Core Viewpoint - Nortech Systems (NSYS) has appointed Andrew Walko as Senior Vice President of Global Operations, succeeding John Lindeen, who will retire in the first quarter of 2026 [1] Group 1: Leadership Changes - Andrew Walko will oversee the Company's global operations, which include facilities in the U.S., Mexico, and China [1] - Walko has a strong background in the medical device industry, having held executive roles at Sanuwave and Biomerics, as well as senior manufacturing operations positions at Minnetronix [1] Group 2: Responsibilities - In his new role, Walko will be responsible for managing the global supply chain, new product introductions, production planning, and ensuring on-time delivery [1]

Core Insights - Nortech Systems Incorporated has appointed Andrew Walko as Senior Vice President of Global Operations, effective immediately, to enhance leadership in strategic initiatives [1][2] Leadership Transition - Andrew Walko replaces John Lindeen, who is set to retire in the first quarter of 2026, and will oversee global operations including facilities in the U.S., Mexico, and China [3] Responsibilities and Focus Areas - Walko's responsibilities include managing the global supply chain, new product introductions, production planning, and ensuring on-time delivery while optimizing the company's near-shoring strategy and manufacturing capacity [3] - The focus will be on reducing lead times, improving quality standards, mitigating supply chain risks, and enhancing cost productivity through innovative customer partnerships [3] Company Profile - Nortech specializes in complex cable harnesses, printed circuit board assemblies, and box builds for low-volume, high-mix global manufacturing [4] - The company has made strategic investments in the U.S., Mexico, and China, which have diversified its capabilities and improved efficiencies, supporting future growth [4] - Nortech serves various markets including medical imaging, medical devices, aerospace & defense, and industrial sectors, with a vertically integrated manufacturing and supply chain capability [5]

Core Viewpoint - Nortech Systems, Inc. is conducting its Third Quarter 2025 Earnings Conference Call to discuss operational reviews, recent developments, and financial results [1][2]. Group 1: Operational Overview - The call will begin with a review of operations and business outlook by the President and CEO, Jay Miller [2]. - The company emphasizes that statements made during the call may include forward-looking information regarding expected net sales and operating results [2][3]. Group 2: Financial Results - The Chief Financial Officer, Andrew LaFrence, will present the financial results for the third quarter of 2025 following the operational review [2]. - The company will provide insights into future plans and opportunities during the call [2].

Financial Data and Key Metrics Changes - Net sales for Q3 2025 totaled $30.5 million, representing a 2.9% decrease from $31.4 million in Q3 2024 [9] - Gross profit for Q3 2025 was $5 million, or 16.5% of net sales, compared to $3.8 million, or 12.2% of net sales in the same prior year quarter [10][11] - Adjusted EBITDA for Q3 2025 was $1.3 million, significantly up from $143,000 in Q3 2024, reflecting improved efficiencies and productivity [17] Business Line Data and Key Metrics Changes - Aerospace and defense net sales decreased by $1.4 million due to increased production in the latter half of 2024 and delays in product approvals [9] - Medical imaging net sales increased by 8.7% or $832,000 compared to the same quarter in 2024, driven by the transfer of customer programs [10] Market Data and Key Metrics Changes - Customer backlog was $77.3 million as of September 30, 2025, consistent with the backlog at June 30, 2025 [10] - The company is well-positioned in North America, particularly with its Monterrey operations under the USMCA framework, reducing exposure to tariffs [4] Company Strategy and Development Direction - The company is focused on strengthening its balance sheet and reducing inventory investments in 2025 [19] - Investments in regulatory capabilities have been made to leverage future growth, including achieving AS 9100D and CMMC 2.0 certifications [5][19] - The strategic plan emphasizes engineering expertise, product innovation, and sustainability, particularly in fiber optic technology [20][23] Management Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about positioning in the nearshoring landscape and the potential for continued sales momentum in 2025 and beyond [26] - The company believes it has overcome revenue and earning headwinds from changes in customer ordering patterns and delays in aerospace and defense programs [18] Other Important Information - The company incurred a net loss of $146,000 in Q3 2025 due to increased income tax expenses [12] - Cash flow increased to $1.3 million as of September 30, 2025, up from $916,000 at the end of 2024 [15] Q&A Session Summary - There were no questions from the line during the Q&A session [27]

