Nortech Systems Incorporated reported net sales of $26.9 million for the first quarter ended March 31, 2025, a 21.4% decrease compared to $34.2 million in Q1 2024. The company recorded a net loss of $1.3 million, a significant decline from net income of $0.8 million in the prior year's first quarter.
Diluted earnings per share for Q1 2025 was a loss of $0.48, compared to a profit of $0.28 in Q1 2024. Adjusted EBITDA was negative $1.0 million, down from positive $1.6 million in Q1 2024, reflecting substantial operational and financial pressures.
Sales decreased across all major markets: Medical Device sales fell by 24.8% to $8.1 million, Medical Imaging by 10.0% to $8.6 million, Industrial by 14.0% to $6.9 million, and Aerospace and Defense by 43.8% to $3.3 million. The significant decline in A&D sales was linked to unexpected delays in customer approvals for products transferred from the closed Blue Earth facility.
The company incurred $266 thousand in restructuring charges in Q1 2025 related to severance from a February 2025 reduction in force and expenses tied to the Blue Earth facility. Cash used in operating activities totaled $2.9 million, a reversal from cash provided of $2.8 million in Q1 2024, primarily due to working capital dynamics.
Nortech amended its Senior Secured Revolving Line of Credit with Bank of America. A First Amendment in March 2025 waived non-compliance with leverage and fixed charge ratios for December 31, 2024, and March 31, 2025, and increased the borrowing rate by one percent. A Second Amendment on May 14, 2025, further deferred compliance with leverage and fixed charge ratios until Q4 2025, introduced minimum adjusted EBITDA requirements ($1.0 million for Q2 2025, $1.3 million for Q3 2025, and $1.6 million for Q4 2025 and thereafter), and a minimum liquidity requirement of $2.5 million. The Second Amendment also accelerated the Revolver's expiration to June 30, 2026, and increased the borrowing rate by an additional 25 basis points.
Management anticipates clearing the majority of the A&D approval backlog during Q2 2025. Strategic facility optimization activities, including the Blue Earth closure and Maple Grove lease reduction, are expected to generate at least $1.6 million in annual savings starting in 2025, contributing to improved long-term EBITDA generation.
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