NN Inc. at Noble Capital Conference: Strategic Repositioning Unveiled

On Thursday, 05 June 2025, NN Inc. (NASDAQ:NNBR) presented at the Noble Capital Markets Emerging Growth Virtual Equity Conference. The company outlined its strategic repositioning and transformation efforts, highlighting both challenges and opportunities. Despite a downturn in core markets, NN Inc. is optimistic about future growth driven by innovation in the automotive sector and a robust new business pipeline.

Key Takeaways

• NN Inc. is launching new programs expected to generate over $50 million in peak annual sales.
• The company anticipates net sales of $430 million to $460 million this year.
• New business pipeline is approximately $750 million, nearly double the company’s size.
• Adjusted EBITDA is projected to increase by 15% compared to fiscal year 2024.
• Focus areas include the automotive, stamping, power, and medical sectors.

Financial Results

NN Inc. reported current net sales of $449 million, with projections for the year ranging from $430 million to $460 million, depending on automotive demand. The adjusted EBITDA stands at $48 million, representing 10.6% of net sales, with an anticipated increase to between $53 million and $63 million for the year.

In terms of new business wins, the company has achieved $160 million over the past two years and expects to secure an additional $60 million to $70 million this year. Free cash flow is projected to be between $14 million and $16 million.

Operational Updates

NN Inc. operates 24 facilities across six countries and holds a 49% stake in a joint venture in China. The workforce has been reduced by 650 employees, or 20% of the total, over the past two years. Capacity utilization varies by region, with Asia operating continuously while other regions have significant unused capacity, overall estimated at about 50%.

Future Outlook

The company plans to focus on producing complex, hard-to-make products to boost gross profit. NN Inc. is also pursuing opportunities in the stamping, power, and medical sectors, with a particular emphasis on expanding its medical segment, including robotic surgery equipment.

China remains a key market, benefiting from the growing automotive industry and supply chain shifts from Europe. The company aims to maintain a self-funding and profitable operation in China.

Q&A Highlights

During the Q&A session, NN Inc. addressed several topics:

• Tariffs have no direct impact on the business model as metal costs are passed through and materials are sourced and converted regionally.
• Accelerated timelines for new programs, particularly in the auto sector, are putting pressure on internal tooling and prototyping.
• The medical segment is currently generating over $15 million in revenue, with plans for expansion.
• The company expects a $12.5 million payment from the CARES Act in the near future.

For a detailed account, readers can refer to the full transcript provided below.

Full transcript - Noble Capital Markets Emerging Growth Virtual Equity Conference:

Joe Gomes, Managing Director and Senior Analyst, Noble Capital Markets: Afternoon, and welcome to the Noble Capital Markets Virtual Equity Conference. I am Joe Gomes, managing director and senior analyst at Noble Capital. Today, I have the pleasure of introducing NN Inc. Following the presentation, we’ll have some time for q and a. NN is a precision component manufacturer with extensive experience in machining, stamping, and precious metal plating.

With us today from the company is Harold Beavis, president and CEO Chris Bonert, CFO, and Tim French, COO. The floor is yours, gentlemen.

Harold Beavis, President and CEO, NN Inc.: Thank you. Thank you, Joe, and we’re happy to be here with Noble. They’re important partner for us. And we have a quick presentation here. We’ll advance forward looking statements.

I’m sure everyone saw those quickly. Wanna start off right with an investment thesis for you. The first point is that we’re progressing through a strong repositioning and transformation program with an experienced team. Chris, Tim, and I have all done transformations before and we’ve done them together. We’ve worked together before.

And where we are is we’ve delivered seven quarters of result. We’re just now have our first batch of new programs that we’re launching that are on our watch that we’ve prospected for, secured the wins and launching now. So in that sense, we’re at an inflection point of having our first batch of new business that’s launching at the company. It’s worth over $50,000,000 at peak annual sales and $30,000,000 this year. There’s more to come this year.

We’re still underway with right sizing our cost structure. We’re really happy with our new business program, and they’re starting to come online right now. The second point is our core markets are mainly in North America. About 70% of our volume is United States. And our market’s in a slight low.

