Q4 2024 Nortech Systems Inc Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the North Tech systems incorporated fourth quarter 2024 earnings Conference call with me on the line today are J Miller, President and Chief Executive Officer, and Andrew <unk>, Chief Financial Officer, and senior Vice President.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Nortech Systems Incorporated fourth quarter 2024 earnings conference.

Operator: With me on the line today are Jay Miller, President and Chief Executive Officer, and Andrew LaFrence, Chief Financial Officer and Senior Vice President of Finance.

Finance.

Operator: All lines have been placed on a listen-only mode, and the call will be open for questions and comments following. management presentation.

All lines have been placed on a listen only mode and the call will be opened for questions and comments following.

Speaker Change: The management presentation at this time it is my pleasure to turn the call over to Andy Laurence.

Andrew LaFrence: This time, it is my pleasure to turn the call over to Andrew LaFrence. Thank you, John. I would also like to welcome everyone to today's conference call.

Okay.

Andy Laurence: Thank you John.

Speaker Change: I would also like to welcome everyone to today's conference call Jay will begin the call with a review of our operations recent development and business outlook, then I will review North, Texas fourth quarter 2024 financial results before turning it back over to Jay for his closing comments.

Jay Miller: Jay will begin the call with a review of our operations, recent developments, and business outlook.

Andrew LaFrence: Then I will review Nortech's fourth quarter 2024 finance results before turning it back over to Jay for his closing comments.

Operator: Then we will be open for your questions.

Andy Laurence: Then we will be open.

Andy Laurence: Four of your questions.

Operator: Before we continue, please note that statements made during this call may be forward-looking statements regarding expected net sales, offering 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 X 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.

Speaker Change: Before we continue please note that statements made during this call may be forward looking statements regarding the expected net sales and 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.

Speaker Change: 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, maybe 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.

Operator: The statements made during this conference call are based upon information known by Nortech as of the date and time of this call, and we assume no obligation to update the information in today's call.

Speaker Change: And we assume no obligation to update the information in today's call.

Operator: You can find Nortech's complete safe harbor statements in our SEC filings.

Speaker Change: You can find north, Texas complete safe Harbor statements at or in our SEC filings.

Jay Miller: And with that, I will turn it over to Jay for his opening comments, Jay. Thank you, Andy. And good afternoon, everyone. We're glad you could join us today.

Speaker Change: And with that I will turn it over to Jay for his opening comments Jay.

Thank you Andy and good afternoon, everyone.

Speaker Change: Glad you could join us today.

Jay Miller: In our last earnings call, we noted customer order headwinds, which we expected to impact our near-term orders and revenue. Our third and fourth quarter net sales were impacted by a continuing pattern of customers delaying product purchases, reducing their on-hand inventories, and shorting order-to-fulfillment timelines.

In our last earnings call, we noted customer order headwinds, which we expected to impact our near term orders and revenue our third and fourth quarter net sales were impacted by a continuing pattern of customers delaying product purchases.

Speaker Change: Reducing their on hand inventories and shorting order to fulfillment timelines he's in.

Jay Miller: These impacts have been a theme at many contract manufacturers over the past couple of Additionally, fourth-quarter results in our aerospace and defense market were negatively impacted by the closure of our Blue Earth facility and the transfer of our customer programs to Bemidji, as we experienced unexpected delays in customer approval. While we fully expect our aerospace and defense business to get back to normal in the second half of 2025, we do expect this headwind to continue to impact revenues to a decreasing level in the first quarter, in the first half of 2025.

Speaker Change: Packs have been have seen many contract manufacturers over the past couple of quarters.

Speaker Change: Additionally, fourth quarter results and our aerospace and defense market were negatively impacted by the impacted by the closure of our Blue Earth facility and the transfer of our customer programs to imaging as we experienced unexpected delays and customer approvals.

Speaker Change: While we fully expect our aerospace and defense business to get back to normal in the second half of 2025, we do expect this headwind to continue to impact revenues to a decreasing level in the first quarter and the first half of 2025.

Jay Miller: Meanwhile, the imposition of tariffs may significantly impact contract manufacturers with facilities in China and Mexico, including Nortech. While the tariffs with Mexico are currently uncertain, it is important to note that Nortech is not the importer of records into the United States for goods produced in Mexico, as we operate under a Maquiladora structure for our customers. This reduces our direct exposure to these tariffs. However, this may cause our customers to evaluate their supply chain model. Throughout this period of uncertainty, we remain vigilant and hand-to-hand with our customers, we are closely monitoring any potential changes that could affect our operations and the operations of our customers.

