SurgePays Announces Third Quarter 2024 Financial Results

Rhea-AI Summary

SurgePays (NASDAQ: SURG) reported Q3 2024 financial results with sales of $4.8 million, down from previous quarters due to the end of Affordable Connectivity Program (ACP) funding. MVNO revenue decreased to $23,609 from $30.2 million year-over-year, while Prepaid Platform Services grew 69% to $4.7 million. The company reported a $7.8 million gross loss, compared to a $10.5 million profit in Q3 2023. SurgePays has migrated over 70,000 customers to the Lifeline program through a partnership with TerraCom, and their prepaid top-ups platform reached $2.2 million in monthly revenue. The company held $24 million in cash and investments as of September 30, 2024.

Positive

• Prepaid Platform Services segment grew 69% to $4.7 million
• Strong cash position with $24 million in cash and investments
• Monthly prepaid top-ups revenue reached $2.2 million, growing 400% in five months
• Successfully migrated 70,000+ customers to Lifeline program
• Board authorized $5 million share repurchase program

Negative

• Total sales declined to $4.8 million due to ACP funding end
• MVNO revenue dropped to $23,609 from $30.2 million YoY
• Gross profit swung to $7.8 million loss from $10.5 million profit YoY
• Increased operating expenses from new El Salvador facility

Insights

Financial Analyst

The Q3 results reveal significant challenges and strategic pivots. Revenue dropped dramatically to $4.8 million from previous quarters due to ACP funding cessation, with MVNO revenue plummeting to $23,609 from $30.2 million year-over-year. The company posted a $7.8 million gross loss, compared to a $10.5 million profit last year.

However, there are positive indicators: Prepaid Platform Services grew 69% to $4.7 million and the company maintains a strong cash position of $24 million. The TerraCom partnership for Lifeline program migration (70,000+ customers already enrolled) and LinkUp Mobile's expansion show promising revenue diversification. Monthly revenue from the Prepaid Top-ups platform has grown 400% to $2.2 million, indicating strong operational momentum despite the transitional period.

Market Research Analyst

The strategic pivot from ACP to Lifeline demonstrates adaptability in a challenging regulatory environment. The company's multi-channel approach with four distinct business segments - MVNO, Prepaid Platform Services, LinkUp Mobile and ClearLine POS - creates multiple revenue streams and reduces dependency on single funding sources. The El Salvador operations center, housing 100 full-time employees, indicates scalability preparation and cost optimization. The $5 million share buyback authorization, with $485,131 already executed, suggests management's confidence in the company's intrinsic value despite current headwinds.

Migration of former ACP Subscribers to Lifeline Well Underway

BARTLETT, Tenn., Nov. 12, 2024 /PRNewswire/ -- SurgePays, Inc. (Nasdaq: SURG) ("SurgePays" or the "Company"), a bridging critical financial and connectivity gaps in underserved communities, today announced its financial results for the third quarter ended September 30, 2024.

Management Commentary

Chairman and CEO Brian Cox commented on the quarter's results, "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 becoming cash flow positive as quickly as possible. We are 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.

"In the third quarter of 2024, SurgePays reported $4.8 million in sales, aligning with expectations for our first full quarter without Affordable Connectivity Funding (ACP) since mid-2021. Our Mobile Virtual Network Operator (MVNO) revenue was $23,609 compared to $30.2 million in the same quarter last year, reflecting the anticipated funding shift. Meanwhile, sales in our Prepaid Platform Services segment surged 69% to $4.7 million, showcasing significant growth momentum.

"Gross profit (exclusive of depreciation and amortization) swung to a $7.8 million loss in the third quarter from a $10.5 million profit in the year-ago period due to our strategic decision to utilize our strong balance sheet to protect our previous ACP subscriber base and distribution network. With ACP funding ending, our immediate focus was on how to retain and preserve these hard-earned customers within the SurgePays ecosystem.   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 and strategic choice that positions us well for potential long-term economic returns. We expect this decision to be both customer-centered and financially astute in the long run.

"Our recent Master Services Agreement with TerraCom, Inc., a licensed Lifeline provider, represents a pivotal step. This partnership allows us to migrate up to 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's 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 is now enrolling thousands of Lifeline customers daily without distracting from our core business focus. This department has been overwhelmed and has had to hire additional employees for the sales onboarding team. Our team has now enrolled over 70,000 customers in the Lifeline program, and we believe our Lifeline subscribers potential can far outpace our highest ACP subscriber count.

"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. 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.

"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. 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 (POS) 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.  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 longstanding outsourcing strategy, which enhances customer relationships and maximizes sales opportunities.

