Surge Components Reports 20.8% Decline in Net Sales, Net Income for Nine Months Ended August 31, 2024

Surge Components, Inc. reported a significant decline in financial performance for the nine months ended August 31, 2024, compared to the same period in 2023. Consolidated net sales decreased by $5.9 million (20.8%) to $22.4 million, down from $28.2 million. This decline was attributed to reduced business with both new and existing customers, as well as delays in orders due to excess inventory from 2022. The company also noted that net sales included $386,343 in tariff costs passed to customers, a decrease from $872,224 in the prior year.

Gross profit for the nine months ended August 31, 2024, was $6.5 million, down from $7.9 million, reflecting a decrease of $1.3 million. However, the gross margin improved to 29.2%, up from 27.8% in the previous year, due to higher margin sales despite lower sales volume. Selling and shipping expenses decreased by 10.2% to $2.0 million, while general and administrative expenses also fell by 5.3% to $3.9 million.

Net income for the nine months ended August 31, 2024, was $570,290, a decline from $1.1 million in the same period of 2023. In contrast, net income for the three months ended August 31, 2024, increased to $444,352 from $133,280, indicating a positive trend in the most recent quarter. The company’s net comprehensive income for the nine months was $756,249, down from $1.1 million in the prior year.

As of August 31, 2024, total assets increased to $25.3 million from $24.7 million, with total current assets rising to $23.7 million. Cash decreased to $4.1 million from $7.6 million, while marketable securities increased significantly to $7.8 million from $3.2 million. Total shareholders’ equity rose to $19.3 million, up from $18.6 million.

Strategically, Surge Components has expanded its product offerings through its subsidiary, Challenge Electronics, which now includes a wider range of audible components. The company has also established Surge Ltd. in Hong Kong to enhance service and business development in Asia. However, challenges persist, including customer consolidation, longer payment terms, and ongoing supply chain issues exacerbated by tariffs and inflation.

The company reported a net cash flow provided by operating activities of $955,000, down from $1.3 million in the previous year, and a net cash flow used in investing activities of $(4.4 million), compared to $(4.0 million) in 2023. The overall net decrease in cash for the nine months was $(3.5 million), compared to $(2.7 million) in the prior year.