Good day, everyone, and welcome to the SurgePays Third Quarter 2024 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Doug Lane, Investor Relations at SurgePays. Sir, the floor is yours.

Thank you, operator. And good afternoon, everyone. Welcome to the SurgePays third quarter 2024 earnings webcast and conference call. Today's date is November 12, 2024, 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. 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, 2024, will also be available on SurgePays' investor relations website. And now, I'd like to turn the call over to President and Chief Executive Officer, Brian Cox.

Thank you for joining today's call and for your continued trust in SurgePays. Today, I'm excited to share our progress in advancing our core business strategy since the Affordable Connectivity Program ran out in May. While there is optimism that ACP may resume when the political landscape allows, as we discussed on our last call, we are not and never have been an ACP-only company. This quarter we've channeled all of our energy into realizing our core mission and positioning ourselves for a transformative growth phase. We anticipated a challenging third quarter, and we seized it as an opportunity to reset, recalibrate, and accelerate. With every team member intensely focused, we're advancing toward our goal of becoming cash flow positive as quickly as possible. It's been all hands on deck, aligning sales, integration, and strategy to generate new revenue streams across each of our business segments. This quarter wasn't a setback but a setup, priming us for long-term sustainable growth. We're now at a turning point where our business summary aligns with our business plan and the flywheel effect takes hold. Over the next few months, we expect each of our four business segments to create momentum that drives continuous growth and improvement, generating synergistic and scalable recurring revenue. As we expand our footprint, our business model becomes increasingly relatable to investors. As revenue climbs, we foresee growth in technology and telecom-based valuations, unlocking new potential for shareholder value. At our core, SurgePays is pioneering financial technology and telecommunications with a single mission to enhance connectivity and financial access where people live, shop, and work. We serve convenience stores, bodegas, and retail local hubs nationwide, delivering prepaid wireless services, financial products, and advanced point-of-sale solutions to those high-need markets. This is an enormous underserved sector, and we are at the forefront. By seamlessly blending telecommunications and fintech on one unified platform, we create an experience that meets customer demand while building a powerful recurring revenue model. SurgePays operates through two primary business segments, both strategically tailored to meet diverse customer needs and engineered for mutual growth. Here's how we do it: Number one, Mobile Virtual Network Operator Telecommunications or MVNO. This segment includes our subsidized wireless and retail prepaid wireless brand LinkUp Mobile. Number two, platform services. This includes our SurgePays prepaid top-ups, software, and ClearLine Point of Sale software-as-a-service or SaaS. Each segment is independently robust, yet both integrate to maximize synergy and scale. We're not here for incremental wins. We're building a nationwide network that redefines access to essential services. With a backbone of convenience stores, bodegas, and neighborhood locations, we bring connectivity and financial products directly to the communities that need them most. While we've made substantial advancements across our four business areas, our subsidized MVNO channel has demonstrated the fastest economic traction, largely through the Affordable Connectivity Program. From the inception of ACP in August 2021 until funding concluded in April 2024, we generated $0.25 billion in FCC-backed revenue, directly fueling our growth initiatives and enabling us to onboard 280,000 MVNO customers. In response to the funding shift, we took strategic action to partner with a Lifeline provider, aiming to migrate as many of these customers as possible and accelerate our profitability trajectory. With ACP funding ending, our immediate focus was on how to retain and preserve these hard-earned customers within the SurgePays ecosystem. Leveraging our solid balance sheet, we chose to temporarily self-fund our MVNO operations, prioritizing customer continuity while facilitating a seamless transition to Lifeline, another government-subsidized program. By maintaining connectivity for our low-income customers, we made a socially responsible choice and a strategic one that positions us for long-term economic returns, and we expect this decision to be both customer-centered and financially