Nortech Systems Reports Second Quarter Results

Rhea-AI Summary

Nortech Systems (NASDAQ: NSYS) reported Q2 2025 financial results, with net sales of $30.7 million, down 9.5% from Q2 2024. Despite lower revenues, the company achieved net income of $313,000 ($0.12 per diluted share), a 99.4% increase from the prior year, and Adjusted EBITDA of $1.1 million, up 16.8% year-over-year.

The company's restructuring efforts and cost discipline have yielded improved earnings and positive EBITDA. The 90-day backlog stands at $26.6 million as of June 30, 2025. Management highlighted increased plant efficiency, improved utilization across transferred programs, and strategic inventory management, with a shift from raw materials to finished goods to support customer stocking programs.

Nortech maintains a strong position in nearshoring operations in Mexico and China, with strategic advantages in the current tariff environment. The company is transitioning from copper to fiber technology to mitigate cost pressures and align with long-term strategy.

Positive

• Net income increased 99.4% to $313,000 in Q2 2025
• Adjusted EBITDA grew 16.8% to $1.1 million
• Gross profit improved 4.8% despite lower revenue
• Operating expenses decreased 4.2% year-over-year
• Strong backlog growth while competitors face declines

Negative

• Net sales declined 9.5% to $30.7 million in Q2 2025
• YTD net loss of $1.0 million compared to $922,000 profit in 2024
• YTD Adjusted EBITDA decreased 97.1% to $73,000
• Long-term line of credit increased to $11.6 million from $8.6 million

Insights

Financial Analyst

Nortech Systems achieved profit growth despite revenue decline through successful restructuring efforts, with improved plant utilization and strategic inventory management.

Nortech Systems (NSYS) reported $30.7 million in Q2 2025 revenue, down 9.5% year-over-year, but delivered $313,000 in net income ($0.12 per diluted share), representing a significant 99.4% increase compared to Q2 2024. This earnings growth during revenue contraction demonstrates that management's restructuring initiatives and cost discipline measures are yielding results.

The company achieved $1.1 million in adjusted EBITDA, a 16.8% year-over-year improvement, highlighting enhanced operational efficiency despite top-line challenges. Gross profit rose 4.8% to $4.8 million, while operating expenses decreased 4.2% to $4.1 million, showcasing effective cost management.

The 90-day backlog stands at $26.6 million as of June 30, 2025, which management characterizes as growing when peers are experiencing declining backlogs. This suggests potential market share gains in their specialized manufacturing niche serving medical, industrial, and aerospace & defense sectors.

The company's balance sheet shows increased reliance on their credit line, with long-term line of credit utilization growing to $11.6 million from $8.6 million at year-end 2024. Inventory management appears effective with inventories decreasing to $18.6 million from $21.6 million, reflecting strategic shifts from raw materials to finished goods to support customer stocking programs.

Year-to-date performance shows more concerning trends, with a $1 million net loss for the first half of 2025 compared to $922,000 net income in the same period of 2024. The six-month revenue decline of 15.5% and 21.4% drop in gross profit indicate Q1 was significantly weaker than Q2, suggesting the company may be in early stages of a turnaround.

Cash flow remains challenging with $2.8 million used in operating activities for the first half of 2025, though this appears to be funding strategic initiatives including inventory restructuring and manufacturing transfers between facilities. Cash balance remains tight at $652,000, down from $916,000 at year-end.

MINNEAPOLIS, Aug. 07, 2025 (GLOBE NEWSWIRE) -- Nortech Systems Incorporated (Nasdaq: NSYS) (“Nortech” or the “Company”), a leading provider of engineering and manufacturing solutions for complex electromedical and electromechanical products serving the medical imaging, medical device, industrial and aerospace & defense markets, reported financial results for the second quarter ended June 30, 2025.

2025 Q2 Highlights:

	●	Net sales of $30.7 million
	●	Net income of $313 thousand, or $0.12 per diluted share
	●	Adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $1.1 million
	●	90-day backlog of $26.6 million as of June 30, 2025

Management Commentary

“Our second quarter results are testament to the dedication, resilience, and execution of our entire team. Despite lower revenues compared with the second quarter of 2024, we delivered improved earnings and a positive EBITDA this quarter—near-term evidence that our restructuring efforts and cost discipline are paying off. Increased plant utilization and improved manufacturing efficiencies across transferred programs are building the operational foundation we need for sustained performance improvement,” said President & CEO, Jay D. Miller.

