NORTECH SYSTEMS INC Q3 FY2024 earnings call

• Customer order headwinds impacted net sales, with customers delaying purchases, reducing inventories, and shortening lead times.
• Facility consolidations: Closing Blue Earth, Minnesota facility in December and moving production to Bemidji, Minnesota; rapidly progressing with a 30% reduction in Maple Grove lease space, resulting in at least $1.6 million annual savings in 2025 and beyond.
• Business development team performed well, with early 2024 completion of fully staffing the industry-specific team driving business quotes. Recently completed realignment of back office and plant operations to better serve customers with shorter lead times and on-time delivery.
• Bullish on future, investing in long-term growth; 3-tier global strategy of manufacturing in U.S., Mexico, and China provides customer flexibility.
• Focus on engineering expertise, product innovation (EBX, AOX), and sustainability plans, including dedicated engineering services team and advancements in fiber optic technology.

Net sales for the third quarter of 2024 were $31.4 million, a 5.9% decrease from the prior year's $33.4 million. For the nine months ended September 30, 2024, net sales were $99.5 million, down 3.6% from the prior year. Aerospace and Defense category showed strong revenue growth year-to-date. Industrial customers were impacted by market softness, and medical customers were aggressively reducing inventory investments with product introductions pushed out. Aerospace and Defense is the smallest by net sales but important for diversification and future growth.

• Bullish on future of Nortech and continuing to make investments to accelerate long-term growth.
• Focus on strengthening balance sheet, aligning operations and infrastructure with market demand for sustainable long-term growth, and driving improvements in free cash flow. Coupled with disciplined lean operations, execution, expense management, and R&D innovation, aiming to deliver on objectives.

• Customer order headwinds and industry headwinds negatively affecting near-term earnings and EBITDA generation.
• Risks associated with forward-looking statements, where actual results may differ materially from expressed or implied statements, including risks detailed in SEC filings.