Nortech Systems — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for Q3 2026 were $33.0 million, an 8.4% increase compared to $30.5 million in Q3 2025; year-to-date (YTD) net sales reached $96.9 million, up 10.1% from $88.1 million in the same period last year.
• Net income for Q3 2026 was $637 thousand ($0.21 per diluted share), a turnaround from a net loss of $146 thousand ($0.05 per diluted share) in Q3 2025; YTD net income was $919 thousand compared to a loss of $1.1 million in YTD 2025.
• Gross profit for Q3 2026 was $5.9 million, a 16.9% increase from $5.0 million in Q3 2025; YTD gross profit was $16.3 million, up 25.8% from $12.9 million in YTD 2025.
• Adjusted EBITDA for Q3 2026 was $2.0 million, up from $1.3 million in Q3 2025; YTD Adjusted EBITDA was $3.4 million, a 160.0% increase from $1.3 million in YTD 2025.
• Operating expenses for Q3 2026 were $4.5 million, up 9.3% from $4.1 million in Q3 2025; YTD operating expenses were $14.2 million, up 10.3% from $12.9 million in YTD 2025.
• Total assets as of September 30, 2026, were $84.5 million, compared to $71.9 million as of December 31, 2025.
• Total liabilities as of September 30, 2026, were $48.0 million, compared to $37.4 million as of December 31, 2025.
• Cash and restricted cash ended the nine months at $4.1 million, up from $1.3 million at the end of the same period in 2025.
• Accounts receivable increased to $20.9 million as of September 30, 2026, from $17.0 million at year-end 2025.
• Inventories increased to $25.6 million as of September 30, 2026, from $20.7 million at year-end 2025.
• Lines of credit outstanding were $8.3 million as of September 30, 2026, compared to $7.0 million at year-end 2025.
• A new term loan of $2.2 million was drawn in the nine months ended September 30, 2026, with a current portion of $440 thousand and a long-term portion of $1.5 million.

Guidance and Future Outlook:

• Management expressed confidence in the direction of the business, citing a 20% year-over-year increase in total backlog to $92.8 million as of September 30, 2026.
• The company plans to focus on converting backlog into profitable shipments, strengthening cash generation through disciplined purchasing and inventory management, and advancing fiber optic technologies for next-generation applications.
• Management highlighted the strategic advantage of nearshoring and a global manufacturing footprint across the U.S., Mexico, and China.

Business Segments and Product Lines:

• China operations drove significant growth with net sales increasing more than 56% in the third quarter.
• Total backlog growth was led by the Aerospace & Defense and Industrial markets.
• The company serves the medical imaging, medical device, industrial, and aerospace & defense markets with vertically integrated capabilities in wire, cable, interconnect assemblies, printed circuit board assemblies, and system-level integration.

Market and Competitive Landscape:

• The company is deepening engineering partnerships with customers and utilizing its global footprint to serve clients from the location that best meets their needs.
• Management noted momentum in customer engagement and strengthened operational discipline across global operations.

Risks and Challenges:

• Potential risks include commodity cost increases coupled with challenges in raising prices or customer pressure to reduce prices.
• Supply chain disruptions leading to shortages of critical components remain a risk.
• Volatility in market conditions, increased competition, and reduced demand could impact results.
• Risks related to labor availability, geopolitical and economic conditions, and changing tariff environments are noted.
• The company faces risks regarding the reliability and efficiency of operating facilities and the ability to improve manufacturing output and product quality.

Management Commentary and Tone:

• President & CEO Jay D. Miller stated that third-quarter results reflect continued execution of the business strategy, resulting in year-over-year revenue growth and improved gross margins.
• Management emphasized the value of the global footprint, specifically noting the performance of China operations.
• The tone was confident regarding the backlog growth and the strategic advantages of the company's manufacturing locations.

Other Key Points:

• The company incurred $236 thousand in strategy review expenses (third-party consulting, legal, and other incremental costs) in Q3 2026, which were excluded from Adjusted EBITDA.
• Total backlog of $92.8 million as of September 30, 2026, represents a 20% increase from $92.8 million (implied $77.3 million based on 20% growth, though text states "up 20% from September 30, 2025" without explicitly stating the 2025 total, the 90-day backlog was $31.5 million vs $31.3 million).
• The company held a conference call on November 12, 2026, hosted by CEO Jay D. Miller and CFO Andrew D. C. LaFrence.
• Stock award exercises generated $320 thousand in cash during the nine months ended September 30, 2026.
• The company reported $236 thousand in strategy review costs for the quarter and $440 thousand for the nine months ended September 30, 2026.