Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Surgepays Inc (SURG, Financial) has successfully acquired over 250,000 subscribers to its MVNO business.
- The company has launched a non-subsidized MVNO business, LinkUp Mobile, to mitigate the impact of the ACP funding uncertainty.
- Surgepays Inc (SURG) has hired Joe Gomez, a senior telecommunications industry executive, to enhance its MVNO operations.
- The company has announced a corporate stock buyback of up to $5 million to align interests with long-term investors.
- Surgepays Inc (SURG) has a strong balance sheet with $38.4 million in cash as of June 30, 2024, to support its transition and growth initiatives.
Negative Points
- Revenues for the second quarter decreased by 58% to $15.1 million compared to $35.9 million in the same quarter of 2023.
- Gross profit swung to a $3.4 million loss in the second quarter from a $10 million profit in the year-ago period.
- SG&A expenses increased by 101% year-over-year, primarily due to additional non-cash stock compensation for management.
- The company reported a net loss of $12.9 million and a loss per share of $0.66 for the second quarter.
- The ending of the federally funded ACP program has significantly impacted the company's financial performance and stock price.
Q & A Highlights
Q: How optimistic are you that the Affordable Connectivity Program (ACP) will be refunded, and do you have any timeline for it?
A: Kevin Cox, CEO: Our optimism wanes as time goes on. We had set an internal date of August 1 to take action and transition to Plan B. We are still told that actions are taking place in Congress, but we can't wait any longer and have started transitioning our customers to either a free Lifeline service or a paid LinkUp Mobile plan.
Q: Do you have any initial read on who will opt for the Lifeline program versus LinkUp Mobile?
A: Kevin Cox, CEO: My instincts tell me that the majority will stick with the free Lifeline program initially. Over the course of 3 to 4 months, some may transition to the paid LinkUp Mobile plan.
Q: What are the initial reads on the ClearLine customer engagement platform?
A: Kevin Cox, CEO: ClearLine has been a great acquisition, allowing us to transition to touchscreens at stores and offering dynamic advertising. It also enables prepaid transactions and activations for LinkUp Mobile. We are rolling it out to several chains, and it has high-margin potential.
Q: Can you achieve free cash flow positivity without ACP being refunded?
A: Kevin Cox, CEO: Yes, our goal of being cash flow positive by the end of the year assumes ACP is gone. This will be achieved through transitioning customers to Lifeline, ramping up third-party wireless transactions, and growing LinkUp Mobile.
Q: Are there any opportunities with carriers to mitigate the costs of keeping ACP customers?
A: Kevin Cox, CEO: Initially, carriers discussed aggressive discounts, but they pulled back due to the belief that ACP would be funded. We expect carriers to offer discounted rates for Lifeline services to keep subscribers, and they have already given us some discounts in the past few months.
Q: Are you considering any other accretive acquisitions with synergistic business models?
A: Kevin Cox, CEO: Yes, we are constantly evaluating acquisitions. The current macro environment is unique for a company with cash in the bank. We are open to acquisitions that align with our mission and can grow the company.
Q: What are you hearing about the economic outlook from your direct relationship with the underserved market through convenience stores?
A: Kevin Cox, CEO: The underbanked segment is not significantly affected by broader economic indicators. We see a stagnant offering platform for these consumers and a huge opportunity for value-added prepaid wireless services. We are focusing on strengthening our international offering and porting numbers to capture more subscribers.
Q: How are you planning to execute the strategy based on the feedback from master agents and stores?
A: Kevin Cox, CEO: We are working on strengthening our international offering and porting numbers. We aim to capture a significant share of the market by addressing these needs. We will be rolling out these products at the largest prepaid convention of the year and aim to be a top player in the market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
