Surge Components, Inc. Announces Fiscal Full Year 2023 Results

Rhea-AI Summary

Surge Components, Inc. (SPRS) reported solid net sales of $36.2 million for fiscal year 2023, with reduced debt and a stronger balance sheet. Despite a decline in market conditions, the company remained profitable through operating leverage and efficiencies. Surge is well-positioned to capitalize on industry rebound with new growth assets.

Positive

• Solid net sales of $36.2 million for fiscal year 2023.
• Reduced debt and strengthened balance sheet entering 2024.
• Maintained profitability through operating leverage and efficiencies.
• Invested in growth assets and new sales talent.
• Well-positioned to capitalize on industry rebound.
• Superior lead times and stable production to serve customers.
• Successful design of customized products for competitiveness.

Negative

• Net income available to common shareholders decreased to $967,110 from $3,731,146 in the prior year.
• Net sales decreased to $36.3 million from $51.9 million in the prior year.
• Gross profit decreased to $9.9 million from $14.3 million in the prior year.
• Gross profit margin slightly decreased to 27.4% from 27.6% in the prior year.
• Decrease in sales volume and product mix affecting gross profit.
• Pressure from customers for price reductions affecting industry.
• General and administrative expenses decreased but with offsetting increases.

Delivered Solid Net Sales of $36.2 Million

Drove Operating Leverage and Efficiencies to Remain Profitable Despite Decline in Market Conditions

Reduced Debt and Enters 2024 with Stronger Balance Sheet

Well Positioned to Capitalize on Eventual Industry Turnaround

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 fiscal year ended November 30, 2023.

Operational Highlights

• The Company continues to invest in growth assets, including new sales talent.
• Challenge and Surge divisions are well-positioned to capitalize on the industry’s eventual rebound as industry dynamics and prospects begin to improve.
• The Company continues to maintain its superior lead times and stable production to better serve customers and preserve a competitive advantage over peers.
• The Company continues to successfully design customized new products for customers to differentiate and increase competitiveness.

Financial Highlights for the Fiscal Year Ended November 30, 2023

• Net income available to common shareholders of $967,110; EPS of $0.17 compared to net income available to common shareholders of $3,731,146; EPS of $0.65 in the prior-year-period.
• Net sales of $36.3 million, compared to $51.9 million in the prior-year period.
• Gross profit of $9.9 million, compared to $14.3 million in the prior-year period.
• Gross profit margin of 27.4%, compared to 27.6% in the prior-year period.

“I am especially proud of the team’s hard and diligent work to remain agile and maintain cost discipline in the face of a sustained and challenging macroeconomic environment,” said Ira Levy, President and Chief Executive Officer of Surge. “While in 2023 the industry was marked by customers consuming their excess inventory levels due to 2022’s one-time over-ordering to ensure supply during a period of disruptive supply chain issues, the company was prepared and continued to execute against its strategic plan. In this challenging environment we remained profitable by being nimble and fiscally prudent in our operations as we achieved gross profit margins in line with the same period last year, 27.4% in FY2023 versus 27.6% in FY2022. Furthermore, we strengthened our balance sheet by reducing our debt burden by over 14%, or $1 million, while increasing our liquidity, both over the prior year period.

“We know that our distribution partners’ inventories of our products have reduced significantly compared to the previous year’s levels and we are seeing signs of them beginning to order some of those products again. We remain confident that the work we accomplished and sustained in 2023 helped maintain our best-in-class industry lead times despite the challenging industry environment and will continue to keep Surge competitive, and we look forward to launching new products at some point in the second half of 2024.

“While we do not expect the industry’s headwinds to dissipate in the near-term, the company hopes to start seeing a slow improvement in at least some of our market segments sometime in the second half of 2024. We remain positive on our business’ outlook and the strong operational foundation that we have laid in 2023 as we continued to invest in the company and solidify our relationships with our customers and strategic partners as we look forward to a coming rebound.”

Results of Operations for the fiscal year Ended November 30, 2022

Net sales for the fiscal year ended November 30, 2023, decreased by $15,634,248, or 30.1%, to $36,276,542, as compared to net sales of $51,910,790 for the fiscal year ended November 30, 2022. The decrease in net sales is attributable to a decrease in business with new customers as well as a decrease in business with existing customers. The decrease can also be attributed to customers pushing out orders due to them over ordering in 2022. The customers have excess inventory that they need to consume before ordering new products. Additionally, many customers, because of having this excess inventory, have not launched new product developments as their cash is tied up in the inventory. We can also attribute some of the decrease in sales during the fiscal year ended November 30, 2023, to one of the Company’s divisions successfully brokering certain products in Fiscal 2022 due to the then supply chain issues, in the amount of approximately $3.9 million in Fiscal 2022 but only $217,000 in Fiscal 2023. In Brokering, the Company helps customers find parts that their regular suppliers can not deliver. Net sales for the fiscal years ended November 30, 2023, and November 30, 2022, reflect $1,032,198 and $1,477,031, respectively of tariff costs that the Company was able to pass on to its customers.

Gross profit for the fiscal year ended November 30, 2023, decreased by $4,388,733 to $9,928,688, or 30.7%, as compared to $14,317,421 for the fiscal year ended November 30, 2022. Gross profit as a percentage of net sales decreased slightly to 27.4% for the fiscal year ended November 30, 2023, compared to 27.6% for the fiscal year ended November 30, 2022. The decrease can be attributed to the decrease in sales volume as well as the change in the product mix since certain products being sold have a lower profit margin. 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.

Selling and shipping expenses for the fiscal year ended November 30, 2023, was $3,010,509, a decrease of $295,205, or 8.9%, as compared to $3,305,714 for the fiscal year ended November 30, 2022. The decrease can be attributed to decreases in sales and the resulting selling expenses such as commission expenses, messenger and delivery and entertainment expenses, offset by increases in sales payroll, travel and trade show expenses as well as auto and freight out expenses.

General and administrative expenses for the fiscal year ended November 30, 2023, was $5,337,395, a decrease of $873,497, or 14.1%, as compared to $6,210,892 for the fiscal year ended November 30, 2022. The decrease is due primarily to decreases in officer salaries and office expenses as well as health and temporary help expenses and consulting and directors’ fees and bad debt expenses offset by increases in salaries and related payroll tax expenses, general insurance and maintenance expenses as well as consulting and public company expenses.

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 global economic conditions, expected rebound in the market, supply chain challenges, customer lead times, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240227729985/en/

Investor Contacts:

Sloane & Company

Neal Nagarajan, nnagarajan@sloanepr.com

Source: Surge Components, Inc.

FAQ

What were Surge Components, Inc.'s net sales for fiscal year 2023?

Surge reported net sales of $36.2 million for fiscal year 2023.

How did Surge Components, Inc. reduce debt entering 2024?

The company reduced its debt burden by over 14%, or $1 million, while increasing liquidity.

What is Surge Components, Inc.'s stock ticker symbol?

The stock ticker symbol for Surge Components, Inc. is SPRS.

What were the key financial highlights for Surge Components, Inc. in fiscal year 2023?

Net income available to common shareholders decreased to $967,110, with net sales of $36.3 million and gross profit of $9.9 million.

How did Surge Components, Inc. maintain profitability in a challenging environment?

The company remained profitable through operating leverage and efficiencies despite a decline in market conditions.

What strategies did Surge Components, Inc. implement to stay competitive?

Surge maintained superior lead times, stable production, and designed customized products for competitiveness.