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Here are two analogies to describe Nortech Systems:

• Nortech Systems is like a specialized Foxconn for industrial, medical, and aerospace companies, designing and manufacturing complex electronic products for them.
• It's similar to Magna International, but for electronic devices, serving as a behind-the-scenes partner to design and manufacture components and products for other companies.

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• Electronics Manufacturing Services (EMS): Provides comprehensive contract manufacturing solutions for complex electronic components and systems, including printed circuit board assembly, box build, and testing.
• Medical Device Manufacturing: Specializes in the manufacturing and assembly of sophisticated medical devices and sub-assemblies for the healthcare industry.
• Engineering & Design Services: Offers product development, prototyping, and design-for-manufacturability (DFM) support to optimize customer products for efficient production.

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Nortech Systems (NSYS) primarily sells its services and products to other companies (B2B), rather than directly to individuals.

As an Electronics Manufacturing Services (EMS) provider, Nortech Systems manufactures highly complex components and systems for Original Equipment Manufacturers (OEMs). While Nortech Systems' SEC filings indicate that a few key customers account for a significant portion of their revenue (e.g., 10% or more of consolidated net sales), the company does not publicly disclose the specific names of these major customer companies in its regulatory filings or on its website, generally referring to them generically (e.g., "Customer A," "Customer B"). This is a common practice in the contract manufacturing industry to protect customer confidentiality.

Nortech Systems serves a diverse range of customers within the following major industries:

• Medical: This category includes companies that design and sell highly complex medical devices, diagnostic equipment, patient monitoring systems, and surgical instruments. Nortech provides the manufacturing expertise for these critical products.
• Industrial: Customers in this segment are typically involved in producing industrial controls, automation equipment, specialized machinery, and other robust industrial applications that require high reliability and precision manufacturing.
• Aerospace & Defense: This category comprises businesses developing and manufacturing systems for flight control, radar, communications, and other critical applications in both commercial aerospace and government defense sectors, demanding stringent quality and regulatory compliance.

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Jay D. Miller President, Chief Executive Officer and Director

Jay D. Miller was named President and CEO of Nortech Systems in February 2019, after serving as interim President since January 2019 and joining the company's board as an independent director in May 2018. He has extensive executive leadership and business experience with various medical technology companies. Miller previously held CEO positions at IMRIS, Inc., Zonare, Inc., and Vital Images, Inc., all within the medical imaging industry. His earlier career included working for the medical divisions of Siemens and GE. He has served on the boards of several medical imaging and medical device companies, including icometrix, NXC Imaging, Nous Imaging, and 3D Imaging Partners. Miller also has experience as a consultant at Vave Health and on the board of advisors at Bio-Tree Systems Inc. He was a former Director of Streamline Health Solutions Inc.

Andrew LaFrence Chief Financial Officer and Senior Vice President of Finance

Andrew LaFrence was appointed Chief Financial Officer and Senior Vice President of Finance in December 2023. He brings over 39 years of experience in finance, operations, and accounting. Prior to Nortech Systems, LaFrence held CFO positions at several companies, including Vyant Bio, Inc., StemoniX, Inc., Biothera Pharmaceuticals, Inc., Surmodics, Inc., and CNS Therapeutics. He began his professional career at KPMG, where he led the Minneapolis office Life Sciences practice for more than 10 years. LaFrence has provided executive leadership to the finance function for both public and private companies.

John Lindeen Senior Vice President of Global Operations

John Lindeen was named Senior Vice President of Global Operations in January 2019. He joined Nortech in 2013 as Director, Industrial Markets, and previously served as Vice President of Global Operations. In his current role, he is responsible for global supply chain management and oversees Nortech's manufacturing facilities in Minnesota, Mexico, and China. His manufacturing career includes extensive experience in the medical device, defense, and industrial sectors with companies such as Donatelle, Pentair, Remmele Engineering, and Sportech.

Monica Hamling Vice President of People Operations and Culture

Monica Hamling was appointed Vice President of People Operations and Culture in November 2021. Before joining Nortech, she was a Senior Human Capital Leader for UnitedHealth Group, where she led HR Strategy and Talent globally for the R&D and Innovation Engine. She also held various HR roles with increasing responsibility at Medtronic, supporting engineering, research, and quality functions.

Corey Hancock Vice President, Sales & Business Development

Corey Hancock joined Nortech Systems in 2023 as Vice President of Sales and Business Development, where he leads the organization's commercial growth strategy. He previously served as Vice President of Strategic Accounts for Benchmark Electronics, and held other leadership positions in customer management, operations, and engineering. Hancock has over 25 years of manufacturing experience, working with customers in the medical device, aerospace and defense, high-end computing, and complex industrial markets.

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A significant risk for Nortech Systems is its **customer concentration and the shifting patterns in customer orders**. A substantial portion of the company's net sales has historically come from a small number of customers. For instance, in 2023, two customers individually accounted for 25.7% and 10.3% of net sales, and in 2022, one customer represented 26.9% of net sales. The loss of a major customer, if not replaced, would adversely affect the company. Furthermore, customer ordering patterns have shifted towards shorter lead times and reduced backlogs, which impacts revenue visibility and makes forecasting more challenging.

Another critical risk is **supply chain disruptions and the bargaining power of suppliers**. Nortech Systems relies heavily on a steady flow of specialized components, making it vulnerable to supply chain disruptions and giving significant leverage to its suppliers. The company's dependence on specialized sources is pronounced, with an assumed 90% reliance on specialized suppliers for critical electronic components. This concentration allows suppliers to exert power, potentially leading to increased input costs, as seen with the semiconductor supply constraint index in 2024 contributing to cost pressure in 2025 operations.

