Nortech Systems(US:NSYS)2025-11-13 13:00Financial 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]