- Revenue Declines (19.6%); GAAP Net Loss of ($1.6) million
- Adjusted EBITDA loss of ($1.5) million for Fiscal First Quarter
of 2021 Compared to $1.0 million in Fiscal First Quarter 2020
- Monthly Bookings Trends Improving. Solid 90-day Backlog of $63
million, Improved $14 million or +29% vs 12/31/20
- Balance Sheet Remains Strong with $7.6 million Unused
Availability on the Long Term Line of Credit
Nortech Systems Incorporated (Nasdaq: NSYS) (the “Company”), a
leading provider of engineering and manufacturing solutions for
complex electromedical and electromechanical products serving the
medical, aerospace & defense and industrial markets, reported
net sales of $22.1 million for the quarter ended March 31, 2021, a
decline of 19.6% compared to $27.4 for the first quarter of 2020.
The decline was primarily due to COVID-related factors including
supply chain disruptions and short-term challenges scaling our
direct labor workforce. Gross margin for the first quarter of 2021
was 7.1% compared to 11.0% in 2020, a decline of 3.9 percentage
points. Lower margin was due to unabsorbed fixed overhead in the
Company’s global manufacturing network. Net loss for first quarter
2021 was ($1.6) million and ($0.58) per diluted share compared to a
net income of $0.1 million and $0.05 per diluted share in first
quarter 2020. Adjusted EBITDA was a loss of ($1.5) million in first
quarter 2021 compared to net income of $1.0 million in first
quarter 2020.
"The first quarter of 2021 was
a significant challenge for Nortech, especially in January and
February. In response, we took aggressive action to overcome
COVID-related obstacles and enable higher production volume. Our
manufacturing plants are regaining strength and we’re confident
we’ll see steady improvement throughout the remainder of 2021.”
stated Jay D. Miller, Chief Executive Officer and
President.
Nortech, in partnership with our medical, industrial and defense
customers, uses intelligence, innovation, speed and global
expertise to provide manufacturing and engineering solutions. This
enables our customers to be leaders in digital connectivity and
data management to achieve their business goals. Nortech strives to
be a premier workplace that fosters valued relationships internally
and in our communities.
About Nortech Systems
Incorporated Nortech Systems is a leading provider of
design and manufacturing solutions for complex electromedical
devices, electromechanical systems, assemblies, and components.
Nortech Systems primarily serves the medical, aerospace &
defense, and industrial markets. Its design services span concept
development to commercial design, and include medical device,
software, electrical, mechanical, and biomedical engineering. Its
manufacturing and supply chain capabilities are vertically
integrated around wire/cable/interconnect assemblies, printed
circuit board assemblies, as well as system-level assembly,
integration, and final test. Headquartered in Maple Grove, Minn.,
Nortech currently has seven manufacturing locations and design
centers across the U.S., Latin America, and Asia. Nortech Systems
is traded on the NASDAQ Stock Market under the symbol NSYS.
Nortech’s website is www.nortechsys.com.
Forward-Looking Statements
This press release contains
forward-looking statements made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995
including without limitation statements regarding the Company
returning to profitable growth, monthly sales booking trends,
customer demand, the ability of our supply chain to supply
materials on a timely basis, our ability to hire sufficient direct
labor to produce our products, and the effects of changes in
operations. While this release is based on management’s best
judgment and current expectations, actual results may differ
materially from those expressed or implied and involve a number of
risks and uncertainties. Important factors that could cause actual
results to differ materially from the forward-looking statements
include, without limitation: (1) the impact of the COVID-19
pandemic on our customers, employees, manufacturing facilities,
suppliers, the capital markets and our financial condition (2)
supply chain disruptions leading to parts shortages for critical
components; (3) volatility in market conditions which may affect
market supply of and demand for the company’s products; (4)
increased competition; (5) changes in the reliability and
efficiency of operating facilities or those of third parties; (6)
risks related to the availability of labor; (7) commodity cost
increases coupled with our inability to raise prices charged to our
customers; (8) the unanticipated loss of key members of senior
management and the transition of new members of our management
teams to their new roles; (9) and general economic, financial and
business conditions that could affect the company’s financial
condition and results of operations. Some of the above-mentioned
factors are described in further detail in the section entitled
“Risk Factors” in our annual and quarterly reports, as applicable.
