Surge Components, Inc.

What they do

Surge Components operates two sales groups: Surge, which sells capacitors and discrete semiconductor components such as rectifiers, transistors and diodes, and Challenge Electronics, which sells audible components including buzzers, speakers, microphones, resonators, alarms, chimes, filters and discriminators. Products are made mainly in Asia by about sixteen independent manufacturers and sold to OEMs and distributors, including three of the world's top four electronic component distributors, as well as through independent sales representatives. The company also acts as exclusive sales agent for manufacturer Lelon Electronics in North America, earning commissions, and operates a Hong Kong subsidiary to handle U.S. customers that design domestically but manufacture in Asia.

Revenue drivers

• Surge components (capacitors and discrete semiconductors) — The larger sales group, selling capacitors and discrete semiconductors like rectifiers, transistors and diodes to OEMs and distributors for use in autos, telecom, computers, consumer electronics, appliances, power supplies and security equipment.
• Challenge Electronics (audible components) — Sells buzzers, speakers, microphones, resonators, alarms, chimes, filters and discriminators, including custom redesigns done with suppliers, through independent representatives and distributors.
• Lelon Electronics sales agency commission — Surge is the exclusive North American sales agent for Lelon Electronics, earning commission revenue determined sale by sale based on product profit margin; commissions totaled $312,389 in fiscal 2025 and $95,584 in fiscal 2024.
• Brokering and Asia transfer business — Challenge at times brokers parts that regular suppliers cannot deliver, and the Hong Kong office handles U.S. customers purchasing and manufacturing in Asia, adding incremental revenue.

Recent performance

Annual revenue fell from $51.9M in 2022 to $36.3M in 2023 and $31.2M in 2024 before recovering to $36.3M in fiscal 2025. Net income was $1.1M in fiscal 2025, up from $825,677 in fiscal 2024, with diluted EPS of $0.20 versus $0.14. Operating cash flow declined to $916,147 in fiscal 2025 from $1.8M in fiscal 2024. For the six months ended May 31, 2026, quarterly revenue was $10.3M, $9.9M, $8.2M and $9.4M across the trailing four quarters, and commission revenue fell to $24,462 from $203,019 in the prior-year six-month period.

Strategy

Management is focused on growing by expanding the product lines it sells and adding new clients and suppliers, while relying on the continued growth of the electronics and semiconductor industries. The company maintains a Hong Kong sales, marketing and warehouse subsidiary to serve customers that design in the U.S. but manufacture in Asia, and it is working with local, regional and national distributors to sell Challenge products across every state. Surge also has engineers who work with suppliers on custom redesigns and new product introductions. Management notes that customers are centralizing purchasing, stretching payment terms and moving manufacturing to Asia, and that consolidation among customers makes business more complicated and costly.

Risks

• Revenue concentration and volatility — Revenue fell from $51.9M in 2022 to $31.2M in 2024 before recovering to $36.3M in 2025, and net income has fallen from $3.7M in 2022 to $1.1M in 2025.
• Supplier dependence — Products are manufactured predominantly in Asia by about sixteen independent manufacturers, and the company has only one binding long-term supply agreement, with Lelon Electronics.
• Commission revenue decline — Commission revenue from the Lelon agency relationship totaled $24,462 for the six months ended May 31, 2026, down from $203,019 in the prior-year period.
• Customer consolidation and pricing pressure — Management says customers are centralizing purchasing, stretching payment terms and consolidating through mergers and acquisitions, which increases competition and cost for the company.

Outlook

Management states that future growth depends on continued growth of the electronics and semiconductor industries, its ability to withstand intense price competition, develop new products and obtain new clients, secure adequate product supply on commercially reasonable terms, and manage growth. The company also cites the need for a presence in Asia to serve customers and manufacturers and notes growing regional sales in Europe. No specific numerical guidance is provided.