Greetings. Welcome to SurgePays' First Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Mike McCormack, Managing Director of Investor Relations at SurgePays. You may begin.

Thank you, operator, and good afternoon, everyone. Welcome to the SurgePays 2025 first quarter financial results conference call. Today's date is May 13, 2025, and on the call today from the company are Brian Cox, President and CEO; and Tony Evers, CFO. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements as they are defined in 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 at ir.surgepays.com. In addition, SurgePays’ Form 10-Q for the quarter ended March 31, 2025, will also be available on SurgePays’ investor relations website. And now, I'd like to turn the call over to President and CEO, Brian Cox.

Thank you, Mike. Good afternoon and thank you for joining us. Our first quarter results were in line with expectations and closely mirrored Q4 of 2024, but today's call is less about the past and more about what lies ahead. Since our last update in mid-March, we've made tremendous progress and closed a strategic financing to accelerate our next phase of growth. Thanks to the long-term investments we've made in our team, technology, distribution, and partnerships, we believe SurgePays is now positioned for the most significant revenue and cash flow growth in our company's history. For the 12-month period looking back to April 1st, 2025, we're targeting $200 million in revenue and expect to exit 2025 operating cash flow positive. We're gaining momentum across all areas of our wireless business, both as an MVNO through LinkUp Mobile and our government-subsidized brand Torch Wireless, and also as an MVNE through our new wholesale platform, which offers the full suite of nationwide wireless to third-party wireless providers. Despite the forward-looking nature of this update, we did have certain major milestones in Q1 2025. One such major milestone was the launch of our multi-year partnership with AT&T. We signed this agreement in November 2024 and completed full integration, including a network migration and SIM activation rollout by April 1st. That's less than six months from handshake to execution, an incredible achievement and I'm proud of the SurgePays team for delivering flawlessly. This partnership gives us direct access to one of the most reliable networks in the country, and critically positions us to provide back-end telecom infrastructure to MVNOs that don't have a direct carrier relationship. Since our soft launch, we've shipped over 210,000 SIM cards to customers and retail partners. Another 290,000 SIMs are in inventory, with 250,000 more arriving before the end of May to meet demand for both retail and wholesale channels. Our wireless services are sold and activated over our robust retail network, over 9,000 community-focused stores nationwide, serving as trusted transaction points for activations, payments, and top-ups. Our distribution model is local, efficient, and deeply integrated into the daily lives of our customers. The heart of this model is our point-of-sale software, which powers transactions and drives recurring revenue from activations and replenishments. It's not just a tool, it's our ecosystem, and it's a true differentiator. On the wholesale side, we're building a new revenue engine. As an MVNE, we're providing billing, provisioning, SIMs, and eSIMs to other wireless companies. This is an expected high-margin model with minimal incremental costs. Many MVNOs you see in the market today are actually sub-MVNOs. We're one of the few with direct carrier access, putting us in a rare and powerful position. To date, we've onboarded three MVNOs with two more in the integration pipeline. These partners collectively serve hundreds of thousands of subscribers, and they're looking to grow fast, giving us a path to rapidly scale our platform and recurring revenue base. In many ways, we believe we've built a uniquely powerful engine that blends technology, innovation, and distribution, and we're just getting started. We're in advanced talks with national distributors, each with footprints in tens of thousands of retail locations. One of those is HT Hackney, which services over 40,000 convenience stores. We utilized the Hackney new product shows recently to roll out our latest concept for fast-paced convenience stores, the Phone in a Box product. This is a retail-ready, grab-and-go solution that allows stores to sell and instantly activate wireless service by scanning at the register. The phone and plan combined retail for under $100. To prove our concept, we brought in 2,600 smartphones already kitted with the SIM installed and custom box packaging and peg hook ready. We sold out in under 30 days. We will replenish these while continuing to monitor the feedback and what sells best at the store level. We can offer a range of smartphone options from good to best and are excited to see the results as the LinkUp brand gains traction in the market, enabling store owners to generate revenue from both the retail phone sale and the monthly top-ups for plan payments. Based on the feedback from the new product shows and its quick sellout, early results are promising. Here's the kicker. Every store that sells the phone in a box joins our network because they will need to accept top-up payments for the monthly wireless plans. This means each store becomes a new activation point, not just for wireless service, but for our entire product suite. We believe this model unlocks exponential growth. We're watching closely and focusing on which product or service provides the fastest path to onboard stores. This is key to scaling to our near-term goal of 100,000 locations operating on the SurgePays platform. I want to take a moment to recognize a key leadership move. We recently promoted Derron Winfrey to President of Sales and Operations. Derron is a proven revenue driver and a veteran operator responsible for over $1 billion in sales in his prior roles. His effective leadership gives me the freedom to stay focused on the big picture, building value, scaling the business, and driving stock performance. Many of you have asked about how we plan to fund this growth and whether we're considering issuing equity. Here's what I'll say. Our team holds significant equity in the company. We're deeply aligned with long-term shareholders, and that guides every capital decision we make. We worked hard to structure the right financing, a non-dilutive, long runway, and shareholder-friendly solution. I'm pleased to share that our largest outside shareholder, Cable Car, stepped up with a $6 million investment. Their support is a decisive vote of confidence in our vision and the execution we've demonstrated so far. The 24-month convertible note amortizes at month eight, converts at $4 per share, and includes an option for the company to repay early. We believe this capital provides us with the flexibility to move quickly and execute our rollout without delay. And based on our current trajectory, we expect to be cash flow positive by the end of December 2025. To sum it all up, SurgePays is at a major inflection point. We've transitioned from a reseller to a platform, from a distributor to a telecom partner. We believe we're building something bigger, backed by strong fundamentals and driven by a leadership team that knows how to execute. We have the products, the partnerships, and now the capital. We're entering a phase of high growth and high impact, and we're doing it the right way, with discipline, with purpose, and with our shareholders in mind. Thank you for your support and belief in our mission. I'll now turn it over to Tony for a detailed review of our Q1 financials.

