SurgePays Q3 2025: Contradictions Emerge on Convenience Store Strategy, Lifeline/LinkUp Prioritization, and Market Growth Projections

Date of Call: November 12, 2025

Financials Results

• Revenue: $18.7M, up 292% YOY (from $4.8M in Q3 2024) and up over 62% sequentially
• EPS: Net loss $7.5M; loss per share -$0.38
• Gross Margin: Gross profit loss narrowed to $2.6M in Q3 2025, versus a $7.8M gross profit loss in Q3 2024; management expects POS/prepaid gross margin improvement and ClearLine to be positive by end of 2025
• Operating Margin: Loss from operations $7.0M (improved from $14.3M in Q3 2024)

Guidance:

• 2026 revenue guidance of $225 million
• Expect ClearLine (POS SaaS) gross margin to be positive by end of 2025
• Expect MVNO segment gross margins to increase with aim to return to positive
• Plan to onboard and integrate new wholesale (MVNE) clients over the next ~6 months
• Immediate goal to achieve profitability with minimal cap‑table impact and dilution

Business Commentary:

* Strong Financial Performance and Growth: - SurgePays reported Q3 2025 revenue of $18.7 million, up 292% year-over-year and over 62% sequentially. - Growth was driven by the increase in MVNO and point-of-sale and prepaid services revenue, notably from Torch Wireless under the subsidized Lifeline program and the expansion of LinkUp Mobile activations.

• Torch Wireless Expansion:
• Torch Wireless, SurgePays' MVNO brand, saw revenue increase from virtually 0 in Q3 2024 to $5.6 million in Q3 2025.

• This growth was attributed to activating over 125,000 subscribers and leveraging the stable, predictable recurring revenue base provided by the government-subsidized Lifeline program.

• Point-of-Sale and Prepaid Services Growth:

• Point-of-sale and prepaid services revenue increased significantly year-over-year to $13.1 million, a 177% increase.

• Growth was driven by the launch and expansion of LinkUp Mobile activations, reaching over 95,000 recurring active subscribers, and the strategic partnerships with distributors like HT Hackney.

• Wholesale MVNE Platform Development:

• SurgePays' MVNE platform, HERO, is a growing revenue engine with a robust pipeline, onboarding 3 MVNO partners serving thousands of subscribers.
• The platform's success is attributed to SurgePays' direct carrier access, enabling a high-margin model with minimal incremental costs and low overhead.

• Technological Integration and Expansion:
• SurgePays launched ClearLine, its SaaS marketing platform, integrating with Corpay's payment processing solution to create a first-of-its-kind capability.
• The integration is expected to generate new recurring revenue streams while providing value-added functionality to merchants and resellers, expanding SurgePays' ecosystem beyond convenience stores.

Sentiment Analysis:

Overall Tone: Positive

• Management called Q3 an "inflection point," reported revenue of $18.7M (up 292% YOY, >62% sequentially), reiterated 2026 revenue guidance of $225M and said "we are now in acceleration mode," highlighting subscriber growth to 125,000 and expanding distribution.

Q&A:

• Question from Edward Woo (Ascendiant Capital Markets LLC, Research Division): What are you hearing from either the convenience stores owners of what they're seeing and whether this customer base is able to be receptive to these new products that you're introducing?
  Response: Management: Customers are highly receptive; store owners view the offering as a low-cost revenue stream—POS + ClearLine enables activations, commissions and SNAP/EBT workflows, creating incremental foot traffic and a win‑win for consumers, stores and SurgePays.

• Question from Edward Woo (Ascendiant Capital Markets LLC, Research Division): There's been a little bit of consolidation with the major convenience store brands. Is that going to impact your business at all? And do you think that's going to be the future of, I guess, the convenience stores?
  Response: Management: Consolidation is not seen as a risk; store-level autonomy and long-standing distributor relationships (e.g., HT Hackney, McLane) preserve decision-making at the owner/operator level and support continued adoption of SurgePays solutions.

Contradiction Point 1

Convenience Store Market Focus and Strategy

It reflects differing perspectives on the company's focus and strategy regarding the convenience store market, potentially impacting business model and customer engagement.

