Surge Components, Inc. Announces First Quarter 2026 Results

• Delivered Solid Q1 Net Sales of $8.2 Million representing year-over-year growth of 13.3%
• Gross Profit of $2.4 Million, representing year-over-year growth of 17.7% and Gross Margin expansion of 110 basis points

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 first fiscal quarter ended February 28, 2026.

Operational Highlights

• Continues to strengthen its distribution sales channel, with distribution partners remaining a key growth driver in addition to sales through subcontractor relationships
• Continues to invest in future growth, including investments in product innovation, hiring new talent, and opening new regional sales offices
• Continues to advance its European sales operation, with strong growth from Surge division European sales and Challenge Electronics establishing a sales presence in Europe, expected by mid-2026
• Challenge Electronics continued to develop new products for its distribution channel, which resulted in new customers during the first fiscal quarter 2026

Financial Highlights for the First Quarter Ended February 28, 2026

• Drove net sales of $8.2 million, compared to $7.2 million in the prior-year period
• Increased gross profit to $2.4 million from $2.0 million in the prior-year period
• Improved gross profit margin to 29.4% from 28.3% in the prior-year period
• Net loss available to common shareholders of $36,775; earnings per share of $(0.01) compared to net income available to common shareholders of $54,856; earnings per share of $0.01 in the prior-year-period

“We are pleased to deliver meaningful growth in sales, gross profit, and expanded gross margins during the first quarter,” said Ira Levy, President and Chief Executive Officer of Surge.

“In addition to our sales directly with customers, we continued to strengthen our distribution sales channel and sales through subcontractors who manufacture on behalf of our customers. By deepening these channels, we effectively open the door to a broad base of end customers. Challenge Electronics developed new products for its expanded distribution sales channel, which also attracted new customers during the quarter.

“We continue to invest in future growth, including investments in product innovation, hiring new talent, and opening new regional sales offices. These investments impacted the bottom line this quarter, but we expect them to drive profitable growth in the future. We are also actively expanding our global reach. The Surge division’s European sales operation continues to perform well, and we are optimistic about continued growth in that market through 2026. At the same time, our Challenge Electronics sales division is establishing a sales presence in Europe, which we anticipate by mid-2026.

“We believe our strategic initiatives and unique value proposition that combines speed, competitive pricing, cutting-edge products, and ease of doing business, position us well for continued growth and value creation through 2026.”

Results of Operations for the Three Months Ended February 28, 2026

Consolidated net sales for the three months ended February 28, 2026 increased by $962,169 or 13.3%, to $8,193,907 as compared to net sales of $7,231,738 for the three months ended February 28, 2025. We attribute the increase to an increase in business with new customers as well as an increase in business with existing customers. Net sales for the three months ended February 28, 2026 and February 28, 2025 reflect $165,574 and $173,081, respectively of tariff costs that the Company was able to pass on to its customers.

Our gross profit for the three months ended February 28, 2026 increased by $362,707 to $2,408,409, or 17.7%, as compared to $2,045,702 for the three months ended February 28, 2025. Gross margin as a percentage of net sales increased to 29.4% for the three months ended February 28, 2026 compared to 28.3% for the three months ended February 28, 2025. The increase in gross profit and gross profit as a percentage of sales can be attributed to the increase in sales volume and can be attributed to certain products being sold at a higher profit margin. The Company was impacted by tariff costs on certain products imported from China, which went into effect as of July 6, 2018 as well as new tariffs that went into effect as of February 4, 2025. 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 February 28, 2026 was $834,180, an increase of $180,813, or 27.7%, as compared to $653,367 for three months ended February 28, 2025. We attribute the increase to increases in selling expenses such as commission expenses and sales payroll, due to the hiring of additional sales personnel and travel and entertainment expenses offset by decreases in advertising expenses.

General and administrative expenses for the three months ended February 28, 2026 was $1,721,278, an increase of $342,016, or 24.8%, as compared to $1,379,262 for the three months ended February 28, 2025. The increase is due primarily to increases in salaries and related payroll tax expenses due to the hiring of additional staff as well as rent, professional fees expenses, as well as office and public company expenses, partially offset by decreases in bank charge expenses.

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, 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.