Financial Data and Key Metrics Changes - Net sales for Q1 2025 totaled $26.9 million, a decrease of 21.4% from $34.2 million in Q1 2024, impacted by delays in customer approvals and manufacturing efficiencies [16][17] - Gross profit for Q1 2025 was $3.1 million, or 11.1% of net sales, compared to $5.4 million, or 15.9% in the same quarter last year, due to lower sales and reduced facility utilization [17] - Adjusted EBITDA for Q1 2025 was negative $1 million, down from $1.6 million in Q1 2024, reflecting ongoing operational challenges [19] Business Line Data and Key Metrics Changes - The aerospace and defense market experienced revenue impacts due to the closure of the Blue Earth facility and delays in customer program transfers to the Bemidji facility [5][6] - Customer backlog has stabilized as of March 31, 2025, consistent with year-end 2024 levels, with expectations for order volume improvement as customer approvals are completed [17] Market Data and Key Metrics Changes - The company is closely monitoring supply chain strategies as customers evaluate their operations in light of tariff uncertainties, particularly regarding facilities in China and Mexico [6][9] - Opportunities are emerging in China for companies seeking to consolidate manufacturing, aligning with the company's nearshoring strategy [9] Company Strategy and Development Direction - The company is focused on strengthening its balance sheet and reducing inventory investments in 2025 while aligning operations with market demand to drive sustainable long-term EBITDA growth [22] - A three-tier global manufacturing strategy across the US, Mexico, and China is in place to enhance competitiveness and adapt to market dynamics [12][13] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the future, emphasizing the importance of strategic customer partnerships and operational adjustments to improve long-term EBITDA generation [11][29] - The company is committed to innovation, particularly in fiber optic technology, which aligns with sustainability goals and customer demands [27][30] Other Important Information - The company has undertaken significant actions to reduce its cost structure, including facility closures and headcount adjustments, to better align with current operating metrics [10][18] - The introduction of new technologies, such as Expanded Beam Extreme Fiber Optic Technology (EBX) and Active Optical Extreme (AOX), is expected to enhance product offerings and meet evolving customer needs [25][30] Q&A Session Summary Question: What are the expectations for future revenue growth? - Management expressed confidence in the stabilization of customer orders and the potential for improved revenue as customer approvals are completed by the end of Q2 2025 [17] Question: How is the company addressing supply chain challenges? - The company is actively monitoring supply chain strategies and adjusting pricing and sourcing to mitigate tariff impacts, particularly in relation to operations in China and Mexico [6][9] Question: What innovations are being pursued? - The company highlighted advancements in fiber optic technology as a key area for growth, with a focus on improving product performance and sustainability [27][30]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 totaled $26.9 million, a decrease of 21.4% from $34.2 million in Q1 2024, impacted by delays in customer approvals and manufacturing efficiencies [15][16] - Gross profit for Q1 2025 was $3.1 million, or 11.1% of net sales, compared to $5.4 million, or 15.9% in the same quarter last year, due to lower sales and reduced facility utilization [16] - Adjusted EBITDA for Q1 2025 was negative $1 million, down from $1.6 million in Q1 2024, reflecting ongoing operational challenges [18] Business Line Data and Key Metrics Changes - The aerospace and defense segment faced revenue impacts due to the closure of the Blue Earth facility and delays in customer approvals for the transfer of programs to the Bemidji facility [4][5] - Customer backlog has stabilized as of March 31, 2025, consistent with the year-end 2024 backlog, with expectations for improved order volume as approvals are completed [16] Market Data and Key Metrics Changes - The company is closely monitoring supply chain strategies as customers evaluate their operations in light of tariff uncertainties, particularly regarding facilities in China and Mexico [6][7] - Opportunities are emerging in China as companies seek to consolidate manufacturing within the region, aligning with the company's nearshoring strategy [7] Company Strategy and Development Direction - The company is focused on reducing operating costs and aligning operations with market demand to drive sustainable long-term EBITDA growth [21] - A three-tier global manufacturing strategy across the US, Mexico, and China is in place to enhance competitiveness and operational flexibility [10][11] - The company is investing in engineering expertise and product innovation, particularly in fiber optic technologies, to meet evolving customer needs [24][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the stabilization of customer backlogs and the potential for revenue recovery in the second half of 2025 [5][9] - The company is committed to monitoring geopolitical uncertainties and adjusting strategies to mitigate risks