2022-07-15 | OTCPK:SPRS | Press release

Company Reports Significant Second Quarter Sales Growth, Up 65.8% Year-Over-Year

Significant sales growth drives 70.9% increase in Q2 gross profit year-over-year to $4.4 million

Solid gross margins of 27.5% in Q2 2022

Surge Components, Inc. (“Surge” or “the Company”) (OTC Pink: SPRS), a leading supplier of capacitors, discrete semiconductors, switches and sound/sound devices, today announced today its financial results for the second fiscal quarter ended May 31, 2022.

Financial highlights for the second fiscal quarter ended May 31, 2022

  • Net sales of $15.9 million, compared to $9.6 million in the same period last year
  • Gross profit of $4.4 million, compared to $2.6 million in the same period of the previous year
  • Gross profit margin of 27.5%, compared to 26.7% in the same period of the previous year
  • Net earnings available to common shareholders of $862,411; EPS of $0.15 compared to net income available to common shareholders of $704,108; EPS of $0.12 in the prior year period

Operational Highlights

  • Increased customer demand is driving strong product demand and sales volumes for the Challenge and Surge divisions.
  • The company continues to use the London, UK sales office to successfully expand the European market.
  • Surge employs a key sales manager in China, strengthening its presence in Asia.
  • Visibility into the remainder of 2022 sales volume remains strong as customers place orders much earlier in the sales cycle due to extended factory lead times
  • Surge has shorter delivery times than its competitors, which helps maintain stable production and maintain a competitive edge over its peers.

“The second quarter was marked by strong performance, underscoring our ability to grow and navigate changing industry dynamics posed by supply chain challenges and global semiconductor chip shortages,” ” said Ira Levy, president and CEO of Surge. “We are successfully managing price increases resulting from inflation and continue to experience extended lead times, transportation issues and intermittent lockdowns in China due to covid.

“Despite a challenging global environment, we delivered record results for the quarter with significant net sales growth, up 65.8% year-on-year. Through disciplined cost control, we generated a 70.9% increase in gross margin over the prior year and gross margins reached 27.5% in the second quarter.

“Both Surge and Challenge have excelled in delivering our products to customers with faster lead times compared to our competitors despite supply chain challenges and global shortages of semiconductor chips that have affected our business and the industry. ‘industry.

“The semiconductor shortage has provided an opportunity for our Challenge business division, significantly increasing sales. This increase is largely due to the division now handling shortage semiconductor products. The challenge is to research and find products for its customers that the customer’s regular supplier cannot deliver.

“Sales in the Surge division also increased significantly. This growth comes from Surge’s continued development of the Surge distribution sales channel. Surge’s business in Europe and Asia has grown significantly due to new customers the company has developed and business growth with existing customers.

“Looking forward, we remain committed to delivering valuable products to our customers, improving our profitability and communicating regularly with our shareholders. We are confident in our ability to identify additional opportunities to strengthen our global sales teams and expand our global footprint through the remainder of 2022 and beyond. We believe we are uniquely positioned to succeed in our market and deliver long-term shareholder value.”

Results of operations for the three months ended May 31, 2022

Net sales for the three months ended May 31, 2022 increased 65.8% to $15.9 million, compared to net sales of $9.6 million for the three months ended May 31, 2021 The increase in net sales for the three-month period can be attributed to an increase in business with new customers as well as an increase in business with existing customers. Also, part of the increase in sales may be due to one of the company’s divisions trading certain products.

Gross profit for the three months ended May 31, 2022 increased 70.9% to $4.4 million from $2.6 million for the three months ended May 31, 2021. Gross profit margin as a percentage of net sales increased to 27.5% for the three months ended May 31, 2022, compared to 26.7% for the quarter ended May 31, 2021. We attribute the increase in gross profit to an increase in sales volume at during the quarter ended May 31, 2022. Our industry will continue to receive pressure from customers for price reductions.

Selling and shipping expenses for the three months ended May 31, 2022 increased 64.4% to $977,097 from $594,251 for the three months ended May 31, 2021. We attribute the increase in mass salespersons’ wages and commissions, as well as representation costs and courier and delivery costs. These increases were offset by a decrease in transportation costs.

General and administrative expenses for the three months ended May 31, 2022 increased 55.7% to $2.1 million from $1.3 million for the three months ended May 31, 2021. The increase in expenses general and administrative is primarily attributable to the increase in rent, utilities, salary and office expenses and general insurance expenses, as well as attendance fees, option expenses, public company expenses, bank fees and bad debt charges, and were offset by decreases in professional fees, temporary staff costs and consulting costs.

Net earnings for the three months ended May 31, 2022 were $862,411 compared to net earnings of $704,108 for the three months ended May 31, 2021.

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

Caution 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 condition, our business strategy, and our management plans and objectives for future operations, are statements prospective. 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 instances, forward-looking statements may be identified by words such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “could”, “at intends”, “targets”, “plans”, “intends”, “believes”, “estimates”, “predicts”, “potential” or “continues” or the negative form of these terms or other similar words. statements are only predictions and are based largely on our current expectations and projections regarding future events and financial trends that could affect our business, financial condition and results of operations.We discuss many risks in more 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 undertake no obligation to update any forward-looking statements to events or circumstances occurring after the date of this press release, except as required by law.

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