astute in the long run. Our recent Master Service Agreement with TerraCom Incorporated, a licensed Lifeline provider, represents a pivotal step. This partnership allows us to migrate 280,000 subscribers to Lifeline, establishing a steady alternative subsidy channel. In tandem, our sales teams are now actively engaging new customers, reigniting growth initiatives and leveraging our SurgePays platform point-of-sale capabilities at convenience stores. While ACP remains uncertain, our subsidized revenue channel is robustly supported by the Lifeline program. The team and platform built for ACP are now enrolling thousands of Lifeline customers daily without distracting from our core business focus. As a matter of fact, this department has been somewhat overwhelmed, and we've had to hire additional employees in the sales onboarding team. We believe our Lifeline subscribers can far outpace our highest ACP subscriber total. Meanwhile, our retail prepaid brand LinkUp Mobile has proved to be a more significant opportunity than initially anticipated, and to capture maximum market share, we moved decisively to secure a direct carrier connection. In the coming weeks, we'll announce a transformative agreement with the largest wireless network in the country, which will enable us to go to market at scale with full-featured wireless plans and enhanced margins. We anticipate this partnership will enable us to quickly generate hundreds of thousands of new subscribers and establish LinkUp Mobile as a formidable presence in the prepaid space. The team is already working on the integration, with a soft launch imminent and a full-scale rollout planned for early Q1 2025. On the software front, our SurgePays prepaid top-ups platform is experiencing exponential growth as a critical element in store readiness for LinkUp Mobile activations. As a prerequisite to LinkUp activations, stores join our platform, which also facilitates prepaid reloads or top-ups. This channel's monthly revenue growth has surged nearly 400% in just five months, reaching over $2.2 million in monthly revenue, a trend we expect will continue as market demand intensifies. Our ClearLine Point of Sale SaaS platform is emerging as a high-potential asset within SurgePays. This advanced platform redefines the in-store customer experience by transforming POS terminals and customer-facing screens into interactive engagement tools. ClearLine's patent-pending application supports in-store marketing campaigns, loyalty enrollment, and QR code interactions, effectively replacing traditional posters with smart TVs for dynamic QR code advertising and instant coupon redemptions. By enhancing revenue per store and elevating customer satisfaction, ClearLine offers retailers actionable insights driving growth and loyalty. As a SaaS solution compatible across various devices, ClearLine has strong market appeal and will become a valuable revenue generator for SurgePays. It opens new pathways for our wireless channels and brings in its own recurring revenue stream. Following years of development, ClearLine is now ready for market deployment, and as it gains traction, we anticipate it will contribute meaningfully to consolidated revenues by Q1 2025. While we continue investing across our four business channels, we're also laying a robust foundation for rapid, sustainable growth. Recently we opened a dedicated sales and operations center in El Salvador, a project over a year in the making and a strategic move in anticipation of growth across all our verticals. Nearly 100 experienced team members previously outsourced are now full-time SurgePays employees, bringing continuity and expertise essential for our ambitious expansion and product launches. This new facility marks a pivotal evolution from our long-standing outsourcing strategy, enhancing customer relationships and maximizing sales opportunities and efficiencies. Positioned as the central hub for all four business channels, it is set up to support our growth, and by 2025 will be integral to launching Hispanic products into the market. In the third quarter of 2024, SurgePays reported $4.8 million in sales, aligning with expectations for our first full quarter without ACP funding since mid-2021. Our MVNO revenue was $23,609 compared to $30 million in the same timeframe last quarter, reflecting an anticipated funding shift. Meanwhile, sales in our prepaid platform service segment surged 69% to $4.7 million, showcasing significant growth momentum. While this quarter's financials may not fully capture our strategic advancements, it was a pivotal 90 days of foundational growth. I believe our disciplined approach will eventually yield substantial returns, rewarding shareholders as we build toward market leadership. Now, I'll turn over the call to Tony to review our financial results before summarizing today's call.

