Nortech Systems Incorporated

Good afternoon, ladies and gentlemen, and welcome to the Nortec Systems Incorporated first quarter 2026 earnings 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, Mike. 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 first quarter 2026 financial results before turning it back to Jay for his closing comments. Then we will open up the call for your questions. Before we continue, please note statements made during this call may be forward-looking regarding expected net sales, operating results, 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. and may be amended, and those risks, including those detailed in our most recent SEC filings, may be amended or supplemented. The statements made during this call are 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 can find NORTEC's complete safe harbor statement in our SEC filings. And with that, I will turn the call over to Jay for his opening comments. Jay?

Thank you, Andy, and good afternoon, everyone. We're glad you could join us today. The first quarter is our fourth consecutive quarter of positive operating and EBITDA results, reflecting the positive execution of our strategic restructuring initiatives in late 2024 and early 2025. This contributed to a $1.7 million improvement in income from operations in the first quarter of 2026 as compared with the same quarter in 2025. we continue to see positive trends in several operating performance indicators, including gross margins, cost management, quality, and customer backlog. During the quarter, we continued the trend of increased manufacturing efficiencies across customer programs transferred to more geographically desirable plants, which are driving planned sustained performance improvements as we experience a continued positive mix shift from new product introduction and first builds to recurring production. We believe our quality metrics are world-class, especially within the low-volume, high-mix market space where we believe we are head and shoulders better than our competitors. Gross margins increased 410 basis points in the first quarter of 2026 as compared with the first quarter of 2025. Our customer backlog continues to be a bright spot as confirmed purchase orders grow. We increased our backlog as of May 31st, 2026 to $90.8 million. an increase of 17.4% from year-end 2025 and a 37.9% increase from the end of 2024. The increase is occurring against the backdrop of several customers ordering with shorter lead times. We have implemented just-in-time finished product delivery strategies with several large customers who have requested much shorter lead times. These programs allow customers to order in small quantities based on long-term binding forecasts, which have produced the delivery time of many items from over 100 days to 20 days or less. I would further note that we are seeing signs of strength in our aerospace and defense customers given the current geopolitical climate. These factors contribute to the strong positive trend in the backlog and has created an opportunity to expand our direct labor at several facilities to handle the increasing workload. Andy and I, along with the rest of the Nortec leadership team, are proud of the hard work and execution by our employees. I would also like to highlight a very important accomplishment in March. We entered into new agreements with the Associated Bank for a $2.2 million term note and a $15 million asset-backed line of credit. We believe that this new asset-backed debt structure and banking arrangement is more flexible and more closely matches our business model. This new relationship will lower our borrowing costs and provides a three-year arrangement to support our business growth. We continue to see strong quoting activity as many of our customers are evaluating near-shore manufacturing strategies for both North America and Asia. We believe we are currently very well positioned with our North American footprint as our monitoring Maquiladora operations and Minnesota facilities work under the framework of the U.S.-Mexico Canada Agreement, or USMCA for short. While the tariff environment remains uncertain, including tariffs with Mexico, it is important to note that Nortec is not the importer of record in 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. In situations where we incur tariffs on imported components, we are working with our customers to pass these costs through. More recently, we are closely monitoring the recent Supreme Court decision regarding the validity of IEPA tariffs and the process for reimbursement of these tariffs. All in all, we are working hard and have all hands on deck to proactively monitoring the shifting landscape, trade policies, and uncertainties in the current geopolitical environment. Next, I'll turn it over to Andy for a more in-depth look at our financial results. Andy?