Our our base plan was to grow about 3% on the base business. Instead of that, it’s down about 3%. It’s really due to some of the new presidential administration things that are happening that ultimately we hope will benefit us. There it’s meant to as a domestic manufacturer, but it’s a it’s a low right now and there are supply chains that are thinning out. It will rebound.

We’re we’re recommitting to our guidance which we’ve given before because the decline in the base business is not so much that we can’t offset it with extra cost and therefore we are. The third point is about 48% of our business is tied into automotive globally, and there’s a tremendous amount of innovation underway, and it’s really playing into our hand as a custom metal part maker. There’s a lot of custom metal parts on vehicles, steering, braking, autonomous driving, vehicle control sensors, safety, fuel efficiency. We’re involved in all those, and we make parts that go into the systems, the metal parts. And we have a large existing pipeline about 750,000,000, which is almost it’s approaching twice the size of our company.

And it’s given us some new optionality that we haven’t had before to cherry pick and replace the use of capacity we have. We have alternate use of capacity. So we’re going through repositioning. We’re at an inflection point. Our core markets are in a little bit of a low.

They will rebound. And then the point three is that we’re in a very innovative environment, and we’re getting a lot of looks at new business. So that’s playing into our strategy. Next, Tim’s gonna give an overview of the company.

Tim French, COO, NN Inc.: So NN is a developer and manufacturer of high precision parts, machined and stamped parts. We’re a strategic partner to global customers, and we service them regionally, across around the world. It’s a global manufacturing footprint. 24 facilities, six countries, and 49% ownership in China in a joint venture, which I’ll talk about in a second. We do focus in multiple business areas, powertrain and safety critical, mission critical components that go into automotive, commercial vehicles, and other industrial applications.

Electrical and electronic components, we have products that work in the grid and smart meter area, industrial components. We are ITAR certified, so we do, work within the defense segment. And we have facilities that are thirteen four eighty five and FDA certified, so we’re also, emerging in the medical component pace. We do have strong gross profit and adjusted EBITDA. Cash flow advancement is improving, and we have grown our adjusted EBITDA and deleveraged the company.

And we’re on track, to deleverage again in 2025. We’ve achieved a hundred and 60,000,000 in new business wins in the first two years, which is is a record for the company. And year to date, we are on track to hit our 2025 goal with a year to date, achievement of 25,600,000.0. Our our strong cost out program is helping drive the EBITDA improvement, and we’re continuing to rightsize our global, s g and a platform as well. Continuous improvement programs are also improving our margins across the company.

Net sales, 449,000,000. Adjusted EBITDA, 48,000,000, but 10.6%. We have over 1,100 customers and 3,000 employees globally, plus approximately 700 in the JV that we have in China. We’re about 48%, a little less than half the company is automotive. The next largest segment would be industrial followed by electrical and and then other.

Next slide. With over 2,000 machine centers globally, our footprint is perfectly set up to effectively service customers in region for region. Each of the regions has centers of excellence, engineering and design capability, prototype capability, and, are basically self sufficient within servicing the customers in those regions. Our largest region is North America. It’s about 65% of the revenue and about 40% of the employees.

The next largest segment would be Asia, which is about 15% of the revenue, and that’s comprised of two wholly owned manufacturing facilities and a joint venture that, as said previously, has about 700 employees and does about a hundred and 20,000,000 in revenue. We also have operations in South America and Europe. And, again, we’re we’re perfectly set up in region for region. Gives us close proximity to the and, gives us that that close feel. Next slide.

The two divisions we report under are power solutions. The first one is power solutions. It’s a high precision stamped and assembled metal products. We also do electroplating. The end markets, as I said before, are electric grid, industrial vehicles, medical connector parts, electric shielding, which is also new to us.

You’ll find us in smart meters, circuit breakers, sensors, transformers, switch gears, defense and surgical and instrumentation. On the bottom of the slide, you can see some of the parts, the connector shields that go into electric wiring harnesses, disconnects on smart meters, and then we also have medical and surgical instruments. We are capable of in house rapid prototyping, and we do the design and build of our own dies. We have tool and die makers internal, and we do manufacture our own dies. Our footprint and power is predominantly in The US, but we do have operations in Mexico and China as well.

