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SurgePays, Inc. (SURG)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $18.7M, up 292% YoY and 62% QoQ; revenue modestly beat Wall Street consensus ($18.12M*) while EPS of -$0.38 missed (-$0.145* est). The quarter marked an “inflection point” led by Lifeline (Torch) and prepaid/retail channels .
  • Gross profit loss improved substantially to $(2.6)M from $(7.8)M YoY; SG&A fell 32.5% YoY to ~$4.2M, reflecting cost reductions and operating leverage as volumes scaled .
  • Management reaffirmed FY2026 revenue guidance at $225M (narrowed from prior $225–$240M), citing continued subscriber growth, retail expansion, MVNE partners, and ClearLine monetization as drivers .
  • Strategic catalysts: (1) Growth Marketing & Data Partnerships division and launch of ProgramBenefits.com; (2) SNAP/EBT free service initiative; (3) QorPay partnership embedding ClearLine into cloud-native payments—each designed to add high-margin, recurring revenue streams and lower subscriber acquisition costs .

What Went Well and What Went Wrong

What Went Well

  • Lifeline (Torch Wireless) scaled rapidly to $5.6M in Q3 revenue with 125,000+ subscribers, establishing a stable recurring base and capacity to keep growing; management highlighted synergy across channels and distribution moat .
  • Prepaid/retail and POS revenue accelerated to $13.1M, driven by LinkUp Mobile and Phone-in-a-Box across major distributors like H.T. Hackney (40,000+ stores), with a near-term goal of 100,000 locations on the platform .
  • Cost discipline and margin trajectory: gross profit loss narrowed to $(2.6)M (vs $(7.8)M YoY) and SG&A decreased ~32.5% YoY; CFO expects POS/prepaid gross margin to be positive by YE25, and MVNO margins to improve as scale expands .
    • Quote: “We expect the gross margin to be positive by the end of 2025 for this revenue channel… we also anticipate gross margins in the MVNO segment will increase” — CFO Tony Evers .

What Went Wrong

  • EPS missed consensus by ~$0.235 as the company remains loss-making; loss from operations was $(7.0)M and net loss $(7.5)M in Q3, reflecting transition costs and investment ahead of scale .
  • Cash depleted to $2.5M at quarter-end (from $11.8M YE24), with significant operating cash use; financing and convertible notes increased liabilities, highlighting near-term liquidity management needs .
  • Guidance narrowed for FY2026 to a single-point $225M (from $225–$240M), implying a more conservative stance despite strong subscriber growth; Q3 did not reiterate FY2025 guidance ($75–$90M) from August .

Financial Results

P&L and Cash Trends (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$10.577 $11.518 $18.680
EPS (Basic, $USD)$(0.38) $(0.36) $(0.38)
Operating Income (Loss) ($USD Millions)$(7.580) $(6.811) $(6.950)
Gross Profit ($USD Millions)$(2.942) (derived from revenue & CoR) $(2.700) $(2.600)
SG&A ($USD Millions)$4.638 $4.156 $4.354
Cash & Equivalents ($USD Millions)$5.398 $4.404 $2.515

Q3 Actuals vs Consensus

MetricConsensus (Q3 2025)Actual (Q3 2025)Surprise
Revenue ($USD)$18,119,000*$18,680,317 +$561,317 (+3.1%)
EPS ($USD)-0.145*-0.38 -$0.235

Values marked with an asterisk were retrieved from S&P Global.

Segment Breakdown (Q3 2025)

SegmentRevenue ($USD Millions)
Torch Wireless (Lifeline)$5.6
POS & Prepaid Services (incl. LinkUp Mobile and top-ups)$13.1
Total Net Revenue$18.7

KPIs and Operating Metrics (Q3 focus; prior quarter context where available)

KPIQ1 2025Q2 2025Q3 2025
Torch Wireless subscribers / activationsAT&T integration completed; platform retooled 20k (Jun) and 57k (Jul) activations; ramp to 80–90k/month by Sep 125k+ subscribers; $5.6M revenue
LinkUp Mobile recurring active subscribersLaunch underway >30k subs; 250k SIMs shipped >95k recurring subs
Prepaid top-ups monthly run-rateNot disclosed$4.3M in July; ~$5M in Aug Indicator of future prepaid growth
MVNO/MVNE partners onboarded3 fully integrated; 2 onboarding 3 integrated MVNOs 3 MVNO partners onboarded, pipeline growing
Retail footprint (distributors/locations)Nationwide network; thousands of stores H.T. Hackney: 40k stores; goal to 100k locations H.T. Hackney 40k+; near-term goal 100k locations

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2026$225M–$240M $225M Narrowed/lowered to single-point $225M
RevenueFY2025$75M–$90M No update in Q3 materials Not reiterated (status unclear)
POS/Prepaid Gross MarginYE2025Not previously specifiedExpected positive gross margin by YE25 New qualitative guidance
MVNE Partner OnboardingNext 6 monthsPipeline referencedExpect onboarding/integration over next 6 months Affirmed execution timeline

