SurgePays, Inc. (SURG) Earnings Call Transcript & Summary

Good day, and welcome to the Second Annual Winter Wonderland Best Ideas Conference. The next presenting company is SurgePays. [Operator Instructions]. I'd now like to turn the floor over to today's host, Brian Cox, CEO of SurgePays. Sir, the floor is yours.

Thank you, and good afternoon, everyone. My name is Brian Cox. I am CEO of SurgePays. Just real briefly a little bit about me. I have been in the underbanked and prepaid markets at a fintech and telecom level for over 19 years, started my first company 20 years ago, as a matter of fact, out of a spare bedroom. I've had several exits along the way. About 5 years ago, once I saw what was going on in the world of -- excuse me, data and digitizing the data on markets, and I saw the influence of large companies and what they were doing, and they were looking to the upper class region, for example, when Amazon acquired Whole Foods, I knew that this was a land rush and gold rush in my backyard, in my world of underbank. So we put together a company. Our goal was to get to NASDAQ. We accomplished that in the fourth quarter of last year. And now we're off to the races. So again, we named the company as SurgePays. We do provide essential financial services, prepaid products to the underbank at a grass roots level. Let me go ahead and get the safe harbor out of the way here. I'm sure you guys are used to seeing that. All right. Going to the next one here. High-level overview. We are a FinTech company. Our target market is the underbanked and underserved. We'll get into that market in a second, and I'll definitely dive in at a granular level on each one of these bullets here in a while. But I think it's important from the onset to know where we are. We've got a clean cap table, know what our float is. The insiders of our company, which consists mainly of our executives own half the company. We've got a vested interest and experienced management team, hungry and excited about this opportunity. And all of the revenue models that we've created inside of our revenue channels, if you'll notice they're all reoccurring revenue, and they're stacking bricks and they're building each month where each thing escalates every month by adding new customers and retaining the customers that we just added last month. So reoccurring revenue has been my business mantra for 20 years. All right. Here's my market. I'll let you guys glance over some of those bullet points, but I do want to tie in that this is ultimately about 1/3 of our country, and we do believe as the immigrant population keeps increasing, that number will -- that percentage of folks here in the States will expand that would be underbanked that would not have access to traditional checking accounts, credit cards, credit and they depend on these types of stores you see on the right as their local -- really the economic heartbeat of their community, everything from their food, supplies, really it's a quasi-bank for them, and they visit these stores 4 to 5 times a week. There's a lot of government studies done on that and it's proven up. And there's a lot of trust in the people who own these local stores. Most of these stores are independently owned. You do have some of your larger gas stations out there, Circle Ks and 7-Elevens, but our market is that independent entrepreneur, all different ethnicities. We're working a lot of hours, where we can go in, build relationships and really help these guys ultimately help the underbank and these are our profit partners. All right. So when our sales guys pull a door, how do -- what do you do for the store, Brian. That's the question I get asked the most. What do you do for the store? So what do you mean tech? What do you mean you're providing these services? And I'll tell you, first, what we're not. I'm not any type of ATM or a machine that we put in a convenience store. Number one, it's too expensive. Number two, the underbanked, somewhat by definition, are going to be untrusting and not going to be sophisticated usually, and it also takes up a lot of space in the convenience store to put the equipment out and the maintenance and management. I'm a transaction guy. I'm a sales guy. I want numbers. And so what we do, we use the clerk at that store, if you want to call it a bank teller or a processor or that ultimately are -- and many times, it's the owner of the store. So now I've got a sales guy, who is incentivized to push our products, everything from, as you see here, gift cards, which doesn't matter where you fall in the income bracket. You don't know what to get people for birthdays and Christmas anymore. Your Amazon Cash, we've integrated directly with Amazon. They approached us with a beta last year. They were trying to expand into this other 1/3 of America that did not have access to order off of Amazon. As you've noticed, you started to see lockers go up. We do feel like that will be something that we'll start adding later this year where you put up lockers at these convenience stores as well. Walk right in, put a $20 bill on the countertop, put the cashier through your telephone number, she or he types in your telephone number on the SurgePays platform in the Amazon app there, and it loads directly to your phone. If you look at the OMNY or iChange, those are also loaded directly. The OMNY is the MTA, which is mass transit in the New York area. Everything is going digital, it's going cashless. That's a problem for 1/3 of the people living in New York. Now they'll be able to go into a Bodega that has the SurgePays platform. The clerk will be able to add that capital -- or excuse me, you tell them on a lot of these calls, we'll be able to add that value directly to the customer's card. Now they can go ride the trains and the buses and get around town. So this is what we do. This is how we deliver our product. You can see the gift card racks. We've got a lot of different ways to get in the store. But this is the hook into the store and to expand on our product offering and what we offer that store and one of the differentiators and how we do what we do, a lot of these one-off products you see here, we have competitors. We