Q4 2021 Nortech Systems Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Q4 2021 Nortec Systems, Inc. Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Chris Jones.
Good afternoon, ladies and gentlemen, and welcome to the Q4 2021, North Tech Systems, Inc. Earnings Conference call. At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments. After the presentation. It is now my pleasure to turn the floor over to your host Chris Jones.
Sir the floor is yours.
Chris Jones: Thanks, John . And I'd also like to welcome everyone to Nortec Systems' fourth quarter 2021 conference call. After my introduction, Jay will begin with a brief review of our fourth quarter and full year accomplishments. And then I'll review our financial results before turning it back over to Jay for his closing comments and our business outlook for 2022. And we'll open it up for your questions.
Thanks, John and I'd also like to welcome everyone to Nord Tech systems fourth quarter 2021 conference call. After my introduction Jay will begin with a brief review of our fourth quarter and full year accomplishments and then I'll review, our financial results before turning it back over to Jay for his closing comments on our business outlook for 2022, and we'll open it up.
For your questions.
Chris Jones: Before we continue, please note that statements made during this call and Q&A session may be forward-looking regarding expected revenue, earnings, future plans, opportunities, and other company expectations.
Before we continue please note that statements made during this call and Q&A session.
May be forward looking regarding expected revenue earnings future plans opportunities and other company expectations.
Chris Jones: 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 in this call.
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 in this call.
Chris Jones: These risks, including those that are detailed in our most recent annual report, Form 10-K , may be amended or supplemented. The statements made during this conference 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.
These risks, including those that are detailed in our most recent annual report Form 10-K may be amended or supplemented.
The statements made during this conference call are based upon information known by Nortek as of the date and time of this call and we assume no obligation to update the information in today's call.
Speaker Change: you can find NORTEX safe harbor statements in our SEC filings. And with that, I'll turn it over to Jay for his...
You can find north, Texas Safe Harbor statements in our SEC filings and with that I'll turn it over to Jay for his opening comments.
Jay: Thank you very much. Chris, I'd like to begin the call today by recognizing some people who were very important to NORTEC's past.
You very much Chris I'd like to begin the call today by recognizing some people very important to <unk> past and.
Success first and foremost it's critical to say, thank you to our frontline workforce.
Jay: First and foremost, it's critical to say thank you to our frontline workforce. They are the key people in the plans building vital parts for our medical, defense, and industrial customers.
The key people in the plants building vital parts of our medical defense and industrial customers.
Jay: Our entire Nortec team deserves enormous credit for their commitment to delivering mission-critical solutions to our customers despite ongoing COVID concerns and significant supply chain disruption.
Our entire north tech team deserves enormous credit for their commitment to delivering mission critical solutions.
Despite ongoing COVID-19 concerns and significant supply chain disruptions.
Jay: I greatly appreciate their tireless efforts under these extremely challenging circumstances.
I greatly appreciate the titled efforts under these extremely challenging circumstances.
Thanks to our customers for their confidence in us or $95 million backlog at the end of 2021 is a testament to their trust that we will continue to do everything possible to deliver quality products to them on time, despite unprecedented unprecedented disruptions to global supply chain.
Jay: Our $95 million backlog at the end of 2021 is a testament to their trust that we will continue to do everything possible to deliver quality products to them on time despite unprecedented disruptions to the global supply chain.
Jay: Thanks to our suppliers for partnering with Nortec to build more effective end-to-end fulfillment solutions to serve our customers.
Yeah.
Thanks to our suppliers for partnering with the Nortek to build more effective end to end fulfillment solutions to serve our customers. It's a team effort and we sincerely appreciate their partnership and hard work.
Jay: It's a team effort, and we sincerely appreciate their partnership and hard work.
Jay: I also want to thank our board of directors for their constant support during a very difficult two years since Nortec first encountered COVID in China in late 2019.
I also want to thank our board of directors for their constant support during a very difficult two years since nortek first encountered COVID-19 in China in late 2019.
Jay: Our board never wavered from the guiding principle that the safety of our frontline workers is our highest priority. Finally, I want to thank our
Our board never wavered from the guiding principle that the safety of our frontline workers as our highest priority.
Finally, I want to thank our shareholders for their commitment to Nortek. We survived the most difficult part of the Covid downturn and our future has never been brighter.
Jay: We survived the most difficult part of the COVID downturn, and our future has never been brighter.
In a few minutes, Chris will review our financials.
Jay: But first I'll outline just a few of our many accomplishments in 2021.
First ill outline just a few of our many accomplishments in 2021.
We augmented our strong board of directors with key additions.
Jay: Phil Smith and Danny Sachs joined in December 2020, and we welcome Stacey Cruz in May 2021. All three new board members.
Smith, Danny sacks joined in December 2020, and we welcome Stacy crews in May 2021, all three new board members bring a wealth of experience. We're thrilled to have them joined forces with our chairman David opinion, as well as Stephen erosion Stone, Brian Mcmanus and myself as we guide and overseeing north tax next phase of growth.
