Surge Components, Inc. (SPRS) research, news, and more from GeoInvesting

Company description

Tue, 02 Feb 2016 14:04:19 GMT

Surge Components, Inc. supplies electronic products and components. The company offers capacitors, which are electrical energy storage devices; and discrete components, such as semiconductor rectifiers, transistors, diodes, circuit protection devices, and audible components, including buzzers, speakers, microphones, resonators, filters, and discriminators. These products are used in the electronic circuitry of various products, including, automobiles, telecomm, audio, cellular telephones, computers, consumer electronics, garage door openers, household appliances, power supplies, and security equipment. The company sells its products to original equipment manufacturers and distributors, as well as independent sales representative. Surge Components, Inc. was founded in 1981 and is headquartered in Deer Park, New York.

Research

Mon, 06 Mar 2023 16:07:35 GMT

Surge Components (OOTC:SPRS), a supplier of electrical components and products announced Q4 2022 results:

Sales of $11.6 million vs $11.5 million in the prior year
EPS of $0.17 vs $0.11 in the prior year

“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...

...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.”

Research

Tue, 15 Oct 2019 12:26:02 GMT

Surge Components (OOTC:SPRS) ($3.09; $16.4M market cap), a supplier of electrical components and products announced Q3 2019 results:

Sales of $8.1 million vs $9.3 million in the prior year
EPS of $0.12 vs $0.06 in the prior year

While EPS showed a strong improvement due to a decrease in the cost of goods, sales were down as tariff concerns start to affect existing customers. Below is verbiage from the 10-Q:

“We attribute the decrease in net sales for the three months ended August 31, 2019 to a decreased demand at certain customers due to a downturn in business due to tariffs as well as a general demand. We also attribute the decrease to a decrease in business with certain existing customers.”

We will be on the conference call later this morning to see if management sheds any light on the potential of further impact from the tariffs.

Research

Mon, 15 Jul 2019 15:15:54 GMT

Surge Components (OOTC:SPRS) ($2.65; $13.9M market cap), a supplier of electrical components and products announced Q2 2019 results:

Sales of $8.5 million vs $7.3 million in the prior year
EPS of $0.09 vs $0.03

“We delivered another strong performance in the second quarter. Driven by robust sales to new and existing high-margin customers, net sales increased 16.6% and gross profit increased 28.6% on a year-over-year basis. A continued focus on maximizing profitability on a global scale also helped us deliver $1.1 million in net income in the first six months of the year, our strongest performance in the Company's history and a testament to our disciplined approach to growth and profitability.

Our results reflect our ongoing commitment to strengthening our world-class supply chain relationships, increasing our sales volumes and continuing to grow our international footprint. We also continue to expand our product offering, providing a total solution to the market, further strengthening our leadership position in the electronics components industry. This diversified offering and global presence are also helping us to more effectively mitigate the ongoing impact of tariffs as we continue to shift some customer deliveries directly to Hong Kong.”

Research

Mon, 15 Apr 2019 16:18:13 GMT

Surge Components (OOTC:SPRS) ($1.88; $10.1M market cap), a supplier of electrical components and products, announced Q1 2019 results:

Sales of $8.4 million vs $7.0 million in the prior year
EPS of $0.11 vs $0.01 in the prior year

“Surge is off to an excellent start to 2019. We delivered year-over-year growth in net sales of 20.4% and a 28.1% increase in gross profit in the first quarter. Driven by a strong sales pipeline of more profitable customers, we also generated a 27.6% gross profit margin.

Our performance in the first quarter illustrates our ongoing commitment to maximizing profitability on a global scale. Through smart investments in new resources, products and capabilities we are positioning Surge for continued growth as a leading supplier of electronic products and components. As part of this effort, we continued to strengthen our international footprint in the quarter. Following the launch of a new sales program in Brazil, we are now actively training local sales teams in the region and expect to see more activity out of this market in the coming year. In addition, we have also shifted some customer deliveries directly to Hong Kong in 2019. This has helped to mitigate the impact of tariffs while also strengthening our global position and our capabilities and services to our global customer base...

...We are extremely encouraged by our performance to date and remain confident that we have the right resources and strategy in place to compete and drive maximum efficiency in our business. We will continue to take a thoughtful and deliberate approach to growth to ensure we create the most value for our shareholders over the long term.”

