Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Nortech Systems Reports First Quarter Results and Actions to Reduce Facility Costs By: Nortech Systems Incorporated via Business Wire May 16, 2024 at 09:15 AM EDT 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 first quarter ended March 31, 2024 financial results. 2024 Q1 Highlights: Net sales of $34.2 million, down 1.9% from Q1 2023. Net income increased to $765 thousand, or $0.26 per diluted share, compared with net income of $681 thousand or $0.23 per diluted share, in Q1 2023. Gross margin of 15.9%, up 20 basis points from gross margin of 15.7% in the same prior-year quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.637 million, compared with EBITDA of $1.559 million in the prior year. Signed new $15 million cash flow line of credit agreement. 90-day backlog of $35.2 million as of March 31, 2024, consistent with the prior year-end level. Management Commentary “We posted solid results in the first quarter of 2024 and continued to improve margins and manage expenses,” said Jay D. Miller, President and CEO of Nortech. “As a result, we are generating improved net income and EBITDA in the quarter as compared with the same quarter in 2023.” “Our dedicated Nortech employees worldwide embody our corporate values, including teamwork, excellence, commitment, integrity and innovation,” Miller noted. “While we measure employee engagement success with a number of metrics, we are pleased to see continued high employee retention and high employee engagement. Most recently, 230 of our North American employees participated in the American Cancer Society “FIT2Be Cancer Free” challenge.” “As we further look for opportunities to optimize our expense structure and plant capacity utilization, we are consolidating our Minnesota facilities. This morning we announced the decision to consolidate production of our wire and cable products for the Aerospace and Defense industry to our Bemidji, Minnesota facility. The shift in production is expected to be completed by the end of 2024, at which time the Company will close the Blue Earth, Minnesota facility. In the spirit of taking the best care of our employees as possible, all Blue Earth employees will be extended job offers at our other Minnesota facilities. We sincerely hope to keep them all.” “Further, we are consolidating the square footage of our Maple Grove, Minnesota headquarters and engineering facility by almost 30 percent. This reduction reflects our current and future space needs which have been heavily influenced by the Company’s hybrid remote work arrangements.” 2024 First Quarter ($ in thousands) Q1 24 Q1 23 % Change Net sales $34,215 $34,888 (1.9) % Gross profit $5,448 $5,484 (0.7) % Operating expenses $4,293 $4,431 (3.1) % Net income $765 $681 12.3 % EBITDA $1,637 $1,558 5.1 % In the first quarter of 2024, net sales totaled $34.2 million. This represents a 1.9% decrease from net sales of $34.9 million in the first quarter of 2023. For the first quarter, gross profit totaled $5.4 million, or 15.9% of net sales, compared with gross profit of $5.5 million, or 15.7%, in the prior year. First quarter 2024 operating expenses totaled $4.3 million, a 3.1% decrease from the prior year operating expenses of $4.4 million. GAAP net income totaled $765 thousand, or $0.26 per diluted share, in the current quarter, up from GAAP net income of $681 thousand, or $0.23 per diluted share, in the same prior-year quarter. EBITDA totaled $1.637 million, a 5.1% increase from EBITDA of $1.558 million in the same prior-year quarter. Conference Call The Company will hold a live conference call and webcast at 3:00 p.m. central time on Wednesday, May 16, 2024, to discuss the Company's 2024 first quarter results. The call will be hosted by Jay D. Miller, Chief Executive Officer and President and Andrew D. C. LaFrence, Chief Financial Officer. To access the live audio conference call, US participants may call 888-506-0062 and international participants may call 973-528-0011. Participant Access Code: 945063. Participants may also access the call via webcast at: https://www.webcaster4.com/Webcast/Page/2814/50447. About Nortech Systems Incorporated Nortech Systems is a leading provider of design and manufacturing solutions for complex electromedical devices, electromechanical systems, assemblies, and components. Nortech primarily serves the medical, aerospace & defense, and industrial markets. Its design services span concept development to commercial design, and include medical device, software, electrical, mechanical, and biomedical engineering. Its manufacturing and supply chain capabilities are vertically integrated around wire/cable/interconnect assemblies, printed circuit board assemblies, as well as system-level assembly, integration, and final test. Headquartered in Maple Grove, Minn., Nortech currently has seven manufacturing locations and design centers across the U.S., Latin America, and Asia. Nortech Systems is traded on the NASDAQ Stock Market under the symbol NSYS. Nortech's website is www.nortechsys.com. Forward-Looking Statements This press release contains forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 including without limitation statements regarding future financial results, expense management, effects of consolidation of our facilities, and continued high performance of personnel. While this release is based on management's best judgment and current expectations, actual results may differ materially from those expressed or implied and involve a number of risks and uncertainties. