajectory that's limited only by our imagination. The past year's successes and, I believe, our future successes are the product of a talented, smart, and hardworking group of folks, and I take a lot of pride and I'm thankful for being a part of this great SurgePays team, who are all working to build something important. Lastly, I greatly appreciate the support and interest of our shareholders as we continue this growth journey. We will now open the call for questions.

Thank you. We will now begin the question-and-answer session. The first question comes from Michael Diana with Maxim Group. Please go ahead with your question.

Hey, thank you. Hey Brian. So, is this the way, I heard you about how late the new tablets arrived. You had been talking about surpassing the 500,000 customer, ACP customer mark. Is that still a 2023 event or does it in fact get pushed out some?

Hey, Michael. No, I appreciate the question. No, absolutely. That's still a 2023 event and if there was not, as Brian P mentioned, the log jam and the press release, you'd see that in the press release as well. But no, that's absolutely a part of where we see the growth trajectory going this year. As a matter of fact, I think we've put it out there a couple of times this initial PO round of tablets that are coming in 15,000, 20,000 at a time was over 300,000 devices. So we're definitely prepped and ready to get that rolling up. What's interesting is this, I don't want to call it a pause. It was strategic. We looked at attrition and we wanted to make sure in, and add every month. We're very careful about it and just, as I said before, I didn't want to overspend on tablets when I knew we could get them a couple of months later at a much better rate. So what we did was, give me just a second. In doing so, we were able to spend a little bit more time developing, looking internally, negotiating with carriers, looking at our software. So it did give us a couple of moments to spend to plan and prepare, retrain, and cross-train our folks down in our operations center. So we didn't just sit idly by and twiddle our thumbs. I want to make sure everybody knows that we're working our tails off in preparation so that we could still go beyond the numbers that we expect to hit this year without hitting any plateaus.

Okay, great. And I know it's probably impossible to answer this, but given the growth of the stores as a sales point for the ACP, like in the fourth quarter, what percentage would you say of your new customers in the fourth quarter could come through the stores?

That's a good guess, Michael. Let me rephrase that. I hope we can maintain our field sales levels. It's a more costly method of acquiring customers, but it establishes a solid base for incoming sales. Our goal is to keep that base without drastically expanding our outdoor field sales, as that area faces significant competition and we believe much of the customer turnover occurs when temporary vendors set up shop for a couple of weeks and then leave, only to be replaced by new ones sporadically. This does contribute to some customer losses, but it has been a factor in getting us to where we are now. We aim to keep that baseline. The cost of acquiring customers through stores is about 80% lower than through field sales. From a cash flow perspective, we expect to see a significant increase in sales from stores since the upfront cost for acquiring customers is much lower. Store owners don't need to cover travel expenses or depend solely on commission; for them, this is an additional product. This creates a different dynamic, and I believe it offers a much better long-term model for us. We are the only ACP company that can operate effectively through stores because we have a software platform that processes FinTech transactions in convenience stores. We are eager to move quickly and seize this opportunity, as we face little competition in this channel. Therefore, I have given Jeremy the go-ahead to hire as many salespeople as needed to handle the sales funnel and onboard deals from California to New England and down to Florida. We have various integrations occurring nationwide, so we expect to see our sales numbers shift, aiming for 70% to 80% of our sales from stores by the fourth quarter.

And as part of your guidance, I think you said you expect to have more than 13,000 stores by the end of the year. Is that the right number?

That's the number we're going to go with right now. My hope is that it's beyond that number, but we want to put out a good number that we feel we can attain. Yes.

Okay. Great. Thanks, Brian.

And the next question comes from the line of Ed Woo with Ascendiant Capital. Please proceed with your question.

Yes. Congratulations on a tremendous growth this year. I think I've asked in the past about how your business is a little bit counter-cyclical. It's obvious the consumers that you guys are targeting will have to look for increased opportunity to save money. Have you seen any significant changes in your customer base in the past three months? Whether people are moving down in the economic ladder at all?

That's an interesting question. It's going to take some time to see the effects. I don't think there will be an immediate impact. However, the federal government has definitely placed a significant emphasis on the ACP program. They've distributed many grants for companies to promote it in areas where there is low awareness or a lack of efforts to enroll people. We know the program is successful, but regarding the broader macroeconomic impact, I’m not sure we'll be able to see a direct correlation. The reason is that we're experiencing such rapid growth that we're effectively deploying all the devices we have. You would need to observe a slowdown in growth to notice new groups coming in. Currently, we are growing so quickly that I don't know if we're able to see or recognize market expansion. We are aware that millions of potential customers exist, and I'm particularly passionate about utilizing the ACP to enter stores. Keep in mind that every subscriber we sign up uses talk, text, and data, which builds relationships with carriers and ultimately gives us stronger negotiating power for better pricing. This allows us to return to the market and leverage the same convenience stores and equipment to offer better pricing for prepaid wireless than our competitors. We've observed how Mobile recently sold to Verizon with slim margins. We're familiar with most MVNOs since we handle payments for many of them. We want to establish ourselves as an MVNO with our own brand, supported by customers through family plans and aggressive rates, enabling transactions through our own platform rather than paying third parties. This provides us with a significant competitive advantage as we enter through the ACP. Additionally, we offer a reloadable debit card and other products to assist customers similarly to how we've helped them with internet services. This encapsulates our approach to the rollout. By Q4, you'll start to notice customers transitioning from ACP through convenience stores. You'll also see an increase in prepaid customers covering their own bills. Remember, ACP is limited to one per household, but surveys suggest an average of four to five smartphones in underbanked households. We want to target those additional devices and services in both urban and rural areas, enabling those individuals to make payments at their local convenience stores, saving them money and travel while enhancing our partnership with store owners serving their communities.

Great. Thanks for answering my question, and I wish you guys good luck. Thank you.

Thank you. This reaches the end of the question-and-answer session, and this also concludes today's conference. Thank you for your participation. You may disconnect your lines at this time. Have a great rest of your day.