Jay: We're thrilled to have them join forces with our chairman, David Cunhan, as well as Stephen Rosenstone, Ryan McManus, and myself as we guide and oversee NORTEC's next phase of
Yes.
Jay: We truly have a world-class board representing our ship.
We truly have a world class class for representing our shareholders.
Jay: We utilize the CARES Act program, specifically the Paycheck Protection Program and Employee Retention Credit, to secure our workforce throughout 2020.
We utilize the cares act programs, specifically, the paycheck protection program and employee retention credit to secure our workforce throughout 2020 and 2021.
Jay: We added a number of new customers, including a strategic development partnership by signing a project funding agreement with Marpe Technologies of Israel for co-development of a teledermatology scanning system.
We added a number of new customers, including a strategic development partnership by signing a project funding agreement with <unk> technologies of Israel for co development of Intel at Dermatology scanning system.
Jay: We gained organizational efficiencies through the consolidation of our PCB operations in Mankato, Minnesota. Those transitions concluded.
Yeah.
We gained organizational efficiencies through the consolidation of our PCB operations and Mankato, Minnesota.
Those transitions concluded in the third quarter.
Jay: We also further established our centers of excellence in Bemidji, Malacca, Maple Grove, and Blue Earth, Minnesota, as well as in Monterrey, Mexico, and Suzhou, China.
We also have further established our centers of excellence in imaging, Malacca Maple Grove, and Blue Earth, Minnesota, as well as in Monterey, Monterey, Mexico institutional China.
Jay: Finally, we ended the year signing an extension of our $16 million Bank of America credit facility.
Finally, we ended the year signing an extension of our $16 million Bank of America credit facility. Our Bofa agreement was a key step in supporting our plans for future growth.
Jay: Our B of A agreement was a key step in supporting our plans for future growth.
Jay: In short, in 2021, we made progress in several important fronts.
In short in 2021, we made progress on several important fronts, we strengthened our balance sheet extended our bank of America agreement until 2026 restored revenue growth.
Jay: strengthen our balance sheet, extended our Bank of America agreement until 2026, restored revenue growth, and improved our economy.
<unk> gross margins, we also tightened our focus on operational excellence and innovation for our customers.
Jay: We also tighten our focus on operational excellence and innovation for our customers.
Creating shareholder value remains a top priority.
Jay: We believe this is best accomplished by creating value for our diverse customer base.
Believe this is best accomplished by creating value for our diverse customer base in today's problematic supply chain environment, our current and new customers increasingly recognize and appreciate nortek as a key long term partner offering complete fulfillment fulfillment solutions.
Jay: In today's problematic supply chain environment, our current and new customers increasingly recognize and appreciate Nortek.
Jay: a key long-term partner offering complete fulfillment.
Jay: We believe in creating efficiencies for our customers and deepening these relationships.
We believe that creating efficiencies for our customers and deepening these relationships will further improve nor tax revenue gross margin and operating cash flow.
Jay: to further improve Nortex revenue, gross margin, and operating cash.
Jay: Our customers also increasingly appreciate Nortec as a key partner building fulfillment solutions tailored to their unique regional needs.
Our customers are also increasingly appreciate north tech as a key partner building fulfillment solutions tailored to their unique regional needs that regionalization trends include serving Asia with in country manufacturing and serving Europe and the Americas.
Jay: That regionalization trend includes serving Asia with in-country manufacturing and serving Europe and the Americas with both U.S.
With both U S and Mexico operations.
Speaker Change: Now I'll ask Chris to review our financial results. Chris? Thanks, Jay, and thanks to everybody.
Now I'll ask Chris to review, our financial results Chris.
Thanks, Jay and thanks to everybody for joining us today.
Chris Jones: So in the next few minutes, I'll provide financial details of our 2021 fourth quarter and full year, but I'd again like to encourage everyone to review our 2021 Form 10-K , which we filed on March 17th.
So in the next few minutes I will provide financial details of our 2021 fourth quarter and full year, but I'd again like to encourage everyone to review our 2021 Form 10-K , which we filed on March 17th.
Chris Jones: It contains far more information about our business operations and financial performance than we'll cover in this call. If you have specific questions about these items or any of our quarterly or annual financial results, I'll be happy to address those during the Q&A portion of the call.
It contains far more information about our business operations and financial performance than we will cover on this call. If you have specific questions about these items or any of our quarterly or for an annual financial results I'll be happy to address those during the Q&A portion of the call.
Chris Jones: So turning to the fourth quarter of 2021, our revenue totaled $33.5 million. That was a 40% increase year-over-year from revenue of $23.8 million in the fourth quarter of 2020. And though we're very pleased with that year-over-year revenue growth, it's also useful to look at Nortec's revenue performance on a sequential quarter-on-quarter basis.
So turning to the fourth quarter of 2021, our revenue totaled $33 $5 million that was a 40% increase year over year from revenue of $23 8 million in the fourth quarter of 2020.
