[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for NN, Inc., including statements of operations, balance sheets, cash flows, and changes in stockholders' equity, along with detailed notes explaining the company's business, accounting policies, segment information, and specific financial line items for the periods ended June 30, 2025 and 2024 [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) This statement details the company's revenues, expenses, and net income or loss over specific periods Consolidated Statements of Operations and Comprehensive Income (Loss) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $107,921 | $122,992 | $213,609 | $244,190 | | Cost of sales | $89,699 | $101,257 | $181,345 | $202,343 | | Selling, general, and administrative expense | $12,095 | $13,511 | $23,265 | $26,859 | | Depreciation and amortization | $8,918 | $11,761 | $17,692 | $24,308 | | Loss from operations | $(1,464) | $(2,147) | $(6,253) | $(6,930) | | Interest expense | $5,657 | $5,873 | $10,851 | $11,239 | | Loss on extinguishment of debt | $3,007 | — | $3,007 | — | | Net loss | $(8,102) | $(2,203) | $(14,787) | $(14,740) | | Basic and diluted net loss per share | $(0.26) | $(0.12) | $(0.48) | $(0.46) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's assets, liabilities, and equity at specific points in time Consolidated Balance Sheets | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total current assets | $171,979 | $167,562 | | Total assets | $460,760 | $456,893 | | Total current liabilities | $89,153 | $83,912 | | Total liabilities | $298,702 | $288,874 | | Total stockholders' equity | $59,540 | $74,522 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(4,041) | $(569) | | Net cash used in investing activities | $(7,179) | $(8,815) | | Net cash provided by financing activities | $1,563 | $1,569 | | Net change in cash and cash equivalents | $(8,586) | $(8,157) | | Cash and cash equivalents at end of period | $9,542 | $13,746 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This statement outlines changes in equity components, including net loss, dividends, and other comprehensive income - **Total stockholders' equity** decreased from **$74,522 thousand** at December 31, 2024, to **$59,540 thousand** at June 30, 2025, primarily due to **net loss** and dividends accrued for preferred stock, partially offset by other comprehensive income[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the financial statements [Note 1. Interim Financial Statements](index=10&type=section&id=Note%201.%20Interim%20Financial%20Statements) This note describes the company's business, operations, and significant accounting policies for interim reporting - **NN, Inc.** is a diversified industrial company manufacturing high-precision components globally, operating **24 facilities** across North America, South America, Europe, and China as of June 30, 2025[26](index=26&type=chunk) - The company adopted ASU 2023-07 (Segment Reporting) for the year ended December 31, 2024, and plans to adopt ASU 2023-09 (Income Taxes) in its 2025 Form 10-K. ASU 2024-03 (Expense Disaggregation) is effective for fiscal years beginning after December 15, 2026, with impact yet to be determined[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The Mobile Solutions plant in Dowagiac, Michigan, ceased production and its land and building, with a **net book value of $1.4 million**, are classified as held for sale as of June 30, 2025[33](index=33&type=chunk) [Note 2. Segment Information](index=11&type=section&id=Note%202.%20Segment%20Information) This note provides financial data and operational details for the company's reportable business segments - **NN, Inc.** operates two reportable segments: Mobile Solutions (automotive, general industrial, medical) and Power Solutions (electrical, general industrial, automotive, medical), plus a Corporate category for unallocated costs[34](index=34&type=chunk)[37](index=37&type=chunk) Segment Sales and Income (Loss) from Operations (Three Months Ended June 30) | Segment (in thousands) | 2025 Sales | 2024 Sales | 2025 Income (Loss) from Operations | 2024 Income (Loss) from Operations | | :--------------------- | :--------- | :--------- | :--------------------------------- | :--------------------------------- | | Mobile Solutions | $63,391 | $72,855 | $(1,110) | $(1,630) | | Power Solutions | $44,641 | $50,151 | $5,782 | $5,320 | | Corporate and Eliminations | $(111) | $(14) | $(6,136) | $(5,837) | | Total | $107,921 | $122,992 | $(1,464) | $(2,147) | Segment Sales and Income (Loss) from Operations (Six Months Ended June 30) | Segment (in thousands) | 2025 Sales | 2024 Sales | 2025 Income (Loss) from Operations | 2024 Income (Loss) from Operations | | :--------------------- | :--------- | :--------- | :--------------------------------- | :--------------------------------- | | Mobile Solutions | $125,635 | $145,915 | $(3,797) | $(3,773) | | Power Solutions | $88,149 | $98,389 | $8,805 | $9,299 | | Corporate and Eliminations | $(175) | $(114) | $(11,261) | $(12,456) | | Total | $213,609 | $244,190 | $(6,253) | $(6,930) | Segment Capital Expenditures and Depreciation & Amortization (Six Months Ended June 30) | Metric (in thousands) | 2025 Capital Expenditures | 2024 Capital Expenditures | 2025 Depreciation & Amortization | 2024 Depreciation & Amortization | | :-------------------- | :------------------------ | :------------------------ | :------------------------------- | :------------------------------- | | Mobile Solutions | $5,531 | $6,182 | $10,180 | $16,119 | | Power Solutions | $1,212 | $2,036 | $6,718 | $7,362 | | Corporate | $887 | $834 | $794 | $827 | | Total | $7,630 | $9,052 | $17,692 | $24,308 | Total Assets by Reportable Segment | Segment (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Mobile Solutions | $297,796 | $294,204 | | Power Solutions | $131,057 | $124,460 | | Corporate | $31,907 | $38,229 | | Total | $460,760 | $456,893 | [Note 3. Revenue from Contracts with Customers](index=13&type=section&id=Note%203.