SurgePays, Inc. (SURG) Earnings

Management highlights

• Wireless Subscriber Growth - Total wireless subscribers across LinkUp Mobile and Torch Wireless surpassed the 200,000 milestone in Q1 2026, reflecting successful in-house scaling of the prepaid wireless business - A new buy-one-get-one promotional campaign was launched to drive further subscriber growth and market penetration across retail and digital channels • In-House Customer Acquisition Engine Restructuring - The company transitioned subscriber acquisition from outsourced third-party agencies to an in-house growth marketing team, delivering permanent structural improvements to unit economics - Cost per lead decreased 28%, cost per enrollment decreased 48%, and lead-to-enrollment conversion rate increased 39% quarter-over-quarter - Programbenefits.com now operates as a unified intake, decisioning, and monetization layer, generating revenue from upsells, cross-sells, affiliate offers, and data partnerships that partially offset customer acquisition costs; the long-term goal is to fully eliminate net customer acquisition costs • Wholesale Distribution Expansion - Six new wholesale distribution partners were signed in Q1 2026: three master agent agreements covering over 3,000 contracted retail locations, and three independent sales organization agreements - Onboarding is underway, with initial volume contribution expected in Q2 2026; full integration of the new independent sales organizations is expected to increase monthly prepaid top-up volume by 30% • New Retail Infrastructure Monetization - Two new incremental revenue streams were launched on top of the existing 9,000+ convenience store retail footprint: a fully integrated stored value and loyalty program for merchants, and a managed marketing services platform that converts in-store smart TVs into a controllable media network for company and third-party advertising • Strategic Partnerships and Platform Development - The strategic partnership framework with Alpha Motus Holdings was executed post-quarter end on May 1, 2026, with a joint pilot launch announced on May 12, 2026 - Multiple MVNO and MVNE customers have signed wholesale contracts for the HERO wireless platform, with one customer already receiving custom SIM cards ahead of launch; initial customer rollouts are expected in Q2 2026, with revenue contribution expected in Q3 2026 - A new real-time AI decisioning platform was deployed to connect the acquisition engine, retail platform, and wholesale relationships, enabling multi-product revenue opportunities from every customer interaction

Guidance

• The company expects continued year-over-year revenue growth, driven primarily by point-of-sale and prepaid services, supported by the new buy-one-get-one wireless promotion and expanded wholesale distribution - Initial volume contribution from the six new Q1 2026 distribution partners is expected in Q2 2026, with volume ramping through the second half of 2026 as new master agent locations come online • General and administrative expenses are expected to continue growing at a slower rate than revenue, sustaining the benefits of the 2025 cost discipline program • The in-house customer acquisition engine is expected to continue delivering sustained improvements in unit economics, with ProgramBenefits.com expected to further offset acquisition costs over the course of 2026 • New monetization layers (stored value/loyalty platform and managed marketing services platform) are expected to contribute increasing incremental revenue as they mature through 2026 • Initial HERO Wireless platform customer rollouts are expected in Q2 2026, with wholesale wireless revenue reflected in Q3 2026 results • The Alpha Motus joint pilot is currently underway, with integration progressing toward full market launch

Segment performance

Total company revenue for Q1 2026 was $16 million, representing a 51% year-over-year increase, driven by a 71% year-over-year increase in point-of-sale and prepaid services. General and administrative expenses were $3.5 million, a 25% year-over-year decrease. Operating loss was $11.2 million, up from $7.6 million year-over-year, driven by higher cost of revenue, increased interest expense and non-cash items. Interest expense was $0.9 million, up from $0.1 million year-over-year due to 2025 and early 2026 financing activity. Net loss available to common stockholders was $12.1 million (51 cents per basic/diluted share), compared to $7.6 million (38 cents per share) year-over-year. Net cash used in operating activities improved to $4.6 million from $7.1 million year-over-year, with $5 million in net cash provided by financing activities, resulting in a positive $0.4 million net change in total cash. As of quarter end, cash and cash equivalents totaled $2 million, and total cash including restricted cash was $2.4 million. The point-of-sale and prepaid services segment contributed the majority of revenue growth, with no specific percentage contribution for other segments provided in the transcript.

Risks & headwinds

Forward-looking statements included in this call are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Additional detailed information about risk factors is included in the company's SEC filings, including the annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. No other specific risks or operational failures were discussed during the call.

Analyst Q&A

• Q: What is SurgePays' long-term target for direct wireless subscribers under the LinkUp and Torch brands, and what is the total addressable market opportunity? /

  A: Management’s stated internal long-term target is 1 million direct subscribers, a milestone they believe will establish the company as a competitive player in the prepaid wireless space. The company is focused on hitting this target first before pushing further, and sees significant total addressable market opportunity in the growing 138 million-person U.S. subprime market that far exceeds the 1 million subscriber goal. Management prioritized reducing and ultimately eliminating customer acquisition costs to improve margins before accelerating large-scale growth, rather than scaling revenue for growth's sake alone, which they expect will let them hit the 1 million target faster.

• Q: How does the growing subprime consumer base in the current K-shaped economy impact SurgePays and its convenience store partners? /

  A: Management noted that the company’s leadership has 20+ years of experience in the prepaid market, and the business has historically performed best during periods of financial strain. Because SurgePays offers lower-cost prepaid plans that deliver clear monthly savings, budget-constrained consumers are more likely to switch from existing higher-cost plans, allowing the company to gain market share. Convenience stores, which act as the transaction hub for many local communities, benefit from this trend: consumers that save on wireless service typically stay in the store and spend the savings on other convenience store products.