Net Sales Increase 16.6% Year-Over-Year on Strong Sales Volumes and Growth in Distribution Sales Channels
Focus on Profitable Expansion Strengthens Gross Profit by 28.6% Year-Over-Year
Robust Profit Margins of 29.2%
Financial Highlights for the Fiscal Second Quarter Ended May 31, 2019
- Net sales of $8.5 million, a 16.6% year-over-year increase driven by strong sales with new and existing customers
- Gross profit of $2.5 million, a 28.6% year-over-year increase, driven by growth in sales volumes and higher profit margin product sales
- Gross profit margin of 29.2%, compared to 26.4% in the prior-year period
- Net income available to common shareholders of $461,632; EPS of $0.09
Operational Highlights
- Continue to cultivate the Company's distribution sales channels in the Americas and globally to solidify additional customer relationships
- Ongoing development of new product pipeline driving increased sales in the Company's Challenge business segment
- Patent pending new pinpoint alarm in Company's Challenge division continues successful market testing with Company’s client base
DEER PARK, N.Y., July 15, 2019 (GLOBE NEWSWIRE) -- Surge Components, Inc. (“Surge” or “the Company”) (OTC Pink: SPRS), a leading supplier of capacitors, discrete semi-conductors and audible/sounding devices, today announced financial results for the fiscal second quarter ended May 31, 2019.
Ira Levy, President and Chief Executive Officer of Surge commented, “We delivered another strong performance in the second quarter. Driven by robust sales to new and existing high-margin customers, net sales increased 16.6% and gross profit increased 28.6% on a year-over-year basis. A continued focus on maximizing profitability on a global scale also helped us deliver $1.1 million in net income in the first six months of the year, our strongest performance in the Company’s history and a testament to our disciplined approach to growth and profitability.
Our results reflect our ongoing commitment to strengthening our world-class supply chain relationships, increasing our sales volumes and continuing to grow our international footprint. We also continue to expand our product offering, providing a total solution to the market, further strengthening our leadership position in the electronics components industry. This diversified offering and global presence are also helping us to more effectively mitigate the ongoing impact of tariffs as we continue to shift some customer deliveries directly to Hong Kong.
We remain pleased with our execution in the quarter and believe we are well positioned for continued growth and to deliver long-term value for our shareholders.”
Results of Operations for the Three Months Ended May 31, 2019
Net sales for the three months ended May 31, 2019 increased by 16.6% to $8.5 million, as compared to net sales of $7.3 million for the three months ended May 31, 2018. 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. Included in the increase are tariff costs that the Company was able to bill its customers totaling $686,000.
Gross profit for the three months ended May 31, 2019 increased by 28.6% to $2.5 million, as compared to $1.9 million for the three months ended May 31, 2018. Gross profit margin as a percentage of net sales increased to 29.2% for the three months ended May 31, 2019, as compared to 26.4% in the three months ended May 31, 2018. The increase in gross profit and gross profit margin for the three month period is primarily attributable to sales volume growth as well as certain products being sold at a higher profit margin. Gross profit margin in the three months ended May 31, 2018 was impacted by a more competitive pricing and rebate strategy with Electronics Manufacturing Service subcontractors. During the three months ended May 31, 2019, the Company was also impacted by tariff costs on certain products imported from China, which 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. These customers accept responsibility for the transportation costs for the goods to be shipped to North America.
Selling and shipping expenses for the three months ended May 31, 2019 increased 2.2% to $651,339, as compared to $637,418 in the three months ended May 31, 2018. The increase in selling and shipping expenses for the three-month period was primarily attributable to increased sales and thus, increases in selling expenses such as salesman compensation and commission expenses, and increases in travel and auto expenses. These increases were offset by decreases in the Company’s freight and messenger and delivery expenses.
General and administrative expenses for the three months ended May 31, 2019 increased 17.3% to $1.3 million, as compared to $1.1 million for the three months ended May 31, 2018. The increase in general and administrative expenses for the three-month period is due to increases in payroll, rent and insurance expenses as well as increases to temporary help and public company expenses, professional fees, and bad debt expenses. These increases were offset by decreases in utilities expense, office expenses, computer and consulting expenses and bank charges.
Net income available to common shareholders for the three months ended May 31, 2019 was $461,632, as compared to a net income available to common shareholders of $168,309 for the three months ended May 31, 2018. Net income per share available to common shareholders for the three months ended May 31, 2019 was $0.09, as compared to net income per share available to common shareholders of $0.03 for the three months ended May 31, 2018.
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.
Conference Call
Surge will host a conference call with investors on Monday, July 15, 2019 at 9:00 am ET.
To access the call please dial (866) 996-4414 from the United States, or (470) 495-0878 from outside the U.S. The conference call I.D. number is 4548885. Participants should dial in 5 to 10 minutes before the scheduled time and must be on a touch-tone telephone to ask questions.
A replay of the call can be accessed through July 22, 2019 by dialing (800) 585-8367 from the U.S., or (404) 537-3406 from outside the U.S. The conference call I.D. number is 4548885.
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