NN INC Q1 FY2025 earnings call

• Market Demand and New Business: Business uncertainty in the quarter led to lighter sales at some customers, especially in global automotive (about 40% of sales). Successful new business program with 120 programs won ramping up this year worth $55 million in annualized sales, including a big win in industrial products.
• Operations: Increased cost reduction efforts, with staff reductions in Q1 to bolster profit rates. Progress on cost-out and new product launch plans, on track for $15 million cost reduction plan.
• Transformation: Enterprise transformation roughly 70% complete. Enhanced leadership, isolating underperforming parts, margin expansion, and work on China operations to help domestic debt profile. About $55 million in new business launching now and likely another $100 million in 2026.

Power Solution Segment

• Net sales for the quarter: $43.5 million, down from $48.2 million in the prior year period, primarily due to the impact of the Lubbock facility and unfavorable foreign exchange translation. On a pro forma basis, excluding Lubbock's contribution, first quarter net sales increased $1.5 million or 4%.
• Adjusted EBITDA: $6.3 million, declined $1.5 million versus last year's first quarter, driven by the non-recurrence of Lubbock's contribution and unfavorable mix.

Mobile Solution Segment

• Net sales for the first quarter: $62.2 million, compared to $73.1 million last year. Impacted by rationalized business, lower automotive volumes, and unfavorable foreign exchange. On a pro forma basis, down $3.1 million or 5% from last year's first quarter.
• Adjusted EBITDA: $8.1 million, down $0.5 million from last year's first quarter, due to lower volumes and foreign exchange impacts. Adjusted EBITDA margins increased to 13% due to cost-out actions and sales mix re-profiling

• Reiterate full-year guidance for EBITDA and new business awards.
• Initiate free cash flow guidance at $14 million to $16 million.
• Expect net sales between $430 million to $460 million for 2025 due to economic uncertainties.
• Adjusted EBITDA range remains $53 million to $63 million, with cost-out program to offset impact of lower net sales.
• New business wins remain in the range of $60 million to $70 million

• Business uncertainty including impacts from tariffs, pandemics, military conflicts, etc.
• Foreign exchange rate fluctuations.
• Supply chain constraints.
• Economic conditions in the industrial sector affecting financial performance

Q: Please go ahead on the tariff-related RFQs.

A: Biggest two material streams of tariff-related activity are reshoring from Canada to US and European supply moving to China. US opportunities are from Canada reshoring to US and China to US, fast-paced and large, with some needing equipment. Europe to China activity is about moving metal parts from Europe to China to be cost-neutral to tariffs, involving 50% new capital and 50% reuse of existing capital Q: Talk about the timing of $55 million of new business wins expected to be seen this year.

A: Immediate win programs have a three-to-six-month ramp-up lag. A big portion of the $55 million new business will impact the second half of the year, about half Q: Is the $15 million cost savings expected to be evenly distributed throughout the year?

A: A lot of it is evenly distributed, with a little bit of backend loading but mostly even throughout the year Q: Does the free cash flow guidance include the CARES Act?

A: Yes, the free cash flow guidance includes the CARES Act, which is about $12.3 million to $12.4 million in that range Q: What are trends in the April, early May timeframe compared to expectations three months ago?

A: Initial start to the quarter has been stronger than forecast, with broad-based strength across several plants, making management optimistic about their comments and guidance