"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 equivelants, and investments as of September 30, 2024, we're positioned to execute our growth strategy with precision. Over the next few months, we expect each of our four business segments to create a momentum that drives continuous growth and improvement, generating synergistic and scalable recurring revenue."

Third Quarter 2024 Results Conference Call

SurgePays management will host a webcast today at 5 p.m. ET / 2 p.m. PT to discuss these results.

The live webcast of the call can be accessed on the company's investor relations website at ir.surgepays.com, or by registering at the following link: Third Quarter Results Call .

Telephone access to the call will be available at 877-545-0320 (in the U.S.) or by dialing 973-528-0002 (outside the U.S.). Participant access code is 801757.

A telephone replay will be available approximately one hour following completion of the call until November 26, 2024. To access the replay, please dial 877-481-4010 (in the U.S.) or 919-882-2331 (outside the U.S.). Replay passcode is 51609.

Share Repurchase Authorization

During the third quarter, SurgePays' board of directors authorized the company to repurchase up to $5 million of common stock in the open market within six months from implementation of the program.  The company repurchased $485,131 of treasury shares in the third quarter.

About SurgePays, Inc.

SurgePays, Inc. is a technology and telecom company focused on the underbanked and underserved communities. SurgePays' technology-layered platform empowers clerks at over 8,000 convenience stores to provide a suite of prepaid wireless and financial products to underbanked customers. SurgePays prepaid wireless companies provide services to over 250,000 low-income subscribers nationwide. The company ranks as the 345th fastest-growing tech company in North America according to the 2023 Deloitte Technology Fast 500. Please visit SurgePays.com for more information.

Cautionary Note Regarding Forward-Looking Statements

This press release includes express or implied statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Forward-looking statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance and may contain projections of our future results of operations or of our financial information or state other forward-looking information. In some cases, you can identify forward-looking statements by the following words: "may," "will," "could," "would," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue," "ongoing," "attempting," or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

Although we believe that the expectations reflected in these forward-looking statements such as regarding our market potential along with the statements under the heading Management Commentary are reasonable, these statements relate to future events or our future operational or financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements including but not limited to, our plans to expand our prepaid wireless company and the stock buyback program, our ability to retain our subscribers on a free monthly plan subsidized by a sister program, our ability to obtain a company that has the license to subsidize our subscribers through a sister program and our expanded service and offerings . Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control, including, without limitation, whether the ACP is funded again, our ability to obtain a company that has the license to subsidize our subscribers through a sister program, statements about our future financial performance, including our revenue, cash flows, costs of revenue and operating expenses; our anticipated growth; and our predictions about our industry. The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission ("SEC"), including in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The forward-looking statements in this press release speak only as of the date on which the statements are made. We undertake no obligation to update, and expressly disclaim the obligation to update, any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

SurgePays, Inc. and Subsidiaries
Consolidated Balance Sheets
		September 30, 2024		December 31, 2023
		(Unaudited)
Assets
Current Assets
Cash and cash equivalents		$                    13,651,559		$                  14,622,060
Investments		10,068,506		-
Accounts receivable - net		1,513,996		9,536,074
Inventory		8,363,138		9,046,594
Prepaids and other		312,679		161,933
Total Current Assets		33,909,878		33,366,661
Construction-in-process		518,189		-
Property and equipment - net		158,092		361,841
Other Assets
Note receivable		176,851		176,851
Intangibles - net		1,636,339		2,126,470
Internal use software development costs - net		372,303		539,424
Goodwill		4,166,782		1,666,782
Investment in CenterCom		498,273		464,409
Operating lease - right of use asset - net		62,786		387,869
Deferred income taxes - net		-		2,835,000
Total Other Assets		6,913,334		8,196,805
Total Assets		$                    41,499,493		$                  41,925,307
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses		$                      3,173,968		$                    6,439,120
Accounts payable and accrued expenses - related party		462,376		1,048,224
Accrued income taxes payable		100,000		570,000
Deferred revenue		-		20,000
Operating lease liability		50,415		43,137
Note payable - related party		1,647,491		4,584,563
Total Current Liabilities		5,434,250		12,705,044
Long Term Liabilities
Note payable - related party		2,303,989		-
Notes payable - SBA government		472,135		460,523
Operating lease liability		13,132		356,276
Total Long Term Liabilities		2,789,256		816,799
Total Liabilities		8,223,506		13,521,843
Stockholders' Equity
Common stock, $0.001 par value, 500,000,000 shares authorized
19,931,549 shares issued and 19,650,779 shares outstanding, respectively, at September 30, 2024
14,403,261 shares issued and outstanding at December 31, 2023		19,935		14,404
Additional paid-in capital		74,725,651		43,421,019
Treasury stock - at cost (280,770 and 0 shares, respectively)		(485,131)		-
Accumulated deficit		(41,102,720)		(15,186,203)
Stockholders' equity		33,157,735		28,249,220
Non-controlling interest		118,252		154,244
Total Stockholders' Equity		33,275,987		28,403,464
Total Liabilities and Stockholders' Equity		$                    41,499,493		$                  41,925,307