You should assume the information appearing in this document is
accurate only as of the date hereof, or as otherwise specified, as
our business, financial condition, results of operations and
prospects may have changed since such date. Except as required by
applicable law, including the securities laws of the United States
and the rules and regulations of the United States Securities and
Exchange Commission, we undertake no obligation to publicly update
or revise any forward-looking statement, whether as a result of new
information, future events or otherwise, to reflect actual results
or changes in factors or assumptions affecting such forward-looking
statements.
Non-GAAP Measurements
Management believes that certain
non-GAAP financial measures may be useful in providing additional
meaningful comparisons between current results and results in prior
periods. Adjusted EBITDA is a metric used by management to evaluate
performance. Adjusted EBITDA is also used by the financial
community to facilitate comparisons between peer companies since
interest, taxes, depreciation, and amortization can differ greatly
between organizations as a result of differing capital structures
and tax strategies. Adjusted EBITDA excludes certain items that are
unusual in nature or not comparable from period to period. The
Company provides this information to investors to assist in
comparisons of past, present, and future operating results and to
assist in highlighting the results of on-going operations. While
the Company’s management believes that non-GAAP measurements are
useful supplemental information, such adjusted results are not
intended to replace the Company’s GAAP financial results and should
be read in conjunction with those GAAP results. Other supplemental
information has been provided to demonstrate reconciliation of
non-GAAP measurements discussed above to most relevant GAAP
financial measurements.
Condensed Consolidated
Statements of Operations
(in thousands, except for share
data)
THREE MONTHS ENDED
March 31,
Unaudited
Unaudited
2021
2020
Net Sales $
22,072
$
27,440
Cost of Goods Sold
20,511
24,435
Gross Profit
1,561
3,005
7.1
%
11.0
%
Operating Expenses Selling Expenses
721
621
General and Administrative Expenses
2,796
1,993
Restructuring Expenses
219
-
Total Operating Expenses
3,736
2,614
Income (Loss) from Operations
(2,175
)
391
Interest Expense
(86
)
(224
)
Income (Loss) Before Income Taxes
(2,261
)
167
Income Tax (Benefit) Expense
(707
)
30
Net Income (Loss) $
(1,554
)
$
137
Income (Loss) Per Common Share - Diluted $
(0.58
)
$
0.05
Weighted Average Number of Common Shares Outstanding -
Diluted
2,659,132
2,668,590
Condensed Consolidated Balance
Sheets
(in thousands)
March 31, 2021
December 31, 2020
Unaudited
Audited
Cash $
384
$
352
Restricted Cash
598
3,212
Accounts Receivable
12,507
15,625
Inventories
17,079
13,917
Contract Assets
6,677
5,899
Prepaid Expenses and Other Current Assets
3,127
2,032
Property and Other Long-term Assets
15,956
15,424
Other Intangible Assets, Net
1,172
1,173
Total Assets $
57,500
$
57,634
Accounts Payable $
13,006
$
11,239
Lease Obligations, Finance & Operating, Net
11,872
11,389
All Other Liabilities
6,312
5,891
Long Term Line of Credit
2,200
3,328
Long-term Debt, Net
6,959
7,069
Shareholders’ Equity
17,151
18,718
Total Liabilities and Shareholders’ Equity $
57,500
$
57,634
Reconciliation of Net Income
(Loss) to Adjusted EBITDA
(in thousands)
THREE MONTHS ENDED
March 31,
2021
2020
Net Income (Loss) $
(1,554
)
$
137
Income Tax (Benefit) Expense
(707
)
30
Interest Expense
86
224
Depreciation and Amortization
477
567
EBITDA
(1,698
)
958
Restructuring Expenses
219
-
Adjusted EBITDA $
(1,479
)
$
958
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210513005618/en/
Chris Jones, CFO cjones@nortechsys.com 952-345-2244
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