Finally, **operational challenges and transitional costs stemming from facility optimization** pose a significant risk. The company has experienced negative impacts on gross margins due to transitional costs and reduced facility utilization from the shift in production, such as the closure of the Blue Earth facility and the transfer of customer programs to Bemidji. These changes have created headwinds, particularly in the aerospace and defense markets.

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Nortech Systems (NSYS) operates primarily in the medical, aerospace & defense, and industrial markets, offering electronic manufacturing services (EMS) such as complete medical devices, printed circuit board assemblies, wire and cable assemblies, and complex higher-level electro-mechanical assemblies.

The addressable markets for Nortech Systems' main products and services can be sized as follows:

• Medical Device Contract Manufacturing: The global medical device contract manufacturing market was estimated at USD 76.8 billion in 2024 and is projected to reach USD 151.98 billion by 2030, growing at a CAGR of 12.36% from 2025 to 2030. Another source estimates the global market size at USD 95.81 billion in 2025, projected to reach USD 156.63 billion by 2030 with a CAGR of 10.33%. North America held approximately 39.1% of the global medical device contract manufacturing market share in 2025. Asia Pacific is projected to expand at a 10.5% CAGR through 2030. The global market is also projected to reach USD 220.57 billion by 2034, expanding at a CAGR of 10.86% between 2025 and 2034. North America held a major revenue share of approximately 39% in this market in 2024.
• Aerospace and Defense Electronic Manufacturing Services (EMS): The global Aerospace and Defense Electronic Manufacturing Services Market was valued at USD 23.5 billion in 2023 and is expected to reach USD 30.7 billion by 2033, at a CAGR of 2.71% during the forecast period 2023-2033. Another report indicates the global market size was USD 22.48 billion in 2024 and is projected to reach USD 29.68 billion by 2032, growing at a CAGR of 3.90% from 2026 to 2032. North America dominates this market, holding the largest market share in 2024, estimated at 40%.
• Aerospace-Defense Electronics Market (includes electronic manufacturing, but is broader): The global aerospace-defense electronics market size was valued at approximately USD 145.7 billion in 2023 and is projected to reach USD 258.3 billion by 2032, growing at a compound annual growth rate (CAGR) of 6.4%. North America holds a significant share of this market due to substantial defense budgets.
• Industrial Electronics Manufacturing Services (part of the broader EMS market): The global Electronics Manufacturing Services (EMS) market size was valued at USD 633.29 billion in 2024 and is expected to grow at a CAGR of 4.8% from 2025 to 2032, reaching nearly USD 921.49 billion. The global EMS market is anticipated to be USD 597 billion in 2024 and is estimated to reach USD 1,478 billion by 2033 with a CAGR of 7.1%. Asia Pacific dominated the largest Electronics Manufacturing Services Market share in 2024. Industrial equipment is one of the end-user segments for the Electronics Manufacturing Services market.

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Nortech Systems (NSYS) anticipates several key drivers for future revenue growth over the next two to three years:

1. Recovery in the Aerospace and Defense Sector: Nortech Systems expects its aerospace and defense business to normalize and regain momentum in the second half of 2025. This sector has experienced delays due to product transfer approvals following the consolidation of facilities, but management is optimistic about its return to normal operations, which should contribute to increased order volume.
2. Advancements in Fiber Optic Technology and R&D Innovation: The company is focused on engineering expertise and product innovation, particularly in fiber optic technology. New offerings like Expanded Beam Xtreme (EBX) and Active Optical Xtreme (AOX) are designed to enhance product performance with improved speed and reliability, supporting continued sales momentum.
3. Improved Manufacturing Efficiencies and Plant Utilization: Nortech Systems is prioritizing driving efficiencies in its manufacturing processes, especially for programs transferred to new facilities. Strategic operational alignments and facility optimization, such as consolidating the Blue Earth facility into the Bemidji factory, are expected to lead to sustainable long-term growth by enhancing productivity and cost management.
4. Strengthening Customer Backlog and New Business Opportunities: Management has noted a stabilization in customer backlog and a robust pipeline of new customer quote opportunities. The company’s business development team is actively pursuing new business, with a significant increase in customer backlog noted in Q2 2025, indicating potential future revenue expansion.
5. Strategic Near-shoring and North American Footprint: Nortech Systems leverages its North American manufacturing footprint, including its Monterrey, Mexico maquiladora operations and Minnesota facilities, to align with market demand. This strategy is considered a key growth driver, particularly in navigating potential tariff uncertainties related to operations in China and Mexico.

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Share Repurchases

• In June 2024, Nortech Systems' Board of Directors approved a common stock buy-back plan of $100,000.
• The company's Q4 2024 financial results (reported March 2025) indicated share repurchases of $100,000.

Share Issuance

• For the fiscal year ended December 31, 2023, 163,744 treasury stock equivalent stock options were included in the computation of diluted net income per common share. For 2022, this figure was 205,907.
• Stock option exercises resulted in cash of $38,000 in 2024 and $159,000 in 2023, as reported in the Q4 2024 results.

Capital Expenditures

• Nortech Systems has a Capital Expenditures value of 0.61.
• The company plans to satisfy its capital expenditures for the next twelve months through existing financing arrangements, anticipated cash flows from operations, and cash on hand.
• Capital expenditures are focused on strategic initiatives such as closing the Blue Earth, Minnesota production facility by the end of 2024 and shifting manufacturing to its Bemidji, Minnesota location, and investing in research and development, particularly in fiber optics technologies, AI, and connectivity solutions. These facility optimization activities are expected to result in at least $1.6 million in annual savings starting in 2025.