Thank you, Brian, and good afternoon, everyone. For the first quarter of 2025, we reported revenue of $10.6 million compared to $31.4 million for the same period in 2024. The decrease was primarily due to the shutdown of the ACP federal funding, which ceased in June of 2024. In addition, we received no revenues from our lead generation services in 2024 and have discontinued that business as of December. Our platform service revenue growth was robust, generating $8.3 million in the first quarter of 2025 as compared to $2.5 million in the first quarter of 2024. This increase in part is a result of our new sales director hired earlier in the year. Gross profit was a loss of $2.9 million for the first quarter of 2025, compared to $8.2 million of gross profit for the first quarter of 2024, due almost entirely 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 product, like the mobile, or into Lifeline and other subsidized programs. SG&A expenses decreased by 28.6% year-over-year to $4.4 million during the first quarter of 2025 as compared to $6.1 million for the first quarter of 2024. This decrease was primarily due to a reduction in contractors and consultants, professional services, compensation, and insurance, partly offset by an increase in computer and Internet expenses, advertising and marketing, and other expenses. Loss from operations was $7.6 million in the first quarter of 2025, compared to $1.8 million in operating profit in the first quarter of 2024. Our reported net loss and loss per share were $7.6 million and negative $0.38 per share. Our loss and loss per share were adversely impacted primarily by the ending of the federally funded ACP. Turning to the balance sheet, our cash, cash equivalents, and investment balances as of March 31, 2025, were $5.4 million compared to $11.8 million as of December 31, 2024. Subject to the quarter, and as Brian mentioned, we closed on a $6 million financing. The note carries an interest rate of 15% per annum and matures 24 months from the date of closing. Amortization of the note begins at month eight with a prepayment option in excess of amortization in whole or in part at any time with five days' advance notice at a 2% premium to the principal amount plus accrued interest. The note has a fixed conversion price of $4 per share beginning at month eight from the date of issuance subject to monthly conversion limits. Included in the note is a dilution offset clause in which the company will exchange 333,333 shares of Cable Car's existing equity position into $999,999 of principal at $3 per share. Additionally, the company will issue 700,000 five-year cash warrants with an exercise price of $6 per share. I will now pass the call back to Brian for some closing remarks.

Thank you, Tony. I've never been more confident in our team, our strategy, and the long-term value we're creating for both our customers and shareholders. The foundation is built. The investments are in place. Now, it's time to execute and deliver. I truly believe we're entering a transformational chapter for SurgePays, one that will define the next phase of our growth story. Thank you all for joining us today. Operator, we will now open the call for questions.

And the first question today is coming from Kunal Madhukar from Water Tower Research. Kunal, your line is live.