Thank you, Brian. And good afternoon, everyone. I will begin my overview of the third quarter's financial results. For the third quarter, we reported revenues of $4.8 million compared to $34.2 million for the same period in 2023, representing a decrease of 86%. The decrease was primarily due to the shutdown of the ACP funding program, which ceased as of June 2024. Similar to the first and second quarters of 2024, we received no revenues from our lead generation services in Q3 of 2024 versus $0.7 million received in the third quarter of 2023, again as a result of operational changes by management. On a positive note, the platform service revenue for the third quarter of 2024 was $4.8 million compared to $2.8 million in the same period of 2023. This increase is the direct result of our new sales director hired earlier in the year. Gross profit swung to a $7.8 million loss in the third quarter from a $10.5 million profit in the year-ago period due 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 MVNO business model, LinkUp Mobile, or into another subsidized program, Lifeline. Additionally, the de-emphasis of our lead generation business resulted in lower gross profits in that segment as well. SG&A expenses increased by 97% year-over-year. The increase was primarily due to additional non-cash stock compensation for management. This stock compensation relates to employment agreements signed in late 2023. We also had additional expenses for contractor and consultant fees. The company continued to engage several contractors to overhaul the financial platform to allow for the conversion to a tablet-based transaction at the store level from the outdated VeriFone terminal. The company also engaged with consultants to provide advisory services specifically in the area of investment relations to identify opportunities to increase our shareholder value. Loss from operations was $14.3 million during the third quarter compared to a $7.1 million profit in the year-ago period. Our reported net loss and loss per share were $14.3 million and $0.73 per share loss. Our loss and loss per share were adversely impacted primarily by the ending of the federally funded ACP. Turning to the balance sheet, liquidity, and cash flow, our cash, cash equivalents, and investment balances as of September 30, 2024 were collectively $23.7 million compared to $38.4 million at the end of the second quarter. Our cash from operations was $13.4 million used in the third quarter versus $90,000 used in the second quarter, a large negative swing due to the winding down of the federally funded ACP and our continued servicing of subscribers for the third quarter of 2024. Accounts receivable increased slightly by $100,000 in the third quarter to $1.5 million from $1.4 million at the end of the second quarter. Given our cash balance and capital structure, our cash allocation priority is in financing the transition of our subscribers to either LinkUp Mobile or Lifeline and the continued emphasis on establishing our LinkUp Mobile brand. I will now pass the call back to Brian for some closing remarks.

Thanks, Tony. At SurgePays, we're driven by four pillars of success: team, product, distribution, and funding. With what I believe is the most seasoned team in prepaid wireless, a market-leading product suite, proprietary distribution channels, and $24 million in cash, cash equivalents, and investments collectively as of September 30, 2024, we're positioned to execute our growth strategy with precision. We're only beginning to tap into a vast market opportunity. Our foundation is built on diversified products, a solid infrastructure, and strategic partnerships all aligning us for rapid expansion. Our focus on high growth sectors in telecommunications, fintech, and retail solutions targets an underserved market with immense potential. Guided by a mission to deliver affordable quality services to communities, our unique approach to problem-solving is our moat. A lasting competitive edge. SurgePays is dedicated to creating enduring value by meeting essential needs in a way that others can't. Thank you so much for your time today. We will now open the call to questions. Operator?

Certainly. At this time, we will be conducting a question-and-answer session. Thank you. Your first question is from Curtis Shauger from Water Tower Research. Your line is live.

Yes. Hey, guys. Thanks for taking the call. I think the main impetus here is around all the new initiatives. Very exciting to see against the tough backdrop of what happened with the ACP. Can you give us any more details on what the renewed expectations about getting back to breakeven? Do you have enough experience now in converting folks to Lifeline in terms of the associated costs and what you're yielding in terms of returns and when we might see a path to cash flow breakeven? Thank you.