“Operationally, we’ve increased plant efficiency, improved utilization across transferred programs, and made strategic inventory shifts—reducing raw materials while investing in finished goods to support key customers’ stocking programs. Backlog levels have reached anticipated targets, and our stocking programs are enhancing delivery, quality, and logistics.” Miller added, “Importantly, we’re growing our order backlog at a time when many manufacturers are seeing theirs decline. This momentum, combined with rising customer approvals and enhanced logistics performance, positions us well for continued growth.”

“Looking ahead, we remain cautiously optimistic. Our position in the nearshoring landscape—both in Mexico and China—is strong, and recent news articles in the New York Times and Wall Street Journal underscores the strategic advantage Mexico holds in today’s tariff environment. With our intellectual property in fiber optic and digital technologies, we’re well aligned with projected future demand for fiber products in the Aerospace & Defense market segment. We’re also taking a forward-looking stance on materials—shifting focus from copper to fiber to mitigate cost pressures and align with our long-term strategy to produce lighter, faster, more sustainable and more affordable technology,” Miller said.

Summary Financial Information

The following table provides summary financial information comparing the second quarter 2025 (“Q2 2025”) financial results to the same quarter in 2024 (“Q2 2024”) as well as the six-month period ended June 30, 2025 (“YTD 2025”) with the same period in 2024 (“YTD 2024”).

($ in thousands)		Q2 2025				Q2 2024				% Change				YTD 2025				YTD 2024				% Change
Net sales		$	30,675			$	33,891				(9.5	)%		$	57,570			$	68,106				(15.5	)%
Gross profit		$	4,837			$	4,617				4.8	%		$	7,915			$	10,065				(21.4	)%
Operating expenses		$	4,095			$	4,273				(4.2	)%		$	8,786			$	8,566				2.6	%
Net income (loss)		$	313			$	157				99.4	%		$	(1,003	)		$	922				(208.8	)%
EBITDA		$	1,073			$	828				29.6	%		$	(193	)		$	2,465				(107.8	)%
Adjusted EBITDA		$	1,073			$	919				16.8	%		$	73			$	2,556				(97.1	)%

Conference Call

The Company will hold a live conference call and webcast at 7:30 a.m. central time on Thursday, August 7, to discuss the Company’s 2025 second quarter results. The call will be hosted by Jay D. Miller, Chief Executive Officer and President and Andrew D. C. LaFrence, Chief Financial Officer. To access the live audio conference call, US participants may call 888-506-0062 and international participants may call 973-528-0011. Participant Access Code: 760771. Participants may also access the call via webcast at: https://www.webcaster4.com/Webcast/Page/2814/52718.

###

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 primarily serves the medical imaging, medical device, 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, and interconnect assemblies, printed circuit board assemblies, as well as system-level assembly, integration, and final test. Headquartered in Maple Grove, Minn., Nortech currently has six 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 future financial results, our ability to generate positive EBITDA, increased plant utilization, growth of our backlog, gaining approval of customers relating to moving production from one facility to another Company-owned facility, improving logistics, nearshoring as a strategic advantage Mexico holds in today’s tariff environment, effect of our intellectual property on financial performance, financial impact of shifting production focus from copper to fiber over time, effects of restructuring and consolidating manufacturing facilities, sustained long-term health and growth, and optimism about customer pipeline. 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) commodity cost increases coupled with challenges in raising prices and/or customer pressure to reduce prices; (2) supply chain disruptions leading to shortages of critical components; (3) volatility in market conditions which may affect demand for the Company’s products; (4) increased competition and/or reduced demand; (5) changes in the reliability and efficiency of operating facilities or those of third parties; (6) risks related to the availability of labor; (7) the unanticipated loss of any key member of senior management; (8) geopolitical, economic, financial and business conditions including changing tariff environment; (9) the Company’s ability to steadily improve manufacturing output and product quality; (10) the impact of global health epidemics on our customers, employees, manufacturing facilities, suppliers, the capital markets and our financial condition; or (11) challenges with customers with respect to moving production from one facility to another Company-owned facility. 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.