Meanwhile, the imposition of tariffs may significantly impact contract manufacturers with facilities in China, and Mexico, including Nortek.

Speaker Change: All the tariffs with Mexico. We're currently uncertain. It is important to note that nortek 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.

Speaker Change: This reduces our direct exposure to these tariffs. However, this may cause our customers to evaluate their supply chain model.

Speaker Change: Throughout this period of uncertainty, we remain vigilant and hand to hand with our customers. We are closely monitoring any potential changes that could affect our operations and the operations of our customers.

Speaker Change: As for China, as we have mentioned on past calls much of our production production work. There is built in country for country near shoring approach to better serve customers in the global market with reduced shipping costs and time.

Jay Miller: As for China, as we have mentioned on past calls, much of our production production work in there is built in country for country and reassuring approach to better serve customers in the global market with reduced shipping costs and. Fortunately, we had the foresight to start implementing this strategy faster than most of our competitors. As a result, our China tariff exposure is primarily related to parts imported from China rather than larger finished goods imported from China. As tariffs on Chinese imports may increase, we are closely monitoring these impacts on our business and adjusting customer pricing as well as our sourcing strategy as needed to mitigate any adverse effects.

Speaker Change: Unfortunately, we had the foresight to start implementing this strategy faster than most of our competitors.

Speaker Change: As a result, our China tariff exposure is primarily related to parts imported from China, rather than larger it's larger finished goods imported from China.

Speaker Change: There's tariffs and tariffs on Chinese imports May increase we are closely monitoring these impacts on our business and adjusting customer pricing as well as our sourcing strategy as needed to mitigate any adverse effects.

Speaker Change: All in all we were working hard and have all hands on deck to proactively monitor this moderate this shifting landscape.

Jay Miller: All in all, we are working hard and have all hands on deck to proactively monitor this shifting landscape.

Jay Miller: trade policies and uncertainties in the current geopolitical environment, which may significantly impact our global business operations. Regarding our cost structure, we also continue to be very diligent in managing operating costs with an eye on long-term optimization of our facilities. In addition to the Blue Earth closure, we recently completed a 30% reduction in our maple grove lease space. Those facility optimization activities are behind us now and will result in at least $1.6 million in annual savings in 2025 and beyond. We have also taken actions during the first quarter of 2025 to further reduce our headcount based on our current operating.

Speaker Change: Trade policies and uncertainties in the current geopolitical environment, which may significantly impact our global business operations.

Speaker Change: Regarding our cost structure. We also continued to be very diligent in managing operating costs with an eye on long term long term optimization of our facilities.

Speaker Change: In addition to the Blue Earth closure, we recently completed a 30% reduction or Humira.

Speaker Change: Maple Grove lease space.

Speaker Change: Those facility optimization activities are behind US now and will result in at least $1 $6 million in annual savings in 2025 and beyond.

We have also taken actions during the first quarter of 2025 to further reduce our head count based on our current operating metrics.

Speaker Change: The backdrop of the past nine months has provided us with opportunities to work closely with customers.

Jay Miller: The backdrop of the past nine months has provided us with opportunities to work closely with customers to provide solutions. for the New Normal Supply Chain Nearshore. These very important strategic customer discussions revolve around shorter lead times and on-time delivery strategies, along with deeper customer partnerships, which are fundamental to a long-term growth strategy.

Speaker Change: To provide solutions.

Speaker Change: For the new normal supply chain near shoring.

These very important strategic customer discussions revolve around shorter lead times and on time delivery strategies, along with deeper customer partnerships, which are fundamental to our long term growth strategy.

Speaker Change: Over the past several years, we have taken a number of steps to invest in core infrastructure and world class leadership team to drive our long term growth strategy.

Jay Miller: Over the past several years, we have taken a number of steps to invest in core infrastructure and world-class leadership team to drive our long-term growth strategy. We continued this leadership investment in 2024 as we completed fully staffing our industry-specific business development team early in the year. This team is performing at a very high level and driving impressive business quotes and opportunities. further to align our organization with the expected accelerated new business growth. We recently completed the seamless realignment of our courting process and our new product introduction, This realignment will allow the company to serve our customers better by delivering high-quality products and services on time with shorter lead times.

Speaker Change: We continued this leadership investment in 2020 four as we completed fully staffing our industry specific business development team early in the year.

Speaker Change: This team is performing at a very high level and driving impressive business quotes and opportunities.

Speaker Change: Further to align our organization with the expected accelerated new business growth.

Speaker Change: We recently completed a seamless realignment of our quoting process and our new product introduction engineering teams.

Speaker Change: This realignment will allow the company to serve our customers better by delivering high quality products and services on time with shorter lead times.

