Nortech Systems Incorporated Q3 FY2025 earnings call

• Restructuring efforts and cost discipline are paying off with increased manufacturing efficiencies and a positive mix shift from new product introduction to recurring production.
• Monitored tariffs, well-positioned in North American footprint under USMCA, not importer of record for Mexico goods, working with customers to pass on tariff costs.
• Completed AS 9,100 D certification in Monterey facility and CMMC 2.0 certification for DoD customers.
• Working to execute strategy for shorter lead times, on-time delivery, high quality, and deeper partnerships, with customer backlog at $77,300,000 as of 09/30/2025.
• Emphasized engineering expertise, product innovation focus, and sustainability plans, including fiber optic technology for reduced EMI, environmental benefits, and alignment with aerospace/defense needs.

For the third quarter of 2025, net sales totaled $3,500,000, a 2.9% decrease from 2024. Aerospace and defense net sales decreased by $1,400,000. Medical imaging net sales increased by $832,000 (8.7%) compared to the same quarter in 2024. Gross profit for the quarter was $5,000,000, 15.5% of net sales, up from $3,800,000 (12.2% of net sales) in the prior year quarter. Adjusted EBITDA for the third quarter of 2025 was $1,300,000 compared to $143,000 in the same period in 2024.

• Focus on strengthening balance sheet, including reducing inventory in 2025 and closing a new asset-backed line of credit in early 2026.
• Drive efficiencies in manufacturing processes for sustainable EBITDA growth and free cash flow improvement.
• Optimistic about remainder of 2025 and 2026 despite past headwinds from customer ordering patterns and program delays.

• Tariff uncertainties and geopolitical environment posing risks to business operations.
• Impact of new tax bill on tax deductions and credits, temporarily limiting ability to deduct expenses and affecting foreign tax deductions/credits.

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