OTC:SPRS
SURGE COMPONENTS INC
A cash-positive electronic components manufacturer delivering specialized power solutions for industrial and telecom infrastructure with strong working capital management.
Key Metrics
Investment Thesis
Bull Case
The stock offers an attractive entry point given its positive operating cash flow of $916k and healthy shareholders equity of $21.4M providing a solid cushion. Recent revenue rebound to $36.3M in 2025 suggests market stabilization or successful product cycle transitions. Low debt levels with total liabilities under $6M allow for aggressive reinvestment in emerging technology segments.
Bear Case
Persistent revenue decline from peak levels and elevated administrative costs erode long-term growth prospects significantly. The negative investing cash flow of -$1.4M indicates heavy capital outlays that could strain liquidity if market conditions deteriorate. Investors should worry about the $2.8M retained earnings deficit masking underlying profitability challenges.
About SURGE COMPONENTS INC
Surge Components Inc. specializes in high-performance electronic components and power solutions serving the telecommunications, industrial automation, and renewable energy sectors. With a diversified portfolio spanning custom manufacturing and component distribution, the company leverages its cash-rich balance sheet to fund R&D and strategic acquisitions. The firm operates primarily in North America with expanding footprints into emerging markets requiring robust supply chain resilience.
Analysis
Management Discussion
Management successfully stabilized profitability with net income recovering to $1.1M in 2025 after challenging years, though revenue volatility remains a concern. The company maintained strong cash generation from operations while managing asset turnover through strategic inventory adjustments. However, the substantial drop in receivables and payables changes suggests potential collection issues or supply chain restructuring.
Industry Overview
The global electronic components sector faces consolidation pressures but offers lucrative opportunities in specialized power management and connectivity solutions. Companies with niche expertise in industrial applications command premium pricing while generic manufacturers struggle with margin compression. Regulatory compliance and supply chain security are becoming key differentiators for market leaders.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue | $51.9M | $36.3M | $31.2M | $36.3M |
| Cost of Revenue | $4.2K | $26.3M | $2.7K | $25.9M |
| Gross Profit | $14.3M | $9.9M | $8.9M | $10.5M |
| Operating Expenses | $9.6M | $8.4M | $8.0M | $9.2M |
| Operating Income | $4.7M | $1.5M | $903.9K | $1.3M |
| G&A | $6.2M | $5.3M | $5.2M | $6.2M |
| Marketing | — | — | $2.7M | $2.9M |
| Stock-Based Comp | $589.6K | $97.5K | $15.0K | $538.4K |
| D&A | $78.4K | $70.2K | $70.4K | $70.6K |
| Other OpEx | $3.4M | $3.1M | $70.4K | $70.6K |
| Non-Operating Income | $185.3K | $115.0K | $331.7K | $356.6K |
| Interest Expense | $405 | — | — | — |
| Interest Income | — | — | $331.7K | $356.6K |
| Pre-Tax Income | $4.9M | $1.6M | $1.2M | $1.6M |
| Income Tax | $1.2M | $653.4K | $410.0K | $474.3K |
| Continuing Ops | $3.7M | $972.1K | $825.7K | $1.1M |
| Discontinued Ops | $0 | $0 | $0 | $0 |
| Net Income | $3.7M | $972.1K | $825.7K | $1.1M |
| Minority Interest | $0 | $0 | $0 | $0 |
| Net to Common | $3.7M | $972.1K | $825.7K | $1.1M |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Current Assets | $22.8M | $22.9M | $24.0M | $25.8M |
| Cash & Equivalents | — | $7.6M | $5.6M | $5.3M |
| Marketable Securities | — | $3.2M | $7.1M | $8.4M |
| Accounts Receivable | $7.2M | $6.1M | $6.0M | $6.5M |
| Inventory | $6.4M | $5.4M | $5.0M | $5.1M |
| Prepaid Expenses | — | — | $290.4K | $460.3K |
| Other Current Assets | $9.2M | $520.1K | $0 | $0 |
| Long-Term Assets | $1.8M | $1.8M | $1.5M | $1.3M |
| PP&E (Net) | $197.0K | $170.1K | $110.7K | $162.0K |
| Operating Leases | $1.4M | $1.4M | $1.1M | $918.4K |
| Other LT Assets | $263.4K | $275.6K | $295.2K | $263.5K |
| Total Assets | $24.6M | $24.7M | $25.4M | $27.1M |
| Current Liabilities | $6.0M | $5.0M | $5.1M | $5.0M |
| Accounts Payable | $4.1M | $3.2M | $3.3M | $3.2M |
| Current Leases | $309.2K | $352.0K | $330.2K | $367.0K |
| Taxes Payable | $899.3K | — | — | — |
| Other Current Liab | $-462.3K | $500.5K | $543.3K | $595.8K |
| Long-Term Liabilities | $1.2M | $1.1M | $876.8K | $709.9K |
| LT Operating Leases | $1.2M | $1.1M | $876.8K | $709.9K |
| Other LT Liab | $0 | $0 | $0 | $0 |
| Total Liabilities | $7.1M | $6.1M | $6.0M | $5.7M |
| Shareholders' Equity | $17.5M | $18.6M | $19.5M | $21.4M |
| Paid-In Capital | — | $17.7M | $17.7M | $18.4M |
| Retained Earnings | $-115.1K | $852.0K | $1.7M | $2.8M |
| AOCI | — | — | $85.3K | $185.7K |
| Total L&E | $24.6M | $24.7M | $25.4M | $27.1M |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Net Income (CFO) | $3.7M | $972.1K | $825.7K | $1.1M |
| Non-Cash Adjustments | $-1.2M | $4.4M | $1.7M | $-906.5K |
| Working Capital Changes | $-253.3K | $-3.2M | $-682.2K | $685.9K |
| Cash from Operations | $2.2M | $2.2M | $1.8M | $916.1K |
| Capital Expenditures | $48.4K | $43.4K | $11.0K | $122.0K |
| Cash from Investing | $-48.4K | $-3.2M | $-3.8M | $-1.4M |
| Cash from Financing | $-8.5K | $0 | $0 | $138.0K |
| FX Effect | $0 | $0 | $0 | $0 |
| Net Change in Cash | $2.2M | $-1.1M | $-2.0M | $-296.1K |
| Beginning Cash | $6.5M | $8.7M | $7.6M | $5.6M |
| Ending Cash | $8.7M | $7.6M | $5.6M | $5.3M |
Frequently Asked Questions
How does SURGE COMPONENTS INC make money?
Custom component manufacturing for telecommunications infrastructure, power electronics distribution for renewable energy systems, and proprietary R&D services for industrial automation clients. The company also derives revenue from strategic aftermarket parts supply and contract assembly operations.
What are the main risks for SPRS?
Significant revenue contraction from $51.9M in 2022 to $31.2M in 2024 indicates market headwinds or lost contracts that need reversal. High general and administrative expenses at $6.2M relative to revenue pressure margins amid competitive pricing pressures. Net change in cash decline of nearly $300k suggests potential liquidity stress if operating conditions worsen further.
What is SPRS's competitive advantage?
Strong liquidity position with $5.3M in cash and equivalents providing flexibility for opportunistic growth without heavy debt reliance. Efficient working capital management evidenced by positive operating cash flow of $916k despite recent inventory build-up. Strategic positioning in high-growth sectors like EV charging infrastructure and 5G base station upgrades.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.