Earnings Call Themes & Trends

TopicQ1 2025Q2 2025Q3 2025Trend
Lifeline/TorchAT&T integration complete; platform retooled Ramp: 20k (Jun), 57k (Jul), targeting 80–90k/month by Sep 125k+ subscribers; $5.6M revenue; program stable despite shutdown Strong acceleration; stable recurring base
LinkUp Mobile (Prepaid)Nationwide launch; 250k SIMs shipped >30k subs; distribution expanding >95k recurring subs; retail traction Rapid growth; improving adoption
MVNE (Hero)3 integrated; 2 onboarding 3 MVNOs live 3 partners onboarded; pipeline post-expo Scaling pipeline; high-margin model
POS/Top-upsPlatform expanded nationwide $4.3M (Jul), ~$5M (Aug) monthly run-rate Indicator of future prepaid revenue growth Increasing run-rate; strong indicator
ClearLine SaaSFoundation set Program building; future updates Market Basket rollout (17 stores); QorPay integration; monetization roadmap Building recurring SaaS layer
Data MonetizationNot highlightedDigitizeIQ re-engineering planned Growth Marketing & Data Partnerships division launched; ProgramBenefits.com live New high-margin revenue channel
Tariffs/Macro—Adjustments to tariffs impacted Q3 pacing Lifeline unaffected by shutdown (funded) Navigating macro; de-risked via Lifeline
Regulatory/LegalAT&T integration validated Lifeline compliance systems enhanced Lifeline stability emphasized Improved compliance; stable program

Management Commentary

  • “Third quarter 2025 revenue totaled approximately $18.7 million, an increase of 292% year-over-year and over 62% sequentially… Each of our revenue channels are synergistic… bringing telecom and fintech products directly to underserved communities” — Brian Cox, CEO .
  • “We expect the gross margin to be positive by the end of 2025 for [POS/prepaid]… we also anticipate gross margins in the MVNO segment will increase” — Tony Evers, CFO .
  • “Our near-term goal is to ramp to 100,000 locations operating on the SurgePays platform… On the wholesale side… we’ve onboarded three MVNO partners” — Brian Cox .
  • “We have built a platform capable of generating revenue during the customer acquisition process rather than incurring a cost… monetizing this data ecosystem to produce recurring, high-margin revenue” — Brian Cox on Growth Marketing & Data Partnerships .

Q&A Highlights

  • Demand receptivity and convenience store channel: Management sees elevated openness among underserved consumers and store owners to new value offerings, boosting foot traffic and monetization via POS and ClearLine .
  • Convenience store consolidation impact: Minimal expected impact due to store-level autonomy and strong distributor relationships; SurgePays integrates financially with store owners, building trust via commissions and ACH processes .
  • Lifeline activation strategy and economics (from Q2 context): State add-ons drive higher margin economics similar to ACP; tent-based enrollment in higher subsidy states; online enrollments in $9.25 states; smartphone provisioning improves stickiness and CAC ROI .

Estimates Context

  • Revenue modestly beat consensus (+3.1%), while EPS missed meaningfully. The setup suggests near-term estimate revisions: higher top-line trajectory on subscriber and retail scale, but with continued investment and margin normalization pacing .
  • Expect Street to adjust revenue upward and EPS downward for near-term until gross margin turns positive in POS/prepaid and MVNO margin benefits materialize per CFO commentary .

Values marked with an asterisk were retrieved from S&P Global.

Key Takeaways for Investors

  • Top-line acceleration is real: Q3 revenue up 62% QoQ, driven by Lifeline and prepaid retail; revenue beat consensus, signaling momentum into Q4 despite macro noise .
  • EPS miss reflects investment and transition; margin inflection expected by YE25 in POS/prepaid and improvement in MVNO, which could drive leverage in 2026 as volumes scale .
  • Strategic initiatives (ProgramBenefits.com, SNAP free service, QorPay integration) aim to cut CAC and add high-margin, recurring revenue—potentially reshaping unit economics and LTV/CAC in 2026 .
  • Distribution moat expanding: 40k+ H.T. Hackney stores with goal of 100k locations on platform; MVNE pipeline broadening post expo—supports recurring revenue visibility .
  • Guidance narrowed to $225M for FY2026 (from $225–$240M), signaling conservatism; watch for quarterly cadence and cash management to fund scale without material dilution .
  • Near-term trading: Favor upside volatility on revenue milestones, subscriber growth updates, and new partner onboards; risk is EPS/margin misses until gross margin turns positive. Medium-term thesis hinges on recurring software/data layers and MVNE scaling to expand margins .
  • Monitor: POS/prepaid gross margin progress, MVNE partner integrations, retail location ramp, and liquidity runway post Q3 cash decline; any 2025 guidance update would be a catalyst .