NN, Inc. Q2 FY2025 earnings call

• Improved gross margins, with adjusted gross margins close to 20% (19.5%). - Gained $32.7 million in new business year-to-date, on pace for annual goal of $65 million. - Portfolio balance: 39% automotive, 61% non-automotive. - Transformational progress with closure of Dowagiac and Juarez facilities, reducing staffing by over 600 (20%), while adding talent in growth areas. - Adjusted EBITDA margins expanded, with year-to-date margins trending at over 11%, on track for 13%-14% goal. - Bolstered Power Solutions sales team, strengthening new business pipeline for industrial stampings.

Power Solutions: Net sales for the quarter were $44.6 million, down from $50.2 million in the prior year period, primarily due to the sale of Lubbock operations in 2024, lower volumes, and unfavorable foreign exchange effects. Adjusted EBITDA was $9.1 million, a decline from $9.5 million in the prior year. On a pro forma basis, net sales increased 2.3% and adjusted EBITDA grew 5.8%. Mobile Solutions: Net sales for the second quarter were $63.4 million compared to $72.9 million in the prior year's second quarter. Adjusted EBITDA was $8.6 million, up from $8.2 million in the prior year. Overall, 39% of sales was in automotive and 61% non-automotive.

• Reiterated guidance for net sales in the range of $430 million to $460 million, adjusted EBITDA $53 million to $63 million (leaning toward lower end). - New business wins expected to be $60 million to $70 million. - Free cash flow projected at approximately $14 million to $16 million. - Planning an Investor Day in December 2025.

• Automotive industry turmoil globally, affecting sales. - Tariffs, vehicle affordability, high interest rates, and fading EV incentives creating uncertainty. - Foreign exchange rate fluctuations impacting financial results. - Macroeconomic conditions and industrial sector uncertainties affecting performance.

Q: Could you remind us again kind of the incremental margin that, that group of wins has over your base?

A: For new business wins, some are priced to win with 15% EBITDA, others with equipment charges and 25% ROI floor. Overall, accretive by 3-4 points on EBITDA.

Q: What are the key drivers to make that lower end of the revenue guidance?

A: Expect base business to perform consistently, benefiting from new business launches and accumulation of launch programs not being pushed out.

Q: Can you go into some more specifics regarding prior performance in on-time delivery and what you're achieving now?

A: Early on had red scorecards with customers, but focused over 18 months to reduce backlog, increase on-time delivery, now have green scorecards with all customers as preferred supplier.

Q: Is there a specific time you expect to get this tax refund?

A: Got a letter from IRS, expect refund in next few weeks, with first return of $6 million imminent.

Q: Can you provide a little more color on the M&A program?

A: Actively pursuing acquisitions, looking for specific types to advance strategy, focused on refinancing preferred stock with lower leverage, with several active processes underway.