Nortech Systems Incorporated Q2 FY2025 earnings call

• Restructuring efforts and cost discipline are paying off with improved earnings and positive EBITDA despite lower revenue. Increased plant utilization and manufacturing efficiencies across transfer programs. - Strategic inventory shifts: reduced raw materials while investing in finished goods for key customer stocking programs. - Made significant headway with aerospace and defense customer approvals for products transferred from Blue Earth to Bemidji, expecting Aerospace and Defense business to normalize in the second half of 2025. - Managed cost structure by reducing operating costs, including closing Blue Earth facility and adjusting headcount. - Nortech's 3-tier cost structure (U.S., Mexico, China) allows global engineering resources to fit customer needs. - Focus on innovation with engineering expertise, product innovation, and sustainability plans, including EBX and AOX fiber optic technologies.

In the second quarter of 2025, Nortech Systems, Inc. reported net sales of $30.7 million, which is a 9.5% decrease from the $33.9 million in the second quarter of 2024. The gross profit for the second quarter of 2025 was $4.8 million, representing 15.8% of net sales, compared to $4.6 million or 13.6% of net sales in the same prior year quarter. The customer backlog at the end of the second quarter of 2025 grew approximately $10 million from March 31, 2025, to $78.4 million. For the 12 months ended June 30, 2025, net sales were $117.6 million compared with $137.5 million for the prior 12-month period.

• Focus on strengthening balance sheet and further reducing inventory investments in 2025. - Drive efficiencies in manufacturing process, especially for transferred programs, to achieve sustainable long-term EBITDA growth and improve free cash flow. - Continue with disciplined lean operation execution, expense management, and R&D innovation.

• Tariffs on China and Mexico may impact manufacturers, though Nortech's Maquiladora structure reduces direct exposure to Mexico tariffs. - Uncertainty around tariff impacts on Chinese imports, which are monitored and may lead to adjusting customer pricing and sourcing strategies. - Delays in aerospace and defense customer approvals of product transfers previously impacted revenues.

Q: No questions received A: No questions