And though we're very pleased with that year over year revenue growth. It is also useful to look at north tax revenue performance on a sequential quarter on quarter basis. So in our fourth quarter revenue was up $4 million or nearly 14% from $29 5 million in the third quarter of 2021.
Chris Jones: So in our fourth quarter, revenue was up $4 million or nearly 14% from $29.5 million in the third quarter of 2021.
Chris Jones: Both 2020 and 21 were greatly impacted by the negative impacts of COVID and supply chain disruptions. And over time, these
Both 2020 and 'twenty, one were greatly impacted by the negative impacts of Covid and supply chain disruptions and over time. These are.
Chris Jones: our quarters will normalize as we anniversary non-recurring events impacting quarterly results. But until then, our sequential comparisons are an important indicator of our performance.
Our quarters will normalize as we anniversary nonrecurring events impacting quarterly results, but until then our sequential comparisons are an important indicator of our performance.
Chris Jones: Nortec's revenue for the full year 2021 was $115 million, compared to $104 million in 2020, an increase of $11 million, or nearly 11%.
Nor tax revenue for the full year 2021 was $115 million compared to $104 million in 2020, an increase of $11 million or nearly 11%.
Chris Jones: Revenue growth was driven by customer demand rebounding in the second quarter of 2021, and that higher demand persisted throughout the last three quarters of 2021.
Revenue growth was driven by customer demand rebounding in the second quarter of 2021 and that higher demand persisted throughout the last three quarters of 2021.
Chris Jones: So turning to gross profit, in Q4 our gross profit totaled $2.7 million or 8% compared to a gross profit of $1.7 million or 7.3% on the prior year quarter.
So turning to gross profit in Q4, our gross profit totaled $2 $7 million or 8% compared to a gross profit of $1 7 million or seven 3% on the prior year quarter.
Chris Jones: For the full year 2021 gross profit totaled $15.9 million or 13.8% compared to a gross profit of $9.7 million or 9.3% in the prior year.
For the full year 2021, gross profit totaled $15 $9 million or 13, 8% compared to a gross profit of $9 7 million or nine 3% in the prior year.
Chris Jones: Note that 2021 gross profit included $4.7 million in CARES Act Employee Retention Credits that were recognized in the third quarter of 2021.
Note that 2021 gross profit included $4 $7 million in cares Act employer retention credits that were recognized in the third quarter of 2021.
Net of the ERC.
Chris Jones: adjusted full-year 2021 gross profit would have totaled $11.2 million or 9.7 percent, which is a 40 basis point increase on 9.3 percent in the prior year.
Adjusted full year 2021, gross profit would have totaled $11 2 million or nine 7%, which is a 40 basis point increase on nine 3% in the prior year.
Chris Jones: Improving that gross margin is a strategic imperative for Nortec in 2022 as the rising cost of raw materials coupled with higher inventory levels exerts pressure on our operating cash flow.
Improving that gross margin is a strategic imperative for north Tech in 2022 is the rising cost of raw materials, coupled with higher inventory levels exert pressure on our operating cash flow.
Chris Jones: Now, I want to highlight several non-recurring items that impacted the P&L below gross profit. So I mentioned earlier that $4.7 million of ERC credits were recognized in the third quarter.
Well I want to highlight several nonrecurring items that impacted the P&L below gross profit. So I mentioned earlier that $4 $7 million of ERC credits were recognized in the third quarter.
Chris Jones: We also recognized another 500,000 of ERC credits in SG&A in Q3 for a total ERC credit of $5.2 million.
We also recognized another 500000 of ERC credits in SG&A in Q3 for a total ERC credit of $5 $2 million.
Chris Jones: Now the IRS has not processed our ERC filing and you will see a $5.2 million receivable on our balance sheet until we receive those funds.
The IRS has not processed our ERC filing and you will see a $5 $2 million receivable on our balance sheet until we receive those funds.
Chris Jones: A second large non-recurring item in 2021 was forgiveness of our PPP loan.
A second large nonrecurring item in 2021 was forgiveness of our PPP loan.
Chris Jones: You'll see a gain in the fourth quarter P&L of $6.2 million.
You'll see a gain in the fourth quarter P&L of $6 $2 million.
Chris Jones: Combining the two CARES Act programs, Nortec recognized $11.4 million of non-recurring income in 2021.
Combining the two cares act programs Nortek recognized $11 $4 million of nonrecurring income in 2021.
Chris Jones: Both of those programs were essential to Nortec continuing full operations all the way through 2020 and 2021 in service of our customers, our suppliers, our employees, and all Nortec stakeholders.
Both of those programs were essential to Nortek, continuing full operations all the way through 2020, and 2021 and service of our customers our suppliers our employees in all nortek stakeholders.
Chris Jones: For a full discussion of these non-recurring events, please see again our recently filed 10-K.
For a full discussion of these non recurring events. Please see again, our recently filed 10-K.
