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 ...

Financial Performance - Net sales for the year ended December 31, 2024, were $128,133, a decrease of $11,199 or 8.0% compared to $139,332 in 2023[106] - Gross profit for the year ended December 31, 2024, was $16,722, down $6,382 or 27.6% from $23,104 in 2023, resulting in a gross margin percentage of 13.1%[111] - Operating loss for the year ended December 31, 2024, was $(195), compared to operating income of $5,953 in 2023, representing a decrease of 103.3%[115] - Net loss for 2024 was $1,295, or $0.47 per diluted share, compared to net income of $6,874, or $2.38 per diluted share in 2023[118] Order Backlog and Shipments - The total order backlog as of December 31, 2024, was $65,852, reflecting a 28.2% decrease from December 31, 2023[108] - The 90-day shipment backlog as of December 31, 2024, was $26,451, down 24.8% from December 31, 2023[107] Expenses and Charges - Selling expenses decreased by $152, or 4.2%, in 2024 compared to 2023 due to lower incentive compensation[113] - Restructuring charges for 2024 amounted to $571 related to the closure of the Blue Earth facility[114] Cash Flow and Financing - Cash used in operating activities for the year ended December 31, 2024 was $2,250, compared to cash provided by operations of $1,769 for 2023, indicating a significant decrease in operational cash flow[125] - Net cash provided by financing activities in 2024 was $2,765, mainly from net proceeds of $2,849 from the line of credit and $345 from notes payable, contrasting with cash used of $1,281 in 2023[127] - The company replaced its asset-backed line of credit with a $15,000 Senior Secured Revolving Line of Credit on February 29, 2024[120] - The financing agreement with China Construction Bank provides a line of credit of 10,000,000 RMB (approximately 1.4 million USD) expiring on September 9, 2025, with an interest rate of approximately 4% as of December 31, 2024[124] Assets and Inventory - As of December 31, 2024, the company recorded a contract asset of $13,792 for unbilled customer net sales included in net sales[132] - The company had an inventory reserve of $1,446 as of December 31, 2024, reflecting ongoing evaluations of slow-moving and excess inventory[135] Tax Positions - The reserve for uncertain tax positions was $97 as of December 31, 2024, indicating potential challenges in tax positions taken by the company[137] - A tax benefit of $2,600 was recorded in 2023 due to the reversal of a previously established valuation allowance against net U.S. deferred tax assets[136] - The company anticipates future adjustments to the deferred tax asset valuation allowance based on changes in expected realizations, which could materially affect financial results[136] Impairment and Valuation - The company has no long-lived asset impairment as of December 31, 2024, despite its common stock trading below net equity value[133]

Core Viewpoint - Nortech Systems Incorporated is set to discuss its fourth quarter and full year 2024 financial results in a live conference call on March 31, 2025, highlighting its ongoing commitment to transparency and stakeholder engagement [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 encompass 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, Minnesota, 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].