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation: (1) commodity cost increases coupled with challenges in raising prices and/or customer pressure to reduce prices; (2) supply chain disruptions leading to shortages of critical components; (3) volatility in market conditions which may affect demand for the Company's products; (4) increased competition; (5) changes in the reliability and efficiency of operating facilities or those of third parties; (6) risks related to the availability of labor; (7) the unanticipated loss of any key member of senior management; (8) geopolitical, economic, financial and business conditions; (9) the Company's ability to steadily improve manufacturing output and product quality throughout the remainder of 2024 or (10) the impact of global health epidemics on our customers, employees, manufacturing facilities, suppliers, the capital markets and our financial condition. Some of the above-mentioned factors are described in further detail in the section entitled "Risk Factors" in our annual and quarterly reports, as applicable. You should assume the information appearing in this document is accurate only as of the date hereof, or as otherwise specified, as our business, financial condition, results of operations and prospects may have changed since such date. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the United States Securities and Exchange Commission, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. Reconciliation of Generally Accepted Accounting Principles (“GAAP”) Measures to Non-GAAP Financial Measure EBITDA is a non-GAAP financial measure used by management that we believe provides useful information to investors because it reflects ongoing performance excluding certain non-recurring items during comparable periods and facilitates comparisons between peer companies since interest, taxes, depreciation, and amortization can differ greatly between different organizations as a result of differing capital structures and tax strategies. EBITDA is defined as net income (loss) plus interest expense, plus income tax expense plus depreciation expense and amortization expense. EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP and should not be considered an alternative to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA has limitations as an analytical metric, and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP. THREE MONTHS ENDED MARCH 31, CONDENSED INCOME STATEMENTS 2024 2023 (in thousands USD, except share and per share amounts) Net sales $ 34,215 $ 34,888 Cost of goods sold 28,767 29,404 Gross profit 5,448 5,484 Operating expenses: Selling expenses 805 890 General and administrative expenses 3,170 3,265 Research and development expenses 318 276 Total operating expenses 4,293 4,431 Income from operations 1,155 1,053 Other expense Interest expense (167 ) (110 ) Total other expense (167 ) (110 ) Income before income taxes 988 943 Income tax expense 223 262 Net income $ 765 $ 681 Income per common share: Basic $ 0.28 $ 0.25 Weighted average number of common shares outstanding - basic 2,741,345 2,692,033 Diluted $ 0.26 $ 0.23 Weighted average number of common shares outstanding - dilutive 2,907,291 2,903,635 Other comprehensive income Foreign currency translation (loss) gain (183 ) 40 Comprehensive income, net of tax $ 582 $ 721 CONDENDSED BALANCE SHEETS ($ in thousands) MARCH 31, 2024 DECEMBER 31, 2023 ASSETS Current assets: Cash $ 4,028 $ 960 Restricted cash - 715 Accounts receivable, less allowances of $292 and $358, respectively 16,051 19,279 Inventories, net 22,951 21,660 Contract assets 14,194 14,481 Prepaid assets and other assets 1,892 1,698 Total current assets 59,116 58,793 Property and equipment, net 6,134 6,513 Operating lease assets, net 7,339 6,917 Deferred tax assets 2,640 2,641 Other intangible assets, net 223 263 Total assets $ 75,452 $ 75,127 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current portion of finance lease obligations $ 296 $ 356 Current portion of operating lease obligations 1,235 1,033 Accounts payable 15,217 15,924 Accrued payroll and commissions 4,771 4,138 Customer deposits 3,139 4,068 Other accrued liabilities 1,063 1,063 Total current liabilities 25,721 26,582 Long-term liabilities: Long-term line of credit 6,170 5,815 Long-term finance lease obligations, net of current portion 168 209 Long-term operating lease obligations, net of current portion 6,977 6,763 Other long-term liabilities 410 414 Total long-term liabilities 13,725 13,201 Total liabilities 39,446 39,783 Shareholders’ equity: Preferred stock, $1 par value; 1,000,000 shares authorized; 250,000 shares issued and outstanding 250 250 Common stock - $0.01 par value; 9,000,000 shares authorized; 2,747,678 and 2,740,178 shares issued and outstanding, respectively 