Nortech Systems Incorporated

Good morning, ladies and gentlemen, and welcome to the Nortec Systems Incorporated Second Quarter 2025 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 Lefferts.

Thank you, Jenny. I would 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 second quarter 2025 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 regarding expected net sales, operating results, future plans, opportunities, and other company expectation. 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 SEC filings, may be amended or supplemented. The statements made during this conference call are made based upon information known by NORTEC as of the date and time of this call, and we assume no obligation to update the information in today's call. You will find NORTEC's complete safe harbor statements in our SEC filings. And with that, I will turn it over to Jay for his opening comments.

Jay? Thank you, Andy, and good morning, everyone. We're glad you could join us today. Our second quarter results are a testament to the dedication, resilience, and execution of our entire team. Despite lower revenue compared with the second quarter of 2024, we delivered improved earnings and positive EBITDA this quarter. Near-term clear evidence that our restructuring efforts and cost discipline are paying off. Increased plant utilization and improved manufacturing efficiencies across transfer programs are building the operational foundation we need for sustained performance improvement. Operationally, we have also made strategic inventory shifts, reducing raw materials while investing in finished goods to support key customer stocking programs. Further, we are starting to see improvements in our manufacturing efficiencies, as our teams are gaining experience manufacturing transfer production between plants on a recurring basis. As previously noted, the first half of 2025 and the fourth quarter of 2024 revenues in our aerospace and defense market were negatively impacted by our closure of our Blue Earth facility and the transfer of customer programs to Bemidji due to unexpected delays as a result of slow customer approvals. We have made significant headway with our customers' approvals over the past quarter, and we fully expect our aerospace and defense business to get back to normal in the second half of 2025. The team at Bemidji has been working very hard, and we're very encouraged by the progress the Bemidji team has made. Regarding our cost structure, we also continue to be very diligent in managing operating costs. Over the past three quarters, we have undertaken significant actions to reduce our cost structure with the Blue Earth facility closure, a reduction of our headquarters lease space, along with other actions during the first quarter of 2025 to further manage our headcount based on our current operating metrics. Meanwhile, the on-again, off-again imposition of tariffs may significantly impact manufacturers with facilities in China and Mexico, including Nortec. While the tariffs with Mexico are currently somewhat uncertain, it's important to note that Nortec is not the importer of record into the United States for goods produced in Mexico as we operate under a maquiladora structure for our customers. This materially reduces our direct exposure to these tariffs. As we expected, many of our customers are evaluating their supply chain strategies. We believe we are currently well positioned with our North American footprint as our Monterey maquiladora operations and Minnesota facilities work under the framework of the USMCA. As for China, as I've mentioned on past calls, much of our production work there is built in country for country and non-US markets, a nearshoring approach to better serve our customers in the global market with reduced shipping costs and time. As a result, our China tariff exposure is primarily related to piece parts imported from China rather than larger finished goods imported from China. As tariffs on Chinese imports may change, we are closely monitoring these impacts in our business and adjusting customer pricing as well as our sourcing strategies as needed to mitigate any adverse effects. As with our North American footprint, we are seeing opportunities in China with companies seeking to consolidate their manufacturing within China to serve the Chinese and Asian markets. All in all, we're working hard to have all hands on deck to proactively monitor the shifting landscape, trade policies, and uncertainties in the current geopolitical environment. As we are continuing to work to execute our strategy to partner closely with customers to drive shorter lead times, tailored on-time delivery strategies, along with deeper customer partnerships that are fundamental to our long-term growth. As a result of the tariffs, we are also encouraged by the new flow of opportunities to quote onshore production in both North America under the USMCA as well as in China. A key takeaway from today's call, and I want to make this very clear, is 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 underscore the strategic advantage Mexico holds in today's tariff environment. Now I'll turn it over to Andy for a more in-depth look at our financial results. Andy?