have a lot of -- not a lot of competitors, but most of the competitors that we have are one-off products. We put a comprehensive suite of everything that you could possibly need in an underbanked suite, which allows me with business retail 101, we can cut our rates and we can be competitive, advantage, empowered to go out there and really take that store. And if I'm providing a store, all of these products and your sales guy comes and pulls the door and tries to offer maybe a better deal or tries to sway them over, they're not going to leave. We've seen this. We know this because they're getting their entire suite from us. All of these tools and services that they're able to pass through and help their customers, they're getting from us. And there's also one ACH. There's not 10 ACHs. There's one administrative interface with reporting and reconciliations, one customer support number. So we really have brought value to that store owner, which ultimately allows us to do these transactions for the unbanked consumer. I put this slide in here to pin a little bit of a picture of how we do our service. We do have our own servers, 80 feet beneath the surface out in Missouri. But what we do differently, I don't want to be only cloud-based or only hard server based. So we integrated what I call a hybrid type cloud. We have our data center, and we also have in AWS, obviously, everything we do is blockchain. I value data significantly. I also value privacy and security significantly in my market. I've seen a lot of things happen over the last 15 years. We want to drive value. Ultimately, we feel like one day, the exit strategy, one of the components, the metrics will be the data that we have, and we've stored and siloed on this underbanked market, both regionally and product driven. But this is how it works. And at the store level, the clerk either has a computer, which many of the stores now have a computer, they use our Secure Web app interface that you see in the picture there in the middle. And if they don't, if it's a tiny bodega, say for example, in the corner of New York and there's just no room, the counter's full of everything from 5-hour Energy to rolling papers to gum and mint, then we have a reprogrammed Verifone terminal that you see right there off to the right in the middle. We're still able to do all the transactions that you've seen in the presentation. It just does it through that terminal for space saving purposes. Because we've built our platform on blockchain, one of the exciting things that we've added, and this is something I've been working on personally because I'm a little bit of a fanatic about this for 4 years now, is the ability to sell cryptocurrency or digital currency to the underbank. Now I'll sidebar here and say there's a lot of us out there who have bought cryptocurrency. I personally even was partner in a mine, I mean, I understand it, I believed in it. But I think at this point in the life cycle of cryptocurrency, it's people with checking accounts, credit cards and it's akin to high-level investing in a volatile market or it's wanting to be a part of something a little different, like the Robinhood guys and the Coinbase guys, just want to be a part of something that's exciting we fear missing out. What I saw missing was I wanted the adoption of how can we use this to actually enhance people's lives. How could -- if there's 80 million people out there without credit cards, by definition, that's 80 million Americans that don't have the ability to buy Bitcoin, well now they can. Now how are we going to use this to expand other than just something that would be a sexy statement as a store? There's a -- this is probably a presentation in and of itself, but at a high level, the remittance companies, which would be MoneyGram, Western Union, I'm sure you guys have all seen those TAMs and Walmarts, what have you, gas stations, to transfer money back to your family if you're an immigrant, they're usually going to take between 14% and 18%. That's money that people have earned on this side of the border and is taken before it gets to their family on the other side of the border. A lot of Central American companies -- excuse me, countries are adopting bitcoin, they're encouraging digital wallet because they know the impact on their GDP, if that 14% to 18% actually kicks their economic ecosystem, and that's flourishing within their country. So just keep an eye on, look to see what happens in the next 2 years as it relates to remitted and the adoption of selling bitcoin and enabling immigrants to transfer money back to their family and the impact that, that has. The one component in that food chain that they haven't solved was the ability for people on this side of the border to buy Bitcoin. We solved it with our platform. So this is going to be a really good hook to get that store on our platform. And obviously, it opens us up to offer all of our other FinTech products through that store. This is one of the unique modules in our store, and it actually came about by requests from some of our key store chains who are on our platform in rural areas. We always ask for input from our customers and our clients. And one of the things that we had gotten asked, especially in the rural areas, where there's not a lot of distributors, there's usually only one truck that rolls through their town was they hear from their cousins and uncles and other folks at these convenience store conventions of all the great products and access to products that they have in the urban area in the bigger cities. And they wanted to see if we could help them get access to the newest Kratom or CBD or bag snack, there's all kinds of products out there. And then also could we work on getting them better pricing. So we went out, talked to a couple of distributors, manufacturers. We integrated our software directly with their shipping mechanisms, and we're able to offer in a back-office a -- and this is wholesale now. These are cases of product going to the store. We're able to offer them a savings of 15% to 20% on the top 50 to 100 products out there because we never take the inventory. We don't warehouse it. We take the order, we ship