Surge Components, Inc. Announces Third Fiscal Quarter 2018 Results

Net Sales Increase 6.7% Year-Over-Year Reflecting Strong Sales Pipeline

Financial Highlights for the Third Fiscal Quarter Ended August 31, 2018

• Net sales of $9.3 million, compared to $8.7 million in the prior-year-period, an increase of 6.7% year-over-year
• Gross profit of $2.1 million, compared to $2.2 million in the prior-year-period
• Gross profit margin of 22.7%, compared to 25.9% in the prior-year period
• Net income available to common shareholders of $337,558; EPS of $0.06

Operational Highlights

• Strong pipeline and continued growth in distribution sales channels driving increased sales growth
• Leveraging efficiencies to strengthen profitability and drive new growth opportunities
• Recently filed a U.S. patent application for an improved pinpoint alarm to expand innovative pipeline of new products

DEER PARK, N.Y., Oct. 09, 2018 (GLOBE NEWSWIRE) -- Surge Components, Inc. ("Surge" or "the Company") SPRS, a leading supplier of capacitors, discrete semi-conductors, switches and audible/sounding devices, today announced financial results for the third fiscal quarter 2018.  

"We delivered a solid operational performance in the third quarter," said Ira Levy, President and Chief Executive Officer of Surge. "Net sales increased 6.7% year-over-year, reflecting a strong sales pipeline, continued growth in our distribution sales channels, and the healthy expansion of our customer base. Leveraging our superior supply chain, we also successfully secured a portion of our new business from customers seeking alternative suppliers in the face of an ongoing global electronics components shortage.

"Recent tariffs levied against Chinese goods by the U.S. government had a modest impact on our gross margins in the quarter, specifically in the months of July and August. In response, we have been actively working to identify ways to mitigate the impact of tariffs on our business.

"We also continue to build out an innovative pipeline of new products to continue to differentiate our offering, and position us for continued future sales growth. Most notably, we recently filed a U.S. patent application for an improved pinpoint alarm designed to improve an individual's ability to determine the location of an alarm versus standard single, multi-frequency, or broadband alarms. The improved alarm can be used in a wide variety of applications, including reversing vehicles,  medical emergency notification, and hardware devices that use Bluetooth or other wireless communications protocols in combination with mobile software applications to locate lost items, including phones, wallets, and keys. We will continue to leverage this and other new product opportunities along with our robust customer base to maximize profitability globally and across industries."

Results of Operations for the Three Months Ended August 31, 2018

Net sales for the three months ended August 31, 2018 increased by 6.7% to $9.3 million, as compared to net sales of $8.7 million for the three months ended August 31, 2017.  The increase in net sales for the three month period is primarily attributable to an increase in business with new customers as well as additional business with existing customers.

Gross profit for the three months ended August 31, 2018 decreased by 6.3% to $2.1 million, as compared to $2.2 million for the three months ended August 31, 2017. Gross profit margin as a percentage of net sales decreased to 22.7% for the three months ended August 31, 2018, as compared to 25.9% for the three months ended August 31, 2017. The decrease in gross profit and gross profit margin as a percentage of net sales for the three month period is partially attributable to the impact of tariffs during this period as well as a more competitive pricing and rebate strategy with Electronics Manufacturing Service subcontractors.

Selling and shipping expenses for the three months ended August 31, 2018 increased 5.0% to $705,638, as compared to $671,802 for the three months ended August 31, 2017. The increase in selling and shipping expenses for the three month period was primarily attributable to increases in commission expense and salesman compensation, as well as increases in entertainment, auto and travel expenses. These increases were offset by decreases in shipping and freight expenses. 

General and administrative expenses for the three months ended August 31, 2018 was $1.0 million, an increase of $1,352, or less than 1.0% as compared to the three months ended August 31, 2017. The increase for the three month period is attributable to increases in office and temporary help expenses, as well as increases in professional fees and directors fees. This was offset by decreases in salaries and telephone and insurance expenses.  

Net income available to common shareholders for the three months ended August 31, 2018 decreased 18.6% to $337,558, as compared to net income of $414,903 for the three months ended August 31, 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