SurgePays, Inc.

Well, ladies and gentlemen, thank you for holding. Please stay on the line. The conference will begin in just a couple minutes. Once again, thank you for holding. Please stay on the line. The conference will begin in just a couple minutes. Thank you. © transcript Emily Beynon We'll be right back. Thank you. Thank you. Thank you. Thank you. Thank you. Greetings and welcome to the Surge Pays Inc. 4th Quarter and 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you Brian Prenevel with Investor Relations. Thank you, Brian. You may begin.

Thank you, operator. Good afternoon, everyone. Welcome to the Surge Pays fourth quarter 2022 earnings webcast and conference call. Today's date is March 30th, 2023. And on the call today from Surge Pays are Brian Cox, President, Chief Executive Officer, and Tony Evers, Chief Financial Officer. Before we begin, we'd like to let everybody know that the press release is in queue. The wire service is a bit backed up, a bit of a log jam, but we have been notified that it should be out momentarily. So you should see anything necessary in the next few minutes. 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 a 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 Surge Pay's 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. Also, during the course of today's call, the company will be discussing one or more non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release in Form 10-K. Copies of today's press release will be accessible on SurgePay's investor relations website at ir.surgepays.com. In addition, SurgePay's Form 10-K for the year ended December 31st, 2022 is also available on SurgePay's Investor Relations website. And now I'd like to turn the call over to President and Chief Executive Officer, Brian Cox.

Thanks, Brian. The fourth quarter of 2022 feels like a lifetime ago, so I want to remind our listeners of some important items announced in our last quarter. We announced that we had eclipsed 200,000 subscribers in our wireless business through the Affordable Connectivity Program, or ACP. We announced the addition of Jeremy Gies as president of SurgePace FinTech. Adding Jeremy has ignited our efforts to grow our convenience store network, which will take on an increased importance in 2023, as I will discuss. Jeremy is playing the lead role in expanding store count as we build our business for sustained growth and expansion. We announced the closing of a senior credit facility on November 18th. This dedicated financing allows us to move away from ordering tablets on the high cost secondary market and order direct from the manufacturer. Going direct reduces our per device cost over 20% and allows us to utilize our financing facility more cost efficiently. I think it's important to state that switching from real time spot buying devices on the secondary market to purchasing, manufacturing, and the shipping logistics of buying direct from the factory overseas did force us momentarily to take our foot off the gas, no different than shifting gears in order to accelerate at a higher velocity. For example, we were faced with the decision of air versus ocean freight. The timing for ocean was an additional 35 days difference, but the cost savings averaged over $35,000 per staged shipment, of which there were 13 shipments. When forced to choose between optimizing the appearance of growth or maximizing the present value of current and future cash flows, we'll always choose the cash flows. I'm happy to say these shipments started arriving in March and are now in a rhythm. A dedicated staff of 40 people are now managing the activation, distribution, and fulfillment of our inventory. During this transition, we did grow our wireless base, but at a controlled and disciplined pace to minimize overpaying for devices simply to attain subscriber numbers we believe we will ultimately achieve either way. In December, we announced the resignation of Jay Jones from our board of directors and the election of Laurie Weisberg and Rich Sherfield. This announcement will be a boon to SurgePays as we continue to scale the company. Jay resigned as an independent board member only to move into a closer advisory role where he will work with us in the company's senior management. Laurie and Rich are either current or former CEOs with extensive executive experience in the tech and telecom industries. In addition to operational expertise in their respective fields, Laurie and Rich bring invaluable next level familiarity with the critical legal and governance issues we expect as SurgePace continues to grow. Subsequent to year end, In February 2023, we announced a new distribution agreement with Capital Candy, a family-owned wholesale distributor to convenience stores in New England. The agreement with Capital Candy will allow Surge Place to sell our prepaid telecom and financial products for the underbanked, including ACP signups, into over 3,000 convenience stores. It's deals like these where we start to see the impact of adding someone like Jeremy Gies to our team. As a matter of fact, we recently added another 20-year veteran to the team as VP of Sales, directly reporting to Jeremy to assist in working through a funnel of over 35 more partnerships, integrations, and similar agreements, with several of those being 10 times the number of convenience stores. In the fourth quarter, revenue exceeded $36 million, a one and a half times increase compared to last year, And we exited 2022 with 144.8 million revenue run rate. 2022 revenue increased by 138% compared to 2021. And it's important to note that this was during the timeframe where sales were intentionally throttled by management to grow without dilution. The disciplined growth plan we laid out earlier this year will be rewarded with continued revenue growth, profitability, and increased shareholder value. As previously discussed, due to us taking the foot off the gas to shift to buying devices direct, the fourth quarter clarifies that SurgePays generates a lot of cash when it doesn't have to expense customer acquisitions fully upfront, and much more of our revenue reached the bottom line with a net gain of $3 million. Looking forward, we're excited about the earnings potential of SurgePays. I've been providing prepaid telecom products to the underbank community through convenience stores for 20 years, and I've never seen the response like what we're seeing in our beta testing for in-store ACP sign-ups. Not just from the customer's response inside of a store that sees a poster or sticker, but from the store owner's willingness to sign on with us, which gives us access to offer all of our FinTech and prepaid wireless products for the underbank through his store. If a customer is on SNAP, EBT, they qualify for ACP. In many cases, the SNAP benefits are used at the store closest to the residence, which is usually the convenience store. Our store owners already have a good idea of their subsidized customer base and immediately are realizing the potential. Also, by enrolling a customer from a brick and mortar store versus a pop-up tent, we anticipate retention will be higher if the customer knows where he can go to get help if needed. and the store owner is making a residual commission, so he has a vested interest to make sure these subscribers remain active and happy. Ultimately, it is our goal to utilize the ACP program to gain access to tens of thousands of convenience stores nationwide and maximize those relationships by deploying our entire suite of prepaid and fintech products for the underbanked. The early data is really encouraging, and we anticipate this being a major revenue growth driver across several verticals. To further prepare for this growth, we've more than doubled our bilingual sales, support, and back office team at our operations center in El Salvador, where we now have over 200 people strong. As I sit back and visualize how I see the model unfolding, being able to watch both main revenue channels grow in synergy, spearheaded by experienced sales leaders, This is really electric for me. Now is the time where we work aggressively to build the foundation for a multi-billion dollar revenue company serving millions of subscribers and tens of thousands of convenience stores with operational excellence and value-minded efficiency. We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to add convenience stores to our network, and leverage those stores as points of distribution into the underbank community. The larger our national network of stores, the more powerful our economic model and more viable platform for an M&A strategy in the near future. We believe increasing our network of stores can translate directly to higher revenue, higher profitability, and correspondingly stronger returns on invested capital. We continue to focus on managing our cash flow, and deploying that cash best. I generally look at current assets as a gauge of where we've been, where we are, and where we want to be. Accounts receivable have increased throughout the year from $3.2 million at the end of 2021 to $9.2 million at the end of 2022 with $7 million of cash. Turning to guidance for 2023, we believe leveraging new alignments with distributors and additional in-store ACP signups will allow SurgePays to generate revenues of at least $190 million. We expect first quarter revenues to be relatively in line with fourth quarter 2022, given that our devices started arriving in March. We anticipate growth accelerating quickly the remainder of the year. We expect 13,000 stores to be operating on the SurgePays network and expect to see positive operating cash flow during the year. I'll turn the call over to Tony to briefly review our financial results before summarizing today's call. Tony?