the money that's due to the manufacturer, distributor to them, along with a pick-pack and ship order. They slap it on the box, send it directly to the store. The store owner now has a product that he either a, didn't have access to or b, had access to, but now we gave them a better price because we're not out there with a sales guy on his door and an 18-wheeler rolling up and all the other logistical storage risk of inventory spoilage. It's all a streamlined process, we call it the DSD, direct store delivery. So this is one as we build out our national sales team this year that with our own in-house salespeople, I expect to see some good numbers from this. I ascertain that you don't see good numbers when you're dealing with 1099 contractors, the ISOs of the world. They sell what they know and go to the next store. But with in-house incentivized salespeople that are building relationships with stores, I really expect to see this be an impact -- a really positive impact on revenue this year. I skip the slide here, guys, sorry about that. I knew that didn't look right. I glitch a little bit. The mobile broadband, those of you that have been following our most recent press release and my shareholder letter, excuse me, which, by the way, if you missed it, I strongly suggest that you would go read the letter because I did give guidance, and I hope that we worked with our team and gave you guys a really good picture an open book and a portal into our company, what my vision is for the company and what our goals are for the company. One of those catalysts is mobile broadband. And when I say mobile broadband, to clarify, it's simply wireless Internet. If you're watching this on your phone right now or you go YouTube on your phone or a tablet, that's mobile broadband. We have access. We're an MVNO. We have access to all of the same towers that AT&T, T-Mobile, Tracfone, everybody has. We provide the services using the government affordable connectivity program. It's a federal program. And essentially, you qualify if you're on SNAP, EBT, Food Stamps or any of the other government programs like Medicaid, then you qualify for ACP. We do get a $100 reimbursement on the tablet that we hand out to folks, cost the customer $10 per tablet, value of the tablet is probably about $150 to $200. Great bill for the consumer. And then we get $30 a month per customer for providing them LTE data. So it's really beneficial for families that need it to be connected. You'd be surprised the number of homes that do not have Internet access, again, which most of us on this call probably take for granted. Kid's homework, access to employment e-mails, job offers, it really is an essential product and the government deemed that this was just as important as food, shelter and some of the other programs they have, and we agree. And if you look at the math, the blue states are the states that we're active in now. If I was a gambling man, I'd say in 60 days, I'd expect that entire amount to be blue. Those of you on the call that know me know that I'm pretty much a go-go-go guy, my number is more, and I don't want limits. I don't want to be geographically limited. And we've done -- we're over 50,000 customers now in the states that you see right there, and we still haven't opened all those states. So we're -- this is a really cool catalyst for us, and it's been a really big boon to our bottom line. I get asked a lot at this stage of conversation. What are you going to do to grow the company? What's your plan? What's your thoughts? I know the underbanked market, whether through telecom and wireless, mobile broadband. We also -- we've got a fantastic team of software developers that can keep us integrated. So our growth strategy, and if you can look and you see the upside potential, those little gray dots, if you can see those little gray dots, really concentrated in the Midwest and the Southeast, those are actual stores. We've got -- and when you look at a dot, I mean you think of an entire city or town, there's a dot. Our target market, a retail store at bodega, tienda, gas station, old gas station, just a retail store of the cash register, there are hundreds and hundreds and hundreds of thousands of stores out there. The upside potential is fantastic. We are going to go after a national sales team just hired our first sales rep in Oklahoma City. New York is going to be my next target because we can go after the MTA market. I think we can really rack up a bunch of stores there. But our goal is to have between 25 and 30 sales guys by the end of July. I expect to see a heck of a lot more dots there, and we're also entertaining, acquiring other companies, those that slide early on, where I showed all of those individual products. There's a lot of companies out there that are struggling a little bit, especially after COVID because they provide one product to a network of stores. Those are the companies that we want to go out and look at acquiring because we can acquire them, acquire that network relationship with stores and then deploy all of our products in that store to maximize the revenue per store. So that's really how we're looking to grow the company. And that's the exact same way that I grew 2 previous companies prior to SurgePays, it was. And so we'll look to do and make those acquisitions that are strategic for shareholders. Again, we are wearing our shareholder hat. I'm the largest shareholder of the company. So while I do run the company hard charging as a CEO, I'm also the coach. I'm also the biggest shareholder. So I put my ball cap on backwards and see what's best for the shareholders. What we had to go through to get to NASDAQ. We really want to minimize dilution while maximizing the market capture. And I do want to go through one of -- each one of these investment highlights because I think these are important. These are what we work with our guys really hard on, the takeaways from here. And a lot of this was in my shareholder update. But mobile broadband subscriber business, we're targeting 200,000 customers this year with a revenue of $75 million. I think we blow the roof off that, but I want to put a number out there that we surpassed, so