Surge Components, Inc. Announces Second Quarter 2025 Results

• Delivered Strong Net Sales of $8.9 Million and Gross Profit of $2.7 Million
• Expanded Gross Profit Margin to 30.2%
• Generated Positive Net Income Available to Common Shareholders

DEER PARK, N.Y.--(BUSINESS WIRE)--Surge Components, Inc. (“Surge” or the “Company”) (OTC Pink: SPRS), a leading supplier of capacitors, discrete semi-conductors, switches, and audible/sounding devices, today announced financial results for the second quarter ended May 31, 2025.

Surge Operational Highlights

• Continues to provide best in-class service to customers and preserve its competitive advantage over peers by maintaining superior lead times and stable production.
• Continues to invest in growth assets including expanding and regionalizing sales talent to drive business through distribution channels. Added new sales talent in both the Challenge and Surge sales teams during the second quarter 2025.
• Continues to successfully design customized new products for customers to differentiate and increase competitiveness.

Surge Financial Highlights for the Second Quarter Ended May 31, 2025

• Drove net sales of $8.9 million compared to $7.3 million in the prior-year period.
• Increased gross profit to $2.7 million compared to $2.0 million in the prior-year period; expanded gross profit margin to 30.2% from 27.3% in the prior-year period.
• Achieved net income available to common shareholders of $117,964; earnings per share of $0.02, compared to net income available to common shareholders of $197,940; earnings per share of $0.03 in the prior-year-period.

“We are very proud of the results we delivered during the second quarter. We were pleased to drive net sales through the expansion of business from existing clients in addition to business from new customer acquisition. At the same time, we expanded gross profit margin on a year-over-year basis and generated positive net income,” said Ira Levy, President and Chief Executive Officer of Surge.

“As broad global trade negotiations under the current administration remain ongoing, we expect tariffs to continue to be a headwind for our customers and industry at large, which may impact the Company’s future financial performance. We remain optimistic about Surge’s business outlook as we navigate these short-term economic challenges. During the quarter, the Company had various business developments, including the addition of new sales talent in both the Challenge and Surge sales teams. We look forward to the growth contribution from this new sales talent going forward. Additionally, we continue to explore opportunities for expansion, including the potential for new product introduction. We continue to drive the business forward on the back of our talented team, product development, and strong network of partners.”

Results of Operations for the Three Months Ended May 31, 2025

Consolidated net sales for the three months ended May 31, 2025 increased by $1,571,730 or 21.4%, to $8,916,725 as compared to net sales of $7,344,995 for the three months ended May 31, 2024. We attribute the increase to an increase in business with new customers as well as an increase in business with existing customers.

Gross profit for the three months ended May 31, 2025 increased by $685,838 to $2,688,403, or 34.2%, as compared to $2,002,565 for the three months ended May 31, 2024. Gross margin as a percentage of net sales increased to 30.2% for the three months ended May 31, 2025 compared to 27.3% for the three months ended May 31, 2024. The increase in gross profit and gross profit as a percentage of sales can be attributed to the increase in sales volume.

Our industry will continue to receive pressure from customers for price reductions. Some of them further demand periodic price reductions on a quarterly or semi-annual basis, as opposed to annual fixed pricing. We work with electronic manufacturing service subcontractor customers who manufacture products for other customers who do not have their own manufacturing operations. At times we are not able to recover these price reductions from our suppliers. The Company has agreements with these subcontractor customers to provide periodic cost reductions through rebates in the amount of 5%. These reductions only affect future shipments of our products, and do not affect existing orders. These reductions can have a negative impact on our profit margins since they reduce the amount of commissions we can earn. Even though this rebate can impact the Company’s gross profit margin, these subcontractor customers represent very significant potential growth for the Company, because they can help the Company become an approved supplier at the customers they manufacture for, and they purchase our components for these customers. We believe it would be very difficult for the Company to achieve business at these customers without the help of these subcontractor customers. During the first half of fiscal year of 2025, the Company was impacted by tariff costs on certain products imported from China as well as new tariffs that went into effect as of February 4, 2025 in addition to pre-existing tariffs that went into effect as of July 6, 2018. The Company has been able to pass along a portion of these costs to its customers. The Company is also moving some customer deliveries directly to Hong Kong in order to mitigate some of these costs. However, there can be no assurance that we will be able to pass along the new costs or the effects if any it will have on our revenue in the future.

Selling and shipping expenses for the three months ended May 31, 2025 was $678,852, an increase of $6,285, or less than 1%, as compared to $672,567 for three months ended May 31, 2024. We attribute the increase for the three months ended May 31, 2025 to increases in commission expenses, freight expenses, travel and entertainment expenses offset by decreases in salesman payroll and auto expenses.

General and administrative expenses for the three months ended May 31, 2025 was $1,929,441, an increase of $729,401, or 60.8%, as compared to $1,200,040 for the three months ended May 31, 2024. The increase for the three months ended May 31, 2025 is due primarily to non cash stock based compensation of $531,797. The increase can also be attributed to increases in salaries and related payroll tax expenses as well as bank charges and bad debt expenses, professional fees and consulting expenses but partially offset by decreases in rent expenses and public company expenses.

Net income for the three months ended May 31, 2025 was $117,964, compared to net income of $197,940 for the three months ended May 31, 2024.

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 global economic conditions, expected rebound in the market, supply chain challenges, customer lead times, our ability to pass tariff costs on to our customers and its effect on our sales, 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," "expected," "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.