SURGE COMPONENTS INC SEC 10-Q Report
SURGE COMPONENTS INC, a leading supplier of electronic components, has released its Form 10-Q report for the third quarter, showcasing robust financial performance and strategic business developments. The company, which operates through its Surge and Challenge Electronics divisions, has demonstrated significant growth in both revenue and profitability, driven by increased sales and improved operational efficiencies.
Financial Highlights
Net Sales: $16.15 million, marking a 12.2% increase compared to the same period last year. This growth is attributed to both new and existing customer expansion and higher profit margin sales.
Gross Profit: $4.73 million, up by 17.0% from the previous year, with the gross margin improving to 29.3% due to increased sales volume.
Income before other income (expense) and income taxes: $58,104, reflecting a slight increase from the previous year, indicating stable operational performance.
Net Income: $175,320, an increase from $125,938 in the prior year, driven by higher sales and improved gross margins.
Net Income available to common shareholders: $172,820, reflecting the net income after preferred stock dividends.
Basic Net Income Per Share: $0.03, up from $0.02 in the previous year, indicating improved profitability per share.
Diluted Net Income Per Share: $0.03, consistent with the basic EPS, reflecting minimal dilution impact.
Business Highlights
Revenue Segments: Surge Components operates with two sales groups, Surge and Challenge Electronics. Surge supplies electronic products like capacitors and discrete semiconductor components, while Challenge focuses on audible components such as buzzers, speakers, and microphones.
Geographical Performance: The company has a significant presence in North America and Asia, with a Hong Kong office to manage business from U.S. customers manufacturing in Asia. Export sales to China and Canada are notable, with China showing a significant increase in sales.
Sales Units: The company acts as a master distribution agent and sales agent, with commission revenue from sales agency activities increasing significantly compared to the previous year.
Future Outlook: Management anticipates continued challenges due to inflation, economic conditions, and supply chain issues. However, they remain cautiously optimistic about growth opportunities, particularly due to shorter lead times compared to competitors.
Operational Challenges: The company faces challenges from customer centralization of purchasing, extended payment terms, and the need for a presence in Asia due to globalization trends. Additionally, tariffs and tense U.S.-China relations could impact operations.
Supply Chain Strategy: To mitigate tariff impacts, the company has adjusted incoterms for customers manufacturing in Mexico and is utilizing bonded warehouses to avoid potential tariffs.
Product Customization: Challenge Electronics is expanding its product line by working with suppliers to customize products for customers, enhancing product performance and differentiating from commodity products.
SEC Filing: SURGE COMPONENTS INC [ SPRS ] - 10-Q - Jul. 14, 2025