In February of 2016, we issued our reasons for tracking SPRS which included its low valuation multiples, stock buyback and activist investor involvement. It was also included as part of our “Run to One” stock screen when the stock was trading at $0.73.

Research

Fri, 01 Mar 2019 17:07:37 GMT

Surge Components (OOTC:SPRS) ($1.00; $5.3M market cap), a supplier of electrical components and products announced Q4 2018 results:

Sales of $8.8 million vs $8.0 million in the prior year
EPS of $0.16 vs $0.07 in the prior year period

“I am very pleased with our performance in the fiscal fourth quarter and fiscal year 2018,” said Ira Levy, President and Chief Executive Officer of Surge. “Driven by a strong sales pipeline and continued growth in our distribution sales channels, full year net sales increased 8.7% year-over-year. A continued focus on operational efficiencies and sales to higher margin customers also drove increased profitability. Gross profit increased 10.3% over the prior year and gross profit margins climbed to 25.6% in fiscal 2018 as we successfully identified customers with whom the Company could increase its margins.

Leveraging our top supply chain, we are developing new customer relationships, increasing sales volumes and expanding our international footprint, with strong sales out of Asia in the fourth quarter. The Company also launched a new sales program in Brazil. While it is still early, we are optimistic about our progress in Brazil to date. We are also continuing to build out a pipeline of new products in our Challenge business segment. We have a patent pending on a new pinpoint alarm and continue to actively look for new product opportunities to drive strong customer acquisitions.

Overall, our performance in 2018 leaves us optimistic for the year ahead. Despite signs of slowing growth in certain markets globally, our established customer relationships, high-quality product lines and global footprint give us confidence that we are positioning the Company to mitigate the impact from any tariffs in the coming year.”

Research

Tue, 17 Apr 2018 14:21:07 GMT

Surge Components (OOTC:SPRS) ($1.20; $6.2M market cap), a supplier of electrical components and products announced Q1 2018 results:

Sales of $7.0 million vs $5.7 million in the prior year
EPS of $0.01 vs a loss of $0.03

Quotes from management:

“We are off to a strong start in fiscal 2018 delivering solid year-over-year growth in sales and profitability in the first quarter. Driven by a strong sales pipeline and an ongoing commitment to servicing high margin customers, net sales increased 23.3% and gross profit increased 28.7% on a year-over-year basis. A continued focus on operational efficiencies across the business also drove solid growth in gross profit margins and helped us continue to hold electronic component lead times below industry averages.

“We remain focused on maximizing profitability on a global scale and across industries with the continued expansion of our customer base internationally with strong sales in Asia in the quarter. Our innovative pipeline of new products along with our strong supply chain is driving increases in customer product approval rates, enabling us to win new customers and drive ongoing sales growth. We are also expanding our internal engineering teams in our Challenge division to meet growing customer demand for new product designs. We believe we are well positioned for continued growth and to deliver long-term value for our shareholders.”

Research

Tue, 17 Oct 2017 15:23:52 GMT

SPRS ($0.56) is a supplier of electrical components and products. In February of 2016, we issued our reasons for tracking SPRS which included its low valuation multiples, stock buyback and activist investor involvement. It was also included as part of our “Run to One” stock screen. Shares were trading at $0.76 at that time and had a brief run reaching highs of $1.40 in December 2016.

In February of 2017 the company announced a tender offer to purchase 5 million shares at price of $1.43. The tender offer was oversubscribed by 1.1 million shares, and the Company agreed to purchase a prorated amount from each tendering stockholder.

While our initial interest was more of an asset value/activist involvement play, rather than a sales/earnings play, the company reported strong Q3 2017 results yesterday after the close, adding another level of intrigue to the story.

Q3 2017 results:

Sales of $8.7 million vs $8.2 million
EPS of $0.08 vs $0.04

Quotes from management:

“I am pleased with our solid performance in the third quarter. We continued to build out our world-class supply chain with new relationships, increased sales and continued growth in our international footprint. Importantly, our strong profitability in the quarter countered the losses incurred in the first half of the year as a result of our previously settled proxy contest and tender offer, a testament to the strength of our operations and commitment to driving value for our shareholders.

Our continued focus on high margin customers and efficient management of the business lead to a 5.2% year-over-year increase in gross profit. Despite an aggressive pricing and rebate strategy, profit margins were also solid at 25.9%. We believe this pricing strategy provides us with significant growth potential over the long term, introducing us to new supplier relationships that support the continued growth and success of the business.”