Thank you for your question, Curtis. I appreciate it, and it's a great one. Let me try to address that. There are a few points to consider because our main focus is becoming cash flow positive as quickly as possible. That's our top priority and the path of least resistance to achieve it. We retained those ACP customers to transition them to Lifeline and make the most of our existing platforms. Currently, we're seeing between 2,000 to 3,000 customers migrating daily, sometimes more. This includes existing ACP customers who opted into Lifeline and new subscribers. We've been running online ads, and they've been so successful that we had to pause them last week to refresh our resources for sales support. I anticipated a conversion rate of 30% to 45%, but we're actually exceeding 50% from the initial contacts. So far, over 70,000 people have enrolled in Lifeline, and my immediate goal is to reach 280,000 to 300,000 subscribers. In terms of average revenue, the typical Lifeline revenue per customer is about $9.25. Some states offer additional funds, with California's revenue similar to ACP's, which is why we plan to be in California soon, as we have 50,000 legacy customers there. With a average cost of around $5 to $5.5 for these customers and expected revenue of $9.25, our aim is to quickly reach that 250,000 to 300,000 subscriber range. From a cash flow viewpoint, we should be covering our overhead, and as our other divisions, particularly LinkUp Mobile, become operational, we see positive potential. During discussions with master agents, we gathered insights on their needs. Access to number portability, which was previously unavailable but is important now, will help us increase the number of Lifeline customers, likely exceeding our current ACP customer base. Lifeline has been established for a long time, and there are just a few strong players, which positions us well since many former ACP service users are potential new subscribers. We also expect LinkUp subscribers to begin contributing in January. We plan to announce subscriber counts as they come in, aiming to reach around 200,000 by the end of the year. At that stage, we should be nearing breakeven, allowing us to start building from there. Achieving 200,000 Lifeline subscribers would get us close to that cash flow breakeven point.

Yeah. That's awesome. Thanks for the detail. I'll let the next person go.

Thanks, Curtis.

Thank you. Your next question is coming from Andrew Scott from SLS. Your line is live.

Hey, Brian, thanks again. The gentleman that asked the question before me was asking the same thing I was going to ask, so I won't hold up too much time. I think everybody is focused on how you can minimize the loss from operations. We see what you're doing with Lifeline, and to your last comment, how you're going to put out some metrics on upcoming press releases, it's going to help the street track the progress you're making. So I'm encouraging you and supporting you to do that. But it sounds like things are lining up. I don't know if you go out and say it yet, but it seems like the worst is behind you now, and you're making progress. Any other guidance going forward that you're comfortable with or what we should be looking for?

Thank you for the question, Andrew. I appreciate the opportunity to discuss this. As we often mention on these calls, we receive numerous inquiries from shareholders and fund managers trying to develop their understanding of our position and future potential. Over the past year or so, I've focused on recognizing that many in the stock market are not familiar with the underbanked sector. The opportunities and challenges in that space aren't something they encounter daily. While we will continue to pay attention to this area, we are adjusting our messaging to create clearer and more consistent communications with shareholders to avoid any confusion about our operations. When we discuss shareholder value and our future plans, we are revising our business strategy to regularly highlight our four segments. Our telecommunications segment is well understood, encompassing prepaid and subsidized services. We expect models to emerge here, especially as we move into Q1 with a new contract that offers improved rates compared to the last few years. Our enhanced capabilities should allow us to capture a larger share of the prepaid market and establish ourselves as a recognizable name in that space. Our telecom segment's customers primarily consist of end users—those who own smartphones, make calls, and access the Internet for various purposes. In our software platform segment, our customers are retailers, including stores, convenience shops, and gas stations. As we discuss point-of-sale software, we will be adopting terms that resonate with our audience, enabling them to understand our model better. We will reduce our use of terms like "underbanked," as these may alienate some audiences, despite their relevance. Our messaging will concentrate on our subsidized and prepaid wireless subscribers, alongside our point-of-sale software as a service, recurring revenue through contracts and subscriptions. I believe this approach will yield positive feedback, drive market traction, and reflect incremental revenue growth and profitability. We offer four segments that operate cohesively, like a hydra, benefiting from our operational synergies through our center in El Salvador. For instance, once we onboard a store for LinkUp activations, they will automatically have access to top-ups and the ClearLine app, which serves as a valuable marketing tool. Additionally, we can assist individuals eligible for Lifeline services. Each of our four segments acts as an entry point for cross-promotion, unlocking a suite of products. This strategy has been in place since we established our business plan back in 2017. Although Q3 presented its challenges, we understood the financial implications and aimed to provide clarity during this call. The groundwork we laid is now supporting our current efforts. I haven't experienced a team as enthusiastic as this one, and combined with our talent, it creates an exciting environment. Beyond calls that discuss Q3 financials, the initiatives we're currently pursuing are infused with a lot of energy.