Speaker Change: [laughter].

Speaker Change: We use them.

Jay Miller: process is a natural evolution of our business and entails changes in organizational structure. to enhance customer intimacy.

Speaker Change: This process is a natural evolution of our business and the tails changes in organizational structure.

Speaker Change: To enhance customer intimacy.

Speaker Change: A key takeaway from today's call and I want to make this very clear is that we are very bullish on the future of nortek and continuing to make investments to accelerate long term growth.

Jay Miller: A key takeaway from today's call, and I want to make this very clear, is that we are very bullish on the future of Nortech and continue to make investments to accelerate long-term growth. While we clearly recognize that it was a difficult and disappointing quarter, we firmly believe that our decision to consolidate our North American footprint, as well as moving customer programs to other manufacturing locations to better fit customers' needs, will improve our long-term EBITDA generation. These numerous strategic activities have been hard and have stretched our employees. But we all know that these changes were important, and we're happy that the whole team came together.

Speaker Change: While we clearly recognize that it was a difficult and disappointing quarter, we firmly believe that our decision.

Speaker Change: To consolidate our north American footprint as well as moving customer programs to other manufacturing locations to better meet customers' needs, we will improve our long term EBITDA generation and.

Speaker Change: These numerous strategic activities.

Speaker Change: Have been hard enough stretched our employees well, we all know that these changes are important and we're happy that the whole team came together.

Jay Miller: and add the wherewithal to get them done expeditiously. I continue to be impressed by how our customers live out Nortech's values of teamwork, excellence, commitment, innovation, and integrity every day. Once again, the whole Nortech team deserves our sincere appreciation.

Speaker Change: And they had the wherewithal to get them done expert expeditiously.

Speaker Change: I continue to be impressed by how our customers live out nor techs values of team work excellence commitment innovation and integrity every day.

Speaker Change: Once again, the whole nortek team deserves our sincere appreciation our three tier global strategy manufacturing in the U S, Mexico and China.

Jay Miller: Our three-tier global strategy of manufacturing in the U.S., Mexico, and China. gives Nortech's customers flexibility to improve their own competitiveness by moving quickly in response to new global market dynamics. We can move production among facilities based on factors like cost, intellectual property management, and operational requirements, including ever-improving on-time delivery of high-quality products with shorter waiting times. Our customer and business development teams and engineers evaluate each customer's needs to determine the most suitable location, which may also change over the course of a product lifecycle.

Speaker Change: North, Texas customers flexibility to improve their own competitiveness by moving quickly.

Speaker Change: Response, new market global global market dynamics.

We can move production among facilities based on factors like cost intellectual property management, and operating operational requirements, including ever improving on time delivery of high quality parts with shorter lead times.

Speaker Change: Our customer and business development teams of engineers evaluate each customers needs to determine the most suitable location, which may also change over the course of a product lifecycle.

Speaker Change: Next I'll turn it over to Andy for a more in depth look at our financial results Andy.

Andrew LaFrence: Next, I'll turn it over to Andy for a more in-depth look at our financial results.

Andy Laurence: Thank you Jay.

Andrew LaFrence: Thank you, Jay. In the next few minutes, I will provide certain details of our financial performance in the fourth quarter of 2024. I would encourage you to review our Form 8K containing our press release and non-GAAP measures, as well as a report on Form 10K filed earlier this morning with the U.S. Securities and Exchange Commission. As a continued theme, we have historically noted that our individual quarterly performance can be affected by outside factors. These might include timing fluctuations, including seasonal fluctuations, customer shipments, and supply chain issues. Any of these could materially impact a particular quarter, either positively or negatively.

Andy Laurence: And the next few minutes I'll provide certain details of our financial performance in the fourth quarter of 'twenty 'twenty four I would encourage you to review our form 8-K containing our press release and non-GAAP measures as well as our report on Form 10-K filed earlier this morning with the U S Securities and Exchange Commission.

As a continued theme we have historically noted that our individual quarterly performance can affect be effected by outside factors. These my include timing fluctuations, including seasonal fluctuations customer shipments and supply chain issues any of these could materially impact a particular quarter either positively.

Andy Laurence: Or negatively.

Andrew LaFrence: Consequently, we believe it is important and appropriate to review our business on a 12-month basis, rather than focusing on quarterly performance. This approach will help normalize these potential anomalies and offer a better gauge of our strategy's long-term success.

Andy Laurence: Consequently, we believe it is important inappropriate to review our business on a 12 month basis, rather than focusing on quarterly performance. This approach will help normalize these potential anomalies and offer a better gauge of our strategies long term success. So today, while focus most of my comments on our.