Chris Jones: So moving to the balance sheet and cash flow. First, our cash used in operating activities for the year ended December 31 2021 was $4.6 million compared to cash provided by operations.
So moving to the balance sheet and cash flow first our cash used in operating activities for the year ended December 31 2021.
$4 $6 million compared to cash provided by operations.
Chris Jones: of 1.4 million and the year ended December 31st, 2020.
A $1 4 million in the year ended December 31 2020.
Chris Jones: In 2021, Nortec had to react quickly to customer POs by securing critical inventory and ramping up production.
In 2021, Nortek had to react quickly to customer pose by securing critical inventory and ramping up production.
Chris Jones: to address global supply chain shortages, so our inventory rose from $13.9 million in December 2020 to a peak of $20.6 million in June of 2021, and we ended the year with inventory of $19.4 million.
To address global supply chain shortages, so our inventory rose from $13 9 million in December 2020 to a peak of $20 6 million in June of 2021, and when you ended the year with inventory of $19 $4 million.
Chris Jones: For 2022, optimizing that investment in inventory and building a more robust end-to-end supply chain fulfillment solution is our top strategic priority.
For 2020 to optimizing that investment in inventory in building a more robust end to end supply chain fulfillment solution is our top strike strategic priority.
Chris Jones: Again, turning to our relationship with Bank of America, we financed that higher working capital with our ABL.
Again, turning to our relationship with Bank of America.
We finance that higher working capital with with our a B L.
Chris Jones: As of 12-31-21, we were borrowing $9 million on the ABL with $3.5 million of unused availability.
As of 12, 31, 21, we were borrowing $9 million on the ABL with $3 5 million of unused availability.
Chris Jones: Throughout 2022, we believe that cash provided by operations, funds available under our credit agreement with B of A.
Throughout 2022, we believe that cash provided by operations funds available under our credit agreement with Bofa.
Chris Jones: Receipt of the $5.2 million of ERC money from the IRS will be adequate to meet our liquidity needs including working capital, capital expenditures, R&D investments, and debt payment obligations.
Receipt of the $5 $2 million of ERC money from the IRS will be adequate to meet our liquidity needs, including working capital and capital expenditures R&D investments and debt payment obligations.
Yes.
Chris Jones: Let me take a moment to reinforce why we believe that Bank of America line of credit is so important for Nortec.
Let me take a moment to reinforce why we believe that bank of America line of credit is so important for Nortek.
Chris Jones: B of A has been a great partner with us since 2017. Their team has worked with us to extend our credit agreement for four more years until 2026.
It's been a great partner with us since 2017 their team has worked with us to extend our credit agreement for four more years until 2026.
Chris Jones: And as the IRS was delayed in processing ERC's claims, B of A amended our credit agreement to allow us an additional $2.5 million of availability against the $5.2 million receivable.
And as the IRS was delayed in processing <unk> claims bofa amended our credit agreement to allow us an additional $2 $5 million of availability against the $5 $2 million receivable. So those actions demonstrate bofa as confidence in our improved results throughout 2020, 2021 and our outlook through 2022 and beyond.
Chris Jones: So those actions demonstrate B of A's confidence in our improved results throughout 2020-2021 and our outlook through 2022 and beyond.
Chris Jones: So as I wrap up, let me clearly state our top financial priority through 2022.
So as I wrap up let me clearly state our top financial priority through 2022.
Chris Jones: We're building a company that will deliver reliable and sustainable free cash flow growth over the long term.
We are building a company that will deliver reliable and sustainable free cash flow growth over the long term.
Chris Jones: In the same way our customers rely on us for ruggedized, high-quality, reliable solutions, our financial stakeholders also rely on Nortec for ruggedized, reliable, free cash flow growth.
In the same way our customers rely on us for Ruggedized high quality reliable solutions, our financial stakeholders also rely on north tech for Ruggedized reliable free cash flow growth.
Chris Jones: Our entire organization is focused on that financial mission.
Our entire organization is focused on that financial mission.
Chris Jones: So we've taken many steps in 2020 and 2021 to ensure our core business becomes a cash generating engine.
So we've taken many steps in 2021 'twenty 'twenty and 2021 to ensure our core business becomes a cash generating engine.
Chris Jones: An essential step was securing those one-time contributions from CARES Act programs, but also $6 million of sale leaseback transactions in August 2020 and $5 million for maximizing participation in our customers' supply chain finance program.
An essential step with securing those onetime contributions from cares act programs, but also a $6 million of sale leaseback transactions in August 2020, and $5 million for maximizing participation in our and our customers' supply chain finance programs.
Chris Jones: Those one-time events coupled with disciplined operational execution, R&D innovation, supply chain optimization give us great confidence that Nortec is well-positioned to achieve our goals for our customers and employees and our shareholders. With that, I'll turn it back over to Jay for his closing.
Those one time events, coupled with disciplined operational execution R&D innovation supply chain optimization give us great confidence that north tech is well positioned to achieve our goals for our customers employees and our shareholders.
With that I'll turn it back over to Jay for his closing comments.
