Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Surgepays Inc (SURG, Financial) is focusing on becoming cash flow positive quickly by aligning sales integration and strategy to generate new revenue streams.
- The company has successfully transitioned from the Affordable Connectivity Program (ACP) to the Lifeline program, maintaining customer continuity and positioning for long-term economic returns.
- Surgepays Inc (SURG) reported a 69% increase in sales for its prepaid platform service segment, showcasing significant growth momentum.
- The company is expanding its footprint with a new sales and operations center in El Salvador, enhancing customer relationships and maximizing sales opportunities.
- Surgepays Inc (SURG) is preparing for a transformative agreement with the largest wireless network in the country, expected to significantly increase subscribers and establish a strong presence in the prepaid space.
Negative Points
- Surgepays Inc (SURG) experienced an 86% decrease in revenue compared to the same period in 2023, primarily due to the shutdown of the ACP funding program.
- The company reported a gross profit loss of $7.8 million in the third quarter, compared to a $10.5 million profit in the previous year.
- SG&A expenses increased by 97% year over year, driven by additional non-cash stock compensation and contractor fees.
- The company faced a significant net loss of $14.3 million during the third quarter, impacted by the ending of the federally funded ACP.
- Cash from operations was a negative $13.4 million in the third quarter, reflecting the winding down of the ACP and continued servicing of subscribers.
Q & A Highlights
Q: Can you provide more details on the expectations for returning to break-even, especially with the transition to Lifeline?
A: Brian Cox, CEO: We are focused on becoming cash flow positive as quickly as possible. We are migrating ACP customers to Lifeline, with over 70,000 already enrolled. Our goal is to reach 200,000 Lifeline subscribers by the end of the year, which should bring us close to break-even. The average revenue per Lifeline customer is $9.25, with costs around $5 to $5.5, allowing us to cover overhead as we grow.
Q: How many convenience stores are currently using your prepaid platform, and what is the revenue outlook?
A: Brian Cox, CEO: We have about 8,000 to 9,000 stores using our platform. The current run rate for top-ups is $2.2 million per month, expected to exceed $3 million by December. We anticipate reaching $10 to $12 million per month by the end of 2025 as we expand our store network and product offerings.
Q: What is the potential market size for Lifeline compared to ACP, and how does it affect your strategy?
A: Brian Cox, CEO: Lifeline has a similar market size to ACP, targeting individuals already receiving government assistance. The transition to Lifeline allows us to retain customers without additional acquisition costs, making it a strategic move to maintain revenue streams and profitability.
Q: How will the new direct carrier connection impact your cost structure and margins?
A: Brian Cox, CEO: The direct carrier connection should reduce our costs to below $5 per customer by January, improving our margins significantly. This will enhance our ability to offer competitive plans and increase profitability, especially for our Linkup Mobile brand.
Q: What are the expected margins and pricing for Linkup Mobile plans?
A: Brian Cox, CEO: Linkup Mobile plans will be priced between $15 and $50, with the most popular plan at $30. Our cost for these plans will be around $15 to $17, allowing us to maintain healthy margins. We are preparing for a full-scale launch in January, aiming for significant subscriber growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