Financial Data and Key Metrics Changes - Net sales for Q3 2024 totaled $31.4 million, a 5.9% decrease from $33.4 million in Q3 2023 [21] - Year-to-date net sales were $99.5 million, down 3.6% from $103.3 million in the same prior year period [21] - Gross profit for Q3 2024 was $3.8 million, or 12.2% of net sales, compared to $5.3 million, or 15.9% of net sales in Q3 2023 [24] - Adjusted EBITDA for Q3 2024 was $143,000, down from $1.6 million in Q3 2023 [31] - Cash and equivalents as of September 30, 2024, totaled $1.2 million, down from $1.7 million as of December 31, 2023 [32] Business Line Data and Key Metrics Changes - Revenue growth was strong in the Aerospace and Defense category, contrasting with softness in the industrial and medical markets [22] - Customer purchasing patterns have shifted towards shorter lead times, resulting in a reduction in customer backlog by the end of Q3 2024 [23] Market Data and Key Metrics Changes - The company faced headwinds from industrial customers due to market softness and delayed product launches [22] - Medical customers are aggressively reducing inventory investments, impacting revenue [22] Company Strategy and Development Direction - The company is focusing on consolidating its North American footprint and moving production to better fit customer needs [9] - Investments are being made in business development and facility optimization, expected to yield at least $1.6 million in annual savings starting in 2025 [11] - The company is pursuing a 3-tier global manufacturing strategy across the U.S., Mexico, and China to enhance competitiveness [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a difficult quarter but remains optimistic about long-term growth and investments [14] - The company is adapting to supply chain nearshoring trends and is committed to improving operational efficiencies [7][8] - Future technological developments, particularly in fiber optic technology, are expected to support sales momentum in 2024 [48] Other Important Information - The closure of the Blue Earth facility is on track for December 2024, with production moving to Bemidji [10] - The company has incurred restructuring costs related to the Blue Earth closure, estimated between $650,000 and $750,000 for 2024 [27] Q&A Session Summary - No specific questions or answers were documented in the provided content, indicating that the call concluded without a Q&A segment [49]

Core Insights - Nortech Systems Incorporated reported a net sales of $31.4 million for Q3 2024, a decrease of 5.9% compared to $33.4 million in Q3 2023 [2][4] - The company experienced a net loss of $739 thousand, or $0.27 per diluted share, compared to a net income of $1.2 million in the same quarter last year [2][4] - Adjusted EBITDA for Q3 2024 was $143 thousand, down 91.1% from $1.6 million in Q3 2023 [2][4] Financial Performance - Net sales for the nine months ended September 30, 2024, were $99.5 million, a decline of 3.6% from $103.3 million in the same period of 2023 [4] - Gross profit for Q3 2024 was $3.8 million, down 27.9% from $5.3 million in Q3 2023 [4] - Operating expenses increased by 4.5% to $4.5 million in Q3 2024 compared to $4.3 million in Q3 2023 [4] Management Commentary - The CEO noted that sales were impacted by customers delaying product purchases and reducing inventory, which has affected the contract manufacturing industry [2] - The company is consolidating facilities and moving programs to lower-cost locations to improve efficiency and reduce costs [2] - Management expressed optimism about the customer pipeline and the future of Nortech Systems despite current challenges [2] Backlog and Strategic Moves - As of September 30, 2024, the company reported a 90-day backlog of $29.6 million [2] - The restructuring of back office and plant operations aims to enhance service delivery and product quality [2] Cash Flow and Balance Sheet - Cash and cash equivalents at the end of Q3 2024 were $1.2 million, an increase from $1.1 million at the end of Q3 2023 [13] - Total assets as of September 30, 2024, were $77.0 million, compared to $75.1 million at the end of 2023 [11][12]

