Robust Customer Growth Drives 23.3% year-over-year Increase in Consolidated Net Sales

Focus on High Margin Customers and Operational Efficiencies Drives 28.7% year-over-year Increase in Gross Profit

Financial Highlights for the Fiscal First Quarter Ending February 28, 2018

  • Consolidated net sales of $7.0 million, a 23.3% year-over-year increase
  • Gross profit of $1.8 million, a 28.7% year-over-year increase, driven by sales efficiencies and focus on client profitability
  • Gross profit margin of 26.0%, compared to 24.9% in the prior-year period
  • Net income of $35,557; EPS of $0.01

Operational Highlights

  • Successful growth in new customer component approval rates, driving enhanced customer engagement and sales growth across business lines
  • Continued new product development out of the Company’s Challenge business segment driving increased sales
  • Growing customer demand for new product designs driving expansion of Challenge business segment’s engineering team and capabilities
  • Expanding internationally with solid sales growth in Asia

DEER PARK, N.Y., April 16, 2018 (GLOBE NEWSWIRE) -- 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 first quarter 2018.

Ira Levy, President and Chief Executive Officer of Surge, said, “We are off to a strong start in fiscal 2018 delivering solid year-over-year growth in sales and profitability in the first quarter. Driven by a strong sales pipeline and an ongoing commitment to servicing high margin customers, net sales increased 23.3% and gross profit increased 28.7% on a year-over-year basis. A continued focus on operational efficiencies across the business also drove solid growth in gross profit margins and helped us continue to hold electronic component lead times below industry averages.

“We remain focused on maximizing profitability on a global scale and across industries with the continued expansion of our customer base internationally with strong sales in Asia in the quarter. Our innovative pipeline of new products along with our strong supply chain is driving increases in customer product approval rates, enabling us to win new customers and drive ongoing sales growth. We are also expanding our internal engineering teams in our Challenge division to meet growing customer demand for new product designs. We believe we are well positioned for continued growth and to deliver long-term value for our shareholders.”

Results of Operations for the Three Months Ended February 28, 2018

Net sales for the three months ended February 28, 2018 increased by 23.3% to $7.0 million, as compared to net sales of $5.7 million for the three months ended February 28, 2017. The increase in net sales for the three month period is primarily attributable to increases in product orders from new and existing customers. 

Gross profit for the three months ended February 28, 2018 increased by 28.7% to $1.8 million, as compared to $1.4 million for the three months ended February 28, 2017. The increase in gross profit for the three month period is primarily attributable to increased business with new and existing customers with higher profit margins. Gross profit margin as a percentage of net sales increased to 26.0% for the three months ended February 28, 2018, as compared to 24.9% in the three months ended February 28, 2017. The increase in gross profit margins in the three month period was driven by increased sales with new and existing customers. Gross profit margin in the three months ended February 28, 2017 was also impacted by a more competitive pricing and rebate strategy with Electronics Manufacturing Service subcontractors.

Selling and shipping expenses for the three months ended February 28, 2018 increased 10.3% to $618,421, as compared to $560,776 in the three months ended February 28, 2017. The increase in selling and shipping expenses for the three month period was primarily attributable to increases in commission expense and travel and advertising costs, offset by a decline in salesman compensation, freight expenses, catalogue and printing expenses and messenger and delivery expenses.

General and administrative expenses for the three months ended February 28, 2018 decreased 17.4% to $1.1 million, as compared to $1.3 million for the three months ended February 28, 2017. The decrease for the three month period is primarily attributable to declines in legal fees incurred by the company during the proxy contest and related settlements with certain shareholders as well as the completed tender offer in 2017. The Company is in discussions with its insurance carrier regarding reimbursement for some of the costs incurred in connection with the proxy contest and related settlement and the tender offer. Offsetting the decline was an increase in staffing and costs for general insurance, computer expenses and director fees. This was partially offset by decreases in temporary help and consulting expenses as well as a decrease in office expenses. 

Net income for the three months ended February 28, 2018 was $35,557, as compared to a net loss of $350,172 for the three months ended February 28, 2017.

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, ebartsch@sloanepr.com

212-486-9500