Surge Components, Inc. Announces Fiscal Full Year 2022 Results

Company Delivers Record Net Sales of $51.9 million, up 30.3% Over Prior Year

Strong Sales Growth Drives Year-Over-Year Gross Profit Increase of 31.5% to $14.3 Million

Exceptional Net Income Increase of 49% to $3.7 Million or $0.65 per diluted share

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, 2022.

Financial Highlights for the Fiscal Year Ended November 30, 2022

• Net sales of $51.9 million, compared to $39.8 million in the prior-year-period
• Gross profit of $14.3 million, compared to $10.9 million in the prior-year-period
• Gross profit margin of 27.6%, compared to 27.3% in the prior-year period
• Net income available to common shareholders of $3.7 million; Diluted EPS of $0.65 compared to net income available to common shareholders of $2.5 million; Diluted EPS of $0.44 in the prior-year period

Operational Highlights

• Annual sales in 2022 were the largest annual sales in the Company’s history.
• Both the Challenge and Surge divisions are experiencing significant increases in product demand and sales volume, which is being fueled by growing customer demand.
• The London, UK sales office has been instrumental in the Company’s ongoing success in expanding its European market.
• Surge is making progress in expanding its footprint in Asia through the hiring of a key sales manager in China.
• Surge has shorter lead times compared to competitors, helping to maintain stable production and preserve a competitive advantage over peers.

“I am pleased to report Surge has seen a record year in 2022 which also followed a record year in 2021,” said Ira Levy, President and Chief Executive Officer of Surge. “Surge continues to grow, proving itself resilient and flexible in the face of industry challenges such as the global semiconductor chip shortages and supply chain issues. Considering changes in the global economy, the company is remaining proactive and taking the necessary actions to adjust and benefit from the evolving landscape.”

“The Company is thrilled with the sales growth achieved this year, generating 30.3% year over year growth with our largest recorded sales volume. By prioritizing cost management and a relentless focus on sales, we achieved an astounding 31.5% gain in gross profit and strong gross margins of 27.6% in 2022. Although a global economic slowdown is currently present, the company is taking protective measures to safeguard the business against future negative impacts. Our ability to provide products with shorter lead times than our peers, in both the Surge and Challenge divisions, has allowed us to overcome supply chain challenges and maintain an impressive competitive edge.”

“The Company’s remarkable year was fueled by both the expansion of business with existing customers and the acquisition of new customers. We are excited about the significant growth in the distribution sales channel and look forward to continued expansion in this area. In particular, the Surge division continues to make notable strides in the automotive market as more customers open to the company as a supplier and as we increase existing business. Additionally, both the Asian and European markets grew year over year, driven by strong customer demand. The introduction of new products helped to propel substantial overall growth.”

“Looking forward to 2023, we are deeply committed to meeting the needs of all our stakeholders, while consistently providing exceptional products and prioritizing profitability for our shareholders. We are dedicated to strengthening our sales team and extending our global presence, capitalizing on every opportunity that lies ahead. We firmly believe that we are well positioned to succeed in this industry and continue to deliver enduring value to our shareholders.”

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

Net sales for the fiscal year ended November 30, 2022 increased by 30.3% to $51.9 million, as compared to net sales of $39.8 million for the fiscal year ended November 30, 2021. The increase in net sales for the twelve-month period can be attributable to an increase in business with both new customers as well with existing customers. Additionally, one of the company’s divisions brokering certain products can be credited with a portion of the growth in sales.

Gross profit for the fiscal year ended November 30, 2022 increased by 31.5% to $14.3 million, as compared to $10.9 million for the fiscal year ended November 30, 2021. Gross profit margin as a percentage of net sales increased to 27.6% for the fiscal year ended November 30, 2022 , as compared to 27.3% for the fiscal year ended November 30, 2021. The increase in gross profit is a result of higher sales volume, but this was mitigated by certain products being sold at a lower profit margin. Our industry will face persistent customer demands for price reductions. The company also offers rebates to subcontractors, which can impact gross profit margin, however these subcontractors represent a significant growth opportunity.

Selling and shipping expenses for the fiscal year ended November 30, 2022 increased 27.8% to $3.3 million as compared to $2.6 million for the fiscal year ended November 30, 2021. We credit the increase to an uptick in selling expenses including commission expenses, travel and entertainment expenses, sales payroll and auto expenses, which were partially offset by lower freight out expenses.

General and administrative expenses for the fiscal year ended November 30, 2022 increased 22.4% to $6.2 million, as compared to $5.1 million for fiscal year ended November 30, 2021. The increase can be primarily attributable to increases in salaries and related payroll taxes, rental expenses, professional fees and office expenses as well as health and general insurance expenses and temporary help expenses and consulting and directors’ fees, public company expenses and warehouse expenses, partially offset by decreases in computer expenses and settlement expenses.

Net income for the fiscal year ended November 30, 2022 was $3.7 million, or $0.65 per diluted share as compared to net income of $2.5 million, or $0.44 per diluted share for the fiscal year ended November 30, 2021.

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, 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," "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.

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