associated with tariffs and supply chain disruptions [6][7] Other Important Information - The company plans to further reduce inventory investments throughout 2025, aiming to improve cash flow and operational efficiency [19][21] - The focus on sustainability and innovation in fiber optics is expected to align with industry trends and customer demands for environmentally friendly solutions [26][27] Q&A Session Summary Question: What are the expectations for future revenue recovery? - Management expects revenue recovery in the second half of 2025 as customer approvals are completed and operational efficiencies improve [5][9] Question: How is the company addressing tariff impacts? - The company is closely monitoring tariff implications and adjusting pricing and sourcing strategies to mitigate adverse effects [7] Question: What innovations are being pursued in product development? - The company is advancing fiber optic technologies, including EBX and AOX, to enhance product performance and meet customer needs [24][26]

Financial Performance - Net sales for Q1 2025 were $26.9 million, a decrease of 21.4% compared to $34.2 million in Q1 2024[6] - Gross profit fell to $3.1 million, down 43.5% from $5.4 million in the same quarter last year[6] - The company reported a net loss of $1.3 million, or $0.48 per diluted share, compared to a net income of $0.8 million in Q1 2024[7] - Adjusted EBITDA for Q1 2025 was a loss of $1.0 million, a decline of 161.1% from $1.6 million in Q1 2024[6] - Net loss for Q1 2025 was $1,316 million, compared to a net income of $765 million in Q1 2024[17] - EBITDA for Q1 2025 was $(1,266) million, down from $1,637 million in Q1 2024[18] - Adjusted EBITDA for Q1 2025 was $(1,000) million, significantly lower than $1,637 million in Q1 2024[18] - Total sales for Q1 2025 were $128.1 million, a decrease from $137.5 million in Q4 2024[20] - Adjusted gross margin for Q1 2025 was 13.1%, down from 16.6% in Q4 2024[20] Operating Expenses and Cash Flow - Operating expenses increased by 9.3% to $4.7 million from $4.3 million in Q1 2024[6] - Cash used in operating activities for Q1 2025 was $(2,930) million, compared to cash provided of $2,828 million in Q1 2024[17] - Cash at the end of Q1 2025 was $1,162 million, down from $4,028 million at the end of Q1 2024[17] - Proceeds from the line of credit in Q1 2025 were $25,970 million, while payments to the line of credit were $22,710 million[17] - Net cash provided by financing activities in Q1 2025 was $3,446 million, compared to $274 million in Q1 2024[17] Backlog and Strategic Initiatives - The company has a 90-day backlog of $26.7 million as of March 31, 2025[7] - The company anticipates clearing the majority of the approval backlog for defense customer transfers during Q2 2025[2] - The company is strategically repositioning its global operations to enhance efficiency and respond to customer needs for near-shoring supply chains[4] Research and Development - Two new patents were issued in the past year, reflecting the company's commitment to R&D in fiber optic technologies[2] Assets - Total assets as of March 31, 2025, were $73.5 million, an increase from $72.4 million at the end of 2024[15] Restructuring Charges - The company incurred $266 million in restructuring charges related to the closure of the Blue Earth facility and staff reductions in Q1 2025[19]

Core Insights - Nortech Systems Incorporated reported a significant decline in financial performance for Q1 2025 compared to Q1 2024, with net sales dropping by 21.4% to $26.9 million and a net loss of $1.3 million [6][10]. Management Commentary - The company has successfully transitioned and stabilized its operations, focusing on profitability and growth in core market segments, particularly aerospace & defense and medical imaging [2]. - Management acknowledged that tough decisions have led to short-term revenue and EBITDA declines but are expected to position the company for long-term growth [2]. - Delays in customer approvals for production transfers from the closed Blue Earth facility to the Bemidji plant are being addressed, with expectations to clear the backlog in Q2 2025 [2]. Financial Performance - Q1 2025 financial results showed net sales of $26.9 million, a gross profit of $3.1 million, and operating expenses of $4.7 million, leading to a net loss of $1.3 million [6][10]. - Adjusted EBITDA for Q1 2025 was a loss of $1.0 million, compared to a profit of $1.6 million in Q1 2024, reflecting a significant decline of 161.1% [6][10]. - The company reported a 90-day backlog of $26.7 million as of March 31, 2025, indicating potential future revenue [10]. Operational Strategy - Nortech is focusing on consolidating operations to improve efficiency and reduce costs, which is part of a strategic repositioning to better respond to customer needs and near-shore supply chains [4]. - The company is committed to innovation in fiber optic technologies, evidenced by the issuance of two new patents in the past year [2]. Summary Financial Information - Key financial metrics for Q1 2025 compared to Q1 2024 include: - Net sales: $26.9 million (down from $34.2 million) - Gross profit: $3.1 million (down from $5.4 million) - Operating expenses: $4.7 million (up from $4.3 million) - Net loss: $1.3 million (compared to a profit of $0.8 million) [6][10].

