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Nortech Systems Announces Q2 2021 Results
August 13, 2021 | Business WireEstimated reading time: 2 minutes
Nortech Systems Incorporated, a leading provider of engineering and manufacturing solutions for complex electromedical and electromechanical products serving the medical, aerospace & defense and industrial markets, reported net sales of $30.2 million for the quarter ended June 30, 2021, an increase of 36.7% compared to $22.1 for the first quarter of 2021 and an increase of 14.0% compared to $26.5 million for the second quarter of 2020. The revenue improvement was primarily due to higher production volume resulting from actions to scale the direct labor workforce and strengthen the supply chain for parts. Gross margin for the second quarter of 2021 was 11.9% compared to 7.1% in the first quarter of 2021, an improvement of 4.8 percentage points.
Higher margin was primarily due to greater production output from the Company’s global manufacturing operations. Net income for second quarter 2021 was $0.2 million and $0.06 per diluted share compared to a net loss of ($1.5) million and ($0.58) per diluted share for the first quarter of 2021. Adjusted EBITDA was $1.0 million for the second quarter 2021 compared to adjusted EBITDA loss of ($1.5) for the first quarter 2021. Adjusted EBITDA excludes one-time restructuring expenses related to relocating manufacturing operations from its plant in Merrifield, Minnesota to its printed circuit board (PCB) center of excellence in Mankato, Minnesota. The Company incurred $77 thousand in restructuring expenses in the second quarter of 2021 and $296 thousand for the year-to-date fiscal 2021.
"Nortech rebounded significantly in the second quarter of 2021. We have been taking aggressive action to overcome COVID-related obstacles. We’re continuing to address supply chain bottlenecks to find creative ways to build and ship mission-critical parts to our medical, military, and industrial customers. We have a large $72 million customer backlog and we’re 100% focused on operations execution to increase production output throughout the remainder of 2021 and into 2022.” stated Jay D. Miller, Chief Executive Officer and President.
In May 2021 Nortech announced that it planned to apply for the Employee Retention Credit (“ERC”) to support ongoing investment in Nortech’s frontline workforce to drive increased manufacturing output to meet our customers’ rising demand. If this action is successful, the Company estimates the ERC will total approximately $5 million in fiscal 2021. As of July 2021, the Company has filed for half of the ERC and expects to file for the second half in Q3 2021. The Company has not received funds as of the date of this press release.
As previously disclosed, in April 2020 Nortech participated in the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). In July 2021 Nortech submitted its application for PPP loan forgiveness to the Small Business Administration (“SBA”).
"The PPP and ERC programs were key factors in helping us retain our workforce during the COVID-19 downturn. As demand recovered in early 2021, we were better prepared to return the Company to profitability in Q2 2021.” stated Jay D. Miller, Chief Executive Officer and President.
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