Nortech Systems(US:NSYS)2022-03-22 00:39Financial Data and Key Metrics Changes - In Q4 2021, revenue totaled $33.5 million, a 40% increase year-over-year from $23.8 million in Q4 2020, and a sequential increase of nearly 14% from $29.5 million in Q3 2021 [17][18] - Full year 2021 revenue was $115 million, up from $104 million in 2020, representing an increase of nearly 11% driven by rebounding customer demand [19] - Gross profit for Q4 2021 was $2.7 million (8% margin), compared to $1.7 million (7.3% margin) in Q4 2020; full year gross profit was $15.9 million (13.8% margin), up from $9.7 million (9.3% margin) in 2020 [20][21] Business Line Data and Key Metrics Changes - The company reported a backlog of $95 million at the end of 2021, which is nearly double the $49 million backlog from the previous year [7][45] - The consolidation of PCB operations in Mankato, Minnesota, was completed in Q3 2021, contributing to organizational efficiencies [12] Market Data and Key Metrics Changes - Rising material and labor costs are significant challenges in the electronics supply chain, with 90% of electronics manufacturers reporting increased material costs [33][34] - Semiconductor shortages continue to impact operations, with lead times extending from 28 to 52 weeks [35] Company Strategy and Development Direction - The company aims to optimize inventory investment and build a robust end-to-end supply chain fulfillment solution as a top strategic priority for 2022 [27] - There is a focus on operational excellence and innovation to create shareholder value, with an emphasis on regionalization in manufacturing [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in future growth, expecting to grow top-line revenue and gross profit, with EBITDA anticipated to grow even faster [39][51] - The company is actively engaging with customers to pass on cost increases and explore more cost-effective production locations [40][58] Other Important Information - The company recognized $11.4 million in non-recurring income from CARES Act programs in 2021, which was essential for maintaining operations during the pandemic [24][31] - The Bank of America credit facility was extended until 2026, providing financial support for future growth [13][29] Q&A Session Summary Question: Future margin expectations and sales forecasts for 2022 - Management did not provide specific guidance but indicated expectations for continued revenue growth and improved gross margins [39] Question: Ability to pass on labor and material cost increases to customers - Management confirmed ongoing discussions with customers about passing on cost increases and exploring lower-cost production options [40][41] Question: Clarification on year-end backlog figures - Management confirmed the backlog increased from $49 million to $95 million, effectively doubling [45] Question: Revenue growth and backlog fulfillment - Management noted that the backlog increase is primarily due to customers placing orders earlier due to supply chain concerns [54] Question: Supply chain challenges and margin impacts - Management acknowledged rising costs from suppliers and ongoing discussions with customers to mitigate these increases [56][57]