Got it, Brian. Thank you. I can hear your enthusiasm, too. I appreciate it. I'll turn it over the call now. Thanks again.

Thanks, Andrew.

Thank you. Your next question is coming from Mike Diana from Maxim Group. Your line is live.

Hey, Brian.

Hey, Michael.

Yes. So you guys have been incredibly busy. Starting with a prepaid platform, about how many convenience stores do you have right now?

Right now, we're still hovering at that 8,000 to 9,000 range. From a perspective of growth, that number should be exponentially more this time next year based on what's on deck with ClearLine, what's on deck with LinkUp, and the prepaid top-ups. That number should be coming on very, very heavy as we move forward. We're also exploring potential acquisitions of companies that focus on top-ups or international top-ups.

All right. And the $4.7 million in revenue from prepaid, was that all top-ups?

It was mostly top-ups, yes.

Okay, and you mentioned also that you're doing $2.2 million a month in top-ups. Is that like a run rate now, or do you expect that to go up a lot?

That's the run rate right now, but that's going to go up every month as we're bringing on these masters who are bringing on their networks. I expect that to be over $3 million in December alone. Now, it won't continue forever, but it will continue to the point where I expect that to get up over $10 million to $12 million later in the year next year. Not only are we doing top-ups, but we're also doing top-ups for our products as well, our LinkUp mobile. Keep in mind that one of the reasons you see that kind of growth is when you add that store, and you start to get those top-ups, then you add more stores. I mean, it's stacking that compounding revenue momentum.

So you're saying you expect $10 million to $12 million a month in top-ups by the end of 2025?

In December next year, I expect that, yes.

Wow. Okay, moving on to Lifeline. How many people qualify for Lifeline compared to ACP?

That's a good question. I probably should have included that in the script. It's an identical sister plan, if you will, and it would be approximately the same number of people qualifying. Anyone receiving any form of government assistance, whether it be EBT food stamps, Medicaid, veterans pension, or low-income school lunches, would qualify. Some states may have additional ones, but that's the primary qualification for both.

Okay. And I guess it wasn't as big because people like you couldn't make much money before on it. Otherwise, logically, it would have been as big as ACP.

Good question. There were Lifeline providers that were strong in certain states like Oklahoma, California, Kansas, and Kentucky—states that had extra funding. If you had asked me, starting from zero, does it make sense to buy devices, pay commissions, kickstart that ROI and come out of pocket to receive that ROI on a customer and build a business that way? It would be difficult. But since we've already paid for the devices and commissions, that's why retaining those customers was so important. By migrating them over, there is no ROI anymore; we're able to return our revenue without the traditional Lifeline ROI history, which is about month four or five. We were able to bypass that.

Okay. And then I think the number you've been using the last few years for how much it costs you per month to provide the service is roughly $10. So I assume your new deal with your direct carrier is what's going to lower it to $5 to $5.50?

Yes, the new deal. Also, to their credit, the carriers have been sensitive to the fact that we maintained our subscriber base. Subscribers are good for all underlying carriers. So the fact that we retained them opened up other plans and ways for us to save money. Ultimately, yes, our direct carrier connection by January should reduce that cost below $5 and enable us to deliver that same product where we get paid $9.25. So our margins by February, Q1 next year should, I'm not saying double, but should be substantially higher.