Mobile solution is Submicron precision machined metal products for really mission critical applications. We’re single digit PPM, world class quality, and we’re, focused in the industrial and vehicle market. We have products that go into ICE, BV, HEV, and we’re we focus in those areas that are really mission critical, electric power steering, braking, electric motors, gas and diesel fuel systems, emission control for heavy duty dosing. You can see some of the examples of the parts from, precision worm gears, inlet fittings, electric motors, and shafts. Every part is customer designed.

The key to success is best manufacturing. We don’t sell complete assemblies in this area. We’re usually a component, a component that goes into a larger assembly like a steering assembly or braking assembly. Our footprint is US, Brazil, France, Poland, and China. So, again, very, very well set up globally, to service customers in region, for region, which in this current market environment is is perfect as far as being cost effective.

With that, I’ll turn it back over to Harold.

Harold Beavis, President and CEO, NN Inc.: Thanks. I just wanted to say a couple points on our new business program. We when we came in two years ago, we did not have the benefit of incoming new wins from the prior management team. So we really, in the last two years, have been winning business and preparing for the launch of that business, and we’re really in vintage year one. This year is the first set that’s on our watch, and it’s worked out pretty well.

We don’t have a big sales force. We have 23 people, each one of them backed up with an engineer. We have a big pipeline of opportunities, about 700 programs. They’re about a million dollars each. It mirrors our revenue base.

We’re launching this year a 20 programs for the full year. And at the same time, we’ve already won another 57 programs. We have around 300 programs to launch already and we continue to build towards that. And where we’re headed is pursuing more and more complicated, complex, hard to make products and and continue to get our gross profit up. And it’s given us optionality around the use of our assets, which we haven’t had before.

In the past, the the prior management had to kind of hang on to what they had. Now we have alternate uses for our machines, and we’re starting to cherry pick that given that we’ve won additional business. So this part of the company is is running very well. On the next page, we’ve given out before sub goals. This might be too much information.

If you don’t know our company well, I just want you to know that we have tied this out strategically. We were we’re we’re chasing very specific areas that fit our assets and our know how and that are accretive, and it’s working out fine. We’re not behind anywhere. I wouldn’t say we’re ahead anywhere either. We’re just we’re kind of on track and marching to our plan.

This little low we’ve had in the market and these tariffs that have been happening hasn’t caused us to get off of our game plan here at all. We’re marching right through it with our game plan, and so far this year, we’re ahead of plan on new wins. And lastly, we get questions about China from some people. China is where the auto making world is moving to. It’s one of the reasons why the current presidential administration in The US is trying to protect The US market because it’s under siege.

A brand new car from BYD, who’s a top customer of ours in China, is about $10,000. It’s about the same price as a high end treadmill in The US. So it’s unbelievable the the value differentials that are happening. And we’re right in the middle of it, we’re benefiting from it. And you can see on the right hand that we’re we’re it’s very profitable and we’re only going into this market with our best mix.

At the same time, there’s a big dynamic that’s really kicked up which is Europe is moving its supply chain to China. And we’re also participating in very, very large movements of part making from Europe to China. So we have our hands full with a very good profitable business in China that self funds itself and sends back cash to Chris so that he can pay down our our loans here that are US domiciled. So this is a big part of our company that’s that we’re right in the middle of.

Chris Bonert, CFO, NN Inc.: Just taking a look at our our forward guidance for the year. We put net sales in around $4.30 to $4.60 range really dependent on the demand in the in the auto space primarily. We’re roughly flat to prior year on a pro form a basis. We have taken quite a few transformation actions by selling off a piece of business last year as well as carving out lower margin business that we rationalized. Our adjusted EBITDA range for the year is 53 to 63,000,000.

At the midpoint, it’s about 15% versus fiscal twenty four on a pro form a basis. We are rationalizing quite a bit of s g and a and taking a lot of cost out. We’ve taken two plants out over the last twelve months to improve the EBITDA margins. Harold just talked about new business wins. This year, the range is 60 to 70,000,000.

These are looking for foundational wins in stamping, power, and medical this year. We won a lot of new business in auto in the past couple years, and we’re looking to diversify those wins in the coming year. Our q one twenty five results have been on pace to achieve our full year guidance. Free cash flow, range for this year, 14 to 16,000,000. This reflects our improved margins as well as the, CARES Act, which we expect to receive, very soon.