Financial Performance - Net sales for the three months ended September 30, 2024, were $31,407 thousand, a decrease of 5.9% compared to $33,369 thousand for the same period in 2023[4]. - Gross profit for the nine months ended September 30, 2024, was $13,900 thousand, down 14.5% from $16,277 thousand in the prior year[4]. - The company reported a net loss of $739 thousand for the three months ended September 30, 2024, compared to a net income of $1,207 thousand for the same period in 2023[4]. - The net income for the three months ended September 30, 2024, was $183, compared to a net income of $1,207 for the previous quarter, indicating a decline of about 85%[9]. - The company reported a net loss of $739 for the nine months ended September 30, 2024, compared to a net income of $2,522 for the same period in the previous year[9]. - Medical segment net sales for the nine months ended September 30, 2024 were $53,991 million, compared to $59,814 million for the same period in 2023, a decline of approximately 10%[25]. - Industrial segment net sales decreased by $2,001 or 19.2% in Q3 2024 compared to Q3 2023, and by $1,323 or 4.6% for the nine months ended September 30, 2024[63]. - Aerospace and defense segment net sales decreased by $173 or 3.4% in Q3 2024 compared to Q3 2023, but increased by $3,381 or 23.3% for the nine months ended September 30, 2024[62]. Operating Expenses - Operating expenses totaled $4,302 thousand for the three months ended September 30, 2024, compared to $4,195 thousand for the same period in 2023, reflecting an increase of 2.6%[4]. - Stock-based compensation expense for the three months ended September 30, 2024 was $127 million, compared to $80 million for the same period in 2023[41]. - Total compensation expense related to stock options was $61 and $184 for the three and nine months ended September 30, 2024, respectively, compared to $42 and $184 for the same periods in 2023[45]. - Restructuring charges of $267 were accrued during the first nine months of 2024 related to the closure of the Blue Earth production facility[54]. - Restructuring charges were $176 million and $267 million for the three and nine months ended September 30, 2024, respectively[73]. Cash Flow and Liquidity - Cash flows from operating activities showed a net cash used of $3,043 thousand for the three months ended September 30, 2024, compared to a net cash provided of $2,181 thousand in the same period of 2023[6]. - As of September 30, 2024, cash balance was $1,239, with approximately $1,035 held in banks located in China[18]. - Cash used in operating activities was $3,043 million in the first nine months of 2024, compared to cash provided of $2,181 million in the same prior-year period[77]. - Cash provided by financing activities was $3,561 million in the first nine months of 2024, compared to cash used of $2,388 million in the same prior-year period[79]. - The company has $5,450 thousand of unused availability on the line of credit as of September 30, 2024[83]. Assets and Liabilities - The company had cash and cash equivalents of $1,239 thousand at the end of the period, compared to $1,121 thousand at the end of the same period in 2023[6]. - The company had contract assets of $15,058 million as of September 30, 2024, an increase from $14,481 million at the beginning of the year[27]. - Total lease liabilities as of September 30, 2024 were $9,378 million, an increase from $8,361 million as of December 31, 2023[37]. - The company’s total intangible assets as of September 30, 2024, were valued at $179, down from $263 as of December 31, 2023, indicating a decrease of approximately 32%[16]. - Amortization expense for finite life intangible assets for the nine months ended September 30, 2024, was $84, compared to $120 for the same period in 2023, reflecting a decrease of 30%[17]. Shareholder Equity - As of September 30, 2024, total shareholders' equity was $35,690, an increase from $30,708 as of June 30, 2023, reflecting a growth of approximately 16%[9]. Risk Factors - The company faces risks including supply chain disruptions, increased competition, and potential FDA noncompliance[87]. - There have been no material changes in risk factors from those disclosed in the Annual Report for the fiscal year ended December 31, 2023[93]. Accounting and Compliance - The company is currently evaluating the impact of new accounting standards issued by the FASB on its consolidated financial statements and related disclosures[13]. - The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the reporting period[91]. - There was no change in internal control over financial reporting that materially affected the company during the most recently completed fiscal quarter[92]. Customer Concentration and Sales - One customer accounted for 28% of net sales for the three months ended September 30, 2024, highlighting a significant concentration of revenue[19]. - Revenue from contract manufacturing agreements recognized over time accounted for approximately 72% of net sales for the three months ended September 30, 2024[22]. - Export sales from the U.S. represented approximately 2% of net sales for both the three and nine months ended September 30, 2024, consistent with the previous year's performance[21].

Core Insights - Nortech Systems Incorporated will hold a live conference call and webcast on November 7, 2024, to discuss its third quarter 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 [1] - The company serves the medical, aerospace & defense, and industrial markets [1] - Nortech's design services include concept development to commercial design, covering medical device, software, electrical, mechanical, and biomedical engineering [1] - The manufacturing capabilities are vertically integrated around wire/cable/interconnect assemblies, printed circuit board assemblies, and system-level assembly, integration, and final testing [1] - The company is headquartered in Maple Grove, Minnesota, and operates seven manufacturing locations and design centers across the U.S., Latin America, and Asia [1] - Nortech Systems is traded on the NASDAQ under the symbol NSYS [1]