Thanks, Chris.
Jay: We believe our results for 2021 provide a great springboard for 2022.
Our results for 2021 provide a great springboard for 2022.
Jay: For the remainder of the year, we will continue to focus on managing supply chain disruptions and the related cost challenges that our customers are experiencing.
For the remainder of the year, we will continue to focus on managing supply changes disruptions and the related cost challenges that our customers are experiencing.
Jay: To give a bit of color on this, here's some of the industry data we are seeing.
To give a bit of color on this for some of the industry data we are seeing.
Jay: Rising material and labor costs continue to be the largest issues facing the electronics supply chain.
Rising material and labor costs continue to be the largest issues facing the electronics supply chain.
Jay: January 2022 ITC study found that 90% of electronics manufacturers reporting rising material costs over 75%
January 2022, ITC study found that 90% of electronics manufacturers reporting rising material costs over 75%.
Jay: site rising labor costs and material costs in North America are rising faster than the Asia-Pacific region.
Rising labor costs and material costs in North America, rising faster than the Asia Pacific region.
Jay: Semiconductor shortages persist and most of our assemblies require it.
Semiconductor shortages persist in most of our assemblies required global semi conductor sales were up 26% in 2021 Wood chip lead times from 28 weeks to 52 weeks.
Jay: Global semiconductor sales were up 26% in 2021, with chip lead times from 28 weeks to 52.
Jay: Companies are overroaring to sharpen inventories, which raises prices and further squeezes capacity.
Companies are over ordering to sharpen the inventories, which raises prices and further squeezes capacity.
Jay: In this current environment, our customer partnerships run much deeper than purchase orders. Innovation is also increasingly...
In this current environment, our customer partnerships run much deeper than purchase worse innovation is also increasingly important for nortel along with key customers. We are leveraging our strong technical expertise and digital connectivity solutions, including cables connectors sensors machine vision technology et cetera, we are fluid.
Jay: On with key customers, we are leveraging our strong technical expertise in digital connectivity solutions, including cables, connectors, sensors, machine vision technology, etc. We are fluent in the numerous...
Numerous aspects of technical infrastructure needed to organize digitized and transmit data, including for the industrial internet of things or Iot.
Jay: technical infrastructure needed to organize, digitize, and transmit data, including for the Industrial Internet of Things, or IIOT.
Jay: A recent article in W Times Europe said the global IAOT market was worth over $77 billion in 2020 and is expected to grow to over $110 billion.
Don't have any time to Europe .
Iot market was worth.
Over 77 billion in 2020 is expected to grow to over 110 billion from 2025% compound annual growth rate of roughly seven 5%.
Jay: A compound annual growth rate of roughly seven and a half percent.
Jay: In tandem with our customers, we are leveraging our decades of technical expertise to develop innovative proprietary technologies for manufacturing methods and products.
In tandem with our customers, we are leveraging our decades of technical expertise to develop innovative and proprietary technologies for manufacturing methods and products with that outcome.
Jay: With that, I will conclude our prepared remarks this afternoon, and we will open it up for questions.
Our prepared remarks this afternoon.
I mean, it up for questions John .
John .
Speaker Change: Thank you. Ladies and gentlemen, the floor is open for questions. If you have any questions or comments, please press star 1 on your touch-tone phone. Pressing star 2 will remove you from the queue should your question be answered. And lastly, while posing your question, please pick up your handset and listening on speakerphone to provide optimum sound quality. Please hold while we...
Thank you ladies and gentlemen, the floor is open for questions. If you have any questions or comments. Please press star one on your Touchtone phone.
<unk> start to will remove it from the Q should your question be answered and lastly, we are posing your question. Please pickup your handset if listening on speaker phone to provide optimum sound quality. Please hold while we poll for questions.
Speaker Change: Once again, that's star one, if you have a question or a comment.
Once again Thats Star one if you have a question or comment.
Speaker Change: Okay, the first question is coming from Paul Luber, private investor, Your Line's Live.
Okay. The first question is coming from Paul Luther private Investor Your line is life.
Paul Luber: Well, hi, Christian. Thanks for the report out. And I've been a longstanding chair of Nortec.
Oh, Hi, Christian Thanks for the report out in.
I've been a long standing shareholder of nor attack them.
Paul Luber: really appreciate how you guys navigated the last two years. And on top of that, I think the restructuring and consolidation taking place at the company is also a positive step. And kind of with that said, I'm just curious.
Really appreciate how you guys navigated the last two years and on top of that.
Thank you.
The restructuring and consolidation taking place at the company as it is also a positive step and kind of with that said I'm just curious.
Paul Luber: What you guys anticipate kind of is go forward margins at the gross profit level and the net profit level.
What you guys anticipate kind of a go forward.
Margins at the gross profit level and at the net profit level.
Paul Luber: And on top of that, if you're willing to put out a general sales and earnings forecast for 2022.
And on top of that if youre willing to put out a general sales and earnings forecast for 2022.