we're comfortable with that number and projecting that number. I expect us to be in all 50 states in the next couple of months. We've made some moves that we think that will come to fruition here in the next couple of months where we won't be limited by geography, we'll be limited by state and will also help us move freely state to state and have sales teams move without having to travel 3 states over to go to the next state. We've got 8,000 stores transacting on our network right now. By the time we had our salespeople and get things going and do a few acquisitions and some other strategic moves, we hope to be over 20,000 stores by the end of the year. Jump into the next one, I do feel like selling Bitcoin will help us get to that 20,000 stores. We're the only company offering this right now. And we do think it's going to take a while for folks to catch up. And the companies that do offer just cryptocurrency do not offer the other products we offer. So we do have a niche there and a massive competitive advantage that I want to take advantage and box our competitors out. And lastly, with our mobile broadband being $75 million plus for 2022, and considering that essentially didn't even exist as a revenue stream last year, if our other subsidiaries simply show up to the party, we're very comfortable with our growth targeting $130 million annualized revenue by Q4 this year. Very comfortable with putting that out there. And that's my time here, guys. Let me jump to a couple of questions real quick, and then I will -- we'll wrap this up here. All right. Let's see here. Recent news announcements suggest improved financial performance in the mobile broadband business growing quickly. Why do you think the stock is trading where it is now? The question I get on every single call. You get couple of bullet points, if you're picking them, it'll give you true sense for it. Obviously, I've got to be careful and tip toe around some of this. I do realize that we got in the door of NASDAQ right when it swung shut and there's been a blood bath in the micro-cap market. So I do understand and respect that. And we can control what we can control. But from a fundamental standpoint, when people look at us right now, okay, we're on the NASDAQ landscape. The only financials that are out there for the first 3 quarters of last year, while we're on the OTC. That era was the cash burning development phase, and all of us were working like crazy to get to NASDAQ. Making money or quite a few other things really wasn't the call. It was survival, crossing the line, going to touchdown and then getting to NASDAQ, getting our capital and then being able to grow our company. So I think it's important to say now we are not burning capital anymore. We're no longer burning money. And I think that after 3 quarters of double-digit growth once we post that and once people realize as analysts start following us now that we are in a double-digit hypergrowth mode We're not burning money like most of the other fintechs out there, but we still have the upside and growth hockey sticks. The reason is with us not burning money, our capital and revenue and profit can be parlayed and poured right back into sales and revenue growth. So we really do have a unique pathway to do some pretty good things by the end of the year. Let me hit this next question real quick. You had 0 mobile broadband customers 6 months ago, now have over 50,000. What are the hurdles to achieving your 200,000 guide in 2022? What are the limitations on growth to begin, 2 questions. Normally, the limitations would be capital for devices, which will be tablets and your geography. We are eliminating the geography problem. We're kicking the walls down there. So I do expect, again, within 60 days to be in 50 states. And we've worked the capital side out to where I don't expect to have any limitations on devices whatsoever. And if I can sneak one more question then because it's tied to this. Your announcement that your mobile broadband business had 1,000 plan-ups in 1 day. Is it realistic to expect that on a regular occurrence? This question kind of dovetails in with the previous question. Yes, I do. Considering that we're expanding into essentially unlimited geography, which is the entire country, also shifting towards having access to unlimited devices and parlaying that money back into sales teams and growth, 100%, I believe that and beyond. We've also built the support and infrastructure with our operations center, our bilingual operations center in El Salvador, where we already have over 100 folks working, taking incoming sales and support calls. So we have built this infrastructure as part of the expense that you see over the last 2 years. We knew what was coming. We knew what we had in front of us. And as soon as we got the capital from the rate to NASDAQ, this was the plan all along to put gas in the tank and slam the pedal. So we -- I said in my shareholder letter, we are seeing some phenomenal success. This is exciting. Everybody's pumped, but we expected it. This is what we planned for, and it was a part of our process to ultimately hitting the numbers that we want to hit that we talked about in shareholder letter. So with that, I'm going to go ahead and wrap it up. I appreciate everybody listening. I think I run things a little bit differently. I appreciate shareholders. I appreciate the feedback. I love talking. I'd much rather have a conversation with you guys if you have more questions. I know that there's a mechanism through the guide here that you can set up meetings with me. And I'd love to talk to you guys, I'd love to get your feedback. I love talking about what we're doing and the growth that we've got in front of us, and we're ready for a blast ahead. So hopefully, a, check us out, Surge, stay in touch with us. And yes, I'd love to talk to you guys.

Thank you. Ladies and gentlemen, that does conclude the SurgePays conference. The next session will begin shortly. Please consult the conference agenda for the next presenting company. Remember, one-on-one meeting requests are still open, so be sure to log into the conference platform and request more meetings. You may now disconnect.