Surge Components, Inc. Announces Second Quarter 2026 Results

• Delivered Solid Q2 Net Sales of $9.4 Million representing year-over-year growth of 5.0%
• Gross Profit of $2.9 Million, representing year-over-year growth of 7.5% and Gross Margin expansion of 70 basis points
• Delivered earnings per share of $0.07 compared to $0.02 in the prior-year-period

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 second fiscal quarter ended May 31, 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 expand its European sales operation
• Continues to invest in future growth, including the hiring of new engineering talent during the quarter

Financial Highlights for the Second Quarter Ended May 31, 2026

• Drove net sales of $9.4 million, compared to $8.9 million in the prior-year period
• Increased gross profit to $2.9 million from $2.7 million in the prior-year period
• Improved gross profit margin to 30.9% from 30.2% in the prior-year period
• Net income available to common shareholders of $404,558; earnings per share of $0.07 compared to net income available to common shareholders of $117,964; earnings per share of $0.02 in the prior-year-period

“We are pleased to deliver meaningful growth in sales, gross profit, and expanded margins during the second 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.

“We are also actively expanding our global reach. Our European sales operation continues to perform well, we are expanding our presence in Europe, and we remain optimistic about continued growth in that market through 2026.

“Margins expanded during the quarter, driven in part by our customized design capabilities for individual customers, a differentiator that commands higher margins. We were able to achieve these margins while continuing to invest in future growth, including the hiring of new engineering talent during the quarter.

“We would also like to touch on industry trends. With continued growth across the AI ecosystem, it is possible that demand may outpace supply, potentially resulting in longer lead times and supply constraints across parts of the industry. Our manufacturing partners’ shorter lead times potentially position Surge to capitalize on these industry dynamics by helping customers secure critical products when existing suppliers cannot meet their needs. The Company will begin pursuing opportunities within the AI ecosystem, targeting potential new customers whose applications require the products that Surge supplies.

“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 May 31, 2026

Consolidated net sales for the three months ended May 31, 2026 increased by $444,969 or 5.0%, to $9,361,694 as compared to net sales of $8,916,725 for the three months ended May 31, 2025. We attribute the increase to an increase in business with new customers as well as an increase in business with existing customers.

Gross profit for the three months ended May 31, 2026 increased by $201,920 to $2,890,323, or 7.5%, as compared to $2,688,403 for the three months ended May 31, 2025. Gross margin as a percentage of net sales increased to 30.9% for the three months ended May 31, 2026 compared to 30.2% for the three months ended May 31, 2025. The increase in gross profit and gross profit as a percentage of sales can be attributed to the increase in sales volume and to certain products being sold at a higher 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. We work with electronic manufacturing service subcontractor customers who manufacture products for other customers who do not have their own manufacturing operations. At times we are not able to recover these price reductions from our suppliers. The Company has agreements with these subcontractor customers to provide periodic cost reductions through rebates in the amount of 5%. These reductions only affect future shipments of our products and do not affect existing orders. These reductions can have a negative impact on our profit margins since they reduce the amount of commissions we can earn. Even though this rebate can impact the Company’s gross profit margin, these subcontractor customers represent very significant potential growth for the Company because they can help the Company become an approved supplier at the customers they manufacture for and they purchase our components for these customers. We believe it would be very difficult for the Company to achieve business at these customers without the help of these subcontractor customers. 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 the 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 May 31, 2026 was $888,011, an increase of $209,159, or 30.8%, as compared to $678,852 for three months ended May 31, 2025. We attribute the increase to increases in selling expenses such as commission expenses, sales payroll, due to the hiring of additional sales personnel and travel and entertainment expenses, as well as auto expenses, freight out and trade show expenses offset by decreases in advertising expenses.

General and administrative expenses for the three months ended May 31, 2026 was $1,537,804, a decrease of $391,637, or 20.3%, as compared to $1,929,441 for the three months ended May 31, 2025. The decrease for the three months ended May 31, 2026 is due to decreases in insurance expenses, professional fees and consulting expenses as well as decreases in bank charges and bad debt allowances, partially offset by increases in salaries, utilities and office expenses as well as directors fees and public company 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.