27 27 Additional paid-in capital 17,009 16,929 Accumulated other comprehensive loss (715 ) (532 ) Retained earnings 19,435 18,670 Total shareholders’ equity 36,006 35,344 Total liabilities and shareholders’ equity $ 75,452 $ 75,127 THREE MONTHS ENDED CONDENSED CASH FLOW STATEMENTS MARCH 31, ($ in thousands) 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 765 $ 681 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 482 505 Compensation on stock-based awards 80 99 Change in inventory reserves 76 32 Change in accounts receivable allowances (66 ) (32 ) Other, net (4 ) (15 ) Changes in current operating assets and liabilities: Accounts receivable 3,215 (206 ) Inventories (1,400 ) 1,075 Contract assets 287 (823 ) Prepaid expenses and other current assets (328 ) (600 ) Accounts payable (8 ) (1,799 ) Accrued payroll and commissions 640 1,244 Customer deposits (926 ) 1,315 Other accrued liabilities 15 242 Net cash provided by operating activities 2,828 1,718 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment 9 - Purchases of property and equipment (744 ) (496 ) Net cash used in investing activities (735 ) (496 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit 32,768 31,133 Payments to line of credit (32,394 ) (32,145 ) Principal payments on financing leases (100 ) (96 ) Stock option exercises - 35 Net cash provided by (used in) financing activities 274 (1,073 ) Effect of exchange rate changes on cash (14 ) 3 Net change in cash and cash equivalents 2,353 152 Cash and cash equivalents - beginning of period 1,675 2,481 Cash and cash equivalents - end of period $ 4,028 $ 2,633 THREE MONTHS ENDED March 31, 2024 2023 RECONCILIATION OF NET INCOME TO EBITDA ($ in thousands) Net Income $ 765 $ 681 Interest 167 110 Taxes 223 262 Depreciation 442 465 Amortization 40 40 EBITDA $ 1,637 $ 1,558 There are no material adjustments to EBITDA in 2022 or 2023. Adjustments to EBITDA in 2021 include ($ in thousands): In the third quarter of 2021, we recognized $5,209 related to the CARES Act Employee Retention Credit (ERC) as a reduction of costs of goods sold of $4,670, selling expense of $125, and general and administrative expense of $414. Nortech received ERC cash payment in two installments, the first in December 2022 and the second in May 2023. CARES Act Paycheck Protection Program (PPP) loan forgiveness gain of $6,170 recorded in the fourth quarter of 2021. Restructuring expense in 2021 of $327 related to the consolidation of our printed circuit board production capabilities into our center of excellence in Mankato, Minnesota and closure of our Merrifield, Minnesota plant. Gain on sale of assets in 2021 of $141 related to the closure of our Merrifield, Minnesota plant. Loss on abandonment of intangible assets in 2021 of $560 related to abandonment of the Devicix tradename. ($ in millions) Last Twelve Months (LTM) Ended in Quarter Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Net Sales $ 102.5 $ 105.5 $ 115.2 $ 123.8 $ 126.1 $ 132.0 $ 134.1 $ 138.3 $ 140.8 $ 138.9 $ 139.3 $ 138.7 Gross Profit $ - Adjusted 8.8 10.3 11.2 13.7 15.1 18.1 20.5 21.9 22.4 21.4 23.1 23.1 Gross Margin % - Adjusted 8.6% 9.7% 9.7% 11.0% 12.0% 13.7% 15.3% 15.8% 15.9% 15.4% 16.6% 16.6% EBITDA - Adjusted $ (2.0) $ (0.7) $ (0.2) $ 1.9 $ 2.5 $ 4.2 $ 5.8 $ 6.7 $ 6.8 $ 6.0 $ 8.0 $ 8.1 View source version on businesswire.com: https://www.businesswire.com/news/home/20240516526389/en/Contacts Andrew D. C. LaFrence Chief Financial Officer and Senior Vice President of Finance alafrence@nortechsys.com 952-345-2243 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Nortech Systems Reports First Quarter Results and Actions to Reduce Facility Costs By: Nortech Systems Incorporated via Business Wire May 16, 2024 at 09:15 AM EDT 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 first quarter ended March 31, 2024 financial results. 2024 Q1 Highlights: Net sales of $34.2 million, down 1.9% from Q1 2023. Net income increased to $765 thousand, or $0.26 per diluted share, compared with net income of $681 thousand or $0.23 per diluted share, in Q1 2023. Gross margin of 15.9%, up 20 basis points from gross margin of 15.7% in the same prior-year quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.637 million, compared with EBITDA of $1.559 million in the prior year. Signed new $15 million cash flow line of credit agreement. 90-day backlog of $35.2 million as of March 31, 2024, consistent with the prior year-end level. Management Commentary “We posted solid results in the first quarter of 2024 and continued to improve margins and manage expenses,” said Jay D. Miller, President and CEO of Nortech. “As a result, we are generating improved net income and EBITDA in the quarter as compared with the same quarter in 2023.” “Our dedicated Nortech employees worldwide embody our corporate values, including teamwork, excellence, commitment, integrity and innovation,” Miller noted. “While we measure employee engagement success with a number of metrics, we are pleased to see continued high employee retention and high employee engagement. Most recently, 230 of our North American employees participated in the American Cancer Society “FIT2Be Cancer