 

SurgePays, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2024		2023		2024		2023
Revenues		$                     4,769,697		$                    34,160,834		$                   51,284,531		$                  104,823,710
Costs and expenses
Cost of revenues		12,602,057		23,680,247		54,377,300		76,622,912
General and administrative expenses		6,448,402		3,389,015		20,312,185		10,201,663
Total costs and expenses		19,050,459		27,069,262		74,689,485		86,824,575
Income (loss) from operations		(14,280,762)		7,091,572		(23,404,954)		17,999,135
Other income (expense)
Interest expense		(112,814)		(130,335)		(362,119)		(478,928)
Loss on lease termination - net		(194,862)				(194,862)
Other income		239		-		637,107		-
Interest income		183,537				183,537
Unrealized gains - investments		38,292				38,292
Dividends, interest and other income - investments		86,626				86,626
Gain on investment in CenterCom		-		51,894		33,864		95,636
Total other income (expense) - net		1,018		(78,441)		422,445		(383,292)
Net income (loss) before provision for income taxes		(14,279,744)		7,013,131		(22,982,509)		17,615,843
Provision for income tax benefit (expense)		-		-		(2,970,000)		-
Net income (loss) including non-controlling interest		(14,279,744)		7,013,131		(25,952,509)		17,615,843
Non-controlling interest		(4,397)		(71,170)		(35,992)		19,209
Net income (loss) available to common stockholders		$                  (14,275,347)		$                       7,084,301		$                  (25,916,517)		$                    17,596,634
Earnings per share - attributable to common stockholders
Basic		$                             (0.73)		$                                0.50		$                             (1.37)		$                               1.24
Diluted		$                             (0.73)		$                                0.49		$                             (1.37)		$                               1.19
Weighted average number of shares outstanding - attributable to common stockholders
Basic		19,689,010		14,291,263		18,940,689		14,205,127
Diluted		19,689,010		14,507,984		18,940,689		14,740,201

 

SurgePays, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For the Three and Nine Months Ended September 30, 2024
(Unaudited)
						Additional										Total
		Common Stock				Paid-in		Accumulated		Treasury Stock				Non-Controlling		Stockholders'
		Shares		Amount		Capital		Deficit		Shares		Amount		Interest		Equity
December 31, 2023		14,403,261		$    14,404		$     43,421,019		$     (15,186,203)		$                     -		$                              -		$                154,244		$        28,403,464
Stock issued for cash		3,080,356		3,081		17,246,913		-		-		-		-		17,249,994
Cash paid as direct offering costs		-		-		(1,395,000)		-		-		-		-		(1,395,000)
Exercise of warrants - cash		1,860,308		1,861		8,797,396		-		-		-		-		8,799,257
Exercise of warrants - cashless		40,238		41		(41)		-		-		-		-		-
Stock issued for services		47,386		48		411,692		-		-		-		-		411,740
Recognition of stock based compensation - unvested shares - related parties		-		-		1,497,417		-		-		-		-		1,497,417
Recognition of stock-based compensation - related party		-		-		6,196		-		-		-		-		6,196
Non-controlling interest		-		-		-		-		-		-		(12,164)		(12,164)
Net income		-		-		-		1,224,595		-		-		-		1,224,595
March 31, 2024		19,431,549		19,435		69,985,592		(13,961,608)		-		-		142,080		56,185,499
Recognition of stock based compensation - unvested shares - related parties		-		-		2,981,577		-		-		-		-		2,981,577
Non-controlling interest		-		-		-		-		-		-		(19,431)		(19,431)
Net loss		-		-		-		(12,865,765)						-		(12,865,765)
June 30, 2024		19,431,549		19,435		72,967,169		(26,827,373)		-		-		122,649		46,281,880
Recognition of stock based compensation - unvested shares - related parties		500,000		500		1,758,482		-		-		-		-		1,758,982
Treasury shares repurchased (share buy-backs)		-		-		-		-		280,770		(485,131)		-		(485,131)
Non-controlling interest		-		-		-		-		-		-		(4,397)		(4,397)
Net loss		-		-		-		(14,275,347)		-		-		-		(14,275,347)
September 30, 2024		19,931,549		$    19,935		$     74,725,651		$     (41,102,720)		280,770		$           (485,131)		$                118,252		$        33,275,987
Per TB/ISL		19,931,549		$    19,935		$     74,725,651		$     (41,102,720)				$           (485,131)		$                118,252
Difference		-		-		-		(0)				-		0		33,275,987