This seems to be the highest level of revenue that the company has reported since prior to 2009. Hopefully, management can confirm if this sales and earnings trend can continue.

Research

Mon, 06 Feb 2017 16:49:10 GMT

SPRS ($1.31) - On February 2, 2016 when the stock was trading at $0.73 we stated our reasons for tracking SPRS which included its low valuation multiples, stock buyback and activist investor involvement. It was also included as part of our “Run to One” stock screen. Since then, shares have been trending up despite subpar operating performance. In our April 2016 note, we stated SPRS was more of asset value/activist involvement play, rather than an sales/earnings growth play. See our original reasons for tracking here.

Today, SPRS announced the commencement of a tender offer to purchase up to 5 million of its shares at a price of $1.43. With 10.1 million shares outstanding, we feel this tender offer will offer a level of support for the Company’s stock.

Comments & Business Outlook

Wed, 28 Sep 2016 13:42:07 GMT

Third Quarter 2016 Results

Sales of $8.2 million vs $8.3 million in prior year
EPS of $0.04 vs $0.04 in the prior year

Qutoes from managment:

“This was a strong quarter for our business. Following a challenging first-half of the year due primarily to macroeconomic headwinds, our operational strategies and initiatives are taking shape, driving a strong sales pipeline. In addition, we have begun to further focus our sales efforts on higher margin customers. We are particularly pleased with the 6.6% year-over-year increase in gross profits and the 26% gross profit margin during the quarter.

“Building off of eight consecutive years of strong growth, we are working diligently to build a robust customer base, including Fortune 500 technology companies and other businesses in various market segments, with noteworthy newer representation from certain high-growth areas such as energy, security, medical, and electronic games.

“Additionally, in the third quarter, we continued to leverage operational and profitability efficiencies across our two sales groups, Surge Components and Challenge Electronics, and have also been growing our sales force. As part of this effort, we have recently begun expanding our geographic footprint in the South American market, beginning in Brazil, and we are already making headway in that region. From a macroeconomic standpoint, our customers are experiencing more favorable tailwinds, which have led to increased sales in China, Canada, and other areas of Asia over the first three quarters of this year.

“Finally, the management and the board of directors of Surge have been developing strategic plans and initiatives for utilizing the cash on our balance sheet. This includes our current share repurchase program. Our focus is on ensuring that we have the right resources to compete and to create maximum efficiency in the business. We are taking a thoughtful and deliberate approach to this process to make certain that our cash is deployed to create the most value for our shareholders.”

Research

Mon, 18 Apr 2016 15:15:28 GMT

SPRS ($0.80) reported Q1 2016 results on Thursday, April 14th 2016. Q1 2016 results were down vs 2015:

Sales of $6.3 million vs $6.9 million
EPS of $0.01 vs $0.02

As we stated in our Feb. 2, 2016 reasons for tracking note, SPRS was more of an asset value/activist involvement play, rather than an sales/earnings growth play. See our original reasons for tracking here.

We will monitor the filings to look for a change in industry outlook commentary. The last several quarters have stated:

“The electronic components industry has changed from one of strong demand to one of reduced demand. This reduced demand can be attributed to a slowdown in global growth as well as a slowdown in the forecast of retail sales in North America. Management expects 2016 to continue with the reduced demand for components that the Company experienced in 2015. Due to this worldwide reduction in demand, the Company expects to feel the effects of potentially reduced demand for its products.”

Until then, SPRS will be more a 13D activist play.

Research

Thu, 17 Mar 2016 15:01:37 GMT

$SPRS ($0.89) - On February 2, 2016 when the stock was trading at $0.73 we stated our reasons for tracking SPRS which included its low valuation multiples, stock buyback and activist investor involvement. On Jan. 4, 2016 Michael D. Tofias, a long time 13G filer (indicating a passive investor) filed his first 13D (indicating an active investor).

In a13D/A filed yesterday, Mr. Tofias added in the “Purpose of Transaction” section that on March 15, 2016 he wrote to each director of the issuer to recommend that the directors should promptly explore a sale of the issuer.

As we stated in our original note, the Company’s book value per share is $1.18, so we believe it is reasonable to assume the stock may trend to that level given the recent improvement in growth outlook coupled with the activist push for sale of the company.

