Nortech Systems Reports 21.4% Revenue Decline in Q1 2025

Nortech Systems Incorporated reported a significant decline in financial performance for the first quarter of 2025, with net sales totaling $26.9 million, down 21.4% from $34.2 million in the same period of 2024. The company experienced a gross profit of $3.1 million, representing a gross margin of 11.4%, a decrease from 15.9% in the prior year. The operating loss for the quarter was $1.6 million, compared to an operating income of $1.2 million in the first quarter of 2024. The net loss for the period was $1.3 million, or $(0.48) per share, contrasting with a net income of $765,000, or $0.28 per share, in the previous year.

The decline in revenue was attributed to delays in customer approvals within the Aerospace and Defense sector, as well as inefficiencies related to the consolidation of production from the now-closed Blue Earth facility to the Bemidji facility. The company noted that these issues are expected to be resolved in the upcoming quarters. Additionally, net sales across major markets saw declines, with Aerospace and Defense down 43.8%, Medical Devices down 24.8%, and Industrial sales decreasing by 14.0%.

Operationally, Nortech's total order backlog as of March 31, 2025, was $68.3 million, reflecting a 3.8% increase from the previous quarter but a 20.5% decrease year-over-year. The company reported a 90-day shipment backlog of $26.7 million, which was a slight increase from the previous quarter but down 24.1% from the same time last year. The company has been focusing on reducing inventory levels and optimizing plant operations to improve efficiency and profitability.

In terms of strategic developments, Nortech has undergone organizational changes, including the realignment of customer-facing managers, which has resulted in increased selling expenses. The company also incurred $266,000 in restructuring charges related to staff reductions and the closure of the Blue Earth facility. As of March 31, 2025, Nortech had total assets of $73.5 million and total liabilities of $40.7 million, with a cash balance of $1.2 million, up from $916,000 at the end of 2024.

Looking ahead, Nortech anticipates that the resolution of customer approval delays and the optimization of its manufacturing processes will lead to improved financial performance in the coming quarters. The company has also amended its revolving line of credit to provide additional liquidity and flexibility as it navigates these challenges. Despite the current setbacks, management remains optimistic about the company's ability to capitalize on growth opportunities in the medical markets and improve overall operational efficiency.