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Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<ul><li>Focus on diversifying the revenue base. As we discussed in our initiation of coverage, SURG has been actively working on diversifying the revenue base.</li><li>We see the company as four different startups—wireless MVNO/MVNE, Lifeline telecom services, prepaid top-ups, and Clearline Mobile—all focused on underserved communities with distribution through neighborhood stores and bodegas.</li><li>SURG’s differentiation is in how they all come together at the points of presence (PoPs), and yet, they represent different independent revenue streams.</li></ul>

Focus on diversifying the revenue base. As we discussed in our initiation of coverage, SURG has been actively working on diversifying the revenue base.We see the company as four different startups—wireless MVNO/MVNE, Lifeline telecom services, prepaid top-ups, and Clearline Mobile—all focused on underserved communities with distribution through neighborhood stores and bodegas.SURG’s differentiation is in how they all come together at the points of presence (PoPs), and yet, they represent different independent revenue streams.

SurgePays, Inc: WTR Small-Cap Spotlight Recap

<ul><li>All elements of SURG’s strategy in place. As we noted in our 1Q25 review, the most compelling takeaway from the quarter was SURG now has all the elements in place to execute its strategy, namely a deep bench of seasoned executives, a robust product portfolio, an attractive and growing distribution base, an integrated backend that can serve customers across all its products, and the financing that is critical to fund growth.</li><li>Going full throttle on the MVNE opportunity. On its earnings call, SURG disclosed that it had already integrated three Mobile Virtual Network Operators (MVNOs) and another two were in the onboarding process.</li><li>The company highlighted that these partners have “hundreds of thousands of subscribers” where the model is extremely attractive, with (1) recurring monthly revenue streams, (2) high margins, (3) low upfront costs, and (4) favorable cash flow dynamics</li></ul>

All elements of SURG’s strategy in place. As we noted in our 1Q25 review, the most compelling takeaway from the quarter was SURG now has all the elements in place to execute its strategy, namely a deep bench of seasoned executives, a robust product portfolio, an attractive and growing distribution base, an integrated backend that can serve customers across all its products, and the financing that is critical to fund growth.Going full throttle on the MVNE opportunity. On its earnings call, SURG disclosed that it had already integrated three Mobile Virtual Network Operators (MVNOs) and another two were in the onboarding process.The company highlighted that these partners have “hundreds of thousands of subscribers” where the model is extremely attractive, with (1) recurring monthly revenue streams, (2) high margins, (3) low upfront costs, and (4) favorable cash flow dynamics

SurgePays, Inc: MVNE Opportunity - Differentiated Offering, Attractive Economics

<ul><li>SURG reported 4Q results that were in line with what one would expect from a company that has made significant strategic shifts during the year.</li><li>More importantly, on the call, management highlighted that early indicators in its new initiatives, which we discussed in detail in our initiation, The Lull Before the Surge; Assuming Coverage, look robust.</li><li>The next 12- month guide for top line, at more than $200 million, materially exceeds consensus of ~$125 million over the same period.</li></ul>

SURG reported 4Q results that were in line with what one would expect from a company that has made significant strategic shifts during the year.More importantly, on the call, management highlighted that early indicators in its new initiatives, which we discussed in detail in our initiation, The Lull Before the Surge; Assuming Coverage, look robust.The next 12- month guide for top line, at more than $200 million, materially exceeds consensus of ~$125 million over the same period.

SurgePays, Inc. - Looking Forward to 2025

<ul><li>Before market open on Thursday, SurgePays announced it has signed a new strategic relationship deal with AT&amp;T.</li><li>The multi-year mobile virtual network operator (MVNO) agreement is a significant enhancement from its pre-existing carrier relationships in the ACP market.</li><li><p>Enables super low-cost service, critical to former ACP and current Lifeline customers. </p></li></ul>

Before market open on Thursday, SurgePays announced it has signed a new strategic relationship deal with AT&amp;T.The multi-year mobile virtual network operator (MVNO) agreement is a significant enhancement from its pre-existing carrier relationships in the ACP market.Enables super low-cost service, critical to former ACP and current Lifeline customers. 

SurgePays, Inc. - Signs Strategic Agreement with AT&T

<ul><li>After the close on Tuesday, SurgePays reported 3Q24 results. Total revenue of $4.8 million was below consensus of $5.9 million.</li><li>The decline in revenue reflects the impact of the ACP program running out of funding in 2Q.</li><li>Profitability remains affected by Lifeline thrown to ACP customers. </li></ul>

After the close on Tuesday, SurgePays reported 3Q24 results. Total revenue of $4.8 million was below consensus of $5.9 million.The decline in revenue reflects the impact of the ACP program running out of funding in 2Q.Profitability remains affected by Lifeline thrown to ACP customers. 

United States

SurgePays, Inc. is a technology and telecommunications company. The Company focuses on the underbanked and underserved communities, as well as provides fintech platform for financial and prepaid products to convert corner stores and bodegas into tech-hubs for underbanked neighborhoods. SurgePays serves customers in the United States.

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SurgePays (SURG US)

SurgePays, Inc: WTR Small-Cap Spotlight Recap

Focus on diversifying the revenue base. As we discussed in our initiation of coverage, SURG has been actively working on diversifying the revenue...

Water Tower Research

SurgePays, Inc: MVNE Opportunity - Differentiated Offering, Attractive Economics

On its earnings call, SURG disclosed that it had already integrated three Mobile Virtual Network Operators (MVNOs) and another two were in the...

Water Tower Research

SurgePays, Inc. - Looking Forward to 2025

SURG reported 4Q results that were in line with what one would expect from a company that has made significant strategic shifts during the year.

Water Tower Research

SurgePays, Inc. - Signs Strategic Agreement with AT&T

The multi-year mobile virtual network operator (MVNO) agreement is a significant enhancement from its pre-existing carrier relationships in the ACP...

Water Tower Research

SurgePays, Inc. - Reports 3Q24 Results

After the close on Tuesday, SurgePays reported 3Q24 results. Total revenue of $4.8 million was below consensus of $5.9 million.

Water Tower Research

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