Speaker Change: Yeah, Paul, thank you for the question, first of all. We are not going to give any guidance, so I'm going to not be very specific with my answer, other than to say that our expectations are that we will continue to grow top-line revenue. We expect to grow our gross profit. Candidly, we expect to grow our gross margins faster than revenue growth, of course.
Yeah, Paul Thank you for the question first of all.
We we are not going to give me any guidance, so im going to not be very specific with my answer other than to say that our expectations are that we will.
Continue to grow topline revenue.
We expect to grow our gross profit candidly, we expect to grow our gross margins faster than than revenue growth of course and.
Speaker Change: And we expect EBITDA to grow even faster. So we expect this business to grow on the top line and grow faster on the bottom line and consistently generate positive cash flows. And we'll leave it at that.
And we expect.
EBITDA to grow even faster so we expect this business to do.
Growing the top line and grow faster on the box on the bottom line and and consistently generate positive cash flows and we'll leave it at that.
For now.
Speaker Change: Got it. Appreciate it. Maybe a little bit of a related question is, can you provide a sense of your ability?
Got it appreciate it maybe a little bit of a related question is can you provide a sense of your ability.
Speaker Change: to pass on labor and material increases to the customer base in the FET.
To pass on labor and material increases to the customer base and the <unk>.
That.
Speaker Change: and the respective timing of your ability to do that. Yeah, that is a very good question. A very timely question right now. And we are and have been engaged in conversations with our customers around passing on cost increases.
And their respective timing of your ability to do that.
Yes, it's a very good question a very timely question right now and we are and have been engaged in conversations with our customers.
Around passing on cost increases.
Speaker Change: Specifically due to material cost increases and labor cost increases, and of course, like nearly everyone else, we have had to come face-to-face with those things and deal with those things.
Specifically due to material cost increases and labor cost increases and of course.
Nearly everyone else, we have we have had to come face to face with those things and deal with those things.
Speaker Change: But we're also having conversations with our customers about moving production to plant.
But we're also having conversations with our customers about moving production to two plants that are in some ways in many ways less expensive for them.
Speaker Change: that are in some ways, in many ways, less expensive for them. Some of those we're starting to facilitate now and, candidly, we should have done them years ago. But now, given what's going on with inflation, we're getting a lot more attention, I'd say, with our customers to moving those things.
Some of those.
We're starting to facilitate now and candidly, we should've done them years ago, but now given what's going on with inflation, we're getting a lot more attention I would say with our customers to moving those things.
Speaker Change: to plants that are more productive for them and for us.
Two plants that are more productive for them and for us.
Speaker Change: We also expect to work with our customers hand-in-hand longer term to work on innovative new solutions that will help them drive cost further.
We also expect to work with our customers.
And in hand longer term to work on innovative new solutions that will help them drive cost productivity. We also expect that that will help us grow our margins as well.
Speaker Change: We also expect that will help us grow our margins as well. But if we can help our customers drive cost productivity through better engineering solutions and candidly make their products more competitive, that's a win-win for everybody.
But if we can help our customers drive cost productivity through better engineering solutions and candidly make their products more competitive.
Win win for everybody.
Got it thank you.
Thank you.
Speaker Change: If there are any remaining questions or comments, please indicate so by pressing star one on your touchtone.
If there are any remaining questions or comments. Please indicate so by pressing star one on your Touchtone phone.
Speaker Change: Okay, we have a few questions in queue. The first coming from Mark Rocca, Private Investor, your line is live.
Okay. We have a few questions in queue. The first coming from Mark Rocco private Investor Your line is live.
Good job gentlemen, I'm glad to see.
Mark Rocca: what's going on here. My question is, there's two questions here. I just wanna make sure that I'm understanding something.
What's going on here. My question is Theres two questions here I just wanted to make sure that I'm understanding something on your yearend backlog of 95 million com are up over 50% from 2020.
Mark Rocca: Your year-end backlog of $95 million, comma, up over 50% from 2020 is in this press release. And I'm sure this is just maybe semantics, but I just want to play it safe. In the $10K, you state that you are $95 million up from $48 million, which would be damn close.
As it is in this press release and I'm sure. This is just maybe semantics, but I just want to play it safe.
You're in the 10-K, you state that you are $95 million up from $48 million, which would be.
Damn close to 100% increase maybe youre, just being conservative and maybe I'm, just being picky I don't know, but I just wanted to.
Mark Rocca: Maybe you're just being conservative, maybe I'm just being picky, I don't know, but I just wanted to clarify that. Yeah, those are the right numbers. It's $49 million up to $95 million. Yeah, so it's doubled.
Well, yes. Those are those are the right numbers at 449 billion up to $95 million. So it's doubled.
Speaker Change: Okay. Very good. Very good. Yep. Okay. All right. And, um,
Okay, very good yep, Okay, alright, and let.
Let me think here.
Speaker Change: OK, and then the last question, correct me if I'm wrong. So now, with the good growth you've had and the good numbers, that your book value per share is approximately $9 a share.
