Nortech Systems (NASDAQ:NSYS) reported improved first-quarter 2026 results, with management pointing to restructuring actions completed in late 2024 and early 2025, stronger backlog and better plant utilization as key drivers of the company’s performance.
President and Chief Executive Officer Jay Miller said the quarter marked Nortech’s fourth consecutive period of positive operating and EBITDA results. He said the company recorded a $1.7 million improvement in income from operations compared with the first quarter of 2025, reflecting execution of its restructuring initiatives.
Sales rise as aerospace and defense leads growth
Chief Financial Officer and Senior Vice President of Finance Andrew LaFrence said net sales for the first quarter ended March 31, 2026, were $33.3 million, up $3.4 million, or 12.7%, from $26.9 million in the first quarter of 2025.
LaFrence said growth was led by aerospace and defense, where sales increased 41.2% year over year following customer approvals and production transfers from Blue Earth to Bemidji. Medical imaging sales rose 15%, driven by higher volumes from existing customers, while medical device sales increased 10.4% as production normalized after the company’s 2025 facility optimization. Industrial sales were relatively flat from the prior-year period.
Gross profit totaled $4.7 million, compared with $3.1 million a year earlier. Gross margin improved to 15.5%, up 410 basis points from 11.4% in the first quarter of 2025. LaFrence attributed the improvement to higher plant utilization, manufacturing efficiency gains from restructuring actions and operating leverage on higher sales volume.
Total operating expenses were $4.7 million and were relatively flat year over year. The prior-year period included $266,000 of restructuring charges. Nortech reported operating income of $47,000, compared with an operating loss of $1.6 million in the first quarter of 2025.
Net interest expense was $256,000, up from $214,000 a year earlier. LaFrence said the increase was primarily tied to the write-off of $82,000 of unamortized debt issuance costs related to refinancing completed during the quarter. The company reported a net loss of $34,000, or $0.01 per share, compared with a net loss of $1.3 million, or $0.48 per share, in the prior-year quarter.
Backlog strengthens and refinancing adds flexibility
Miller said customer backlog remained a “bright spot” as confirmed purchase orders increased. Backlog as of May 31, 2026, was $90.8 million, up 17.4% from year-end 2025 and 37.9% from the end of 2024.
He said the increase is taking place even as several customers move to shorter lead times. Nortech has implemented just-in-time finished product delivery strategies with several large customers, allowing them to order smaller quantities based on long-term binding forecasts. Miller said those programs have reduced delivery time for many items from more than 100 days to 20 days or less.
Miller also said Nortech is seeing signs of strength among aerospace and defense customers given the current geopolitical climate. He said the growing workload has created an opportunity to expand direct labor at several facilities.
During the quarter, Nortech entered into new agreements with Associated Bank for a $2.2 million term note and a $15 million asset-backed line of credit. Miller said the structure is more flexible and better matched to the company’s business model, adding that it should lower borrowing costs and provide a three-year arrangement to support growth.
LaFrence said cash used in operating activities was $1.6 million, an improvement from $2.9 million used in the prior-year period. At quarter end, cash and restricted cash totaled $2.2 million. The company’s revolving line of credit balance was $7.2 million, with approximately $3.5 million of available borrowing capacity under the new Associated Bank facility.
Adjusted EBITDA was $350,000 in the first quarter, compared with an adjusted EBITDA loss of $1 million in the first quarter of 2025.
Management highlights nearshoring and tariff exposure
Miller said Nortech continues to see strong quoting activity as customers evaluate nearshore manufacturing strategies for North America and Asia. He said the company believes it is well-positioned with its North American footprint, including its Monterrey Maquiladora operations and Minnesota facilities operating under the U.S.-Mexico-Canada Agreement framework.
While Miller said the tariff environment remains uncertain, including tariffs involving Mexico, he noted that Nortech is not the importer of record in the U.S. for goods produced in Mexico because it operates under a Maquiladora structure for customers. He said that structure materially reduces Nortech’s direct exposure to those tariffs.
In cases where Nortech incurs tariffs on imported components, Miller said the company is working with customers to pass those costs through. He also said the company is monitoring the recent Supreme Court decision regarding the validity of IEEPA tariffs and the process for reimbursement of those tariffs.
Technology focus includes fiber optics, diagnostics and AI
Miller used his closing remarks to emphasize Nortech’s engineering expertise, product innovation and sustainability plans. He said the company’s engineering services team focuses on manufacturability, serviceability, supply chain risk mitigation and cost efficiency for customers.
He said Nortech’s three-tier cost structure across the U.S., Mexico and China gives the company flexibility to adapt its global engineering resources to customer needs. Miller highlighted the company’s work in ruggedized fiber optic technology, particularly for aerospace and defense applications, including interest in wearable technology and tethered drones.
Miller also discussed Nortech’s Digital Diagnostics Extreme and Sky IoT technology platforms, which integrate digital diagnostics with fiber optic cables to generate real-time cable and system performance data. He said those systems can help customers shift from preventative maintenance to predictive maintenance.
He said Nortech is also focusing on technologies that are lighter, faster and more sustainable, noting that fiber optic cable can serve as an alternative to copper as copper prices rise. Miller said the company’s power-over-fiber technology reduces cable weight while providing immunity from electromagnetic interference.
Miller also described artificial intelligence as an opportunity to streamline processes, improve productivity and better serve customers. He said Nortech is allocating resources and time to building AI skills among employees across functions.
Management did not take questions during the call, as the operator said there were no questions in the queue.
About Nortech Systems (NASDAQ:NSYS)
Nortech Systems, Inc is a specialized engineering and manufacturing company that designs, develops and produces custom gas distribution and control solutions. Its core offerings include cryogenic valves and regulators, gas distribution panels and manifolds, and precision instrumentation for monitoring and controlling the delivery of industrial, specialty and medical gases. The company leverages in-house engineering, machining and assembly capabilities to tailor products to the exact specifications of its customers.
In addition to its mechanical product lines, Nortech Systems provides electronic monitoring and control systems.