Will this consolidation impact your business? Do you see this as the future of the convenience store industry? - Edward Woo (Ascendiant Capital Markets LLC, Research Division)

2025Q3: The convenience store market remains consistent despite brand consolidation, with store owners maintaining a significant level of control and decision-making power. SurgePays focuses on building strong relationships with store owners, integrating its systems for mutual benefit. - Kevin Cox(CEO)

Is Lifeline growth primarily through your retail network or tents? What commissions, if any, are paid per account? - Michael Keelan Diana(Maxim Group)

2025Q2: Growth is primarily through enrollment tents in states with additional funding, similar to the ACP program. In states with only federal funding, enrollments are online with no additional commissions. The focus is on scaling enrollment tents due to their high return on investment. Eventually, the retail network will be scaled, but currently, tents have proven effective. - Kevin Brian Cox(CEO)

Contradiction Point 2

Lifeline and LinkUp Business Prioritization

It shows a shift in the company's prioritization strategy regarding Lifeline and LinkUp businesses, potentially impacting resource allocation and long-term goals.

What are convenience store owners observing about their customer base's receptiveness to your new products? - Edward Woo (Ascendiant Capital Markets LLC, Research Division)

2025Q3: We have done a good job in terms of building a software platform that we think has a lot of growth opportunity in it... We're not sure how much we're going to grow or how soon that's going to happen, but it's an area where we think we can continue to work on. - Kevin Cox(CEO)

How are you balancing priorities between Lifeline and LinkUp in terms of dollar allocation and growth focus, given resource constraints? - John Marc Andre Roy(Water Tower Research)

2025Q2: We prioritize our resources based on known revenue. Lifeline activations are more predictable, resulting in cash flow positivity at a certain subscriber level. This is the focus to stabilize the business. The LinkUp market adoption is a longer-term strategy but is also cultivated. The focus is on knowns and being cash flow positive, with Lifeline activations being the primary focus. - Kevin Brian Cox(CEO)

Contradiction Point 3

Target Market and Customer Base

It highlights differences in the company's perception of its target market and customer base, which can influence business strategies and market positioning.

What are you hearing from convenience store owners regarding their customers' receptiveness to your new products? - Edward Woo (Ascendiant Capital Markets LLC, Research Division)

2025Q3: The feedback from convenience store owners has been positive, with a broader openness to new products due to economic uncertainty. The subprime market has grown from 100 million to 137 million in the past 4 years, representing an opportunity for SurgePays to provide lower-cost, high-value products to underserved consumers. - Kevin Cox(CEO)

Can you outline the economic outlook for your market and how it will impact your business? - Ed Woo (Ascendiant Capital)

2024Q4: SurgePays focuses on the overlooked and underserved market, which remains resilient despite economic fluctuations. Tight economic conditions often encourage value-seeking behavior, benefiting SurgePays' offerings. - Brian Cox(CEO)

Contradiction Point 4

Revenue Projections and Market Growth

It involves different revenue projections and market growth expectations, which are crucial for investor confidence and strategic planning.

What are you hearing from convenience store owners regarding their observations and if the customer base is receptive to the new products you're introducing? - Edward Woo (Ascendiant Capital Markets LLC, Research Division)

2025Q3: The 200 million revenue projection is for the next 12 months, commencing April 1st, reflecting the full integration and launch of SurgePays' new capabilities. - Brian Cox(CEO)

Can you clarify the SIM card orders and their activation dependencies? Also, does the $200 million revenue projection for 2025 cover Q2 2025 through Q1 2026 or the entire year of 2025? - Kunal Madhukar (Water Tower Research)

2024Q4: The 200 million revenue projection is for the next 12 months, commencing April 1st, reflecting the full integration and launch of SurgePays' new capabilities. - Brian Cox(CEO)

Contradiction Point 5

SIM Card Economics and Margins

It highlights differing information on the economics and margins of SIM cards, which can impact financial forecasts and operational strategies.

What are convenience store owners reporting about their observations and if the customer base is receptive to your new products? - Edward Woo (Ascendiant Capital Markets LLC, Research Division)

2025Q3: The feedback from convenience store owners has been positive, with a broader openness to new products due to economic uncertainty. The subprime market has grown from 100 million to 137 million in the past 4 years, representing an opportunity for SurgePays to provide lower-cost, high-value products to underserved consumers. - Kevin Cox(CEO)

Can you discuss the economics and margin profile of the SIM cards? - Anja Soderstrom (Sidoti)

2024Q4: The margin for SIM cards varies, with higher plans yielding better margins. On average, LinkUp Mobile plans offer margins of $8 to $15. For Lifeline, focus is on states with higher subsidies, aiming for a similar margin as ACP. - Brian Cox(CEO)