Surge Components, Inc. Announces Fiscal Third Quarter 2017 Results

Financial Highlights for the Fiscal Third Quarter Ending August 31, 2017

• Consolidated net sales of $8.7 million, a 5.5% year-over-year increase
• Gross profit of $2.2 million, a 5.2% year-over-year increase, driven by sales efficiencies and focus on client profitability
• Gross profit margin of 25.9%, flat with the year-ago period
• Net income of $414,903; EPS of $0.08

Operational Highlights

• Development of new products driving increased sales in the Company’s Challenge business segment
• Expanding global reach through new strategic relationships with electronic manufacturing service (“EMS”) subcontractors
• Leveraging efficiencies across sales groups to drive year-over-year and sequential improvements in profitability
• Continuing to cultivate the Company’s distribution sales channels to solidify additional customer relationships

DEER PARK, N.Y., Oct. 16, 2017 -- Surge Components, Inc. (“Surge” or “the Company”) (OTC Pink:SPRS) a leading supplier of capacitors, discrete semi-conductors and audible/sounding devices, today announced financial results for the fiscal third quarter ended August 31, 2017.  

Ira Levy, President and Chief Executive Officer of Surge, said, “I am pleased with our solid performance in the third quarter. We continued to build out our world-class supply chain with new relationships, increased sales and continued growth in our international footprint. Importantly, our strong profitability in the quarter countered the losses incurred in the first half of the year as a result of our previously settled proxy contest and tender offer, a testament to the strength of our operations and commitment to driving value for our shareholders.

“Net sales in the quarter increased 5.5% year-over-year, driven by strong customer sales growth coupled with a robust pipeline of new products and growth in our distribution sales channels. Our continued focus on high margin customers and efficient management of the business lead to a 5.2% year-over-year increase in gross profit. Despite an aggressive pricing and rebate strategy, profit margins were also solid at 25.9%. We believe this pricing strategy provides us with significant growth potential over the long term, introducing us to new supplier relationships that support the continued growth and success of the business.”

Results of Operations for the Three Months Ended August 31, 2017

Net sales for the three months ended August 31, 2017 increased by 5.5% to $8.7 million, as compared to net sales of $8.2 million for the three months ended August 31, 2016.  The increase in net sales is primarily attributable to increases in product orders from new and existing customers. 

Gross profit for the three months ended August 31, 2017 increased by 5.2% to $2.2 million, as compared to $2.1 million for the three months ended August 31, 2016.  The increase in gross profit is primarily attributable to business with new and existing customers with higher profit margins. Gross profit margin as a percentage of net sales remained flat at 25.9% for the three months ended August 31, 2017, as compared to the three months ended August 31, 2016.  Gross profit margins in the three months ended August 31, 2017 were modestly impacted by a more competitive pricing and rebate strategy with EMS subcontractors.

Selling and shipping expenses for the three months ended August 31, 2017 increased by 2.2% to $671,802, as compared to $657,093 for the three months ended August 31, 2016.  The increase in selling and shipping expenses is attributable to increased costs related to hiring additional salespeople as well as increases in freight and travel expenses and commissions. Partially offsetting these increases were decreases in entertainment, advertising and sales payroll expenses.   

General and administrative expenses for the three months ended August 31, 2017 were essentially flat with the prior year period at $1.0 million, an increase of 1.6% year-over-year.  The increase in general and administrative expenses is primarily attributable to increases in staffing, higher health and general insurance, maintenance and director fees, offset by decreases in office expenses, temporary help, professional fees, dues and subscriptions and bad debt expense.

Net income for the three months ended August 31, 2017 was $414,903, as compared to net loss of $38,602 for the three months ended August 31, 2016.

This press release should be read in conjunction with the consolidated financial statements included in the Company’s most recent quarterly report on Form 10-Q, which can be found at www.surgecomponents.com and at www.sec.gov. 

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements.  All statements other than statements of historical facts contained herein, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements.  These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, forward-looking statements can be identified by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar words.  These statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that may affect our business, financial condition and results of operations.  We discuss many of the risks in greater detail under the heading "Risk Factors" in our Annual Report on Form 10-K.  These forward-looking statements represent our estimates and assumptions only as of the date of this press release.  We assume no obligation to update any forward-looking statements for events or circumstances occurring after the date of this press release, except as required by law.

Investor Contacts:

Sloane & Company

Erica Bartsch, [email protected]

212-486-9500