Nortech Systems (NSYS) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $33.9M, down 3.2% year-over-year, with six-month sales at $68.1M, down 2.6%.

• Medical segment sales declined, while aerospace and defense grew 23.9% in Q2 and 29.3% for the six months; industrial segment had moderate gains.

• Net income for Q2 2024 was $157K, a 75.2% decrease year-over-year; adjusted EBITDA was $919K, down 49%.

• Gross margin decreased to 13.6% in Q2 2024 from 15.6% in Q2 2023, mainly due to lower sales and reduced facility utilization.

• Announced closure and consolidation of Blue Earth facility into Bemidji by end of 2024, with facility optimization expected to yield at least $1.6M in annual savings starting 2025.

Financial highlights

• Q2 2024 gross profit was $4.6M (13.6% margin), down from $5.5M (15.6%) in Q2 2023.

• Net income for Q2 2024 was $157K ($0.06 basic EPS), down from $634K ($0.23) in Q2 2023.

• Adjusted EBITDA for Q2 2024 was $919K, down from $1.6M in Q2 2023; trailing twelve-month adjusted EBITDA was $7.3M, up from $6.8M.

• Cash and equivalents at June 30, 2024, were $1.5M, with $6.6M available under the line of credit.

• Net cash used in operations for the first half of 2024 was $1.5M, versus $281K provided in 2023.

Outlook and guidance

• Facility optimization in Minnesota is expected to yield at least $1.6M in annual savings starting 2025.

• Management anticipates improved top and bottom-line growth following these actions.

• Backlog decreased 14.8% sequentially and 27.4% year-over-year as customers rebalance inventories.

• Management believes current financing and cash flows are sufficient for the next twelve months.

• Focus remains on strengthening the balance sheet, aligning operations with market demand, and driving sustainable EBITDA growth.