Great. Thank you. Thank you for taking the questions. A couple if I could. The first one on the MVNE opportunity, and you talked about three already integrated and two in the pipeline with hundreds of thousands of subscribers. So can you talk about the timeline over which we can start seeing revenues starting to flow in from these MVNE partners that you have?

Yes, the revenues should start showing up in Q2. Those three companies, I just got an update as early as this morning, are all activating currently. And as they ramp up and they shift out of their old SIM card inventory and start replenishing with ours, we'll see those steadily rising. And like I said, it's the recurring revenue model for all of them, which we get to participate in even on the wholesale level. So we're very excited about the MVNE portion of our business, and it has got a lot of emphasis from our development team.

Thank you. And then another one on the SIM cards. So you disclosed that by June you should have about 800,000 SIM cards either distributed or within your inventory. How are you distributing it among your subscribers, existing subscribers, the retail network that you have, and the MVNEs that you're partnering with?

It's almost, if you look at it like a triage across all facets of our company. We have to have inventory in stock because there's a, let's say, a four-week turnaround from the time we order SIMs till the time we get them. And once you've got folks heating up and selling, you've got to be able to replenish those sales distributors and sales teams or wholesale companies. You can't run out of SIMs. So this will stock us internally with our inventory. This will give us inventory to activate on the government-subsidized portion of our business Lifeline and get that inventory out to folks that are doing activations in the field. It'll give us inventory for LinkUp, get the hands of the distributors, master agents, the wireless stores, the convenience stores. It'll give us the SIMs to do our next round, if you will, of our phone in the box concept, based on the feedback we get and what type of phone and more offerings through the phone in the box program. And then it'll also give our initial inventories to the new companies that are coming on that are buying wholesale from us on the MVNE side. So, by the end of that month, that's our projection by the end of June. And then we should be in a constant replenishing mode where we keep a watermark of inventory to be able to absorb any bursts of sales that we have depending on the market. But that's the way we're going to move forward and that's where we feel like we've got, that'll get us a good baseline, and then we'll obviously ramp up our ordering of SIMs as the adoption of our product kicks off and scales up.

Great. Actually, if I could, one on the MVNE side, you talked about high-margin recurring revenue from the MVNEs. Can you talk about the economics and how, like, we should model out in terms of if you get one MVNE subscriber, how many does it translate into? And then ultimately when we are thinking of these hundreds of thousands of subscribers, how should one think of adoption for your part of the service for those subscribers?

That's a complex question because you are trying to generalize across different MVNOs. Some may be smaller prepaid regional MVNOs, while others could be large-scale Lifeline MVNOs operating nationwide, or they could be nationwide prepaid companies. This reflects the diversity of companies we are currently working with. Each company's performance will depend on its specific circumstances, including its funding and goals. We aim to partner with those looking to grow quickly, while many smaller players will have to take a slower approach. Economically, it's difficult to state a fixed revenue expectation for each MVNO we onboard. Within each MVNO's model, there are various factors at play; for instance, an MVNO will have a monthly recurring charge to keep the SIM card active, which includes a set amount of talk and text. Data usage is the only metered component. In the past, charges applied to minutes, texts, and data separately, but now unlimited texts and minutes are part of the monthly charge. For a Lifeline company with a monthly charge around $9.25, data usage might be low, but if we maintain a healthy 20% to 30% margin per subscriber, it won't significantly impact our profit whether a customer pays $10 or $30. However, we will earn more as data consumption increases. This aspect is challenging to model, and we'll look for effective ways to communicate this to you as it develops. You will likely need to consider a blended average or margin for each MVNO, but we will need time to see how everything plays out for your modeling efforts.

Great. Thank you so much.

The next question is coming from Ed Woo from Ascendiant Capital. Ed, your line is live.

Yeah. Congratulations on the progress. My question is, obviously, you guys have a very broad distribution network in the communities of these underserved customers. Are you seeing any change in the outlook of these convenience store owners, of whether they're really concerned about the economy or whether they see any change in their consumer, their customers' economic activities?