Financial Performance - Net sales for Q3 2025 were $30.5 million, a decrease of 2.9% compared to $31.4 million in Q3 2024[5] - Gross profit increased by 31.0% to $5.0 million in Q3 2025 from $3.8 million in Q3 2024[5] - Net loss improved to $(146) thousand, or $(0.05) per basic share, compared to a net loss of $(739) thousand, or $(0.27) per basic share in Q3 2024, representing an 80.2% improvement[6] - Adjusted EBITDA for Q3 2025 was $1.3 million, up 776.2% from $0.1 million in Q3 2024[6] - For the nine months ended September 30, 2025, the net loss was $1,149,000 compared to a net income of $183,000 for the same period in 2024[16] - EBITDA for the nine months ended September 30, 2025, was $1,060,000, a decrease from $2,432,000 in the same period of 2024[17] - Adjusted EBITDA for the nine months ended September 30, 2025, was $1,326,000, down from $2,699,000 in the prior year[17] - The total net sales for the last twelve months ended in Q3 2025 were $120.8 million, a decline from $138.9 million in Q3 2023[18] - The adjusted gross profit margin for Q3 2025 was 13.1%, down from 15.4% in Q3 2024[18] Operational Metrics - The company reported a 90-day backlog of $31.3 million as of September 30, 2025, compared to $29.6 million as of September 30, 2024[6] - Operating expenses decreased by 5.2% to $4.1 million in Q3 2025 from $4.3 million in Q3 2024[5] - Cash used in operating activities for the nine months ended September 30, 2025, was $2,865,000, slightly improved from $3,043,000 in 2024[16] - The company experienced a significant increase in accounts receivable, with a change of $(3,875,000) for the nine months ended September 30, 2025[16] Assets and Liabilities - Total assets increased to $74.8 million as of September 30, 2025, up from $72.4 million as of December 31, 2024[13] - Current liabilities rose to $33.6 million as of September 30, 2025, compared to $21.4 million as of December 31, 2024[13] Certification and Strategic Outlook - The Monterrey, Mexico facility achieved AS9100:D certification, enhancing service offerings in aerospace and industrial markets[3] - The company is optimistic about leveraging operational performance in the nearshoring landscape with its North American and Asian footprint[3] Financing Activities - The company reported a net cash provided by financing activities of $3,218,000 for the nine months ended September 30, 2025, compared to $3,561,000 in 2024[16] - The cash balance at the end of the period was $1,271,000, compared to $1,239,000 at the end of the same period in 2024[16] - The company incurred $235,000 in severance charges during Q1 2025 related to a reduction in force[17]

