Nortech Systems Incorporated Q4 FY2025 earnings call

• Fourth quarter is the third consecutive quarter of positive operating and EBITDA results, with a $2.1 million improvement in income from operations compared to the same quarter in 2024.
• Continued positive trends in operational performance indicators like gross margins, cost management, quality, and customer backlog.
• Increased manufacturing efficiencies across customer programs, transferred to more geographically desirable plants, driving plant-sustained performance improvement and mix shift from new product introduction first builds to recurring production.
• Realized significant improvements in key quality metrics such as defective parts per million (DPPM) and escapes.
• Customer backlog increased to $77.3 million at year-end 2025, a 17.4% increase from 2024, and continued positive trend in Q1 2026 with just-in-time finished product delivery strategies for large customers.
• Entered into new agreements with Associated Bank for a $2.2 million term note and a $15 million asset-backed line of credit, which is more flexible and matches business model, lowering borrowing costs and supporting business growth.
• Strong quoting activity as customers evaluate near-shore manufacturing strategies; well-positioned with North American footprint under USMCA, materially reducing direct exposure to tariffs; monitoring Supreme Court decision regarding AEPA tariffs and reimbursement process.

Medical imaging: Net sales in 2025 increased by $2.5 million compared with 2024, a 6.7% increase; net sales in the fourth quarter of 2025 increased by $1.4 million compared with the same period in 2024. Medical device: Net sales in 2025 increased by $2.7 million compared with 2024, a 7.8% increase; net sales in the fourth quarter of 2025 decreased by $184,000 compared with the same period in 2024. Aerospace and defense: Net sales in 2025 decreased by $5 million compared with 2024; net sales in the fourth quarter of 2025 increased by $1.1 million compared with the same period in 2024. Industrial: Net sales in 2025 decreased by $4.6 million compared with 2024, a 12.9% decline; net sales in the fourth quarter of 2025 decreased by $607,000 compared with the same period in 2024, a 7.7% decline. Customer backlog: Increased to $77.3 million at the end of the fourth quarter of 2025, a 17.4% increase from the end of 2024.

• Extremely focused on continuing to strengthen balance sheet and further reduce inventory investments in 2026.
• Focused on driving efficiencies in manufacturing processes and operating leverage to deliver sustainable long-term EBITDA growth and improve free cash flow.

• Tariff environment remains uncertain, including tariffs with Mexico; Nortec is not the importer of record into the US for goods produced in Mexico under Maquiladora structure, but still has exposure in situations where tariffs are incurred on imported components.
• Closely monitoring the Supreme Court decision regarding the validity of AEPA tariffs and the process for reimbursement of these tariffs.

At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question key. And you may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 for any questions or comments. Okay, sirs, as we have no questions in the queue at this time, I'd like to hand the call back over to Mr. Miller for any closing remarks he may have. Thank you, Ali, and thanks to everyone for joining us today. We look forward to speaking with you in May when we report our first quarter 2026 results. Again, thank you and goodbye. Thank you. Ladies and gentlemen, this concludes today's call and you may disconnect your lines at this time. And we thank you for your participation.