Nortech Systems Reports Second Quarter 2023 Results

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Nortech Systems Incorporated, a leading provider of engineering and manufacturing solutions for complex electromedical and electromechanical products serving the medical, industrial and defense markets, reported 2023 second quarter results for the period ended June 30, 2023.

2023 Second Quarter Highlights:

• Revenue of $35.0 million, up 7.7% from the prior-year period. First half revenue $69.9 million up 10.6% from prior-year period.
• Generally Accepted Accounting Principles (GAAP) net income of $0.6 million, or $0.22 per diluted share, compared to net income of $0.7 million, or $0.25 per diluted share, in the same period in 2022.
• Gross margin of 15.6%, up 20 basis points from gross margin of 15.4% in the second quarter of 2022.
• Earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.6 million, up from EBITDA of $1.5 million in the prior-year period.
• Second quarter bookings of $37 million, the highest level in last 4 quarters.
• Quarter-end backlog of $101 million as of June 30, 2023, up $2 million from the prior quarter end.

Management Commentary

“Nortech Systems demonstrated continued strong performance in the second quarter, underpinned by strong revenue, solid EBITDA levels, near-record bookings and a healthy backlog,” says Jay D. Miller, President & CEO of Nortech Systems.

“Our sustained momentum in operational performance and profitability is shown in the quarterly improvements we delivered across key metrics, both year-over-year and on a trailing twelve-month basis. These consistent results are a testament to the commitment of our Nortech team members to deliver mission-critical quality and performance to our medical, industrial and defense customers,” Miller stated. “We also appreciate our many supplier partners for their vital contributions to our success.”

In Q2 2023, revenue totaled $35.0 million. This represents a 7.7% increase from revenue of $32.5 million in the second quarter of 2022. Net income totaled $0.6 million, or $0.22 per diluted share, in Q2 2023, down from net income of $0.7 million, or $0.25 per diluted share, in Q2 2022.

In the second quarter of 2023, gross profit totaled $5.5 million, or 15.6% of revenue, compared to gross profit of $5.0 million, or 15.4% of revenue, in the prior-year quarter.

Second quarter 2023 operating expenses totaled $4.4 million, in line with the prior quarter and a 10.0% increase from second quarter 2022 operating expenses of $4.0 million. The increase in year-over-year operating expense was by primarily driven by investments in IT and HR systems as well as inflationary pressures on expenses overall.

Second quarter 2023 EBITDA totaled $1.6 million, a 6.7% increase over EBITDA of $1.5 million in the second quarter of 2022 and consistent with the prior quarter. The year-over-year increase in EBITDA resulted primarily from the previously highlighted revenue increase in the same period.

Business Outlook

“In the second half of 2023 we will remain agile and focused on our core operations, cash flow and balance sheet in order to deliver profitable growth and shareholder value,” declared Miller. “We are pleased to see that supply chain disruptions and inflationary pressures have subsided somewhat. These positive trends are reflected in our strong bookings and backlog levels. However, we share a cautious optimism with our customers, and we have positioned Nortech to be nimble and responsive to any macroeconomic changes.

“To help better prepare Nortech for the future, we are judiciously investing in our own proprietary technologies that can enhance our customers’ solutions and provide us with more competitive advantages in the marketplace,” Miller explained. “We are also early into the exploration of benefits from implementing Internet of Things - or IoT - applications to augment our service offering, enhance operational efficiencies and further scale our financial platform.” He added that the company’s proactive Environmental, Social and Governance, or ESG, efforts reflect a deep dedication to corporate responsibility. “Our policies and internal resources will keep Nortech ahead of any upcoming third-party ESG reporting requirements,” he concluded.