WAYZATA, MN – Nortech Systems reported first quarter net sales were $30.7 million, up 38.9% year-over-year, driven primarily due to higher production volume, as well as price increases to counteract higher material and labor cost. The company says it has scaled the direct labor workforce and strengthened the supply chain for parts.

The electronics manufacturer’s net income for the three months ended Mar. 31 was $138,000, compared to net loss of $1.6 million for the same period last year.

First quarter income from operations was $169,000, compared to a loss from operations of $2.3 million for the first quarter in 2021, driven by the increase in sales and gross margin as a percent of sales.

The firm’s 90-day shipment backlog as of Mar. 31 was $35.4 million, a 4.1% decrease from the beginning of the quarter and a 13.8% increase from March 31, 2021. Backlog for medical customers decreased 3.4% from the beginning of the quarter and increased 23.9% from the prior year. Industrial customers' backlog increased 9% from the beginning of the quarter and decreased 4% from the prior year. The aerospace and defense backlog decreased 21.1% from the beginning of the quarter and increased 17.6% from the prior year.

Restructuring charges during the first quarter were $200,000, or 1% of sales, due to the closure of the Merrifield facility during 2021.

Research and development expenses were $300,000, or 1.1% of net sales. There were no research and development expenses for the three months ended Mar. 31, 2021.

The Covid-19 pandemic continued to impact business in the first quarter, primarily driven by the emergence of the Omicron variant, with a resulting increase in Covid cases in early 2022. During the first quarter, performance was also adversely affected by continued supply chain disruptions and delays. The full extent to which Covid-19 will directly or indirectly impact business, the company’s financial condition, and results of operations will depend on future developments that are highly uncertain and cannot be accurately predicted, the firm says, including new information that may emerge concerning Covid-19, the actions taken to contain it or treat its impact, and the economic impact on local, regional, national and international markets.

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