Andrew LaFrence: So today, while I will focus most of my comments on our fourth quarter and year-end 2024 results, I will provide some comparisons for the year-ended December 31, 2024, compared with the year-ended December 31, 2023. Net sales for the fourth quarter of 2024 totaled $28.6 million. This represents a decrease of 20.6% from the net sales of $36.1 million in the fourth quarter of 2023. For the year ended December 31, 2024, net sales were $128.1 million as compared with $139.3 million in the same prior year period, a decrease of 8%. During 2024, we realized headwinds with our industrial customers as a result of softness in this market, which is similar to results published by other contract manufacturers, as well as the delayed product launches.

Andy Laurence: <unk> fourth quarter and year end 2024 results I will provide some comparisons for the year ended December 31, 2024, compared with the year ended December 31 2023.

Andy Laurence: Net sales for fourth quarter of 'twenty 'twenty four totaled $28 $6 million. This represents a decrease of 26% from the net sales of $36 1 million in the fourth quarter of 2023 for the year ended December 31, 2024 net sales were.

Andy Laurence: $128 1 million as compared with $139 3 million in the same prior year period, a decrease of 8%.

Andy Laurence: During 'twenty to 'twenty, four we realized headwinds with our industrial customers as a result of softness in this market, which is similar to results published by other contract manufacturers as well as the delayed product launches in 2024, we have experienced revenue headwinds from our medical customer.

Andrew LaFrence: In 2024, we have experienced revenue headwinds from our medical customers as they are aggressively reducing their inventory investments. We have also noted several medical product introductions being pushed out. As previously discussed, we experienced lower aerospace and defense net sales in the fourth quarter of 2024 as we addressed unexpected requirements to transfer our Blue Earth production to our Bemidji location. Further, as Jane noted in his remarks, we have realized a reduction in customer backlog in the fourth quarter of 2024, as customers have changed their purchasing patterns and are requesting shorter lead times with new orders. Of course, with shorter lead times comes smaller backlog.

Andy Laurence: <unk> as they are aggressively reducing their inventory investment we have often noted several mineral called product introductions has been pushed out.

Andy Laurence: As previously discussed we experienced lower aerospace and defense net sales in the fourth quarter of 'twenty 'twenty four as we dressed unexpected requirements to transfer our blue Earth production toward the midyear location.

Andy Laurence: Further as Jay noted in his remarks, we have realized a reduction in customer backlog in the fourth quarter of 2024 as customers have changed their purchasing patterns and are requesting shorter lead times with new orders of course with shorter lead times come smaller backlogs.

Andrew LaFrence: Fourth quarter of 2024 gross profit totaled $2.8 million, or 9.9% of net sales, compared with gross profit of $6.8 million, or 18.9% of net sales in the same prior year quarter. For the year ended December 31st, 2024, we realized gross profit of $16.7 million, or 13.1% of net sales, as compared with $23.1 million, or 16.6% of net sales in the year ended December 31st, 2023. The reduction in gross margin percentages in the 2024 periods is largely due to lower net sales and resulting reduced facility utilization, and to a lesser extent, incremental training and other transitional costs related to the movement of blue earth production to Bemidji by the end of 2024.

Andy Laurence: Fourth quarter of 'twenty 'twenty, four gross profit totaled $2.8 million or nine 9% of net sales compared with gross profit of $6 $8 million or 18, 9% of net sales in the same prior year quarter.

Andy Laurence: For the year ended December 31, 2024, we realized gross profit of $16 $7 million or 13, 1% of net sales as compared with $23 1 million or 16, 6% of net sales in the year ended December 31 2023.

Andy Laurence: The reduction in gross margin percentages in the 'twenty 'twenty four periods is largely due to lower net sales and resulting in reduced facility utilization and to lesser extent incremental training and other transitional costs related to the movement of Blue Earth production to the mid <unk> by the.

Andy Laurence: The end of 'twenty 'twenty four.

Andrew LaFrence: Operating expenses in the fourth quarter and the year ended December 31st, 2024, are lower than the prior year periods as a result of lower incentive compensation rules and expense management, which offsets increased payroll-related costs. In 2024, we incurred $571,000 of restructuring costs related to the retention bonuses and other costs associated with the Bluebirds closure. We currently do not anticipate any significant non-cash asset impairment charges related to this closure. We paid substantially all these restructuring costs in 2024.

Andy Laurence: Operating expenses in the fourth quarter and the year ended December 31, 2024 are lower than the prior year periods.

Andy Laurence: As a result of lower incentive compensation accruals and expense management, which offsets increased payroll related costs.