Research

Tue, 02 Feb 2016 14:07:09 GMT

SPRS ($0.73) – Surge Components (SPRS) is a supplier of electrical components and products. The main electrical products that it sells are capacitors, semiconductor rectifiers, transistors, diodes, circuit protection devices, and audible components such as buzzers, speakers, microphones, resonators, filters, and discriminators.

SPRS operates in a competitive, low margin commodity type environment where opportunities for growth may not be explosive. However, from a value perspective, there may be some reasons to track the company if shares continue to fall:

It’s selling at very low valuation multiples:
- TTM P/E: 18.2 (Q4 last year was a loss of $0.04; assuming a profitable to slightly profitable quarter like the company has reported in the first 3 quarters of 2015, the TTM P/E will drop significantly)
- Book value per share: $1.18
- Cash per share: $0.64
- Current ratio: 3.57
- Long term debt: $0
The stock may be priced right to attract activist investors that would push for a sale of the company or return of capital. In fact, on January 4, 2016 Michael D. Tofias, a long time 13G filer (indicating a passive investor) filed his first 13D (indicating an active investor). The purpose of transaction from the filing states:

“The purpose of the acquisition is investment. However, from time to time the reporting person intends to make recommendations to the issuer's management and/or board of directors with the goal of enhancing stockholder value and the income-paying capacity of the Common Stock generally, through operational efficiencies, corporate finance strategies, cost containment, and corporate governance initiatives. The reporting person may also recommend strategic initiatives, such as capital structure and balance sheet restructurings or a sale, merger, acquisition, or other transaction. The reporting person may seek representation on the issuer’s board by the reporting person and/or other stockholders, the removal of anti-takeover mechanisms, the rescission of executives’ golden parachutes, changes in the issuer’s management and board of directors, and incorporation of the issuer in a different state. The reporting person supports exploring the sale of some or all of the business to a strategic buyer that may benefit the company by reducing overlapping boards and management, if it results in creating and realizing value for stockholders.”

In November 2015, the company announced a stock buyback program of up to $500,000 worth of its shares of common stock.
Stress test: We often like to perform "stress tests" on how companies perform/performed during and after the 2008 recession to possibly get a glimpse at a worst case business outcome scenario.

We performed this exercise for SPRS, which revealed some encouraging trends, even during a difficult market environment. The following table illustrates that while this company has not been growing its earnings, profits have remained relatively steady while other valuation metrics have been improving.

This could support a case that the company may continue to attract value oriented activist investors, despite the overall market environment.


	Current	2014	2013	2012	2011	2010	2009
Sales	29.6ttm	27.2	25.2	22.3	23.2	21.6	12.3
EPS	.04ttm	0.04	0.13	0.14	0.14	0.16	0.03
B/V	1.18	1.1	1.06	0.93	0.76	0.47	0.31
Cash/share	.64	0.63	0.43	0.35	0.2	0.09	0.12

Caveats:

Lack of transparency; the company rarely issues any press releases or hold any conference calls.
Cautious commentary regarding industry and margins from Q3 2015 10Q:

The reduced demand for electronic components has continued in 2015 due to slowdowns in global growth and forecasted retail sales in North America and significant pricing pressures that it experienced in 2014. Due to this worldwide reduction in demand, we may be negatively impacted by reduced margins for our products. Despite the reduced demand, we have continued to grow our revenues due to specific customer projects and our management believes that we may be able to continue growing our revenue. In order for us to grow, we will depend on, among other things, the continued growth of the electronics and semiconductor industries, our ability to withstand intense price competition, our ability to obtain new customers, our ability to retain and attract sales and other personnel in order to expand our marketing capabilities, our ability to secure adequate sources of products, which are in demand on commercially reasonable terms, our success in managing growth, including monitoring an expanded level of operations and controlling costs. Profit margins have decreased for the nine months ended August 31, 2015 as certain of our customers, who are some of the biggest buyers of components, demand the lowest prices for our products. Some of these customers further demand periodic price reductions on a quarterly or semi-annual basis, as opposed to annual fixed pricing. In addition, many of our customers are electronic manufacturing service subcontractors, who manufacture products for their customers who do not have their own manufacturing operations. We have 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 does not affect such customers’ existing orders. These agreements negatively impact our profit margins since they reduce the amount of commissions we can earn on our products. Nevertheless, these subcontractor customers are important to us as they represent very significant potential growth for us as they enable us to become approved suppliers for their manufacturing customers, and they purchase our components for these customers. We believe it would be very difficult for us to achieve business with such manufacturing companies without these subcontractor customers. In addition, because some of our products are commodities, our gross profit margins continue to be pressured due to the competitive environment. We continue to take action to mitigate the pressure on our gross profit margins.