Financial Performance - Net sales for Q1 2025 were $26,895, a decrease of $7,320 or 21.4% compared to Q1 2024's $34,215, primarily due to delays in customer approvals and manufacturing inefficiencies[67] - Medical Device segment net sales decreased by $2,668 or 24.8% in Q1 2025 compared to Q1 2024, attributed to inventory re-balancing and lower productivity[67] - Operating loss for Q1 2025 was ($1,613), representing (6.0)% of net sales, compared to operating income of $1,155 or 3.4% of net sales in Q1 2024[77] - Gross profit margin for Q1 2025 was 11.4%, down from 15.9% in Q1 2024, due to lower net sales and decreased manufacturing productivity[74] - Cash used in operating activities was $2,930 in Q1 2025, compared to cash provided of $2,828 in Q1 2024, largely due to timing of customer shipments[81] Order Backlog and Expectations - Total order backlog as of March 31, 2025, was $68,332, a 3.8% increase from $65,852 at the beginning of the quarter, but a 20.5% decrease from the prior-year comparable quarter[69] - The company expects to resolve current operational issues and improve backlog approvals by the end of Q2 2025[69] - Net sales in Q1 2025 were negatively impacted by delays in customer approvals and manufacturing inefficiencies, with expectations for resolution in the next two quarters[91] Restructuring and Cost Management - Restructuring charges for Q1 2025 amounted to $266, related to severance and facility closure costs[76] - The Company has implemented cost-cutting initiatives and plant optimization activities to address losses and reduce borrowings for the remainder of 2025[91] Financial Obligations and Ratios - Interest expense increased to $214 in Q1 2025 from $167 in Q1 2024, driven by higher borrowings under the line of credit[78] - Effective tax rate for Q1 2025 was 28.0%, up from 22.6% in Q1 2024, primarily due to changes in pretax loss income[79] - The Company must maintain a leverage ratio of no more than 2.5 times and a minimum fixed charge coverage ratio of at least 1.25 times, with compliance deferred until Q4 2025[88] - Adjusted EBITDA requirements are set at a minimum of $1,000 for Q2 2025, $1,300 for Q3 2025, and $1,600 for Q4 2025 and thereafter[88] Capital and Liquidity - As of March 31, 2025, the Company had borrowings of $11,955 and unused availability on the line of credit of $3,045[89] - The Company believes it has sufficient capital and liquidity to operate its business for at least twelve months from the filing date of the Form 10-Q[91] - The Revolver bears interest at a weighted-average rate of 7.2% as of March 31, 2025, and 7.7% as of December 31, 2024[89] - The Company has an interim funding agreement with $563 outstanding for equipment purchases as of March 31, 2025[90] - The Revolver is secured by substantially all of the Company's assets and is set to expire on June 30, 2026, following amendments[88] Compliance and Waivers - The Company received a waiver for non-compliance with financial covenants related to its Mexican operations in Q1 and Q2 2024[87]

Core Insights - Nortech Systems Incorporated will hold a live conference call and webcast on May 14, 2025, at 3:30 p.m. Central Time to discuss its first quarter 2025 financial results [1] - The call will be hosted by the CEO Jay D. Miller and CFO Andrew D. C. LaFrence [1] Company Overview - Nortech Systems is a leading provider of engineering and manufacturing solutions for complex electromedical and electromechanical products [2] - The company serves various markets including medical imaging, medical devices, aerospace & defense, and industrial sectors [2] - Nortech's design services cover the entire process from concept development to commercial design, including various engineering disciplines [2] - The company has vertically integrated manufacturing and supply chain capabilities, focusing on wire/cable/interconnect assemblies and printed circuit board assemblies [2] - Nortech is headquartered in Maple Grove, Minnesota, and operates six manufacturing locations and design centers across the U.S., Latin America, and Asia [2] - The company is publicly traded on the NASDAQ under the symbol NSYS [2]