Higher than you double from $4?

No, our cost should be closer to $4 at that point, which would put our gross margin just a hair above $5.

Okay. And the LinkUp, have you really started that yet, or are you waiting for this direct carrier connection before you do that?

No, we started it and then tapped the brakes. I was actually sitting in on some of those meetings and I heard the opportunity out there. We have somewhere between 30,000 and 40,000 customers. Those are for the smaller masters that we allowed to go ahead and start bringing on some numbers to test our systems internally. We throttled the growth because we wanted to be able to go out there and create a good first impression. If you're unable to execute certain functions, you're going to be labeled, and most likely relegated to the corner. We didn't want that. We believe we can get significant traction and go LinkUp beyond 100,000 activations a month. We saved the boom, the fireworks, if you will, for when we could be fully prepared. That 35,000 customers are proving out our systems: activation, SIM shipping, deactivation, taking payments, and communicating with the carrier. However, we currently lack some features like throttling after a certain data amount and porting numbers, which we need to compete at the highest level.

Okay, so I assume your cost for LinkUp is going to be the same as for Lifeline. You say you can get it down to about $4. What's the how much are your plans going to cost, your main LinkUp plan?

Good question. The LinkUp plans will actually be considerably more profitable than Lifeline. The plans will cost us a little bit more, but our revenue, we're not going to be selling $9.25 plans. You're looking at plans priced at $15, $20, $25, $30, $40, and $50. One of the unique factors for our company is that we can see payments, millions of dollars in payments for all of our competitors. We know that the most popular plan out there is a $30 payment. That psychologically appeals to customers, being an easy payment. We're expecting that plan to cost us around $15 to $17. You can keep your old ACP pencil for this, because the margins, ROI, and mechanisms we use to deploy that popular plan will be about the same. We’re going to start rolling that out toward the end of the year. We need to be careful for first impressions, as the wireless distribution world is not forgiving, and we hope to have a soft launch shortly, with a full launch in January. By then, we should be talking about subscriber growth and moving toward breakeven.

Okay, and the LinkUp, the 30,000 to 40,000 LinkUp customers you have now, how much are you charging that?

The plans range from $15 to $45 or $50. Until January, I'm not spending much time on analytics for that because it's still at proving-out stage. My focus has been on the Lifeline integration and getting everything set up. As we add these customers for LinkUp, we must earn their business. It doesn’t matter how much less our product costs; we still must deliver value to secure their monthly payments. All these components are critical for our ongoing growth. Thank you, Michael. Appreciate the questions.

Thank you. Your next question is coming from Ed Woo from Ascendiant Capital. Your line is live.

Yeah, thanks for taking my question. I know it's only been a week out since the elections, but there seems to be a little bit of optimism in the economy. What are you hearing from your end customers, the convenience stores, the bodegas, who are on the feet of dealing with these underserved, underbanked customers? Do you sense any trace of optimism, or do you feel things are about the same, and it’s still going to be tough, which ultimately is good for your business?

Yeah, I think being in this business for almost 25 years now, a lot of folks in this 30% of the market, when you're in the ocean and a wave is coming—which represents the ebbs and flows of the economy—you drop below the water line, and that wave doesn't affect you a whole lot. That's really where our market is; it sits below that water line. When times get tough, more people transition into our potential market; they're looking for value. When things get tight, they become more value-conscious, they're open to changing their wireless care. Their subconscious starts paying attention to opportunities to save money, and that benefits us. I think we could tell in a week how the election results directly impact us, but talking to convenience store owners doesn’t provide straightforward answers, especially in our political world. Politically cautious sentiment exists, but optimism exists for Lifeline programs since they know that J.D. Vance, a lead senator, is a huge proponent of such programs, which is positive for us.

Great. I really appreciate the answers to my questions, and I wish you guys good luck. Thank you.

Thanks for the question, Ed. Appreciate it.

Thank you. That completes our Q&A session, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.