Nortech Systems Reports Q1 Results and Actions to Reduce Facility Costs

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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 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.”

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.