SurgePays, Inc. (Nasdaq: SURG) (“SurgePays” or the “Company”), a
technology and telecom company focused on the underbanked and
underserved, today announced its financial results for the second
quarter ended June 30, 2023.
Second Quarter 2023 Financial
Highlights
-
Net income of $6.0 million in the second quarter 2023, compared to
a net loss of $(1.0) million in the second quarter 2022.
-
Revenue of $35.9 million in the second quarter 2023, an increase of
28% over the second quarter 2022.
-
Gross profit of $10.0 million in the second quarter 2023, an
increase of $7.8 million over the second quarter 2022. Gross profit
margin expanded to 27.9% in the second quarter 2023.
-
Second quarter 2023 EBITDA of $6.4 million compared to a second
quarter 2022 EBITDA loss of $(86) thousand.
Management Commentary
Commenting on the quarterly results, Chairman
and CEO Brian Cox said, “During the second quarter, we continued
our multi-year strategy that yielded the best and most profitable
quarter in the Company’s history. Our increased efficiencies and
margin improvement created $6.0 million in net income, putting us
over $10 million in net income for 2023. Becoming profitable and
self-reliant enables us to make disciplined business decisions
based on goals and modeling what we want to accomplish, not based
on raising cash for survival. Most know that I do not lead the
Company by 90-day cycles, but I am pleased to post back-to-back
quarters in the black, knowing we have been focused inward to
prepare for our real growth opportunity in the upcoming years.
“The proven business case for convenience stores
is over a century old, so aligning our sales interests with these
constant points of distribution positions us for stability,
longevity, and tremendous growth both in reach and the products and
services offered. We have been highly focused on utilizing our
unique suite of underbanked products and services to grow our
footprint in owner-operated convenience stores. We are testing
customer-facing LCD screens at the register to promote our
products, activate wireless subscribers and create customer
engagement. This next step advancement is part of our strategy to
solidify SurgePays as an innovative market leader in our space.
“Throughout the second quarter, we continued to
scale growth and increase points of distribution, subscribers, and
cash flow. Our development, sales intake, onboard training,
compliance, and support teams have all been diligently working to
originate in-store ACP wireless subscriber activations. We are
utilizing access to this beneficial assistance program as the
enticing catalyst to build what is now a pipeline of over 25,000
locations to be onboarded with a staging target of less than 12
months. We believe this onboarding will create one of the largest
direct distribution networks of underbanked products and services
in the country.
“New partnerships have been a recent highlight
in our growth strategy. We partnered with ParichuteConnect, a
social impact investor who looks to use their investment dollars to
effect social improvements. This collaboration allows us the
opportunity to provide ParichuteConnect's representatives with the
resources necessary to increase awareness about ACP in state or
city school systems, community service organizations, and public
service organizations. Recently we partnered with LeadEx Solutions,
whose proprietary banking software provides SurgePays integrated
access to place full-screen ads on ATMs during a transaction and
enable the customer to opt-in to the ACP enrollment process. These
partnerships are a great opportunity for us to expand our ACP
subscriber base and grow our network by partnering with synergistic
companies, nonprofits, and governmental organizations.
“Our business case is strong and profitable. The
difficult macro-environment is creating acceleration opportunities
for SurgePays. We are primed to maximize these opportunities to
drive revenue and substantially higher profitability through our
expanded convenience store distribution and new partners. We are
now well positioned to grow our prepaid wireless and financial
products revenue and further build long-term value for our
shareholders,” concluded Cox.
Management Discussion &
Analysis
SurgePays is a technology and telecom company
focused on the underbanked and underserved communities. SurgePhone
and Torch Wireless provide subsidized mobile broadband to over
250,000 low-income subscribers nationwide. The SurgePays fintech
platform empowers clerks at thousands of convenience stores to
provide a suite of prepaid wireless and financial products to
underbanked customers.
During the second quarter ended June 30, 2023,
overall revenue increased by $7.9 million or 28% as compared to the
second quarter ended June 30, 2022. The increase was primarily due
to revenues related to providing mobile broadband and wireless
service to low-income subscribers through the Affordable
Connectivity Program (“ACP”).
Operating income improved overall to $6.2
million in the second quarter of 2023, compared to a loss of $1.0
million in the second quarter of 2022.
Net income in the second quarter of 2023 was
$6.0 million compared to a net loss of $(1.0) million in the second
quarter of 2022. EBITDA increased to $6.4 million in the second
quarter compared to ($86) thousand in the second quarter of
2022.
Second Quarter 2023 Results Conference
Call
SurgePays management will host a webcast at 5
p.m. ET / 2 p.m. PT to discuss these results.
The live webcast of the call can be accessed at
2Q23 Webcast Link and on the company’s investor relations website
at ir.surgepays.com.
Telephone access to the call will be available
at 1-844-481-2822 (in the U.S.) or by dialing 1-412-317-0681
(outside U.S.).