Financial Data and Key Metrics Changes - Net sales for Q4 2024 totaled $28.6 million, a decrease of 20.6% from $36.1 million in Q4 2023 [22] - For the year ended December 31, 2024, net sales were $128.1 million, down 8% from $139.3 million in 2023 [22] - Gross profit for Q4 2024 was $2.8 million, or 9.9% of net sales, compared to $6.8 million, or 18.9% of net sales in Q4 2023 [25] - Adjusted EBITDA for Q4 2024 was a negative $585,000, compared to a positive $3.2 million in Q4 2023 [29] - Year-end 2024 adjusted EBITDA was $2.1 million, down from $8 million in 2023 [30] Business Line Data and Key Metrics Changes - Aerospace and defense net sales were negatively impacted by the closure of the Blue Earth facility and transfer of customer programs to Bemidji, leading to unexpected delays [7][24] - Industrial and medical customers faced revenue headwinds due to market softness and inventory reductions [23] Market Data and Key Metrics Changes - The company experienced a reduction in customer backlog in Q4 2024 as customers requested shorter lead times with new orders [24] - Inventory levels were $21.6 million as of December 31, 2024, slightly down from $21.7 million in 2023, reflecting a buildup in anticipation of the Blue Earth facility transition [32] Company Strategy and Development Direction - The company is focused on consolidating its North American footprint and optimizing its facilities to improve long-term EBITDA generation [16] - Investments in core infrastructure and leadership teams are aimed at driving long-term growth [13] - The three-tier global manufacturing strategy across the U.S., Mexico, and China provides flexibility to respond to market dynamics [17] Management's Comments on Operating Environment and Future Outlook - Management expects aerospace and defense business to normalize in the second half of 2025, despite ongoing revenue headwinds in the first half [8] - The company is closely monitoring geopolitical uncertainties and trade policies that may impact operations [11] - Management remains optimistic about future growth and is committed to investments that accelerate long-term growth [15] Other Important Information - The company completed a 30% reduction in lease space at its Maple Grove facility, resulting in annual savings of at least $1.6 million starting in 2025 [12] - The company is focusing on reducing inventory investments in 2025 by several million dollars [27] Q&A Session Summary Question: What are the expectations for the aerospace and defense market? - Management expects the aerospace and defense business to return to normal in the second half of 2025, despite current challenges [8] Question: How is the company addressing the impact of tariffs? - The company is monitoring tariff impacts closely and adjusting customer pricing and sourcing strategies as needed [10] Question: What are the company's plans for innovation and technology? - The company is committed to advancing its engineering capabilities and product innovations, particularly in fiber optic technology [39][40]

Financial Data and Key Metrics Changes - Net sales for Q4 2024 totaled $28.6 million, a decrease of 20.6% from $36.1 million in Q4 2023 [22] - For the year ended December 31, 2024, net sales were $128.1 million, down 8% from $139.3 million in 2023 [22] - Gross profit for Q4 2024 was $2.8 million, or 9.9% of net sales, compared to $6.8 million, or 18.9% of net sales in Q4 2023 [25] - Adjusted EBITDA for Q4 2024 was a negative $585,000, compared to a positive $3.2 million in Q4 2023 [29] - Year-end 2024 adjusted EBITDA was $2.1 million, down from $8 million in 2023 [30] Business Line Data and Key Metrics Changes - Aerospace and defense net sales were negatively impacted by the closure of the Blue Earth facility and delays in customer approvals [7] - Revenue headwinds were noted in the industrial and medical sectors due to reduced inventory investments and delayed product launches [23] Market Data and Key Metrics Changes - The company experienced a reduction in customer backlog in Q4 2024 as customers requested shorter lead times with new orders [24] - The imposition of tariffs may significantly impact contract manufacturers, including Nortech, particularly regarding operations in China and Mexico [8][10] Company Strategy and Development Direction - The company is focused on consolidating its North American footprint and moving customer programs to better fit customer needs, which is expected to improve long-term EBITDA generation [16] - Nortech is investing in core infrastructure and leadership teams to drive long-term growth, including a fully staffed business development team [14] - The company is pivoting towards fiber optic technology to enhance product performance and align with sustainability goals [44] Management's Comments on Operating Environment and Future Outlook - Management expects the aerospace and defense business to normalize in the second half of 2025, despite ongoing headwinds in the first half [8] - The company remains vigilant in monitoring trade policies and geopolitical uncertainties that may impact operations [11] - Management is optimistic about future growth opportunities, particularly in fiber optic technology and AI capabilities [42][48] Other Important Information - The company completed a 30% reduction in lease space at its Maple Grove facility, resulting in annual savings of at least $1.6 million [12] - Cash and cash equivalents totaled $916,000 as of December 31, 2024, down from $1.7 million in 2023 [30] Q&A Session Summary Question: What are the expectations for the aerospace and defense market? - Management expects the aerospace and defense business to return to normal in the second half of 2025, despite current challenges [8] Question: How is the company addressing the impact of tariffs? - The company is closely monitoring tariff impacts and adjusting customer pricing and sourcing strategies as needed [10] Question: What are the company's priorities for 2025? - The company aims to strengthen its balance sheet, reduce inventory investments, and align operations with market demand for sustainable long-term EBITDA growth [34]

Financial Performance - Fourth quarter net sales were $28.6 million, a decrease of 20.6% compared to $36.1 million in Q4 2023[6] - The company reported a net loss of $1.5 million, or $0.54 per diluted share, compared to a net income of $4.4 million, or $1.59 per diluted share in Q4 2023[4][6] - Adjusted EBITDA for Q4 2024 was a loss of $585 thousand, down 118.4% from $3.2 million in Q4 2023[6] - Gross profit for Q4 2024 was $2.8 million, a decline of 58.7% from $6.8 million in Q4 2023[6] - Net loss for the year ended December 31, 2024, was $1,295 million, a significant decrease from a net income of $6,874 million in 2023[15] - EBITDA for the twelve months ended December 31, 2024, was $1,543 million, down from $8,003 million in 2023[16] - Adjusted EBITDA for the year ended December 31, 2024, was $2,114 million, compared to $8,003 million in 2023[16] - The company reported a gross profit margin of 16.1% for Q4 2024, down from 16.6% in Q4 2023[18] Cash Flow and Liquidity - Cash and cash equivalents at the end of 2024 were $916 million, down from $1,675 million at the end of 2023[15] - Net cash used in operating activities for the year was $2,250 million, compared to net cash provided of $1,769 million in 2023[15] - Total cash and restricted cash reported in the consolidated statements of cash flows was $916 million at the end of 2024, down from $1,675 million in 2023[15] - Proceeds from the line of credit for the year were $129,793 million, with payments totaling $126,944 million[15] Operational Changes and Strategy - The company anticipates clearing the majority of the approval backlog for defense customer transfers by Q2 2025, which is expected to improve sales[3] - Nortech has completed a significant restructuring of its operations to enhance efficiency and reduce costs, focusing on high-quality product delivery[3] - Investments in research and development, particularly in fiber optics technologies, are expected to position the company for long-term growth[3] - The company is actively monitoring regulatory changes and geopolitical uncertainties that may impact its global operations[3] Backlog and Accounts Receivable - The 90-day backlog as of December 31, 2024, was $26.5 million, indicating potential future revenue[4] - The company experienced a significant change in accounts receivable, with an increase of $4,405 million in 2024 compared to a decrease of $3,432 million in 2023[15] Other Expenses - The company incurred $571 thousand in retention bonuses and other expenses related to the closure of the Blue Earth, Minnesota facility[17] - Operating expenses decreased slightly by 2.4% to $4.0 million in Q4 2024 from $4.2 million in Q4 2023[6]

MINNEAPOLIS, March 31, 2025 (GLOBE NEWSWIRE) -- Nortech Systems Incorporated (Nasdaq: NSYS) ("Nortech" or the "Company"), a leading provider of engineering and manufacturing solutions for complex electromedical and electromechanical products serving the medical, industrial and defense markets, reported financial results for the fourth quarter ended December 31, 2024. "We have just completed a significant restructuring of our back office and plant operations to better serve our customers by delivering high-q ...