Reports Mixed 4Q Results in Uncertain Market
After the close on Tuesday, SurgePays reported mixed 4Q23 results. Total revenue of $32.3 million exceeded our $32.1 million estimate but was slightly below consensus of $33.6 million. However, EBITDA of $3.4 million was below both our estimate and consensus of $6.5 million and $6.9 million, respectively. Enters 2024 on solid financial footing with more than $40 million in cash. While SURG reported $14.6 million in cash at the end of 2023, it is important to note it has since raised ~$15 million from its recent equity offering and more than $8 million from the exercise of warrants, totaling more than $40 million in cash. With minimal external debt outstanding, SURG is in a solid liquidity position. Wireless business continues to deliver good results in the face of uncertain ACP funding. Wireless revenue (which it now identifies as “Mobile Virtual Network Operator or [MVNO]) grew ~8% Y/Y to $29 million, slightly better than our $28.2 million estimate. The slight Q/Q decline reflects the uncertain funding of the ACP program, which stopped enrolling new participants in February of this year. Launch of prepaid wireless brand in 2Q represents a critical strategic focus. Although management clearly remains optimistic about the future of ACP, with funding set to run out in April, it is shifting focus and investment to the nationwide launch of Linkup Mobile to leverage its installed distribution and diversify its revenue base. With more than 100 million subscribers (versus 23+ million in the ACP program) in the US, prepaid represents a logical extension of SURG’s efforts.
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