Andy Laurence: In 2024, we incurred $571000 of restructuring costs related to the retention bonuses and other costs associated with the Bluebird closure. We currently do not anticipate any significant noncash asset impairment charges related to this closure.

Andy Laurence: We paid substantially all of these restructuring costs in 2024.

Andrew LaFrence: Moving to the cash flow statement for the year ended December 31st, 2024, net cash used in operating activities totaled 2.3 million dollars as compared with cash provided by operating activities of 1.8 million dollars in the same period in 23. While the timing of customer and vendor payments impact operating cash flows for the periods, we purposely increased inventory levels in anticipation of the Blue Earth facility transition to Bemidji. We plan to focus on reducing our investment in inventory during 2025 by several million dollars. As noted in our press release distributed this morning, we use earnings before interest, tax, depreciation, and amortization, or EBITDA, as well as adjusted EBITDA, which does not reflect the restructuring charges we incurred through the fourth quarter related to our Blue Earth closure, as key performance indicators to manage our business.

Andy Laurence: Moving to the cash flow statement for the year ended December 31, 2024, net cash used in operating activities totaled $2 $3 million as compared with cash provided by operating activities of $1 $8 million in the same period in 'twenty three.

Andy Laurence: While the timing of customer and vendor payments impact operating cash flows for the periods, we purposely increased inventory levels in anticipation of the Brewers facility transition to the imaging we plan to focus on reducing our investment in inventory during 2025 by several million dollars.

Andy Laurence: As noted in our press release distributed this morning, we as earnings before interest tax depreciation and amortization or EBITDA.

Andy Laurence: As well as adjusted EBITDA, which does not reflect the restructuring charges, we incurred through the fourth quarter related to our blue worth closure as key performance indicators to manage our business.

Andrew LaFrence: While EBITDA and adjusted EBITDA are non-GAAP measures, we believe that these provide meaningful information regarding our underlying core business financial performance. In the press release, we have provided a reconciliation of our financial performance determined in accordance with U.S. Generally Accepted Kind Principles. and EBITDA, as well as adjusted EBITDA. For the fourth quarter ended December 31st, 2024, adjusted EBITDA was a negative $585,000 as compared with a positive $3.2 million for the same period in 2023. Year-end 2024 adjusted EBITDA is $2.1 million, as compared with $8 million for the year ended December 31, 2023. The decrease in adjusted EBITDA is the result of lower net sales and related gross profits.

Andy Laurence: Well EBITDA and adjusted EBITDA non-GAAP measures, we believe that these provide meaningful information regarding our underlying core business financial performance.

Andy Laurence: In the press release.

Andy Laurence: We have provided a reconciliation of our financial performance determines and determined in accordance with U S. Generally accepted accounting principles.

Andy Laurence: And EBITDA as well as adjusted EBITDA.

Andy Laurence: For the fourth quarter ended December 31, 2024, adjusted EBITDA was a negative $585000 as compared with a positive $3 $2 million for the same period in 2023.

Andy Laurence: Year end 2024, adjusted EBITDA is two $1 million as compared with $8 million for the year ended December 31, 2023. The decrease in adjusted EBITDA is a result of lower net sales and related gross profit.

Andrew LaFrence: Turning the balance sheet, as of December 31st, 2024, cash and cash equivalents totaled $916,000, down from $1.7 million as of December 31st, 2023. The fluctuation in cash balances reflect the timing of cash receipts, expenditures, and credit line borrowings. We ended the fourth quarter of 2024 with $6.3 million of borrowing capacity under our line of credit, which was amended in March of 2025 to address the previously noted near-term impacts of revenue headwinds. Accounts receivable as of December 31st, 2024 were $14.9 million, down from $19.3 million as of December of 2023. This is in line with our strong fourth quarter sales in 2023, the expected timing of customer payments, and strong collection outcomes from our staff.

Andy Laurence: Turning to the balance sheet Hazard December 31.

Andy Laurence: 2024, our cash and cash equivalents totaled 916000 down from $1 7 million.

Andy Laurence: As of December 31, 2023, the fluctuation in cash balances reflect the timing of cash receipts expenditures and credit line borrowings. We ended the fourth quarter of 2024 was $6 $3 million of borrowing capacity under our line of credit which was amended in March of 2025 to address that.

Andy Laurence: Previously noted near term impacts our revenue headwinds.

Andy Laurence: Accounts receivable as of December 31, 2024 were $14 $9 million down from $19 3 million as of December of 2023. This is in line with our strong fourth quarter sales in 'twenty three the expected timing of customer payments and strong.

Andy Laurence: And the outcomes from our staff.

Andy Laurence: Inventories.