Free” challenge.” “As we further look for opportunities to optimize our expense structure and plant capacity utilization, we are consolidating our Minnesota facilities. This morning we announced the decision to consolidate production of our wire and cable products for the Aerospace and Defense industry to our Bemidji, Minnesota facility. The shift in production is expected to be completed by the end of 2024, at which time the Company will close the Blue Earth, Minnesota facility. In the spirit of taking the best care of our employees as possible, all Blue Earth employees will be extended job offers at our other Minnesota facilities. We sincerely hope to keep them all.” “Further, we are consolidating the square footage of our Maple Grove, Minnesota headquarters and engineering facility by almost 30 percent. This reduction reflects our current and future space needs which have been heavily influenced by the Company’s hybrid remote work arrangements.” 2024 First Quarter ($ in thousands) Q1 24 Q1 23 % Change Net sales $34,215 $34,888 (1.9) % Gross profit $5,448 $5,484 (0.7) % Operating expenses $4,293 $4,431 (3.1) % Net income $765 $681 12.3 % EBITDA $1,637 $1,558 5.1 % In the first quarter of 2024, net sales totaled $34.2 million. This represents a 1.9% decrease from net sales of $34.9 million in the first quarter of 2023. For the first quarter, gross profit totaled $5.4 million, or 15.9% of net sales, compared with gross profit of $5.5 million, or 15.7%, in the prior year. First quarter 2024 operating expenses totaled $4.3 million, a 3.1% decrease from the prior year operating expenses of $4.4 million. GAAP net income totaled $765 thousand, or $0.26 per diluted share, in the current quarter, up from GAAP net income of $681 thousand, or $0.23 per diluted share, in the same prior-year quarter. EBITDA totaled $1.637 million, a 5.1% increase from EBITDA of $1.558 million in the same prior-year quarter. Conference Call The Company will hold a live conference call and webcast at 3:00 p.m. central time on Wednesday, May 16, 2024, to discuss the Company's 2024 first quarter results. The call will be hosted by Jay D. Miller, Chief Executive Officer and President and Andrew D. C. LaFrence, Chief Financial Officer. To access the live audio conference call, US participants may call 888-506-0062 and international participants may call 973-528-0011. Participant Access Code: 945063. Participants may also access the call via webcast at: https://www.webcaster4.com/Webcast/Page/2814/50447. About Nortech Systems Incorporated Nortech Systems is a leading provider of design and manufacturing solutions for complex electromedical devices, electromechanical systems, assemblies, and components. Nortech primarily serves the medical, aerospace & defense, and industrial markets. Its design services span concept development to commercial design, and include medical device, software, electrical, mechanical, and biomedical engineering. Its manufacturing and supply chain capabilities are vertically integrated around wire/cable/interconnect assemblies, printed circuit board assemblies, as well as system-level assembly, integration, and final test. Headquartered in Maple Grove, Minn., Nortech currently has seven manufacturing locations and design centers across the U.S., Latin America, and Asia. Nortech Systems is traded on the NASDAQ Stock Market under the symbol NSYS. Nortech's website is www.nortechsys.com. Forward-Looking Statements This press release contains forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 including without limitation statements regarding future financial results, expense management, effects of consolidation of our facilities, and continued high performance of personnel. While this release is based on management's best judgment and current expectations, actual results may differ materially from those expressed or implied and involve a number of risks and uncertainties. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation: (1) commodity cost increases coupled with challenges in raising prices and/or customer pressure to reduce prices; (2) supply chain disruptions leading to shortages of critical components; (3) volatility in market conditions which may affect demand for the Company's products; (4) increased competition; (5) changes in the reliability and efficiency of operating facilities or those of third parties; (6) risks related to the availability of labor; (7) the unanticipated loss of any key member of senior management; (8) geopolitical, economic, financial and business conditions; (9) the Company's ability to steadily improve manufacturing output and product quality throughout the remainder of 2024 or (10) the impact of global health epidemics on our customers, employees, manufacturing facilities, suppliers, the capital markets and our financial condition. Some of the above-mentioned factors are described in further detail in the section entitled "Risk Factors" in our annual and quarterly reports, as applicable. You should assume the information appearing in this document is accurate only as of the date hereof, or as otherwise specified, as our business, financial condition, results of operations and prospects may have changed since such date. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the United States Securities and Exchange Commission, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. Reconciliation of Generally Accepted Accounting Principles (“GAAP”) Measures to Non-GAAP Financial Measure EBITDA is a non-GAAP financial measure used by management that we believe provides useful information to investors because it reflects ongoing performance excluding certain non-recurring items during comparable periods and facilitates comparisons between peer companies since interest, taxes, depreciation, and amortization can differ greatly between different organizations as a result of differing capital structures and tax strategies. EBITDA is defined as net income (loss) plus interest expense, plus income tax expense plus depreciation expense and amortization expense. EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP and should not be considered an alternative to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA has limitations as an analytical metric, and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP. THREE MONTHS ENDED MARCH 31, CONDENSED INCOME STATEMENTS 2024 2023 (in thousands USD, except share and per share amounts) Net sales $ 34,215 $ 34,888 Cost of goods sold 28,767 29,404 Gross profit 5,448 5,484 Operating expenses: Selling expenses 805 890 General and administrative expenses 3,170 3,265 Research and development expenses 318 276 Total operating expenses 4,293 4,431 Income from operations 1,155 1,053 Other expense Interest expense (167 ) (110 ) Total other expense (167 ) (110 ) Income before income taxes 988 943 Income tax expense 223 262 Net income $ 765 $ 681 Income per common share: Basic $ 0.28 $ 0.25 Weighted average number of common shares outstanding - basic 2,741,345 2,692,033 Diluted $ 0.26 $ 0.23 Weighted average number of common shares outstanding - dilutive 2,907,291 2,903,635 Other comprehensive income Foreign currency translation (loss) gain (183 ) 40 Comprehensive income, net of tax $ 582 $ 721 CONDENDSED BALANCE SHEETS ($ in thousands) MARCH 31, 2024 DECEMBER 31, 2023 ASSETS Current assets: Cash $ 4,028 $ 960 Restricted cash - 715 Accounts receivable, less allowances of $292 and $358, respectively 16,051 19,279 Inventories, net 22,951 21,660 Contract assets 14,194 14,481 Prepaid assets and other assets 1,892 1,698 Total current assets 59,116 58,793 Property and equipment, net 6,134 6,513 Operating lease assets, net 7,339 6,917 Deferred tax assets 2,640 2,641 Other intangible assets, net 223 263 Total assets $ 75,452 $ 75,127 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current portion of finance lease obligations $ 296 $ 356 Current portion of operating lease obligations 1,235 1,033 Accounts payable 15,217 15,924 Accrued payroll and commissions 4,771 4,138 Customer deposits 3,139 4,068 Other accrued liabilities 1,063 1,063 Total current liabilities 25,721 26,582 Long-term liabilities: Long-term line of credit 6,170 5,815 Long-term finance lease obligations, net of current portion 168 209 Long-term operating lease obligations, net of current portion 6,977 6,763 Other long-term liabilities 410 414 Total long-term liabilities 13,725 13,201 Total liabilities 39,446 39,783 Shareholders’ equity: Preferred stock, $1 par value; 1,000,000 shares authorized; 250,000 shares issued and outstanding 250 250 Common stock - $0.01 par value; 9,000,000 shares authorized; 2,747,678 and 2,740,178 shares issued and outstanding, respectively 27 27 Additional paid-in capital 17,009 16,929 Accumulated other comprehensive loss (715 ) (532 ) Retained earnings 19,435 18,670 Total shareholders’ equity 36,006 35,344 Total liabilities and shareholders’ equity $ 75,452 $ 75,127 THREE MONTHS ENDED CONDENSED CASH FLOW STATEMENTS MARCH 31, ($ in thousands) 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 765 $ 681 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 482 505 Compensation on stock-based awards 80 99 Change in inventory reserves 76 32 Change in accounts receivable allowances (66 ) (32 ) Other, net (4 ) (15 ) Changes in current operating assets and liabilities: Accounts receivable 3,215 (206 ) Inventories (1,400 ) 1,075 Contract assets 287 (823 ) Prepaid expenses and other current assets (328 ) (600 ) Accounts payable (8 ) (1,799 ) Accrued payroll and commissions 640 1,244 Customer deposits (926 ) 1,315 Other accrued liabilities 15 242 Net cash provided by operating activities 2,828 1,718 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment 9 - Purchases of property and equipment (744 ) (496 ) Net cash used in investing activities (735 ) (496 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit 32,768 31,133 Payments to line of credit (32,394 ) (32,145 ) Principal payments on financing leases (100 ) (96 ) Stock option exercises - 35 Net cash provided by (used in) financing activities 274 (1,073 ) Effect of exchange rate changes on cash (14 ) 3 Net change in cash and cash equivalents 2,353 152 Cash and cash equivalents - beginning of period 1,675 2,481 Cash and cash equivalents - end of period $ 4,028 $ 2,633 THREE MONTHS ENDED March 31, 2024 2023 