Reasons For Tracking

Tue, 02 Feb 2016 05:00:00 GMT

It’s selling at very low valuation multiples:
- TTM P/E: 18.2 (Q4 last year was a loss of $0.04; assuming a profitable to slightly profitable quarter like the company has reported in the first 3 quarters of 2015, the TTM P/E will drop significantly)
- Book value per share: $1.18
- Cash per share: $0.64
- Current ratio: 3.57
- Long term debt: $0
The stock may be priced right to attract activist investors that would push for a sale of the company or return of capital. In fact, on January 4, 2016 Michael D. Tofias, a long time 13G filer (indicating a passive investor) filed his first 13D (indicating an active investor). The purpose of transaction from the filing states:

“The purpose of the acquisition is investment. However, from time to time the reporting person intends to make recommendations to the issuer's management and/or board of directors with the goal of enhancing stockholder value and the income-paying capacity of the Common Stock generally, through operational efficiencies, corporate finance strategies, cost containment, and corporate governance initiatives. The reporting person may also recommend strategic initiatives, such as capital structure and balance sheet restructurings or a sale, merger, acquisition, or other transaction. The reporting person may seek representation on the issuer’s board by the reporting person and/or other stockholders, the removal of anti-takeover mechanisms, the rescission of executives’ golden parachutes, changes in the issuer’s management and board of directors, and incorporation of the issuer in a different state. The reporting person supports exploring the sale of some or all of the business to a strategic buyer that may benefit the company by reducing overlapping boards and management, if it results in creating and realizing value for stockholders.”

In November 2015, the company announced a stock buyback program of up to $500,000 worth of its shares of common stock.
Stress test: We often like to perform "stress tests" on how companies perform/performed during and after the 2008 recession to possibly get a glimpse at a worst case business outcome scenario.

This could support a case that the company may continue to attract value oriented activist investors, despite the overall market environment.


	Current	2014	2013	2012	2011	2010	2009
Sales	29.6ttm	27.2	25.2	22.3	23.2	21.6	12.3
EPS	.04ttm	0.04	0.13	0.14	0.14	0.16	0.03
B/V	1.18	1.1	1.06	0.93	0.76	0.47	0.31
Cash/share	.64	0.63	0.43	0.35	0.2	0.09	0.12

Caveats:

Lack of transparency; the company rarely issues any press releases or hold any conference calls.
Cautious commentary regarding industry and margins from Q3 2015 10Q:

The reduced demand for electronic components has continued in 2015 due to slowdowns in global growth and forecasted retail sales in North America and significant pricing pressures that it experienced in 2014. Due to this worldwide reduction in demand, we may be negatively impacted by reduced margins for our products. Despite the reduced demand, we have continued to grow our revenues due to specific customer projects and our management believes that we may be able to continue growing our revenue. In order for us to grow, we will depend on, among other things, the continued growth of the electronics and semiconductor industries, our ability to withstand intense price competition, our ability to obtain new customers, our ability to retain and attract sales and other personnel in order to expand our marketing capabilities, our ability to secure adequate sources of products, which are in demand on commercially reasonable terms, our success in managing growth, including monitoring an expanded level of operations and controlling costs. Profit margins have decreased for the nine months ended August 31, 2015 as certain of our customers, who are some of the biggest buyers of components, demand the lowest prices for our products. Some of these customers further demand periodic price reductions on a quarterly or semi-annual basis, as opposed to annual fixed pricing. In addition, many of our customers are electronic manufacturing service subcontractors, who manufacture products for their customers who do not have their own manufacturing operations. We have 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 does not affect such customers’ existing orders. These agreements negatively impact our profit margins since they reduce the amount of commissions we can earn on our products. Nevertheless, these subcontractor customers are important to us as they represent very significant potential growth for us as they enable us to become approved suppliers for their manufacturing customers, and they purchase our components for these customers. We believe it would be very difficult for us to achieve business with such manufacturing companies without these subcontractor customers. In addition, because some of our products are commodities, our gross profit margins continue to be pressured due to the competitive environment. We continue to take action to mitigate the pressure on our gross profit margins.