Okay and then the last question correct me if I'm wrong.
So now with the good growth you've had in the good numbers.
That your book value per share is approximately $9 a share.
Speaker Change: Yeah, is that a question or just yes, I'm checking myself is what I'm doing here. I'm making sure I'm thinking correctly.
Yeah.
Western World.
I'm checking myself is what I'm doing here I'm, making sure I'm thinking correctly.
Okay.
Yeah. The reason I'm asking I'm sorry go ahead you are finished please.
Speaker Change: Go ahead and finish your question, I think we can also follow up with you.
Yeah. Go ahead go ahead go ahead finish your question I think we can also follow up with you.
Speaker Change: Okay, well, okay. So I'm just thinking about the valuation of the stock, your the price of the stock are well below your revenues per share, probably around $40 a share. And I think I've got that one down, Pat. And I was just trying to determine to make sure I'm not
Okay, well there is that okay. So.
I'm just thinking about the valuation of the stock your the price of the stock well below your revenues per share probably around $40 a share.
And I think I've got that one down pads and I was just trying to determine to make sure I'm not.
Speaker Change: miscalculating that the book value, your book value per share is approximately $9.
Miscalculating that see book value or book value per share is approximately $9.
Sure.
Speaker Change: Right, yeah, so our total shareholder equity, if this is what you're saying is our $26 million shareholder equity? Correct. Book shareholder equity? Yeah, at about 2.7 million shares? Yes, and that's about $9 per share book value of equity, yes.
Right, yes, so our total shareholder equity if that's what you're saying is our $26 million shareholder equity books shareholder equity at about $2 7 million shares, yes, and that's about $99 per per share book at book value of equity yes.
Speaker Change: Okay, very good. And did I understand correctly, this will be my last question, that you're optimistic for growing revenues this year. I realize costs can be out of your control, but do you think you've got the top line pretty much ahead of you for this year?
Okay, very good and did I understand correctly. This will be my last question that.
You are optimistic for growing revenues this year I realized costs can be.
Out of your control, but do you think you've got the top line pretty much.
I had a view for this year.
Speaker Change: Yeah, we, as I mentioned earlier, we expect to grow revenue and we expect to grow the bottom line faster. Very good. Thank you very much.
Yeah, we as I mentioned earlier, we expect we expect to grow revenue and we expect to grow the bottom line faster.
Very good. Thank you very much have a good day.
Thank you.
Speaker Change: Okay, the next question is coming from Thor Nicholson, Private Investor. Your line's live. Hi, good afternoon. Can you hear me okay? Yes, we can hear you just fine.
Okay. The next question is coming from Thor Nicholson private Investor Your line is live.
Hi, Good afternoon can you hear me okay.
Yes, we can hear you just fine dork.
Congratulations to your whole team.
Thor Nicholson: Jay, for your remarkable achievements this last year. It's really breathtaking.
Chris Jay for your remarkable achievements. This last year, it's really breathtaking. Congratulations I have just a couple of quick questions on revenue and margins.
Speaker Change: I have just a couple of quick questions on revenue and margins.
Speaker Change: On revenue, you've been really building on your early achievements at NorTech. I think that this might be the highest revenue in recent years, if not ever, from what I see from your quarterly results.
On revenue <unk> been really building on your early achievements at <unk> I think that this might be the highest revenue in recent years have not.
Average nicely from your quarterly results.
Speaker Change: Now, your total shipment backlog has increased significantly as well.
Now your total shipment backlog has increased significantly as well.
Speaker Change: And it looks like it's up 16.4 million from the September quarter.
It looks like it's up $16 4 million from the September quarter.
Speaker Change: Your 90-day backlog suggests that the bulk of the total shipment backlog.
Your 90 day backlog suggests that the bulk of the total shipment backlog.
Speaker Change: will be fulfilled after the March quarter. Could you comment on that? And what is causing your
It will be fulfilled after the March quarter could you comment on that.
And what is.
Causing your backlog to build.
Speaker Change: Is this due to some combination of new programs, extension programs, deferred orders due to supply chain disruption?
Is this due to some combination of new programs extension programs deferred orders due to supply chain disruptions.
Speaker Change: Yeah, I would say most of it is due to customers giving us orders earlier and a little farther out.
I would say most of it is is do customers, giving us orders.
Earlier, and a little farther out or they're concerned about the supply chain disruptions. They asked us how they could help we have conversations with them part of those conversations is is is giving us more visibility into their business and placing orders sooner. So.
Speaker Change: They're concerned about the supply chain disruptions. They asked us how they could help. We have conversations with them. Part of those conversations is giving us more visibility into their business.
Speaker Change: and placing orders sooner so that we can get orders to our suppliers sooner as well. This is all very helpful for our supply chain.
We can we can get orders to our suppliers at sooner as well. This is all very helpful for our supply chain.