RECONCILIATION OF NET INCOME TO EBITDA ($ in thousands) Net Income $ 765 $ 681 Interest 167 110 Taxes 223 262 Depreciation 442 465 Amortization 40 40 EBITDA $ 1,637 $ 1,558 There are no material adjustments to EBITDA in 2022 or 2023. Adjustments to EBITDA in 2021 include ($ in thousands): In the third quarter of 2021, we recognized $5,209 related to the CARES Act Employee Retention Credit (ERC) as a reduction of costs of goods sold of $4,670, selling expense of $125, and general and administrative expense of $414. Nortech received ERC cash payment in two installments, the first in December 2022 and the second in May 2023. CARES Act Paycheck Protection Program (PPP) loan forgiveness gain of $6,170 recorded in the fourth quarter of 2021. Restructuring expense in 2021 of $327 related to the consolidation of our printed circuit board production capabilities into our center of excellence in Mankato, Minnesota and closure of our Merrifield, Minnesota plant. Gain on sale of assets in 2021 of $141 related to the closure of our Merrifield, Minnesota plant. Loss on abandonment of intangible assets in 2021 of $560 related to abandonment of the Devicix tradename. ($ in millions) Last Twelve Months (LTM) Ended in Quarter Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Net Sales $ 102.5 $ 105.5 $ 115.2 $ 123.8 $ 126.1 $ 132.0 $ 134.1 $ 138.3 $ 140.8 $ 138.9 $ 139.3 $ 138.7 Gross Profit $ - Adjusted 8.8 10.3 11.2 13.7 15.1 18.1 20.5 21.9 22.4 21.4 23.1 23.1 Gross Margin % - Adjusted 8.6% 9.7% 9.7% 11.0% 12.0% 13.7% 15.3% 15.8% 15.9% 15.4% 16.6% 16.6% EBITDA - Adjusted $ (2.0) $ (0.7) $ (0.2) $ 1.9 $ 2.5 $ 4.2 $ 5.8 $ 6.7 $ 6.8 $ 6.0 $ 8.0 $ 8.1 View source version on businesswire.com: https://www.businesswire.com/news/home/20240516526389/en/Contacts Andrew D. C. LaFrence Chief Financial Officer and Senior Vice President of Finance alafrence@nortechsys.com 952-345-2243
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 first quarter ended March 31, 2024 financial results. 2024 Q1 Highlights: Net sales of $34.2 million, down 1.9% from Q1 2023. Net income increased to $765 thousand, or $0.26 per diluted share, compared with net income of $681 thousand or $0.23 per diluted share, in Q1 2023. Gross margin of 15.9%, up 20 basis points from gross margin of 15.7% in the same prior-year quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.637 million, compared with EBITDA of $1.559 million in the prior year. Signed new $15 million cash flow line of credit agreement. 90-day backlog of $35.2 million as of March 31, 2024, consistent with the prior year-end level. Management Commentary “We posted solid results in the first quarter of 2024 and continued to improve margins and manage expenses,” said Jay D. Miller, President and CEO of Nortech. “As a result, we are generating improved net income and EBITDA in the quarter as compared with the same quarter in 2023.” “Our dedicated Nortech employees worldwide embody our corporate values, including teamwork, excellence, commitment, integrity and innovation,” Miller noted. “While we measure employee engagement success with a number of metrics, we are pleased to see continued high employee retention and high employee engagement. Most recently, 230 of our North American employees participated in the American Cancer Society “FIT2Be Cancer Free” challenge.” “As we further look for opportunities to optimize our expense structure and plant capacity utilization, we are consolidating our Minnesota facilities. This morning we announced the decision to consolidate production of our wire and cable products for the Aerospace and Defense industry to our Bemidji, Minnesota facility. The shift in production is expected to be completed by the end of 2024, at which time the Company will close the Blue Earth, Minnesota facility. In the spirit of taking the best care of our employees as possible, all Blue Earth employees will be extended job offers at our other Minnesota facilities. We sincerely hope to keep them all.” “Further, we are consolidating the square footage of our Maple Grove, Minnesota headquarters and engineering facility by almost 30 percent. This reduction reflects our current and future space needs which have been heavily influenced by the Company’s hybrid remote work arrangements.” 2024 First Quarter ($ in thousands) Q1 24 Q1 23 % Change Net sales $34,215 $34,888 (1.9) % Gross profit $5,448 $5,484 (0.7) % Operating expenses $4,293 $4,431 (3.1) % Net income $765 $681 12.3 % EBITDA $1,637 $1,558 5.1 % In the first quarter of 2024, net sales totaled $34.2 million. This represents a 1.9% decrease from net sales of $34.9 million in the first quarter of 2023. For the first quarter, gross profit totaled $5.4 million, or 15.9% of net sales, compared with gross profit of $5.5 million, or 15.7%, in the prior year. First quarter 2024 operating expenses totaled $4.3 million, a 3.1% decrease from the prior year operating expenses of $4.4 million. GAAP net income totaled $765 thousand, or $0.26 per diluted share, in the current quarter, up from GAAP net income of $681 thousand, or $0.23 per diluted share, in the same prior-year quarter. EBITDA totaled $1.637 million, a 5.1% increase from EBITDA of $1.558 million in the same prior-year quarter. Conference Call The Company will hold a live conference call and webcast at 3:00 p.m. central time on Wednesday, May 16, 2024, to discuss the Company's 2024 first quarter results. The call will be hosted by Jay D. Miller, Chief Executive Officer and President and Andrew D. C. LaFrence, Chief Financial Officer. To access the live audio conference call, US participants may call 888-506-0062 and international participants may call 973-528-0011. Participant Access Code: 945063. Participants may also access the call via webcast at: https://www.webcaster4.com/Webcast/Page/2814/50447. About Nortech Systems Incorporated Nortech Systems is a leading provider of design and manufacturing solutions for complex electromedical devices, electromechanical systems, assemblies, and components. Nortech primarily serves the medical, aerospace & defense, and industrial markets. Its design services span concept development to commercial design, and include medical device, software, electrical, mechanical, and biomedical engineering. Its manufacturing and supply chain capabilities are vertically integrated around wire/cable/interconnect assemblies, printed circuit board assemblies, as well as system-level assembly, integration, and final test. Headquartered in Maple Grove, Minn., Nortech currently has seven manufacturing locations and design centers across the U.S., Latin America, and Asia. Nortech Systems is traded on the NASDAQ Stock Market under the symbol NSYS. Nortech's website is www.nortechsys.com. Forward-Looking Statements This press release contains forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 including without limitation statements regarding future financial results, expense management, effects of consolidation of our facilities, and continued high performance of personnel. While this release is based on management's best judgment and current expectations, actual results may differ materially from those expressed or implied and involve a number of risks and uncertainties. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation: (1) commodity cost increases coupled with challenges in raising prices and/or customer pressure to reduce prices; (2) supply chain disruptions leading to shortages of critical components; (3) volatility in market conditions which may affect demand for the Company's products; (4) increased competition; (5) changes in the reliability and efficiency of operating facilities or those of third parties; (6) risks related to the availability of labor; (7) the unanticipated loss of any key member of senior management; (8) geopolitical, economic, financial and business conditions; (9) the Company's ability to steadily improve manufacturing output and product quality throughout the remainder of 2024 or (10) the impact of global health epidemics on our customers, employees, manufacturing facilities, suppliers, the capital markets and our financial condition. Some of the above-mentioned factors are described in further detail in the section entitled "Risk Factors" in our annual and quarterly reports, as applicable. You should assume the information appearing in this document is accurate only as of the date hereof, or as otherwise specified, as our business, financial condition, results of operations and prospects may have changed since such date. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the United States Securities and Exchange Commission, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. Reconciliation of Generally Accepted Accounting Principles (“GAAP”) Measures to Non-GAAP Financial Measure EBITDA is a non-GAAP financial measure used by management that we believe provides useful information to investors because it reflects ongoing performance excluding certain non-recurring items during comparable periods and facilitates comparisons between peer companies since interest, taxes, depreciation, and amortization can differ greatly between different organizations as a result of differing capital structures and tax strategies. EBITDA is defined as net income (loss) plus interest expense, plus income tax expense plus depreciation expense and amortization expense. EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP and should not be considered an alternative to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA has limitations as an analytical metric, and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP. THREE MONTHS ENDED MARCH 31, CONDENSED INCOME STATEMENTS 2024 2023 (in thousands USD, except share and per share amounts) Net sales $ 34,215 $ 34,888 Cost of goods sold 28,767 29,404 Gross profit 5,448 5,484 Operating expenses: Selling expenses 805 890 General and administrative expenses 3,170 3,265 Research and development expenses 318 276 Total operating expenses 4,293 4,431 Income from operations 1,155 1,053 Other expense Interest expense (167 ) (110 ) Total other expense (167 ) (110 ) Income before income taxes 988 943 Income tax expense 223 262 Net income $ 765 $ 681 Income per common share: Basic $ 0.28 $ 0.25 Weighted average number of common shares outstanding - basic 2,741,345 2,692,033 Diluted $ 0.26 $ 0.23 Weighted