A telephone replay will be available
approximately one hour following completion of the call through
Thursday, August 24, 2023. To access the replay, please dial
877-344-7529 (in the U.S.) or 412-317-0088 (outside U.S.). Enter
Conference ID #3929073.
About SurgePays, Inc.
SurgePays, Inc. is a technology and telecom
company focused on the underbanked and underserved communities.
SurgePhone and Torch Wireless provide subsidized mobile broadband
to over 250,000 low-income subscribers nationwide. SurgePays
fintech platform empowers clerks at over 8,000 convenience stores
to provide a suite of prepaid wireless and financial products to
underbanked customers. Please visit SurgePays.com for more
information.
About Non-GAAP Financial
Measures
The Company believes that EBITDA (earnings
before interest, taxes, depreciation and amortization) is useful to
investors because it is commonly used to evaluate companies on the
basis of operating performance and leverage.
EBITDA is not intended to represent cash flows
for the periods presented, nor have they been presented as an
alternative to operating income or as an indicator of operating
performance and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”). In accordance with SEC Regulation G, the non-GAAP
measurements in this press release have been reconciled to the
nearest GAAP measurement, which can be viewed under the heading
“Reconciliation of Net Income (loss) from Operations to EBITDA” in
the financial tables included in this press release.
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,” 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
Business Outlook 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. 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, 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, 2022. 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.
Investor RelationsBrian M. Prenoveau, CFAMZ
Group – MZ North AmericaSURG@mzgroup.us 561 489 5315
SurgePays, Inc. and
SubsidiariesConsolidated Balance
Sheets
|
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
|
|
(Unaudited) |
|
|
(Audited) |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
5,188,098 |
|
|
$ |
7,035,654 |
|
Accounts receivable - net |
|
|
10,289,379 |
|
|
|
9,230,365 |
|
Inventory |
|
|
18,086,916 |
|
|
|
11,186,242 |
|
Prepaids |
|
|
167,655 |
|
|
|
111,524 |
|
Total Current
Assets |
|
|
33,732,048 |
|
|
|
27,563,785 |
|
|
|
|
|
|
|
|
|
|
Property and equipment
- net |
|
|
502,607 |
|
|
|
643,373 |
|
|
|
|
|
|
|
|
|
|
Other
Assets |
|
|
|
|
|
|
|
|
Note receivable |
|
|
176,851 |
|
|
|
176,851 |
|
Intangibles - net |
|
|
2,453,224 |
|
|
|
2,779,977 |
|
Internal use software
development costs - net |
|
|
603,954 |
|
|
|
387,180 |
|
Goodwill |
|
|
1,666,782 |
|
|
|
1,666,782 |
|
Investment in CenterCom |
|
|
397,948 |
|
|
|
354,206 |
|
Operating lease - right of use
asset - net |
|
|
409,858 |
|
|
|
431,352 |
|
Total Other
Assets |
|
|
5,708,617 |
|
|
|
5,796,348 |
|
|
|
|
|
|
|
|
|
|
Total
Assets |
|
$ |
39,943,272 |
|
|
$ |
34,003,506 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
5,423,313 |
|
|
$ |
5,784,374 |
|
Accounts payable and accrued
expenses - related party |
|
|
467,899 |
|
|
|
1,728,721 |
|
Installment sale
liability |
|
|
11,349,440 |
|
|
|
13,018,184 |
|
Deferred revenue |
|
|
43,200 |
|
|
|
243,110 |
|
Operating lease liability |
|
|
41,290 |
|
|
|
39,490 |
|
Notes payable - related
parties |
|
|
1,108,150 |
|
|
|
1,108,150 |
|
Notes payable |
|
|
42,243 |
|
|
|
1,542,033 |
|
Total Current
Liabilities |
|
|
18,475,535 |
|
|
|
23,464,062 |
|
|
|
|
|
|
|
|
|
|
Long Term
Liabilities |
|
|
|
|
|
|
|
|
Note payable |
|
|
31,970 |
|
|
|
53,134 |
|
Notes payable - related
parties |
|
|
4,026,413 |
|
|
|
4,493,798 |
|
Notes payable - SBA
government |
|
|
465,633 |
|
|
|
474,846 |
|
|
|
|
|
|
|
|
|
|
Operating lease liability |
|
|
378,284 |
|
|
|
399,413 |
|
Total Long Term
Liabilities |
|
|
4,902,300 |
|
|
|
5,421,191 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities |
|
|
23,377,835 |
|
|
|
28,885,253 |
|
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies (Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity |
|
|
|
|
|
|
|
|
