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Surge Components, Inc. Announces Fiscal Fourth Quarter and Full Year 2018 Results

Net Sales for FY 2018 Increase 8.0% Year-Over-Year Reflecting Strong Sales Pipeline

Gross Profit Increases 19% Year-Over-Year to $2.4 Million in FY 2018; One of Surge’s Most Profitable Years on Record

FY 2018 Gross Profit Margins Strengthen to 25.6%

Company Launches New Sales Program in Brazil; Further Expanding International Footprint

Financial Highlights for the Fiscal Year Ending November 30, 2018

  • Net sales of $32.4 million, an 8.7% year-over-year increase
  • Gross profit of $8.3 million, a 10.3% year-over-year increase, driven by growth in sales volumes and a focus on client profitability
  • Gross profit margin of 25.6%, compared to 25.2% in the prior-year period
  • Net income available to common shareholders of $2.0 million; EPS of $0.37, compared to net income available to common shareholders of $352,466; EPS of $0.05 in the prior-year period

Financial Highlights for the Fourth Fiscal Quarter Ended November 30, 2018

  • Net sales of $8.8 million, compared to $8.0 million in the prior-year-period, an increase of 11.0% year-over-year
  • Gross profit of $2.4 million, compared to $2.1 million in the prior-year-period, an increase of 19% year-over-year
  • Gross profit margin of 28.0%, compared to 26.0% in the prior-year period
  • Net income available to common shareholders of $1.4 million; EPS of $0.27 compared to net income available to common shareholders of $396,069; EPS of $0.07 in the prior-year period

Operational Highlights

  • Expanding internationally with solid sales growth in Asia
  • Successful growth in new customer approvals of the Company’s products by existing and new customers
  • Continued growth in distribution sales channels driving increased sales growth
  • Patent pending on improved pinpoint alarm in Company’s Challenge division, part of continued efforts to expand the Company’s product offerings

DEER PARK, N.Y., Feb. 28, 2019 (GLOBE NEWSWIRE) --  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 fiscal fourth quarter and fiscal year ended November 30, 2018.  

“I am very pleased with our performance in the fiscal fourth quarter and fiscal year 2018,” said Ira Levy, President and Chief Executive Officer of Surge. “Driven by a strong sales pipeline and continued growth in our distribution sales channels, full year net sales increased 8.7% year-over-year.  A continued focus on operational efficiencies and sales to higher margin customers also drove increased profitability. Gross profit increased 10.3% over the prior year and gross profit margins climbed to 25.6% in fiscal 2018 as we successfully identified customers with whom the Company could increase its margins.

Leveraging our top supply chain, we are developing new customer relationships, increasing sales volumes and expanding our international footprint, with strong sales out of Asia in the fourth quarter. The Company also launched a new sales program in Brazil. While it is still early, we are optimistic about our progress in Brazil to date.  We are also continuing to build out a pipeline of new products in our Challenge business segment. We have a patent pending on a new pinpoint alarm and continue to actively look for new product opportunities to drive strong customer acquisitions.

Overall, our performance in 2018 leaves us optimistic for the year ahead. Despite signs of slowing growth in certain markets globally, our established customer relationships, high-quality product lines and global footprint give us confidence that we are positioning the Company to mitigate the impact from any tariffs in the coming year.”

Results of Operations for the Three and Twelve Months Ended November 30, 2018

Net sales for the fiscal year ended November 30, 2018 increased by 8.7% to $32.4 million, as compared to net sales of $29.8 million for the fiscal year ended November 30, 2017. Net sales for the three months ended November 30, 2018 increased by 11.0% to $8.8 million, as compared to net sales of $8.0 million for the three months ended November 30, 2017.  The increase in net sales for the three and twelve month periods is primarily attributable to increases in business with new customers as well as additional business with existing customers.

Gross profit for the fiscal year ended November 30, 2018 increased by 10.3% to $8.3 million, as compared to $7.5 million for the fiscal year ended November 30, 2017.  Gross profit for the three months ended November 30, 2018 increased by 19.0% to $2.4 million, as compared to $2.1 million for the three months ended November 30, 2017. The increase in gross profit for the three and twelve month periods is primarily attributable to an increase in sales volume as well as certain products being sold at a higher profit margin.

Gross profit margin as a percentage of net sales increased to 25.6% for the fiscal year ended November 30, 2018, as compared to 25.2% in the fiscal year ended November 30, 2017.  Gross profit margin as a percentage of net sales was 28.0% for the three months ended November 30, 2018, as compared to 26.0% for the three months ended November 30, 2017. Gross profit margins were driven by increased sales volumes in the three and twelve months ended November 30, 2018 and by increased pricing to customers and the successful negotiation of lower costs from our supply chain.  

Selling and shipping expenses for the fiscal year ended November 30, 2018 increased 4.8% to $2.6 million, as compared to $2.5 million for the three months ended November 30, 2017. The increase in selling and shipping expenses for fiscal year 2018 is attributable to increased costs related to commission expenses, travel and entertainment and auto expenses, offset by a decline in freight out and shipping expenses. Selling and shipping expenses for the three months ended November 30, 2018 increased 8.0% to $687,979, as compared to $634,822 for the three months ended November 30, 2017. The increase in selling and shipping expenses for the three month period was primarily attributable to the increase in sales.

General and administrative expenses for the fiscal year ended November 30, 2018 decreased 11.8% to $4.1 million, as compared to $4.6 million for the fiscal year ended November 30, 2017.  General and administrative expenses for the three months ended November 30, 2018 decreased 19.0% to $855,097, as compared to $1.0 million for the three months ended November 30, 2017. The decrease in general and administrative expenses for the three and twelve month periods is primarily attributable to decreases in legal fees incurred by the company during the proxy contest and related settlement with certain shareholders of the Company and the completed tender offer in the fiscal year ended November 30, 2017. In the fiscal year ended November 30, 2018, the Company incurred approximately $28,000 of expenses relating to the proxy contest. In the fiscal year ended November 30, 2017, the Company incurred approximately $37,000 of expenses for the proxy contest and related settlement and approximately $218,000 of expenses for the tender offer completed by the Company in March 2017 and related expenses.

In October 2018, the Company received reimbursement from its insurance carrier in the amount of $603,362 for a portion of the costs it incurred in connection with the proxy contest and related settlement. This amount is included in the Company’s consolidated statements of operations as other income. Offsetting the decline in the twelve month period were increased expenses for the hiring of additional employees and increased costs for health insurance, computer and rent expenses as well as increases in general insurance expenses and directors fees. This was partially offset by decreases in temporary help, telephone and consulting expenses as well as decreases in dues and utilities.

Net income for the fiscal year ended November 30, 2018 was $2.0 million, as compared to net income of $357,466 for the fiscal year ended November 30, 2017. Net income for the three months ended November 30, 2018 was $1.4 million, as compared to net income of $396,069 for the three months ended November 30, 2017.

This press release should be read in conjunction with the Company’s consolidated financial statements included in the Company’s most recent Annual Report on Form 10-K, 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