- Revenue at $30.2 million in Fiscal Second Quarter of 2021; +
37% from Fiscal First Quarter of 2021
- US GAAP Net Income $0.2 million for the Fiscal Second Quarter
of 2021; Adjusted EBITDA $1.0 million
- Monthly Bookings Trends Remain Strong. Solid Backlog of $72
million, an increase of +$23 million or +47% vs 12/31/20
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 $30.2 million
for the quarter ended June 30, 2021, an increase of 36.7% compared
to $22.1 for the first quarter of 2021 and an increase of 14.0%
compared to $26.5 million for the second quarter of 2020. The
revenue improvement was primarily due to higher production volume
resulting from actions to scale the direct labor workforce and
strengthen the supply chain for parts. Gross margin for the second
quarter of 2021 was 11.9% compared to 7.1% in the first quarter of
2021, an improvement of 4.8 percentage points. Higher margin was
primarily due to greater production output from the Company’s
global manufacturing operations. Net income for second quarter 2021
was $0.2 million and $0.06 per diluted share compared to a net loss
of ($1.5) million and ($0.58) per diluted share for the first
quarter of 2021. Adjusted EBITDA was $1.0 million for the second
quarter 2021 compared to adjusted EBITDA loss of ($1.5) for the first quarter
2021. Adjusted EBITDA excludes one-time restructuring expenses
related to relocating manufacturing operations from its plant in
Merrifield, Minnesota to its printed circuit board (PCB) center of
excellence in Mankato, Minnesota. The Company incurred $77 thousand
in restructuring expenses in the second quarter of 2021 and $296
thousand for the year-to-date fiscal 2021.
"Nortech rebounded
significantly in the second quarter of 2021. We have been taking
aggressive action to overcome COVID-related obstacles. We’re
continuing to address supply chain bottlenecks to find creative
ways to build and ship mission critical parts to our medical,
military, and industrial customers. We have a large $72 million
customer backlog and we’re 100% focused on operations execution to
increase production output throughout the remainder of 2021 and
into 2022.” stated Jay D. Miller, Chief Executive Officer and
President.
In May 2021 Nortech announced
that it planned to apply for the Employee Retention Credit (“ERC”)
to support ongoing investment in Nortech’s frontline workforce to
drive increased manufacturing output to meet our customers’ rising
demand. If this action is successful, the Company estimates the ERC
will total approximately $5 million in fiscal 2021. As of July
2021, the Company has filed for half of the ERC and expects to file
for the second half in Q3 2021. The Company has not received funds
as of the date of this press release.
As previously disclosed, in
April 2020 Nortech participated in the Paycheck Protection Program
(“PPP”) under the Coronavirus Aid, Relief, and Economic Security
Act (the “CARES Act”). In July 2021 Nortech submitted its
application for PPP loan forgiveness to the Small Business
Administration (“SBA”).
"The PPP and ERC programs were
key factors in helping us retain our workforce during the COVID-19
downturn. As demand recovered in early 2021, we were better
prepared to return the Company to profitability in Q2 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 and backlog
trends, customer demand, the ability of our supply chain to supply
materials on a timely basis, our ability to hire and retain
sufficient direct labor to produce our products, the steady
improvement in production output, receiving Employee Retention
Credit funds and forgiveness of our PPP loan. 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) general economic,
financial and business conditions that could affect the company’s
financial condition and results of operations; (10) the Company’s
ability to steadily improve manufacturing output throughout the
remainder of 2021 and into 2022 (11) the Company obtaining ERC
funds of approximately $5 million in 2021; and (12) the Company
receiving SBA approval for forgiveness of its PPP loan. 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
SIX MONTHS ENDED
June 30,
June 30,
Unaudited
Unaudited
Unaudited
Unaudited
2021
2020
2021
2020
Net Sales $
30,182
$
26,461
$
52,254
$
53,901
Cost of Goods Sold
26,597
23,736
47,108
47,936
Gross Profit
3,585
2,725
5,146
5,965
11.9
%
10.3
%
9.8
%
11.1
%
Operating Expenses Selling Expenses
571
730
1,292
1,351
General and Administrative Expenses
2,418
1,946
5,214
4,174
R&D Expenses
207
207
Restructuring Expenses
77
296
(Gain) on Sale of Assets
(94
)
(94
)
Total Operating Expenses
3,179
2,676
6,914
5,525
Income (Loss) from Operations
406
49
(1,769
)
440
Interest Expense
(116
)
(176
)
(202
)
(400
)
Income (Loss) Before Income Taxes
290
(127
)
(1,971
)
40
Income Tax (Benefit) Expense
111
(4
)
(596
)
26
Net Income (Loss) $
179
$
(123
)
$
(1,375
)
$
14
Income (Loss) Per Common Share - Basic $
0.07
$
(0.05
)
$
(0.52
)
$
0.01
Weighted Average Number of Common Shares Outstanding - Basic
2,658,926
2,657,530
2,659,028
2,657,530
Income (Loss) Per Common Share - Diluted $
0.06
$
(0.05
)
$
(0.52
)
$
0.01
Weighted Average Number of Common Shares Outstanding - Diluted
2,767,991
2,657,530
2,659,028
2,666,532
Condensed Consolidated Balance
Sheets
(in thousands)
June 30, 2021
December 31, 2020
Unaudited
Audited
Cash $
661
$
352
Restricted Cash
592
3,212
Accounts Receivable
16,670
15,625
Inventories
18,301
13,917
Contract Assets
6,918
5,899
Prepaid Expenses and Other Current Assets
3,030
2,032
Property and Equipment, Net
5,744
6,426
Assets Held for Sale
430
Operating Lease Assets
9,336
8,998
Other Intangible Assets, Net
1,130
1,173
Total Assets $
62,812
$
57,634
Accounts Payable $
12,815
$
11,239
Lease Obligations, Finance & Operating, Net
11,494
11,389
All Other Liabilities
6,575
5,891
Line of Credit
7,667
3,328
Long-term Debt, Net
6,847
7,069
Shareholders’ Equity
17,413
18,718
Total Liabilities and Shareholders’ Equity $
62,812
$
57,634
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
(in thousands)
THREE MONTHS ENDED
SIX MONTHS ENDED
June 30,
June 30,
2021
2020
2021
2020
Net Income (Loss) $
179
$
(123
)
$
(1,375
)
$
14
Add Income Tax (Benefit) Expense
111
(4
)
(596
)
26
Add Interest Expense
116
176
202
400
Add Depreciation and Amortization
490
564
967
1,131
EBITDA
896
613
(801
)
1,571
Add Restructuring Expenses
77
296
Adjusted EBITDA $
973
$
613
$
(505
)
$
1,571
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210812005559/en/
Chris Jones, CFO cjones@nortechsys.com 952-345-2244
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