And along with the free cash flow, we expect to take our net debt and leverage down throughout the year, for the full year. We came in at just over three turns, in first quarter. Thank you. That, Joe, I’ll turn it back over to you.

Joe Gomes, Managing Director and Senior Analyst, Noble Capital Markets: Thanks, Chris, Harold, and Tim. Great, insightful presentation. Let let’s turn to some questions. We’re we’re gonna start with the the the one that’s on on everybody’s mind. You you’ve touched on it briefly, but may you give us a little more color is tariffs.

And and what could be the tariff threat directly on NN’s business, and maybe a little bit about, you know, what could, indirect impacts be?

Harold Beavis, President and CEO, NN Inc.: Good question. So metal is a is a pass through item for us in all of our agreements. There it’s indexed and adjusted quarterly. We buy our materials in region and convert them in region and sell them in region. So we do not import products into The United States and we don’t export products out of The United States.

So the big tariff thing is it’s US centric, so nothing happened for instance with on tariffs between Europe and China. Just still free trade if you will. So we’re not exposed to direct impacts on that. If we’re indirectly exposed in that the uncertainty that’s been caused amongst the end vehicle makers and end equipment makers has caused a a tightening of supply chain. So we feel the overall demand and GDP impact of this, but it it’s not a direct business model impact.

And it but we believe that the tariff regime by the current administration as well as other administration changes, those uncertainties have caused us to suffer a few percent kinda decline in revenue, which we think will rebound.

Joe Gomes, Managing Director and Senior Analyst, Noble Capital Markets: K. Great. Thanks for that. And you talk about the large number of new programs that you expect to start up this year. Can you talk about the timing of that?

Have you seen any delays for any of these programs, possibly due to some of the tariff stuff that’s going out there? You know, when do you expect these new program revenues to be reflected, in the top line?

Harold Beavis, President and CEO, NN Inc.: Overall, we we’ve seen a we’ve seen a couple pushes, Joe, but we’ve seen more accelerations. So the especially in the auto space, so the pressure really is on us to are you done yet? And the the end goal is to get ramped up with a new feature that’s gonna go into a vehicle or a piece of equipment and or robotic surgery equipment. You know, we’re a tier two part maker, So our our parts are going into basically new equipment. Our our new business development approach has been and is to participate in the next generation of innovation at our targeted customers rather than a share shift of existing business.

So we’re tethered to new products. And so we’re primarily seeing an acceleration acceleration requests upon us. What does that mean? It puts stress onto our tool rooms because we make our own tools, and it and it causes us to have to fit in trial runs and prototypes and push production out. So it’s causing Tim some stress in the plants.

We expense these costs. We’re not capitalizing. We’re just expensing them as we go. But the the real pressure we have, Joe, is is to accelerate a bit. We’re not ready to change our guidance for the year on sales, which is what that would entail.

On Chris’s chart, he said that the record high silver and gold prices might inflate our revenue, and it looks like that is going to happen. But we haven’t reflected that in our sales guidance. It’s a pass through item anyway. But right now, I don’t think we’re gonna net benefit or be harmed by the by that dynamic, Joe.

Joe Gomes, Managing Director and Senior Analyst, Noble Capital Markets: Okay. I’ll take a couple here from the from the audience. First one is, what is your capacity utilization? And if you were to fill your capacity, how much incremental revenue would that generate?

Harold Beavis, President and CEO, NN Inc.: Well, that’s one for Tim.

Tim French, COO, NN Inc.: That that’s a loaded question that varies from region to region. For example, in in our in our Asia region, we’re running twenty four seven today. So, we ultimately will be looking at some form of an expansion over there. We do have some some footprint left that we can we can occupy. But when you get into the other regions, we’re not running full twenty four seven, in those facilities.

In some cases, we’re only running one shift, which means we have significant capacity available on existing equipment as well as existing footprint within the facilities. So, I I couldn’t put a number, a global number on utilization because it does range from from, region to region, but it’s significant.

Harold Beavis, President and CEO, NN Inc.: Okay. We think we’re running around 50%, Joe.