 

SurgePays, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
		For the Nine Months Ended September 30,
		2024		2023
Operating activities
Net income (loss) - including non-controlling interest		$                 (25,952,509)		$                    17,615,843
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations
Depreciation and amortization		693,880		701,279
Amortization of right-of-use assets		70,857		32,426
Amortization of internal use software development costs		167,121		96,795
Stock issued for services		411,740		874,284
Recognition of stock based compensation - unvested shares - related parties		6,237,976		-
Recognition of share based compensation - options - related party		6,196		27,882
Interest expense adjustment - SBA loans		19,750		-
Right-of-use asset lease payment adjustment true up		(148,584)		-
Gain on equity method investment - CenterCom		(33,864)		(95,637)
Cash paid for lease termination		(212,175)		-
Loss on lease termination - net		194,862		-
Changes in operating assets and liabilities
(Increase) decrease in
Accounts receivable		8,022,078		(544,063)
Inventory		683,456		(3,363,165)
Prepaids and other		(150,746)		(86,355)
Deferred income taxes - net		2,835,000		-
Increase (decrease) in
Accounts payable and accrued expenses		(5,765,152)		1,048,750
Accounts payable and accrued expenses - related party		(86,857)		(726,163)
Accrued income taxes payable		(470,000)		-
Installment sale liability - net		-		(7,097,838)
Deferred revenue		(20,000)		(125,110)
Operating lease liability		84,257		(29,230)
Net cash provided by (used in) operating activities		(13,412,714)		8,329,698
Investing activities
Advances made for construction-in-process costs		(518,189)		-
Capitalized internal use software development costs		-		(281,304)
Purchase of investments - net		(10,068,506)		-
Net cash used in investing activities		(10,586,695)		(281,304)
Financing activities
Proceeds from stock issued for cash		17,249,994		-
Proceeds from exercise of common stock warrants		8,799,257		207,240
Cash paid as direct offering costs		(1,395,000)		-
Repayments of loans - related party		(1,132,074)		(1,017,385)
Repayments on notes payable		-		(1,531,478)
Repayments on notes payable - SBA government		(8,138)		(10,976)
Treasury shares repurchased (share buy-backs)		(485,131)		-
Net cash provided (used in) by financing activities		23,028,908		(2,352,599)
Net increase (decrease) in cash and cash equivalents		(970,501)		5,695,795
Cash and cash equivalents - beginning of period		14,622,060		7,035,654
Cash and cash equivalents - end of period		$                     13,651,559		$                     12,731,449
Supplemental disclosure of cash flow information
Cash paid for interest		$                          372,579		$                          209,840
Cash paid for income tax		$                                      -		$                                      -
Supplemental disclosure of non-cash investing and financing activities
Reclassification of accrued interest - related party to note payable - related party		$                          498,991		$                                      -
Exercise of warrants - cashless		$                                   41		$                                      -
Termination of ROU operating lease assets and liabilities		$                          309,826
Right-of-use asset obtained in exchange for new operating lease liability		$                            98,638		$                                      -
Goodwill (ClearLine Mobile, Inc.)		$                       2,500,000		$                                      -

 

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SOURCE SurgePays

FAQ

What were SurgePays (SURG) Q3 2024 revenue and earnings?

SurgePays reported Q3 2024 sales of $4.8 million, with MVNO revenue of $23,609 and Prepaid Platform Services revenue of $4.7 million. The company recorded a gross loss of $7.8 million.

How many customers has SurgePays (SURG) migrated to the Lifeline program?

SurgePays has successfully migrated over 70,000 customers to the Lifeline program through their partnership with TerraCom.

What is the monthly revenue of SurgePays (SURG) prepaid top-ups platform?

SurgePays' prepaid top-ups platform reached $2.2 million in monthly revenue, showing approximately 400% growth in five months.

How much cash does SurgePays (SURG) have as of Q3 2024?

As of September 30, 2024, SurgePays had $24 million in cash, cash equivalents, and investments.