Andrew LaFrence: Inventories. were $21.6 million as of December 31, 2024, as compared to $21.7 million as of December 31, 2023. The slight decrease in inventories, which also impacted by the Blue Earth facility close, reflects the buildup of inventory balances in anticipation of completing that move. We are focusing on reducing our investment and inventory over the next several quarters as we mirror our purchasing activities to customer ordering patterns. Our contract asset, which represents revenue earned by not yet billed to customers, decreased slightly to $13.8 million as of December 31, 2024, as compared with $14.5 million at the end of 2023.

Andy Laurence: We're twins 1.6 million as of December 31, 2024, as compared to $21 7 million as of December 31, 2023, the slight decrease in inventories, which also in <unk>.

Andy Laurence: Impacted by the Blue Earth facility close reflects the buildup of inventory balances in anticipation of completing that move.

Andy Laurence: We are focusing on reducing our investment in inventory over the next several quarters as we mirror, our purchasing activities to customer ordering patterns.

Andy Laurence: Our contract asset, which represents revenue earned but not yet billed to customers decreased slightly to $13 8 million as of December 31, 2024, as compared with $14 5 million at the end of 'twenty. Three this decrease reflects the timing of customer shipments.

Andrew LaFrence: This decrease reflects the timing of customer shipment.

Andrew LaFrence: In our press release issued earlier today, we have presented non-GAAP results, including trailing 12-month financial data, EBITDA, and adjusted EBITDA for the year ended December 31, 2024. Net sales were $128.1 million. That's compared with $139.3 in the year ended December 31, 2023. and adjusted EBITDA was $2.1 million in 2024 as compared to $8 million in December of 2023.

Andy Laurence: In our press release issued early today. We are also we have presented non-GAAP results, including trailing 12 month financial data EBITDA and adjusted EBITDA.

Andy Laurence: For the year ended December 31, 2024, net sales were $128 1 million as compared with $139. Three in year ended December 31 2023.

Andy Laurence: And adjusted EBITDA was $2 1 million in 2024 as compared to $8 million in December of 2023.

Andrew LaFrence: Our top financial priorities for 2025 remain unchanged. First, we are extremely focused on continuing to strengthen our balance sheet. We made good progress in our receivable collections in 2024 and plan to reduce our inventory investments in 2025. Next, we will take further advantage of opportunities to align our operations and infrastructure with the market demand that we are seeing to deliver sustainable long-term EBITDA growth as well as driving improvements in free cash flow. Coupled with disciplined lean operations, execution, expense management, and R&D innovation, we believe Nortech can deliver on our objectives.

Andy Laurence: Our top financial priorities priorities for 2025 remain unchanged first we are extremely focused on continuing to strengthen our balance sheet. We made good progress in our receivable collections in 2024 and plan to reduce our inventory investments in 2025 next we will take further advantage.

Andy Laurence: [noise] of opportunities to align our operations and infrastructure with the market demand that we're seeing to deliver sustainable long term EBITDA growth as well as driving improvements in free cash flow, coupled with disciplined lean operations execution and expense management and R&D.

Andy Laurence: Innovation, we believe nortek can deliver on our objectives.

Jay Miller: With that, I will turn it back to Jay for his closing comments. Jay? Thanks, Andy.

Jay: With that I'll turn it back to Jay for his closing comments Jay.

Jay Miller: Before we open the call to your questions, I want to touch on three related areas that together serve our customers and help advance Nortech's corporate stewardship. Our engineering expertise, product innovation focus, and sustainability point. As for engineering expertise, we have a dedicated engineering services team that is focused on enhancing manufacturability, serviceability, supply chain risk mitigation, and cost efficiency for our customers. Our three-tier cost structure across the U.S., Mexico, and China allows us to quickly adopt our global engineering resources to fit our customers' changing needs.

Jay: Thanks, Andy.

Speaker Change: Before we open the call to your questions I wanted to touch on three related areas that together to serve our customers and help advance nor teck's corporate stewardship our.

Speaker Change: Our engineering expertise product innovation focus and sustainability plans.

Speaker Change: Astroengineering expertise, we have a dedicated dedicated engineering services team that is focused on enhancing manufacture ability serviceability supply chain risk mitigation and cost efficiency for our customers. Our three tier cost structure across the U S, Mexico, and China allows us to quickly adopt.

Speaker Change: Our global engineering resources to fit our customers' changing needs.

Speaker Change: Our core goal of our long term strategic plan focuses on unique innovation.