We obviously have our ear to the ground and our neck deep in all of these communities. And whether it's a traditional gas station convenience store or a corner store or a community market, that community that really falls underneath that, let's just call it the wave break zone of the economy, there's normally not a whole lot of change based on craziness on the macroeconomics of the country. If anything, it's only going to increase our available market. It adds, as things get a little tighter, our target, that third of the country, that's our target customer, doesn't normally have 401(k)s and mutual fund IRAs and investments. So, stock market GDP, tariffs, those types of things don't really directly affect them necessarily. So, but we've said this a couple of times before. One thing about when the world gets a little more myopic and more paying attention to value, that's great for us because we're presenting an alternative to whatever people are using now for wireless. We're presenting an alternative and a new revenue possibility for that store owner. So, if we can enhance that store owner's bottom line and we can also increase the amount of money that the end subscriber, end customer gets to use or gets to keep in their wallet or let's go ahead and spread that out to the MVNE side. If we can offer better rates at a friendlier partner to these other entrepreneurs in the prepaid wireless or wireless world, then we get a year that's a little different than in times are good, and people are just not really caring about what they do tomorrow, they're just going to repeat what they did yesterday because they're fine. So, we always find opportunities in moments where things are a little bit tight or dicey or stormy. And that's why I think it's great timing, all things considered, for the product suite and the distribution mechanisms that we have in place right now.

Great, that's a very good answer to my questions. I wish you guys good luck. Thank you.

Thank you.

Thank you. And next, we will have a follow-up from Kunal Madhukar from Water Tower Research. Kunal, your line is live.

Okay, great, thank you. A quick one on the near-term goal of 100,000 locations that you talked about. Now, you're currently in about, just about maybe 10,000 locations. So, that seems quite ambitious at first glance. But if you have a near-term goal, you must have a lot of visibility into how you're going to get there. So can you please talk about how you intend to get to 100,000 distribution locations?

Yes, and you stole one of my thunder words there with visibility. I use that word often because we do have visibility downrange, and we're able to look at the possibilities and the feedback that we're getting. So that number is definitely what I would consider a conservative compilation of folks at some level in the pipeline of sales, whether it be direct distributors, whether it be, again, one of the things I touched on in my script was we have probably four products that can get us in the door. And all that one product, whether you want to call it a doorjamb or a Trojan horse, doesn't matter; that gets our entire product suite, our entire SurgePays network platform into that store at the register. So, looking at the, to use your word again, evaluating the visibility, looking downrange at the folks like HT Hackney, quite a few others that I won't mention because we're in negotiations. HT Hackney is regional. There's plenty of HT Hackneys. There's also other products on the top-up side of things. There's huge networks that we're in discussions with on LinkUp. There's huge networks in the Lifeline space that deal with EBT redemption, specifically out West in the tens and tens of thousands. So, there's a lot of other companies we're talking to actively right now that are the merchant processing, credit card processing ISOs that have tens of thousands of stores in their network where they're making that small fraction of a percent on all those credit card transactions, and they're looking for ways to upsell their existing base, so that they can squeeze a few more bucks per location out and enhance their portfolios. So, all of these are on the table. We have various high-level sales folks in our company who are each focused independently on their own category. So, there's definitely some stock that went into that. And that is my goal by the end of next year, is to get at that 100,000 mark. I hope we get there sooner, but that is our goal collectively that we've been talking about amongst the management team.

Got it. So, by end of 2026 is what you're kind of thinking of. And we would be remiss to not talk about the, at least on the Lifeline side, the opportunity that exists in higher revenue states and regions and demographics. So, like California for instance, what's the progress that you're seeing on that side?

Progress is moving forward across the country. After this financing, I want to emphasize that while I am very driven and decisive, our entire team has invested their life's work into what we are doing. Therefore, we are not going to rush into things carelessly. We have been systematically advancing, pending this financing, which is primarily growth capital aimed at Lifeline and other investments that yield a strong return on investment for recurring revenue subscribers, particularly the Lifeline subscribers. Yes, we will prioritize the states with higher rates like $15, $21, $34, and $30, similar to the previous ACP world. However, we will not overlook the $9.25 option because we believe, based on the feedback from Washington, that there will be an improved Lifeline product. The government understands the challenges of delivering a usable phone service for $9.25, and I believe they will consider increasing that amount and potentially opening opportunities for companies like ours. I am not officially forecasting this because, as we all know, decisions from Washington can change quickly. However, the current aim of the coalitions focused on subsidized telecom is to advocate for an enhanced Lifeline around $20 to provide consumers with a viable product, leading to no more $9.25 states, just $20 states along with other states at different amounts.

Got it. Great. Thank you so much.

Thank you. This concludes today's Q&A session and also this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.