Speaker Change: especially given the circumstances we have right now. So our customers have really done a good job of partnering with us and helping us candidly so we can help our suppliers. And at the end of the day, this all helps us in our ability to deliver quality products to our customers on time or as close to on time as we possibly can.
Especially given the circumstances, we have right now so our customers have really done a good job of partnering with us and helping us candidly. So we can help our suppliers and at the end of the day. This all helps us in our ability to deliver quality products to our customers on time or as close to on time as we possibly can.
Okay.
On the margin front you were just mentioning this.
Speaker Change: the issue of supply chain disruptions, cost challenges, the whole industry is facing. Could you provide some more color on what you're experiencing with supply chain and cost challenges? And could you also comment on how these increases in revenues might be affecting your margins? For example, as you're ramping up programs, is this also affecting margins on these initial?
The issue of supply chain disruptions caused challenges the whole industry is facing could you provide some more color on what you're experiencing with supply chain and cost challenges and could you also come in how these increases.
And revenues might be affecting your margins for example, as youre ramping up programs as it's also affecting margins.
These initial programs.
Speaker Change: Yeah, well, as you might imagine, our suppliers are faced with a lot of the same challenges we have, so they're faced with rising labor costs.
Yes.
As you might imagine our suppliers are faced with 11 same challenges we have.
So they're faced with rising labor costs.
Speaker Change: Of course, certainly here in the States, as we all know, we read about this often. We know we're facing inflation, not only domestically, but globally. At this point, we know supply chain disruptions have resulted in increase in materials. That's also driving inflation, and so our suppliers are seeing that.
Of course.
Certainly here in the states as we all know we read about this often we know we are facing inflation.
Not only domestically, but globally at this point, we we know see supply chain disruptions have have resulted in an increase in materials. That's also driving inflation. So.
And so our suppliers are seeing that which means we're seeing it and then we're having our conversations with our customers as well.
Speaker Change: means we're seeing it, and then we're having our conversations with our customers as well.
Speaker Change: And for better or for worse, this is what's, you know, part of the reason that we're seeing inflation in this country.
And for better for worse. This is what's part of the reason that we're seeing inflation in this country.
Speaker Change: We do expect it to abate at some point, and we are, we feel like we...
We do expect it to abate at some point.
And we are we feel like we.
Speaker Change: obviously recognized this pretty quickly, and we started programs with our customers to increase prices so that we can maintain or candidly improve our margins going forward. I have to say our customers have been pretty darn patient with us as we've gone through this, as we've tried to be patient with our suppliers.
Obviously recognize this pretty quickly and we started programs with our customers.
Two.
To increase prices, so that we can maintain or candidly improve our margins going forward.
I have to say our customers have been pretty darn patient with us as we've gone through this is we've tried to be patient with our suppliers.
Speaker Change: So, anyway, we expect that, and as I mentioned earlier, we are having different conversations with our customers now, really productive conversations with our customers about ways to mitigate some of these increases in the cost.
So anyway, we expect that and as I mentioned earlier, we are having different conversations with our customers now really productive conversations with our customers, but ways to mitigate some of these increases in the costs.
Speaker Change: For example, if we can manufacture in another lower cost location, we are looking to do those things. If we can decrease shipping costs by manufacturing in certain locations, we are working on those things. We can help our customers with their engineering, and oftentimes we know the products
For example, if we can manufacturer.
Other lower cost location, we are looking to do those things if we can decrease shipping cost by by manufacturing in certain locations. We are working on those things we can help our customers with their engineering and oftentimes we know the products that we're building for our customers better than our customers do.
Speaker Change: that we're building for our customers better than our customers do and we have good ideas as to how to drive cost productivity through engineering with those customers, they're engaged actively in those discussions as well. We're all working to try to mitigate this.
And we have good ideas as to how to drive cost productivity three engineering with those customers they're.
<unk> actively in those discussions as well, we're all working to try to mitigate this.
Thank you so much.
Okay. Thank you.
Speaker Change: Okay, the next question is coming from Daniel Everingham, private investor, Your Line's Live.
Okay. The next question is coming from Daniel Everingham private Investor your lines life.
Daniel can you hear us.
Okay.
Okay. It looks like Daniel has disconnected.
Daniel Everingham: If there are any remaining questions, please indicate so by pressing star 1.
Any remaining questions. Please indicate so by pressing star one.
Speaker Change: There's no remaining questions in queue. I'd like to turn the floor back to Mr. Miller for a closing remark.
Okay. It looks like Theres no remaining questions in queue I'd like to turn the floor back to Mr. Miller for closing remarks.
Miller: Thank you and thank you all for those questions. Very good set of questions.
Thank you and thank you all for those questions very good set of questions.
Miller: And thanks to everybody for taking the time to listen to our call today. We look forward to updating you on our first quarter 2022 conference call in May. Thank you all very much, and goodbye.
And thanks to everybody for taking the time to listen to our call. Today, we look forward to updating you on our first quarter 2022 conference call in May.
Thank you all very much and goodbye.
Speaker Change: Thank you ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day.
You for your participation.