Financial Performance - Net sales for Q3 2025 were $30,482, a decrease of 2.9% from $31,407 in Q3 2024[8] - Gross profit increased to $5,025 in Q3 2025, compared to $3,835 in Q3 2024, reflecting a gross margin improvement[8] - Operating expenses totaled $4,080 in Q3 2025, down from $4,302 in Q3 2024, indicating a reduction of 5.2%[8] - The company reported a net loss of $146 in Q3 2025, an improvement from a net loss of $739 in Q3 2024[8] - The company reported a comprehensive loss of $167 in Q3 2025, compared to a comprehensive loss of $516 in Q3 2024[8] - The company reported a net loss of $739 for the three months ended September 30, 2024, and a net loss of $146 for the three months ended September 30, 2025[16] - Total net sales for the three months ended September 30, 2025, were $30,482 million, a slight decrease from $31,407 million in the same period of 2024, representing a 2.9% decline[33] - For the nine months ended September 30, 2025, total net sales were $88,052, down $11,461 or 11.5% from $99,513 in the prior year[71] Assets and Liabilities - Total current assets increased to $59,206 as of September 30, 2025, up from $55,315 at the end of 2024[10] - Total liabilities rose to $41,400 as of September 30, 2025, compared to $38,430 at the end of 2024, reflecting an increase of 5.1%[10] - As of September 30, 2025, total shareholders' equity was $33,357, a decrease from $35,690 as of June 30, 2024, reflecting a net loss of $1,149 during the period[16] - Long-lived tangible assets as of September 30, 2025, totaled $12,628, down from $14,371 as of December 31, 2024[59] Cash Flow and Financing - Cash at the end of Q3 2025 was $1,271, an increase from $916 at the beginning of the period[12] - Net cash used in operating activities for the nine months ended September 30, 2025, was $2,865, a slight improvement from $3,043 in the same period of 2024[12] - Cash provided by financing activities was $3,218 million for the nine months ended September 30, 2025, compared to $3,561 million in the prior-year period, driven by line of credit advances[92] - Cash provided by inventory was $2,823 million for the nine months ended September 30, 2025, compared to cash used of $(922) million in the prior-year period, reflecting a reduction in inventory balances[95] - The company entered into a $15,000 million Senior Secured Revolving Line of Credit on February 29, 2024, with a current outstanding amount of $12,030 million as of September 30, 2025[36][39] - As of September 30, 2025, the company had unused availability on the line of credit of $2,970 million, subject to a month-end cap based on minimum liquidity requirements[40] - The company plans to refinance its $12,030 million outstanding Revolver, which matures on August 31, 2026, to alleviate substantial doubt about its ability to continue as a going concern[93] Operational Metrics - Medical Device sales for the nine months ended September 30, 2025, were $23,971 million, compared to $26,493 million in 2024, reflecting a decrease of 9.5%[33] - The 90-day shipment backlog as of September 30, 2025, was $31,322, an increase of 17.8% from $26,592 at the beginning of the quarter[73] - Total order backlog as of September 30, 2025, was $77,292, representing a 1.4% decrease from $78,351 at the beginning of the quarter but a 10.8% increase year-over-year[74] - The company operates primarily in the Medical Device market, which accounts for over 50% of its net sales[58] Expenses and Costs - The company incurred interest expenses of $273 in Q3 2025, compared to $216 in Q3 2024, representing a 26.4% increase[8] - Total lease costs for the three months ended September 30, 2025, were $686 million, down from $840 million in the same period of 2024, a decrease of 17.5%[44] - Stock-based compensation expense for the three months ended September 30, 2025 was $134 million, compared to $127 million in 2024[47] - Total compensation expense related to stock options was $84 million for the three months ended September 30, 2025, down from $61 million in 2024[49] - General and administrative expenses decreased to 8.5% of net sales for the three months ended September 30, 2025, down from 9.4% in 2024, primarily due to lower incentive compensation accruals[84] Taxation - The effective tax rate for the three months ended September 30, 2025 was 122%, compared to 8% for the same period in 2024[56] - The company plans to optimize tax cash payments and overall tax expense following the restoration of the ability to immediately deduct domestic research and development expenses[57] Restructuring and Facility Changes - Restructuring charges incurred during the nine months ended September 30, 2025, totaled $266, related to the closure of the Blue Earth facility and staff reductions[60] - The company completed the sale of the Blue Earth manufacturing facility for $500, which approximated book value, with no gain or loss recorded[27] - The company has facilities in Minnesota, Mexico, and China, with the Blue Earth facility closure completed in December 2024[66] Future Outlook and Compliance - The company expects to transfer substantially all remaining performance obligations for contract assets to receivables within 90 days as of September 30, 2025[35] - The Company must maintain a leverage ratio of 2.5 times and a minimum fixed charge coverage ratio of 1.25 times starting from Q4 2025[97] - Adjusted EBITDA requirements are set at least $1,000 for Q2 2025, $1,300 for Q3 2025, and $1,600 for Q4 2025 and thereafter[97] - The Company must maintain liquidity of at least $2,500 as per the Second Amendment to the Revolver[97]

Core Viewpoint - Nortech Systems Incorporated will hold a live conference call on November 13, 2025, to discuss its third quarter 2025 financial results, hosted by the CEO and CFO [1] Company Overview - Nortech Systems Incorporated is a leading provider of design and manufacturing solutions for complex electromedical devices and electromechanical systems, primarily serving the medical device, medical imaging, aerospace & defense, and industrial markets [2] - The company's design services cover the entire process from concept development to commercial design, including various engineering disciplines such as medical device, software, electrical, mechanical, and biomedical engineering [2] - Nortech's manufacturing capabilities are vertically integrated, focusing on wire/cable/interconnect assemblies, printed circuit board assemblies, and system-level assembly, integration, and final testing [2] - The company is headquartered in Maple Grove, MN, and operates six manufacturing locations and design centers across the U.S., Latin America, and Asia [2] - Nortech Systems is publicly traded on the NASDAQ under the symbol NSYS [2]

Core Insights - Nortech Systems Incorporated has made significant advancements in its fiber optic capabilities, achieving a low insertion loss of 0.35dB per mated pair [1] - The company utilizes US Conec's Multimode MT Elite® ferrules, which enhances its ability to deliver superior performance in mission-critical applications [1] Company Overview - Nortech Systems is recognized as a leading provider of design and manufacturing solutions specifically for complex electromedical devices and electromechanical systems [1]