Tim French, COO, NN Inc.: Yeah. Yeah. Give or take. Yeah.

Joe Gomes, Managing Director and Senior Analyst, Noble Capital Markets: Okay. Fair enough. I wanna combine a couple of questions here because they’re both talking about the the medical segment. One would like to know, you know, how much revenue is medical currently generating, and at what level would you report that as a separate segment? And another question is, what are the big opportunities in medical, and when could those materialize?

Harold Beavis, President and CEO, NN Inc.: Yep. So the reentry into medical for us has been deliberate. We really are focused on orthopedics and equipment, equipment and implants. And on equipment side, pins and structural members. Those are the strength members.

And we had to get recertified. We had to hire salespeople who had relationships. We had to hire engineering manager that knew how to quote, knew the lingo. We had to update our certifications. Tim ordered some specialized equipment, and we had to build a pipeline, you know, when we first day one, we had no pipeline.

So the the business, you know, was sub 15,000,000. And we’re now over 15,000,000, and we’ve secured new wins that will launch this year. They’re little ish. Our first big win in medical is around the corner. It’s one we’ve been working on for a little over a year.

We don’t wanna say who it’s with, but we’re when we when we do win it, we’re definitely gonna talk about it. And it’s robotic surgery equipment, and it’s a reusable parts and robotic surgeries. And it’s right down our alley. It’s made on a certain type of machine, a citizen now thirty two nine access lathe to get geeky about it. But we have we have 95 of those machines in house that we make other types of parts with, and now we’re buying them set up to to make medical parts.

So we’re really happy with where we are with that, Joe. We could go faster if we spent more money, but our our cash flow game plan has been to pretty much spend the cash that we’re generating, and we and we’ve we’ve done that, and the main use of our free cash flow has been severance. We’ve gotten rid of 650 people, 20% of our workforce when we walked in the door, and we’ve hired back about a hundred in China, and we closed two plants. So the free cash flow we’ve been generating when we’re spending it, and we’ve we’ve been spending the normal amount on on CapEx, which is around $1,516,000,000. So we’ve been running kind of free cash flow neutral.

We could have gone a little faster in certain areas, but it would have made us be negative free cash flow, and we didn’t wanna be that aggressive. So we’re at a turning point with our EBITDA and with the severance the the mega severance behind us where we’re gonna be free cash flow positive going forward. So we now are at the at the point where we could turn it up in medical. What would we do? Hire more salespeople and and generate you know, put more lines in the water, if you will, to get the pipeline going faster, and that’s one thing we’re talking about right now.

Joe Gomes, Managing Director and Senior Analyst, Noble Capital Markets: Okay. Thank you for that. And I don’t wanna leave Chris out of the the question. So, Chris, here’s here’s two for you. One is, you know, how much is the CARES Act payment you expect?

And the second one is, you know, what’s your thinking on how best to address the preferred equity? You know, kind of what creative options are at your disposable, help remove the overhang presented by the pref?

Chris Bonert, CFO, NN Inc.: Yeah. Yeah. Great question, Joe. So the the CARES Act has been a long, long process for the business, and we’re we’re finally at the tail end waiting on final approval. It’s it’s about 12 and a half million dollars, and and we’re expecting that sometime this year, hopefully, in the next quarter.

With regards to the pref, you know, we took care of the ABL extending that in December. We extended the term loan five years in April. So the pref is really the last you know, the third leg of the capital structure that we need to redo. And, you know, we’re looking at a lot of different options. I think, you know, the business is is on a trajectory to grow, and so we’re hoping that, you know, that will give us some more optionality on dealing with the pref.

You know, right now, it’s it’s around 12 and a half percent. So it is, you know, a little bit less expensive pref in the grand scheme of things, but, you know, we’re hopeful that we’ll have some optionality on that in the in the coming quarters.

Joe Gomes, Managing Director and Senior Analyst, Noble Capital Markets: Great. Well, Harold, Tim, and Chris, we’ve come to the end of our allotted time. We covered a lot of ground today and got significant insight into what NN does, its markets, and opportunities. We appreciate you taking the time to participate in our conference, and we wish you and the company the best in the future. Thanks again.

Chris Bonert, CFO, NN Inc.: Thank you, John.

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