Good day, ladies and gentlemen, and welcome to the Q3 2021 Nortech Systems Inc. Earnings Conference Call. All lines have been placed on a listen-only mode and the floor will be open for questions and comments following the presentation. [Operator instructions] At this time, it is my pleasure to turn the floor over to your host, Chris Jones. Sir, the floor is yours.

Thank you and good afternoon and welcome to Nortech Systems third quarter 2021 conference call. I'm Chris Jones, Senior Vice President and CFO and with me is our President and CEO, Jay Miller. Jay will begin today's call with a brief introduction and then I'll review Nortech's Q3 financial results before turning it back over to Jay for his comments on the quarter. And at the end, we'll open it up for questions. Before we continue, please note that statements made during this call and Q&A session may be forward looking regarding expected revenue, earnings, future plans, opportunities and other company expectations. These estimates, plans and other forward-looking statements involve unknown and known risks and uncertainties that may cause actual results to differ materially from those expressed or implied on this call. These risks, including those that are detailed in our most recent annual report and Form 10-K may be amended or supplemented. The statements made during this conference call are based upon information owned in Nortech as of the date and time of this call, and we assume no obligation to update the information in today's call. You can find Nortech's complete Safe Harbor statements and our SEC filings. And with that, I will turn it over to Jay for his opening comments.

Thank you, Chris. I'd like to begin the call today by recognizing some people who are very important in Nortech's past and future success. First and foremost, it's critical to say thank you to our frontline workforce. They are the key people in the plant to making mission-critical products and parts for our medical, military and industrial customers. They've been working overtime for most of Q2 and Q3 2021 to scale up production and I greatly appreciate their tireless efforts during these extremely challenging circumstances. I'm very proud of everyone in the Nortech facilities in Bemidji, Blue Earth, Mankato, Maple Grove and Mankato, Minnesota, as well as our people in Monterey, Mexico and Suzhou, China. Thanks to our customers for their confidence in us. Our records $79 million backlog in September is a testament to their trust that we will continue to do everything possible to deliver them quality products on time. We take this responsibility very seriously and we work hard every day to take great care of our customers. Thanks to our suppliers for their resourcefulness and hard work in overcoming these unprecedented global -- unprecedented global supply chain challenges. It's a team effort and we sincerely appreciate their partnership. I also want to thank our board of directors for their constant support during a very difficult 22 months since Nortech first encountered COVID 19 in China in January 2020. Our board never wavered from the guiding principle that the health and safety of our frontline workers was our highest priority. Finally, I want to thank all of our shareholders for being patient with us as we worked hard to fix some of Nortech's fundamentals while battling COVID 19. Q3 and Q4 of 2020, and Q1 of 2021 were rough quarters, but we're very proud of our Q2 and our Q3 '21 results. Rest assured Nortech is significantly stronger now than we were in 2020. And our future has never been brighter. Now we'll turn it over to Chris to review the Q3 financials.

All right, thanks, Jay. Also, in the spirit of saying thank you, I want to recognize that today is Veterans Day 11/11, and I'm a former member of the US Navy. So today is very meaningful to me personally. And it's also meaningful that I work here at Nortech Systems with manufacturers parts that literally are mission critical, the people who are in the frontlines of our core markets. So our medical customers, our industrial customers, and our aerospace and defense customers. So I also want to say thank you to all of them on Veterans Day. Right? Turning to revenue. I think sequentially is the best way to look at Nortech's results in 2021 and in the first quarter, as Jay mentioned, that was a rough quarter at $22 million. And it was a low point of demand in this fiscal year for us. There was a COVID 19 downturn. We recovered in the second quarter to $30.2 million and now we just finished our third quarter at $29.5 million. And that compares year over year to $26.4 million in the third quarter of 2020. So that's a 12 -- almost a 12% year over year increase in revenue. We do expect to continue that growth -- quarter on quarter growth in Q4 and throughout each quarter of 2022. Now I also want to highlight three non-recurring items that occurred in Q3 2021. First, we applied for the employer retention credit, and that's for qualified wages paid in the first and second quarters of 2021. And we expect to receive approximately $5.2 million in Q4 or in 2022. PRC was recorded as a reduction of payroll and benefit costs of 4.7 of the reduction going to cost of goods and the remaining $500,000 of that $5.2 million to SG&A.…

Thanks again, Chris. Overall, we're very pleased with the steady improvements we're making on many fronts. As with all global manufacturers, we are battling components shortages in many areas; chips, sensors, connectors, cables, power supplies etcetera. Lead times are long and delivery dates can be unreliable. Our operations team have been working aggressively to overcome these challenges. At the same time, our teams are building new supply chain capabilities to ensure we are getting stronger every day to scale our plants to meet future demand. We take great pride in the fact that we have such strong supplier relationships. We're a growth company, and every day we're focused on finding innovative ways, new ways to improve our ability to deliver high quality products on time to meet growing demand, grow revenue and improve profitability. Speaking of growth and future demand, our backlog and bookings are both at record levels in Q3 and that's a trend we see continue in Q4. September 30, our backlog was $79 million an increase of $33 million or 72% increase versus September of 2020. As I mentioned earlier, that rising backlog represents an encouraging vote of competence from our customers that bodes well for growth throughout 2022. In addition to building stronger supply chain capabilities, I'm also very enthusiastic about the innovative new technologies Nortech has been developing. We are pivoting our engineering talent towards R&D investments and initiatives to develop customized solutions for our customers’ most challenging wire and cable interconnect problems. Our engineers love challenging problems and building powered smart cables that can leverage critical digital data represents a different chain [ph] and capability that Nortech is developing that will help our customers compete better and stay on the cutting edge of new digital data opportunities in 2023 and beyond. Our team is passionate about R&D and they are inspired about developing new technologies. We're confident this will enable Nortech to grow top line revenue, expand margins, improve free cash flow and create lasting shareholder value. With that. I'll conclude our prepared remarks this afternoon, and we'll open it up for questions.

Thank you very much. Thanks everybody. Thank you very much for taking the time to listen to us. And we look forward to our first quarter 2021 conference call. Thank you.

Thank you. This concludes today's conference call. We thank you for your participation. You may disconnect your lines at this time and have a great day.