Net Sales: $33.9 million for Q2 2024, a 3.2% decrease from $35 million in Q2 2023.
Six-Month Net Sales: $68.1 million for the first half of 2024, down 2.6% from $69.9 million in the same period of 2023.
Gross Profit: $4.6 million or 13.6% of net sales for Q2 2024, compared to $5.5 million or 15.6% in Q2 2023.
Six-Month Gross Profit: $10.1 million or 14.8% of net sales for the first half of 2024, compared to $11 million or 15.7% in the first half of 2023.
Operating Expenses: Marginally lower in Q2 2024 compared to the prior year, due to lower incentive compensation accruals and expense management.
Restructuring Costs: $91,000 in Q2 2024 related to the Blue Earth facility closure.
Cash Flow from Operations: Net cash used was $1.5 million for the first six months of 2024, compared to cash provided of $281,000 in the same period of 2023.
Adjusted EBITDA: $919,000 for Q2 2024, down from $1.6 million in Q2 2023; $2.6 million year-to-date 2024, compared to $3.2 million in the first half of 2023.
Cash and Cash Equivalents: $1.5 million as of June 30, 2024, down from $1.7 million as of December 31, 2023.
Accounts Receivable: $17.6 million as of June 30, 2024, down from $19.3 million as of December 31, 2023.
Inventories: $22.8 million as of June 30, 2024, up from $21.7 million as of December 31, 2023.
Trailing 12-Month Net Sales: $137.5 million as of June 30, 2024, compared to $140.8 million for the same period in 2023.
Trailing 12-Month Adjusted EBITDA: $7.3 million as of June 30, 2024, compared to $6.8 million for the same period in 2023.
Nortech Systems Inc (NASDAQ:NSYS) is seeing strong ordering patterns from aerospace and defense customers, indicating robust demand in these sectors.
The company is actively engaging with customers to accelerate nearshoring, which is expected to enhance customer partnerships and support long-term growth.
Facility optimization activities, including the consolidation of the Blue Earth facility, are projected to result in at least $1.6 million in annual savings starting in 2025.
Nortech Systems Inc (NASDAQ:NSYS) has completed staffing its industry-specific business development team, which is driving impressive quote and new business opportunities.
The company's engineering capabilities and product innovations, such as the Expanded Beam Xtreme fiber optic technology, are enhancing product performance and aligning with sustainability goals.
Negative Points
Nortech Systems Inc (NASDAQ:NSYS) experienced a 3.2% decrease in net sales for the second quarter of 2024 compared to the same period in 2023, primarily due to reduced sales from medical customers.
Gross profit and gross margin percentage declined in the second quarter of 2024, attributed to lower net sales and reduced facility utilization.
The company is facing reduced visibility to customer orders, particularly from medical and industrial customers, who are balancing inventories and deferring orders.
Operating cash flow was negative for the first six months of 2024, with net cash used in operating activities totaling $1.5 million.
Adjusted EBITDA decreased for both the second quarter and year-to-date 2024 compared to the same periods in 2023, reflecting lower net sales and related gross profit.
Q & A Highlights
Q: Can you provide an overview of the current challenges and opportunities Nortech Systems is facing in terms of customer orders and market dynamics? A: Jay Miller, President and CEO, explained that Nortech is experiencing reduced visibility in customer orders, particularly from medical and industrial sectors, due to inventory balancing and delayed product launches. However, there is strong demand from aerospace and defense customers. The company is also benefiting from supply chain normalization and nearshoring trends, which are enhancing customer partnerships and supporting long-term growth strategies.
Q: What steps is Nortech taking to optimize its cost structure and facilities? A: Jay Miller highlighted the consolidation of the Blue Earth facility into the Bemidji factory and a reduction in Maple Grove leased space, which are expected to save at least $1.6 million annually starting in 2025. These actions are part of a broader strategy to optimize facilities for long-term growth and profitability.
Q: How is Nortech addressing the changes in supply chain dynamics to better serve its customers? A: Jay Miller noted that Nortech is restructuring operations to improve service delivery, focusing on shorter lead times and high-quality products. This involves leveraging their global manufacturing strategy across the US, Mexico, and China to meet customer needs efficiently and effectively.
Q: Can you elaborate on Nortech's financial performance in the second quarter of 2024? A: Andrew LaFrence, CFO, reported a 3.2% decrease in net sales compared to the previous year, primarily due to reduced sales from medical customers. Gross profit also declined due to lower sales and reduced facility utilization. However, aerospace and defense sectors showed strong revenue growth.
Q: What are Nortech's priorities for 2024 in terms of financial management and growth? A: Andrew LaFrence emphasized the focus on strengthening the balance sheet, aligning operations with market demand, and driving sustainable long-term EBITDA growth. The company is also committed to improving free cash flow through disciplined operations and expense management.
