NN INC Q3 FY2024 earnings call

• North America Mobile Business: Initiated plant closure and cost reductions; goal is 10% adjusted EBITDA by 2025, current action puts it over 10%.
• China Operations: Record sales and profits; capacity up 19% Y/Y; working with Top Tier 1 customers.
• New Business Wins: Over $100M of new wins in last 21 months; October also had new wins; 2025 budgeting underway.
• Refinancing: Focused on refinancing ABL and term loan; expects expanded flexibility; process underway.
• Transformation Plan: Five major elements: new leadership (60% progress), fixing unprofitable areas (plants improved from -$8.4M EBITDA last year to $0.8M this year), expanding margins (40% along), deleverage/refinance debt, fixing sales engine.
• Markets: North America mobile slow; China strong; general industrial (power solutions) growing; medical (orthopedic) doing fine; commercial vehicles soft but outlook positive; housing construction weaker but grid management/smart grid strong.
• Organic Growth: Focused on electrical, medical, stamp products; turnaround of underperforming plants key; improved customer service reduced expedited behaviors.
• New Product: Rear wheel steering innovation in China, working with top providers; benefits in safety, braking, etc.

Power Solutions Segment

• Revenue in Q3 2024: $42.9 million vs $45.5 million prior year. On pro forma basis excluding Lubbock sale, quarterly revenue increased by $3 million or 7.5%.
• New business wins in Q3: $3.4 million. Pipeline ~$230 million.
• Adjusted EBITDA margins: Faced near-term headwinds from mix but YTD margin improved 200 basis points.

Mobile Solutions Segment

• New business awards: Over $50 million in past year, $11.5 million in Q3 2024.
• China sales growth: 19% Y/Y.
• Sales in Q3 2024: $70.7 million vs $74.4 million prior year pro forma.
• Adjusted EBITDA in Q3 2024: $8.9 million, down $0.9 million Y/Y pro forma.

• Maintaining 2024 outlook; expect to continue winning new business; cash flow investment in new programs; cost initiatives and footprint rationalizations to improve results.
• Refinancing expected to provide expanded operational and financial flexibility.
• Goal for North America mobile business to be 10% adjusted EBITDA by 2025, on track with current actions.

• Forward-looking statements subject to risks and uncertainties outside company's control.
• Refinancing process still underway, not yet consummated.
• Market slowdown in North America mobile business; unfavorable mix in Power Solutions initially.
• Interest rate environment, global economic challenges, U.S. elections impact refinancing and business operations.

Q: Gross margins in Q3 below expectations, cause?

A: Due to mix in Power Solutions, which has corrected.

Q: Revenue growth in electrical market, drivers?

A: Strong general industrial market, rebuilds and updates, key customers driving demand.

Q: Medical segment revenue run rate, capacity build?

A: First dedicated capacity received, second arriving soon; medical business running well.

Q: 10% adjusted EBITDA goal for North America mobile, timeline?

A: Early 2025 roll-up, plant closures underway, rationalizing unprofitable business.

Q: New business wins, difference from past?

A: Pursuing new products/innovation, not takeover business; new business has higher margins.

Q: Refinancing, preferred stock?

A: Focused on ABL and term loan first, pref may be second tier.

Q: China growth in slowing market?

A: China winning in vehicle export market, benefiting from government incentives, nearing capacity for production.