Financial Data and Key Metrics Changes - Net sales for Q2 2025 totaled $30.7 million, representing a 9.5% decrease from $33.9 million in Q2 2024, impacted by delays in aerospace and defense customer approvals and manufacturing inefficiencies [12][17] - Gross profit for Q2 2025 was $4.8 million, or 15.8% of net sales, compared to $4.6 million, or 13.6% of net sales in the same prior year quarter, due to increased facility utilization and manufacturing productivity [12][13] - Adjusted EBITDA for Q2 2025 was $1.1 million, up from $900,000 in Q2 2024, indicating improved operational performance despite lower sales [14][17] Business Line Data and Key Metrics Changes - The aerospace and defense segment faced challenges due to the closure of the Blue Earth facility and the transfer of programs to Bemidji, but significant progress has been made in customer approvals [5][12] - Customer backlog increased by approximately $10 million from March 31, 2025, to $78.4 million by the end of Q2 2025, indicating potential future revenue growth [12][17] Market Data and Key Metrics Changes - The company is well-positioned in North America and China, with operations under the USMCA framework and a near-shoring approach to reduce shipping costs and time [7][8] - The company is monitoring tariff impacts closely, particularly regarding piece parts imported from China, and is adjusting pricing and sourcing strategies accordingly [8][9] Company Strategy and Development Direction - The company is focused on strengthening its balance sheet and reducing inventory investments while driving efficiencies in manufacturing processes [18] - There is a strong emphasis on engineering expertise, product innovation, and sustainability, with advancements in fiber optic technology being a key area of growth [19][20][24] - The shift from copper to fiber optics aligns with industry trends towards more efficient and reliable solutions, particularly in aerospace and defense markets [25][28] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding future revenues, citing improved customer backlog and stabilization of supply chains [17][26] - The company is adapting to changing customer needs and geopolitical uncertainties, focusing on building deeper partnerships and tailored delivery strategies [8][9][27] Other Important Information - The company completed the sale of the Blue Earth facility in July 2025, which is expected to further reduce ongoing operating expenses [13] - Cash totaled $652,000 as of June 30, 2025, down from $916,000 at the end of 2024, reflecting timing of cash receipts and expenditures [15][16] Q&A Session Summary Question: Are there any questions from the audience? - No questions were received during the Q&A session, and the call was concluded with a note of thanks for participation [29][31]

Financial Performance - Net sales for Q2 2025 were $30.7 million, a decrease of 9.5% compared to Q2 2024's $33.9 million[5] - Net income for Q2 2025 was $313 thousand, or $0.12 per diluted share, representing a 99.4% increase from $157 thousand in Q2 2024[6] - Adjusted EBITDA for Q2 2025 was $1.1 million, up 16.8% from $919 thousand in Q2 2024[5] - Gross profit for Q2 2025 was $4.8 million, a 4.8% increase from $4.6 million in Q2 2024[5] - Adjusted EBITDA for the six months ended June 30, 2025, was $73 million, down from $2,556 million in the same period of 2024[17] - The adjusted gross margin for the last twelve months ended June 30, 2025, was 12.4%, compared to 11.9% for the same period in 2024[18] Operational Efficiency - Operating expenses decreased by 4.2% to $4.1 million in Q2 2025 from $4.3 million in Q2 2024[5] - The company is experiencing improved manufacturing efficiencies and increased plant utilization, contributing to operational performance[2] - The company reported a 90-day backlog of $26.6 million as of June 30, 2025, indicating strong order growth[6] Strategic Initiatives - The company is focusing on nearshoring in Mexico and China to leverage strategic advantages in the current tariff environment[3] - The shift from copper to fiber materials is aimed at reducing costs and aligning with long-term sustainability goals[3] Asset and Liability Management - Total assets increased to $74,825 million as of June 30, 2025, up from $72,435 million at December 31, 2024, representing a growth of 3.3%[14] - Long-term liabilities increased to $19,829 million as of June 30, 2025, compared to $17,002 million at December 31, 2024, reflecting a rise of 16.5%[14] - Total current liabilities rose to $21,608 million, up from $21,428 million, indicating an increase of 0.8%[14] - Accounts receivable increased to $17,810 million as of June 30, 2025, from $14,875 million at December 31, 2024, a growth of 19.5%[14] - Inventories decreased to $18,628 million from $21,638 million, a decline of 13.9%[14] Cash Flow - Cash at the end of the period decreased to $652 million from $916 million at the beginning of the period, a decline of 28.8%[16] - The company reported a net cash used in operating activities of $2,773 million for the six months ended June 30, 2025, compared to $1,458 million for the same period in 2024[16] Management Outlook - Management remains cautiously optimistic about future growth, supported by rising customer approvals and enhanced logistics performance[3] - Net loss for the six months ended June 30, 2025, was $1,003 million, compared to a net income of $922 million for the same period in 2024[16]