Jay Miller: A core goal of our long-term strategic plan focuses on unique innovation. is somewhat unusual for most contract manufacturers. Nortech's engineering capabilities and innovation skills further our research and development activities with advancements like the Expanded Beam Extreme Fiber-Optic Technology, or EBX, that we announced in January. EBX is designed for digital data transmission through the very complex custom cable systems we manufacture and offers improved speed, reliability, and security when compared to traditional copper. We're also excited about our Active Optical Extreme, or AOX. Hybrid Power Plus Data Fiber Optic Technology that works in sophisticated magnetic environments, a testament to our team's dedication to innovation, hard work, and excellence in the field of digital connectivity solutions.

Speaker Change: This is somewhat unusual for most contract manufacturers or tech.

Speaker Change: Engineering capabilities and innovation skills further our research and development activities with advancements like the expanded being extreme fiber optic technology or E. B X that we announced in January.

Speaker Change: You'd be actions designed for digital data transmission through the very complex custom cable system manufacturer and offers improved speed reliability and security when compared to traditional copper.

Speaker Change: We're also excited about our active optical extreme or a O X.

Speaker Change: Hybrid power plus data fiber optic technology that works and sophisticated magnetic environments, a testament to our team's dedication to innovation hard work and excellence in the field with digital connectivity solutions.

Jay Miller: AOX represents a significant advancement in our product offerings and underscores our commitment to providing state-of-the-art solutions that meet the evolving needs of our clients to deliver products that offer lighter weight, lower cost, and ruggedized solutions sustainably. At the simplest level, the vast majority of Nortech's products provide complex, custom digital connectivity solutions that transmit data and power in various applications. As you may know, the Internet of Things, or IoT, integrates a variety of electronic components, such as microcontrollers, sensors, actuators. and connectivity modules. These components, in turn, enable IoT connected devices to collect, parse, transmit, and receive data.

Speaker Change: <unk> represent a significant advancement in our product offerings and underscores our commitment to providing state of the art solutions that meet the evolving needs of our clients to deliver products that offer lighter weight lower cost and Ruggedized solutions sustainably.

Speaker Change: At the simplest level the vast majority of north tax products provide complex custom digital connectivity solutions, but that transmit data and power in various applications. As you may know the internet of things or Iot integrates a variety of electronic components, such as Microcontrollers sensors acts.

Speaker Change: <unk>.

Speaker Change: Connectivity modules.

Speaker Change: Ponant in turn enable Iot kind of connected devices to collect parse transmit and receive data.

Jay Miller: More and more today, that data is being evaluated and analyzed using human intelligence and combined artificial and human intelligence for improved performance and data management for our customers, as well as for their customers. For Nortech, we see AI capabilities as a clear opportunity to streamline and improve our process. make our employees more productive. and serve our customers better.

Speaker Change: More and more today that data is being evaluated and analyze using human intelligence and combined artificial and human intelligence for improved performance and data management for our customers as well as for their customers.

Speaker Change: For Nortek, we see AI capabilities, as a clear opportunity to streamline and improve our processes make our employees more productive.

Speaker Change: Serve our customers better we will.

Speaker Change: Here more about you will hear more about our innovations that hey, I in future conference calls.

Jay Miller: You will hear more about our innovations in AI in future conference calls. More data needs better data pipelines, and that's where Nortech comes in. Technology like our eBX smart cables helps collect and distribute this data faster, more cost-effectively, and more securely across these sophisticated networks. We see strong opportunities of growth here. Our pivot to more fiber optic technology improves product performance for our customers by offering unparalleled speed and reliability. It also aligns with sustainability goals that we share with many of our customers. When compared with traditional copper, fiber optics offer significant environmental benefits during both production and operations, including improved energy efficiency and less material usage, while decreasing the carbon footprint of the complex cables that we manufacture.

More data needs better data pipelines and that's word nortek comes in technology like our E. B X smart cables helps collective distribute this data faster and more cost effectively and more security securely across these sophisticated networks.

Speaker Change: We see strong opportunities for growth here.

Speaker Change: Our pivot to more fiber optic technology improves product performance for our customers by offering unparalleled speed and reliability. It also aligns with sustainability goals sustainability goals that we shared with many of our customers when.

Speaker Change: When compared with traditional copper fiber optics offers significant environmental benefits during both production.

Speaker Change: In operations, including improved energy efficiency and less material usage, while decreasing the carbon footprint of complex care or the current practice of cables that we manufacture.

One might think that our customers no longer care about their carbon footprint, we're staying very close to our customers and we know they still do care for a range of important business reasons.

Jay Miller: One might think that our customers no longer care about their carbon footprint. We're staying very close to our customers and we know they still do care for a range of important business. We also know that our aerospace and defense customers are adopting fiber-optic technology due to these key advantages. Reduce size, weight, and power. immunity to electromagnetic interference and greater ruggedization in harsh environments. Harsh environments, of course, are very common in aerospace.

