Nortech Systems Incorporated

Systems Incorporated First Quarter 2024 Earnings Conference Call. With me on the line today are Jay Miller, President and Chief Executive Officer, and Andrew LaFrance, Chief Financial Officer and Senior Vice President of Finance. All lines have been placed on a listen-only mode, and the call will be open for questions and comments following the management presentation. At this time, it is my pleasure to turn the call over to Andy LaFrance.

Thank you, Matthew. I'd also like to welcome everyone to today's conference call. Jay will begin the call with a review of our operations, recent developments, and business outlook. Then I will review Nortec's first quarter 2024 financial results before turning it back over to Jay for his closing comments. Then we will open up the call for your questions. Before we continue, please note that statements made during this call may be forward looking statements regarding expected net sales, earnings, future plans, opportunities, and other company expectations. These estimates, plans, and other forward looking statements involve unknown and known risks and uncertainties that may cause actual results to differ materially from those expressed or implied on this call. These risks, including those that are detailed in our most recent Form 10Q, may be amended or supplemented. The statements made during this conference call are based on information known by NORTEC as of this date and time of this call, and we assume no obligation to update the information in today's call. You can find NORTEC's complete safe harbor statements in our SEC filings. And with that, I'll turn it back over to Jay for his opening comments. Jay?

Thank you, Andy, and good afternoon, everyone. We're glad you can join us today. In the first quarter of 2024, we extended our reporting of solid operating results, notably by improving margins and managing expenses. During the first quarter, I have met with hundreds of Nortec employees to share our appreciation of their efforts and our results on behalf of the management, board of directors, and shareholders. Everything starts and ends with how our employees live Nortec's values of teamwork, excellence, commitment, innovation, and integrity every day. It is very clear to me that our employees are living these values, and we would not have delivered our first quarter of 2024 financial results without our team members' continued outstanding contributions. Once again, the whole Nortec team deserves our sincere appreciation. Touching briefly on our financial results now, we posted net sales of $34.2 million for the first quarter, along with continued improvements in gross margin. We work carefully with our customers as strategic partners to adjust pricing as needed to reflect market conditions and supply chain realities. Our EBITDA levels were also solid at $1.6 million for the first quarter. In the 12-month period ended March 31, 2024, we have generated $8.1 million of EBITDA. Overall, we are seeing a shift in customer ordering activities wherein they are seeking to shorten their ordering times, which is requiring us to work on different strategies to stock inventories and work with vendors to have ready-to-pick parts on hand. We believe this is an expected evolution of supply chain management given the normalization of supply chains and focus on near-shoring strategies. We recently hired a new global leader in supply chain management to lead this initiative. We are also noting, similar to many other contract manufacturers, recent reduced visibility to bookings in the next several quarters as compared with order patterns in the prior year quarters as customers are balancing their inventories and therefore deferring the placement of some workers. Earlier today, we announced our plan to consolidate our Minnesota facilities to optimize our operating expense structure and plant capacity utilization to increase the efficiency of our operations. Part of our strategy for continue to improve the bottom line and direct our future capital expenditures. Specifically, we are closing our Blue Earth Minnesota production facility by the end of 2024. We will be shifting wire and cable assembly and system level assembly manufacturing to Nortec's Bemidji, Minnesota location. All of the Blue Earth employees are being extended job offers at our other Minnesota facilities. We are very hopeful to keep all of the Blue Earth employees in the Nortec family. Further, we are reducing the square footage of our Maple Grove, Minnesota headquarters and engineering facility by almost 30%. This reduction reflects our current and future space needs. which have been heavily influenced by the company's hybrid remote work arrangements. Andy will speak in more detail on the impact of these facility optimization activities. Our three-tier global strategy of manufacturing in the US, Mexico, and China gives Nortec's customers flexibility in improving their own competitiveness. We can move production around based on factors like cost, operational requirements, quality control, and intellectual property management. Our customer teams and engineers evaluate each customer's needs to determine the most suitable location, which may also change over the course of a product's lifetime. In terms of China, as I mentioned in past calls, much of our production work there is built in country for country, a nearshoring approach to better serve our customers in the global market, including reduced shipping and cost times. Next, I will turn it over to Andy for a more in-depth look at our financial results. Andy? Thank you, Jay.