Nortech Systems Announces Second Quarter 2021 Results
Nortech Systems Incorporated (NASDAQ: NSYS) reported net sales of $30.2 million for Q2 2021, a 36.7% increase from Q1 2021 and 14.0% compared to Q2 2020. This revenue growth is attributed to higher production volumes and enhanced supply chain operations. The gross margin improved to 11.9%, up from 7.1% in Q1 2021. The company achieved a net income of $0.2 million compared to a net loss of $1.5 million in the previous quarter. Nortech holds a customer backlog of $72 million and is targeting approximately $5 million from the Employee Retention Credit.
- Net sales increased 36.7% from Q1 2021 to Q2 2021.
- Gross margin improved to 11.9%, a 4.8 percentage point increase.
- Achieved a net income of $0.2 million, reversing from a net loss of $1.5 million.
- Customer backlog stands at $72 million, indicating strong future demand.
- Estimated potential Employee Retention Credit of approximately $5 million.
- Restructuring expenses totaled $77 thousand in Q2 2021, which could affect cash flow.
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
"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
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
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
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 |
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(in thousands, except for share data) |
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THREE MONTHS ENDED |
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SIX MONTHS ENDED |
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June 30, |
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June 30, |
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Unaudited |
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Unaudited |
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Unaudited |
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Unaudited |
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2021 |
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2020 |
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2021 |
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2020 |
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| Net Sales | $ | 30,182 |
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$ | 26,461 |
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$ | 52,254 |
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$ | 53,901 |
|
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| Cost of Goods Sold | 26,597 |
|
23,736 |
|
47,108 |
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47,936 |
|
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| Gross Profit | 3,585 |
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2,725 |
|
5,146 |
|
5,965 |
|
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11.9 |
% |
10.3 |
% |
9.8 |
% |
11.1 |
% |
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| Operating Expenses | ||||||||||||||||
| Selling Expenses | 571 |
|
730 |
|
1,292 |
|
1,351 |
|
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| General and Administrative Expenses | 2,418 |
|
1,946 |
|
5,214 |
|
4,174 |
|
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| R&D Expenses | 207 |
|
207 |
|
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| Restructuring Expenses | 77 |
|
296 |
|
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| (Gain) on Sale of Assets | (94 |
) |
(94 |
) |
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| Total Operating Expenses | 3,179 |
|
2,676 |
|
6,914 |
|
5,525 |
|
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| Income (Loss) from Operations | 406 |
|
49 |
|
(1,769 |
) |
440 |
|
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| Interest Expense | (116 |
) |
(176 |
) |
(202 |
) |
(400 |
) |
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| Income (Loss) Before Income Taxes | 290 |
|
(127 |
) |
(1,971 |
) |
40 |
|
||||||||
| Income Tax (Benefit) Expense | 111 |
|
(4 |
) |
(596 |
) |
26 |
|
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| Net Income (Loss) | $ | 179 |
|
$ | (123 |
) |
$ | (1,375 |
) |
$ | 14 |
|
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| Income (Loss) Per Common Share - Basic | $ | 0.07 |
|
$ | (0.05 |
) |
$ | (0.52 |
) |
$ | 0.01 |
|
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| Weighted Average Number of Common Shares Outstanding - Basic | 2,658,926 |
|
2,657,530 |
|
2,659,028 |
|
2,657,530 |
|
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| Income (Loss) Per Common Share - Diluted | $ | 0.06 |
|
$ | (0.05 |
) |
$ | (0.52 |
) |
$ | 0.01 |
|
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| Weighted Average Number of Common Shares Outstanding - Diluted | 2,767,991 |
|
2,657,530 |
|
2,659,028 |
|
2,666,532 |
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Condensed Consolidated Balance Sheets |
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(in thousands) |
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June 30, 2021 |
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December 31, 2020 |
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Unaudited |
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Audited |
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| Cash | $ | 661 |
$ | 352 |
||
| Restricted Cash | 592 |
3,212 |
||||
| Accounts Receivable | 16,670 |
15,625 |
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| Inventories | 18,301 |
13,917 |
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| Contract Assets | 6,918 |
5,899 |
||||
| Prepaid Expenses and Other Current Assets | 3,030 |
2,032 |
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| Property and Equipment, Net | 5,744 |
6,426 |
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| Assets Held for Sale | 430 |
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| Operating Lease Assets | 9,336 |
8,998 |
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| Other Intangible Assets, Net | 1,130 |
1,173 |
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| Total Assets | $ | 62,812 |
$ | 57,634 |
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| Accounts Payable | $ | 12,815 |
$ | 11,239 |
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| 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 |
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Reconciliation of Net Income (Loss) to Adjusted EBITDA |
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(in thousands) |
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THREE MONTHS ENDED |
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SIX MONTHS ENDED |
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June 30, |
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June 30, |
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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 |
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| EBITDA | 896 |
613 |
|
(801 |
) |
1,571 |
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| Add Restructuring Expenses | 77 |
296 |
|
|||||||||||
| Adjusted EBITDA | $ | 973 |
$ | 613 |
|
$ | (505 |
) |
$ | 1,571 |
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FAQ
What were Nortech's net sales for Q2 2021?
How much did Nortech's gross margin improve in Q2 2021?
What was Nortech's net income in Q2 2021?
What is the current customer backlog for Nortech Systems?
What is the estimated amount of the Employee Retention Credit for Nortech?