Speaker Change: We also note that our aerospace and defense customers are adopting fiber optic technology due to these key advantage advantages.

Speaker Change: Reduced size weight and power requirements mutinied electric neck, electromagnetic interference and greater regulation in harsh environments.

Speaker Change: She environments of course are very common in aerospace and defense.

Jay Miller: Nortech has a proud history of serving these customers' unique needs, dating back roughly 30 years. It's the smallest of our four core markets by net sales, but very important for our diversification and future growth. Our contributions to our national defense are also a source. are also a source of great pride for Nortech's employees. The majority of our aerospace and defense cables are still the traditional type common and legacy defense. such as shipboard missile launchers for the Navy. but we are looking to the future with ruggedized fiber optics and evolving with our customers.

Speaker Change: Nortek has a proud history of serving these customers unique needs dating back roughly 30 years.

Speaker Change: It's the smallest of our four core markets by net sales, but very important for our diversification and future growth.

Speaker Change: Our contributions to our National Defense are also a source.

Speaker Change: Excuse me.

Speaker Change: Are also a source of great pride for North Texas Boys.

Speaker Change: The majority of our aerospace and defense cables are still with traditional type coming in legacy defense systems, such as shipboard missile launchers for the Navy.

Speaker Change: But we are looking to the future with ruggedized fiber optics and evolving with our customers.

Jay Miller: In closing, we are excited about our technological developments across all of our Expect them to support our continued sales momentum in 2025 and beyond. aided by stabilization and supply chain and customer orders. Nortech is well-positioned to capitalize on these trends with our fiber-optic capabilities. Our EVX and AOX technologies align perfectly with the industry's move towards more efficient, reliable fiber-optic solutions. VBX offers non-physical contact connectors for applications in harsh environments while AOX combines fiber optics with copper to provide EMI immune high-speed data transmission, low-speed signals and power delivery all in one hybrid cable. By integrating digital diagnostics with fiber optic cables, we are able to generate real-time cable and system performance data.

Speaker Change: In closing we are excited about technological developments across all of our markets.

Speaker Change: To support our continued sales momentum in 2025 and beyond.

Speaker Change: Aided by stabilization of the supply chain and supply chain and customer orders.

Speaker Change: North Tech is well positioned to capitalize on these trends with our fiber optics capabilities or E. B X and <unk> technologies aligned perfectly with the industry's move towards more efficient reliable fiber optic solutions.

Speaker Change: The X offers non physical contact connectors for applications in harsh environments, while AOS combines fiber optics with copper.

Speaker Change: EMI immune high speed data transmission, most speed signals and power delivery all in one hybrid cable.

Speaker Change: By integrating digital diagnostics with fiber optic cables, we are able to generate real time cable system performance data.

Jay Miller: These digital diagnostic cables advance our customers' ability to monitor their systems and devices, to evolve them, evolve from preventive maintenance to predictive maintenance to minimize downtime and cost. Our commitment to innovation and sustainability positions us as a leader in the fiber optics industry, ready to meet the growing demands for high-speed, reliable, and environmentally friendly connectivity solutions.

Speaker Change: These digital diagnostic cables advance our customers' ability to monitor their systems and devices to evolve them, a ball from preventative maintenance to predictive maintenance to minimize downtime and costs.

Speaker Change: Our commitment to innovation and sustainability positions us as a leader in the fiber optics industry ready to meet the growing demands for high speed reliable.

Speaker Change: Environmentally friendly connectivity solutions.

Speaker Change: We will now open up the call for your questions. John Please open the lines.

Operator: We will now open up the call for your questions. John, please open the line. Certainly.

Speaker Change: Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment.

Speaker Change: Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please while we poll for questions. Once again, please press star one if you have a question or comment.

Speaker Change: Once again, please press star one if you have a question or comment.

Speaker Change: Okay. It appears we have no questions in queue I'd like to turn the floor back to J Miller for any closing remarks.

Operator: Okay, it appears we have no questions in queue.

Jay Miller: I'd like to turn the floor back to Jay Miller for any closing remarks. Thank you, John, and thanks to everyone for joining us today. We look forward to talking with you in May when we report our first quarter 2025 results. Again, thank you and goodbye.

J Miller: Thank you John and thanks to everyone for joining US today, we look forward to talking with you in May when we report our first quarter 2025 results again, thank you and goodbye.

Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Operator: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation. Thanks, John. Thank you, gentlemen. Take care.

J Miller: Yeah.

Sean: Thanks, Sean.

J Miller: Thank you gentlemen take care.

J Miller: Yep.