Reconciliation of Generally Accepted Accounting Principles (“GAAP”) Measures to Non-GAAP Financial Measure

EBITDA is a non-GAAP financial measure used by management that we believe provides useful information to investors because it reflects ongoing performance excluding certain non-recurring items during comparable periods and facilitates comparisons between peer companies since interest, taxes, depreciation, and amortization can differ greatly between different organizations as a result of differing capital structures and tax strategies. EBITDA is defined as net income (loss) plus interest expense, plus income tax expense plus depreciation expense and amortization expense. EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Adjusted EBITDA reflects the impact of restructuring and non-recurring items. EBITDA and Adjusted EBITDA are not a measurement of our financial performance under GAAP and should not be considered an alternative to net sales or net income (loss), as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA and Adjusted EBITDA have limitations as an analytical metric, and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP.

NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

		THREE MONTHS ENDED								SIX MONTHS ENDED
		JUNE 30,								JUNE 30,
		2025				2024				2025				2024
Net sales		$	30,675			$	33,891			$	57,570			$	68,106
Cost of goods sold			25,838				29,274				49,655				58,041
Gross profit			4,837				4,617				7,915				10,065
Operating expenses:
Selling			1,204				909				2,388				1,714
General and administrative			2,589				2,982				5,504				6,152
Research and development			302				291				628				609
Restructuring charges			-				91				266				91
Total operating expenses			4,095				4,273				8,786				8,566
Income (loss) from operations			742				344				(871	)			1,499
Other expense:
Interest expense			(257	)			(165	)			(471	)			(332	)
Income (loss) before income taxes			485				179				(1,342	)			1,167
Income tax expense (benefit)			172				22				(339	)			245
Net income (loss)		$	313			$	157			$	(1,003	)		$	922
Net income (loss) per common share:
Basic (in dollars per share)		$	0.12			$	0.06			$	(0.36	)		$	0.34
Weighted average number of common shares outstanding - basic (in shares)			2,773,598				2,760,052				2,767,263				2,751,330
Diluted (in dollars per share)		$	0.12			$	0.05			$	(0.36	)		$	0.32
Weighted average number of common shares outstanding - diluted (in shares)			2,954,765				2,935,671				2,767,263				2,922,113
Other comprehensive income (loss)
Foreign currency translation			124				(175	)			130				(358	)
Comprehensive income (loss), net of tax		$	437			$	(18	)		$	(873	)		$	564

NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2025 AND DECEMBER 31, 2024
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

		JUNE 30, 2025				DECEMBER 31, 2024
ASSETS
Current assets:
Cash		$	652			$	916
Accounts receivable, less allowances of $206 and $196, respectively			17,810				14,875
Inventories, net			18,628				21,638
Contract assets			14,984				13,792
Assets held for sale			495				-
Prepaid assets and other assets			5,749				4,094
Total current assets			58,318				55,315
Property and equipment, net			5,443				6,232
Operating lease assets, net			7,563				8,139
Deferred tax assets			3,275				2,575
Other intangible assets, net			165				174
Other assets			61				-
Total assets		$	74,825			$	72,435
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	11,931			$	11,582
Accrued payroll and commissions			1,752				1,841
Customer deposits			5,176				5,140
Current portion of operating lease obligations			1,237				1,175
Current portion of finance lease obligations			229				143
Notes payable			-				344
Other accrued liabilities			1,283				1,203
Total current liabilities			21,608				21,428
Long-term liabilities:
Long-term line of credit			11,615				8,634
Long-term operating lease obligations, net of current portion			7,145				7,773
Long-term finance lease obligations, net of current portion			781				311
Other long-term liabilities			288				284
Total long-term liabilities			19,829				17,002
Total liabilities			41,437				38,430
Shareholders’ equity:
Preferred stock, $1 par value; 1,000,000 shares authorized; 250,000 shares issued and outstanding			250				250
Common stock - $0.01 par value; 9,000,000 shares authorized; 2,780,134 and 2,760,793 shares issued and outstanding, respectively			28				28
Additional paid-in capital			17,585				17,329
Accumulated other comprehensive loss			(847	)			(977	)
Retained earnings			16,372				17,375
Total shareholders’ equity			33,388				34,005
Total liabilities and shareholders’ equity		$	74,825			$	72,435

NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

		SIX MONTHS ENDED JUNE 30,
		2025				2024
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income		$	(1,003	)		$	922
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization			678				966
Compensation on stock-based awards			235				206
Deferred taxes			(700	)			-
Change in accounts receivable allowance			10				(88	)
Change in inventory reserves			351				113
Other, net			-				(59	)
Changes in current operating assets and liabilities:
Accounts receivable			(2,842	)			1,690
Inventories			2,714				(1,288	)
Contract assets			(1,192	)			(476	)
Prepaid expenses and other assets			(1,647	)			(531	)
Accounts payable			295				(2,546	)
Accrued payroll and commissions			(94	)			(1,516	)
Customer deposits			36				1,385
Other accrued liabilities			386				(236	)
Net cash used in operating activities			(2,773	)			(1,458	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment			9				9
Purchases of property and equipment			(367	)			(1,020	)
Net cash used in investing activities			(358	)			(1,011	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit			51,405				68,323
Payments to line of credit			(48,485	)			(65,809	)
Principal payments on financing leases			(85	)			(202	)
Stock option exercises			23				31
Net cash provided by financing activities			2,858				2,343
Effect of exchange rate changes on cash			9				(7	)
Net change in cash			(264	)			(133	)
Cash - beginning of period			916				1,675
Cash - end of period		$	652			$	1,542

		THREE MONTHS ENDED JUNE 30,								SIX MONTHS ENDED JUNE 30,
		2025				2024				2025				2024
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
($ in thousands)
Net income (loss)		$	313			$	157			$	(1,003	)		$	922
Interest			257				165				471				332
Taxes			172				22				(339	)			245
Depreciation			327				444				669				886
Amortization			4				40				9				80
EBITDA			1,073				828				(193	)			2,465
Restructuring Charges			-				91				266				91
ADJUSTED EBITDA		$	1,073			$	919			$	73			$	2,556

There were no material adjustments to EBITDA in the quarter ended June 30, 2025. Adjustment to EBITDA in the six months ended June 30, 2025 includes ($ in thousands):

●

During the first quarter of 2025, we incurred $235 of severance charges for a February 2025 reduction in force to align staffing to our forecasted net sales and $31 of expenses related to our closed Blue Earth facility, which expense amount is not included in Adjusted EBITDA.

Adjustment to EBITDA in 2024 includes ($ in thousands):

●

In connection with the Blue Earth facility closure, we accrued $91 of retention bonus and other expenses in both the three and six-months ended June 30, 2024, which expense amount is not included in Adjusted EBITDA.

($ in millions)		Last Twelve Months (“LTM”) Ended in Quarter
		Q2 2022				Q3 2022				Q4 2022				Q1 2023				Q2 2023				Q3 2023				Q4 2023				Q1 2024				Q2 2024				Q3 2024				Q4 2024				Q1 2025				Q2 2025
Net Sales		$	126.1			$	132.0			$	134.1			$	138.3			$	140.8			$	138.9			$	139.3			$	138.7			$	137.5			$	135.6			$	128.1			$	120.8			$	117.6
Gross Profit $ - Adjusted			15.1				18.1				20.5				21.9				22.4				21.4				23.1				23.1				22.2				20.7				16.7				14.4				14.6
Gross Margin % - Adjusted			12.0	%			13.7	%			15.3	%			15.8	%			15.9	%			15.4	%			16.6	%			16.6	%			16.1	%			14.9	%			13.1	%			11.9	%			12.4	%
EBITDA - Adjusted		$	2.5			$	4.2			$	5.8			$	6.7			$	6.8			$	6.0			$	8.0			$	8.1			$	7.3			$	5.9			$	2.1			$	(0.5	)		$	(0.4	)

Contact

Andrew D. C. LaFrence
Chief Financial Officer and Senior Vice President of Finance
alafrence@nortechsys.com
952-345-2243

FAQ

What were Nortech Systems (NSYS) Q2 2025 earnings results?

Nortech reported Q2 2025 net income of $313,000 ($0.12 per diluted share) on revenue of $30.7 million. Adjusted EBITDA was $1.1 million, up 16.8% year-over-year.

How did Nortech's Q2 2025 revenue compare to the previous year?

Nortech's Q2 2025 revenue of $30.7 million decreased 9.5% compared to $33.9 million in Q2 2024.

What is Nortech Systems' current backlog as of Q2 2025?

Nortech reported a 90-day backlog of $26.6 million as of June 30, 2025.

What strategic changes is Nortech implementing in its operations?

Nortech is transitioning from copper to fiber technology, improving plant efficiency, enhancing manufacturing utilization, and implementing strategic inventory management with focus on finished goods for customer stocking programs.

How is Nortech performing in terms of operational efficiency?

Despite lower revenues, Nortech achieved improved earnings and positive EBITDA through restructuring efforts, increased plant efficiency, and better utilization across transferred programs.