SurgePays, Inc. (SURG)·Q4 2021 Earnings Summary

Executive Summary

• Q4 2021 implied revenue was $14.16M, bringing FY 2021 revenue to $51.06M (-6% YoY), while full-year gross margin improved ~150% to $6.2M and operating loss was cut 41% to $(6.0)M . Q4 revenue is derived as FY 2021 less 9M 2021 revenue .
• Mobile broadband (ACP) scaled from zero in August to ~30,000 subscribers by Dec 31, 2021, with December monthly revenue of ~$2.90M; management highlighted an ability to add 1,000 activations in a single day .
• 2022 outlook: management guided to at least $130M revenue and at least $15M adjusted EBITDA (includes LogicsIQ), underpinned by ACP growth; prior Feb goals included $75M from mobile broadband alone and a $130M annualized revenue run-rate by Q4 2022 .
• Balance-sheet progress: NASDAQ uplisting and ~+$20M gross raise in Nov 2021 strengthened liquidity (year-end cash ~$6.3M); management emphasized disciplined working-capital deployment to fund device inventory and delayed ACP reimbursements .

What Went Well and What Went Wrong

• What Went Well

  • Margin and operating efficiency: “Gross margin in '21 improved to $6.2 million from $2.5 million… Loss from operations decreased 41%” as the company rationalized products/customers .
  • ACP scale and product-market fit: “Our mobile broadband channel has gone from zero to nearly $3,000,000 in monthly revenue in less than six months” with ~30,000 subs by year-end and 1,000+ daily activation capability .
  • Capital markets milestone: Completed NASDAQ uplisting and capital raise netting approximately $20M, enabling growth investments and balance-sheet cleanup .

• What Went Wrong

  • Legacy fintech pressure: ECS/fintech revenue fell ~30% in Q3 YoY (COVID-impacted store access), part of a full-year ECS decline of $10.23M YoY .
  • Higher financing burden: Elevated 2021 interest expense and debt discount effects pressured the bottom line despite operational improvements .
  • Full-year net loss widened YoY (to ~$13.5M) due to other expenses, even as operating loss improved; management noted focus on adjusted EBITDA and cash flow in 2022 .

Financial Results

• Consolidated revenue and profitability (select periods)

Notes:

• Q4 revenue and Q4 net loss are derived from audited FY and reported 9M figures (see citations in table).

• FY 2021 net loss and EPS reflect management’s prepared remarks; the 10-K shows Loss from operations $(5,992,568) and Total other (expense) $(7,538,576) .

• Segment mix (FY 2021 YoY change)

• KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic focus and 2021 transformation: “We made the strategic decision to focus on driving profitability with existing customers and eliminating unprofitable customers… Gross margin in '21 improved to $6.2 million… Loss from operations decreased 41%” .
• Capital markets and liquidity: “In November 2021, we completed a capital raise that netted the company approximately $20 million, and we completed our listing on the NASDAQ Exchange” .
• Growth/working capital balance: “Growing at 1,000 a day… we’ve got millions in inventory out in the field, millions in receivables… I’m not willing to… sell stock for more money… we can grow organically… protect shareholder value” .
• 2022 guidance and profitability path: “Adjusted EBITDA improved to a loss of $3.9 million in '21… anticipate becoming adjusted EBITDA-positive by the second quarter… generate at least $15 million overall in '22” .

Q&A Highlights

• Competition and sales force: Management sees competition reacting to SURG’s growth; cited a backlog of >100 vetted field reps awaiting tablets; retention and customer stickiness expected due to integrated fintech incentives (e.g., Amazon cash, iTunes cards) .
• State expansion cadence: Licensing is the gating item; management expects to add “at least another 30 states… definitely by May,” with active scouting underway .
• Guidance composition: The ≥$130M revenue and ≥$15M adjusted EBITDA guidance includes LogicsIQ; spin timing uncertain, so LogicsIQ remains included for now .

Estimates Context

• Wall Street consensus (S&P Global) for SURG Q4 2021 revenue and EPS was unavailable via our S&P Global feed during this analysis window (request limit), and the company did not cite consensus on the call . Given the lack of accessible consensus, we evaluate results versus company internal goals/guidance only.

Key Takeaways for Investors

• ACP momentum de-risking top-line: Q4 implied revenue (~$14.16M) was consistent with Q3 levels as ACP scaled to ~30k subs by year-end and December mobile broadband revenue neared $3M, supporting a strong 2022 setup .
• Clear 2022 profit path: With adjusted EBITDA guided to ≥$15M on ≥$130M revenue, mix shift to higher-margin ACP plus operating efficiencies underpin a credible profitability inflection .
• Working-capital intensity is the swing factor: Device procurement and 30–45 day ACP reimbursement cycles constrain pace; management aims to fund growth with cash flow and credit lines, limiting dilution risk .
• Legacy drag easing: ECS COVID headwinds and legacy mix weighed on 2021; 2022 should see acceleration from ACP/state expansion and continued de-emphasis of lower-margin channels .
• Capital position improved post-uplisting: Liquidity strengthened by the NASDAQ raise; YE cash of ~$6.3M positions the company to support expansion and inventory needs .
• Execution watch items: (1) state approval cadence and salesforce ramp; (2) ACP policy/funding stability; (3) receivable turns and inventory velocity; (4) potential LogicsIQ spin timing and impact on consolidated guidance .

Footnote on derived figures: Q4 revenue and Q4 net loss are calculated from audited FY 2021 and reported 9M 2021 results (see citations in the Financial Results table). All other figures are taken directly from company filings/press releases/transcripts as cited.