Common stock, $0.001 par
value, 500,000,000 shares authorized 14,234,655 and 14,116,832
shares issued and outstanding, respectively |
|
|
14,286 |
|
|
|
14,117 |
|
Additional paid-in
capital |
|
|
41,625,010 |
|
|
|
40,780,707 |
|
Accumulated deficit |
|
|
(25,291,773 |
) |
|
|
(35,804,106 |
) |
Stockholders’ equity |
|
|
16,347,523 |
|
|
|
4,990,718 |
|
Non-controlling interest |
|
|
217,914 |
|
|
|
127,535 |
|
Total Stockholders’
Equity |
|
|
16,565,437 |
|
|
|
5,118,253 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
39,943,272 |
|
|
$ |
34,003,506 |
|
|
SurgePays, Inc. and
SubsidiariesConsolidated Statements of
Operations(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
35,886,433 |
|
|
$ |
28,005,144 |
|
|
$ |
70,662,876 |
|
|
$ |
49,146,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
25,860,705 |
|
|
|
25,814,153 |
|
|
|
52,942,665 |
|
|
|
44,321,894 |
|
General and administrative
expenses |
|
|
3,823,227 |
|
|
|
3,038,529 |
|
|
|
6,812,648 |
|
|
|
6,722,310 |
|
Total costs and
expenses |
|
|
29,683,932 |
|
|
|
28,852,682 |
|
|
|
59,755,313 |
|
|
|
51,044,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
|
6,202,501 |
|
|
|
(847,538 |
) |
|
|
10,907,563 |
|
|
|
(1,897,689 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(156,267 |
) |
|
|
(566,999 |
) |
|
|
(348,593 |
) |
|
|
(736,644 |
) |
Gain (loss) on investment in
CenterCom |
|
|
10,713 |
|
|
|
35,519 |
|
|
|
43,742 |
|
|
|
10,336 |
|
Amortization of debt
discount |
|
|
- |
|
|
|
(37,068 |
) |
|
|
- |
|
|
|
(37,068 |
) |
Gain on forgiveness of PPP
loan - government |
|
|
- |
|
|
|
524,143 |
|
|
|
- |
|
|
|
524,143 |
|
Total other income
(expense) - net |
|
|
(145,554 |
) |
|
|
(44,405 |
) |
|
|
(304,851 |
) |
|
|
(239,233 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
including non-controlling interest |
|
|
6,056,947 |
|
|
|
(891,943 |
) |
|
|
10,602,712 |
|
|
|
(2,136,922 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interest |
|
|
90,955 |
|
|
|
81,094 |
|
|
|
90,379 |
|
|
|
48,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to common stockholders |
|
$ |
5,965,992 |
|
|
$ |
(973,037 |
) |
|
$ |
10,512,333 |
|
|
$ |
(2,185,371 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share - attributable to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.42 |
|
|
$ |
(0.08 |
) |
|
$ |
0.74 |
|
|
$ |
(0.18 |
) |
Diluted |
|
$ |
0.40 |
|
|
$ |
(0.08 |
) |
|
$ |
0.71 |
|
|
$ |
(0.18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding - attributable to common
stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
14,191,083 |
|
|
|
12,268,669 |
|
|
|
14,154,163 |
|
|
|
12,166,817 |
|
Diluted |
|
|
15,076,466 |
|
|
|
12,268,669 |
|
|
|
14,811,785 |
|
|
|
12,166,817 |
|
|
Reconciliation of Net Income (loss) from
Operations to EBITDA
|
|
Three months
ended |
Three months
ended |
Three months
ended |
Three months
ended |
Six months
ended |
Six months
ended |
|
|
June 30,
2023 |
June 30,
2022 |
March 31,
2023 |
March 31,
2022 |
June 30,
2023 |
June 30,
2022 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Revenue |
|
$ |
35,866,433 |
$ |
28,005,144 |
|
$ |
34,796,443 |
$ |
21,141,371 |
|
$ |
70,662,876 |
$ |
49,146,515 |
|
Cost of
revenue (exclusive of depreciation and amortization) |
|
|
25,860,705 |
|
25,814,153 |
|
|
27,081,960 |
$ |
18,507,741 |
|
|
52,942,665 |
|
44,321,894 |
|
General and
administrative expenses |
|
|
3,823,227 |
|
3,038,529 |
|
|
2,989,421 |
$ |
3,683,781 |
|
|
6,812,648 |
|
6,722,310 |
|
Gain (loss)
from operations |
|
$ |
6,182,501 |
$ |
(847,538 |
) |
$ |
4,725,062 |
$ |
(1,050,151 |
) |
$ |
10,907,563 |
$ |
(1,897,689 |
) |
Net gain
(loss) to common stockholders |
|
|
5,965,992 |
|
(973,037 |
) |
|
4,546,341 |
$ |
(1,212,334 |
) |
|
10,512,333 |
|
(2,185,371 |
) |
Interest
expense |
|
|
156,267 |
|
566,999 |
|
|
192,326 |
$ |
169,645 |
|
|
348,593 |
|
736,644 |
|
Depreciation
and Amortization |
|
|
276,833 |
|
238,971 |
|
|
276,710 |
$ |
195,020 |
|
|
553,543 |
|
433,991 |
|
EBITDA |
|
$ |
6,399,092 |
|
(167,067 |
) |
$ |
5,015,377 |
$ |
(847,669 |
) |
$ |
11,414,469 |
|
(1,014,736 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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