average number of common shares outstanding - dilutive 2,907,291 2,903,635 Other comprehensive income Foreign currency translation (loss) gain (183 ) 40 Comprehensive income, net of tax $ 582 $ 721 CONDENDSED BALANCE SHEETS ($ in thousands) MARCH 31, 2024 DECEMBER 31, 2023 ASSETS Current assets: Cash $ 4,028 $ 960 Restricted cash - 715 Accounts receivable, less allowances of $292 and $358, respectively 16,051 19,279 Inventories, net 22,951 21,660 Contract assets 14,194 14,481 Prepaid assets and other assets 1,892 1,698 Total current assets 59,116 58,793 Property and equipment, net 6,134 6,513 Operating lease assets, net 7,339 6,917 Deferred tax assets 2,640 2,641 Other intangible assets, net 223 263 Total assets $ 75,452 $ 75,127 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current portion of finance lease obligations $ 296 $ 356 Current portion of operating lease obligations 1,235 1,033 Accounts payable 15,217 15,924 Accrued payroll and commissions 4,771 4,138 Customer deposits 3,139 4,068 Other accrued liabilities 1,063 1,063 Total current liabilities 25,721 26,582 Long-term liabilities: Long-term line of credit 6,170 5,815 Long-term finance lease obligations, net of current portion 168 209 Long-term operating lease obligations, net of current portion 6,977 6,763 Other long-term liabilities 410 414 Total long-term liabilities 13,725 13,201 Total liabilities 39,446 39,783 Shareholders’ equity: Preferred stock, $1 par value; 1,000,000 shares authorized; 250,000 shares issued and outstanding 250 250 Common stock - $0.01 par value; 9,000,000 shares authorized; 2,747,678 and 2,740,178 shares issued and outstanding, respectively 27 27 Additional paid-in capital 17,009 16,929 Accumulated other comprehensive loss (715 ) (532 ) Retained earnings 19,435 18,670 Total shareholders’ equity 36,006 35,344 Total liabilities and shareholders’ equity $ 75,452 $ 75,127 THREE MONTHS ENDED CONDENSED CASH FLOW STATEMENTS MARCH 31, ($ in thousands) 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 765 $ 681 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 482 505 Compensation on stock-based awards 80 99 Change in inventory reserves 76 32 Change in accounts receivable allowances (66 ) (32 ) Other, net (4 ) (15 ) Changes in current operating assets and liabilities: Accounts receivable 3,215 (206 ) Inventories (1,400 ) 1,075 Contract assets 287 (823 ) Prepaid expenses and other current assets (328 ) (600 ) Accounts payable (8 ) (1,799 ) Accrued payroll and commissions 640 1,244 Customer deposits (926 ) 1,315 Other accrued liabilities 15 242 Net cash provided by operating activities 2,828 1,718 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment 9 - Purchases of property and equipment (744 ) (496 ) Net cash used in investing activities (735 ) (496 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit 32,768 31,133 Payments to line of credit (32,394 ) (32,145 ) Principal payments on financing leases (100 ) (96 ) Stock option exercises - 35 Net cash provided by (used in) financing activities 274 (1,073 ) Effect of exchange rate changes on cash (14 ) 3 Net change in cash and cash equivalents 2,353 152 Cash and cash equivalents - beginning of period 1,675 2,481 Cash and cash equivalents - end of period $ 4,028 $ 2,633 THREE MONTHS ENDED March 31, 2024 2023 RECONCILIATION OF NET INCOME TO EBITDA ($ in thousands) Net Income $ 765 $ 681 Interest 167 110 Taxes 223 262 Depreciation 442 465 Amortization 40 40 EBITDA $ 1,637 $ 1,558 There are no material adjustments to EBITDA in 2022 or 2023. Adjustments to EBITDA in 2021 include ($ in thousands): In the third quarter of 2021, we recognized $5,209 related to the CARES Act Employee Retention Credit (ERC) as a reduction of costs of goods sold of $4,670, selling expense of $125, and general and administrative expense of $414. Nortech received ERC cash payment in two installments, the first in December 2022 and the second in May 2023. CARES Act Paycheck Protection Program (PPP) loan forgiveness gain of $6,170 recorded in the fourth quarter of 2021. Restructuring expense in 2021 of $327 related to the consolidation of our printed circuit board production capabilities into our center of excellence in Mankato, Minnesota and closure of our Merrifield, Minnesota plant. Gain on sale of assets in 2021 of $141 related to the closure of our Merrifield, Minnesota plant. Loss on abandonment of intangible assets in 2021 of $560 related to abandonment of the Devicix tradename. ($ in millions) Last Twelve Months (LTM) Ended in Quarter Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Net Sales $ 102.5 $ 105.5 $ 115.2 $ 123.8 $ 126.1 $ 132.0 $ 134.1 $ 138.3 $ 140.8 $ 138.9 $ 139.3 $ 138.7 Gross Profit $ - Adjusted 8.8 10.3 11.2 13.7 15.1 18.1 20.5 21.9 22.4 21.4 23.1 23.1 Gross Margin % - Adjusted 8.6% 9.7% 9.7% 11.0% 12.0% 13.7% 15.3% 15.8% 15.9% 15.4% 16.6% 16.6% EBITDA - Adjusted $ (2.0) $ (0.7) $ (0.2) $ 1.9 $ 2.5 $ 4.2 $ 5.8 $ 6.7 $ 6.8 $ 6.0 $ 8.0 $ 8.1 View source version on businesswire.com: https://www.businesswire.com/news/home/20240516526389/en/
Andrew D. C. LaFrence Chief Financial Officer and Senior Vice President of Finance alafrence@nortechsys.com 952-345-2243