%20Revenue%20from%20Contracts%20with%20Customers) This note details the company's revenue recognition policies and disaggregation of net sales by industry - Revenue is recognized when control of goods or services is transferred to the customer. The company's products serve automotive, commercial vehicle, general industrial, and residential/commercial electrical industries[44](index=44&type=chunk)[45](index=45&type=chunk) Net Sales by Customer Industry (Three Months Ended June 30) | Industry (in thousands) | 2025 Sales | 2024 Sales | | :---------------------- | :--------- | :--------- | | Automotive and Commercial Vehicle | $65,612 | $58,283 | | General Industrial | $12,210 | $31,203 | | Residential/Commercial Electrical | $18,444 | $21,486 | | Other | $11,655 | $12,020 | | Total net sales | $107,921 | $122,992 | Net Sales by Customer Industry (Six Months Ended June 30) | Industry (in thousands) | 2025 Sales | 2024 Sales | | :---------------------- | :--------- | :--------- | | Automotive and Commercial Vehicle | $125,736 | $115,514 | | General Industrial | $26,192 | $63,054 | | Residential/Commercial Electrical | $38,976 | $41,718 | | Other | $22,705 | $23,904 | | Total net sales | $213,609 | $244,190 | - A single customer in the Mobile Solutions segment accounted for **13% of consolidated revenue** during the six months ended June 30, 2025[49](index=49&type=chunk) - **Deferred revenue** increased from **$0.2 million** at December 31, 2024, to **$0.5 million** at June 30, 2025. Revenue recognized from prior period **deferred revenue** was **$0.1 million** for the six months ended June 30, 2025[50](index=50&type=chunk) [Note 4. Accounts Receivable](index=14&type=section&id=Note%204.%20Accounts%20Receivable) This note provides information on accounts receivable, including the allowance for credit losses and customer concentrations Changes in Allowance for Credit Losses (Six Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | | :-------------------- | :--- | :--- | | Balance at beginning of year | $1,515 | $1,241 | | Additions | $134 | $582 | | Write-offs and other | $(86) | $(148) | | Currency impact | $37 | $(15) | | Balance at end of period | $1,600 | $1,660 | - Fees related to the sale of receivables decreased from **$0.6 million** in the six months ended June 30, 2024, to **$0.3 million** in the same period of 2025[53](index=53&type=chunk) - One customer represented **12% of consolidated accounts receivable** as of June 30, 2025, primarily related to the Mobile Solutions segment[54](index=54&type=chunk) [Note 5. Inventories](index=14&type=section&id=Note%205.%20Inventories) This note presents the breakdown of inventory components, including raw materials, work in process, and finished goods Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Raw materials | $23,058 | $20,664 | | Work in process | $21,194 | $22,139 | | Finished goods | $18,541 | $19,074 | | Total inventories | $62,793 | $61,877 | [Note 6. Intangible Assets](index=15&type=section&id=Note%206.%20Intangible%20Assets) This note details the carrying value and amortization of the company's intangible assets by segment Changes in Intangible Assets, Net (in thousands) | Segment | Balance as of December 31, 2024 | Amortization | Balance as of June 30, 2025 | | :-------------- | :------------------------------ | :----------- | :-------------------------- | | Mobile Solutions | $15,649 | $(1,677) | $13,972 | | Power Solutions | $28,761 | $(5,134) | $23,627 | | Total | $44,410 | $(6,811) | $37,599 | - No impairment charges were recognized for **intangible assets** during the six months ended June 30, 2025 and 2024[57](index=57&type=chunk) [Note 7. Investment in Joint Venture](index=15&type=section&id=Note%207.%20Investment%20in%20Joint%20Venture) This note describes the company's equity method investment in a joint venture and changes in its carrying value - **NN, Inc.** holds a **49% equity method investment** in Wuxi Weifu Autocam Precision Machinery Company, Ltd. (the 'JV') in Wuxi, China[58](index=58&type=chunk) Changes in Investment in Joint Venture (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2024 | $34,971 | | Share of earnings | $4,620 | | Foreign currency translation gain | $721 | | Balance as of June 30, 2025 | $40,312 | [Note 8. Debt](index=15&type=section&id=Note%208.%20Debt) This note provides details on the company's debt facilities, including term loans, ABL, and financing obligations Debt Facilities Outstanding (in thousands) | Debt Facility | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Term loan facilities | $118,901 | $114,397 | | ABL Facility | $5,000 | $5,400 | | Financing obligations from sale-leaseback transactions | $30,493 | $24,496 | | International loans | $9,140 | $8,485 | | Unamortized debt issuance costs and discount | $(3,907) | $(4,148) | | Total debt | $159,627 | $148,630 | - On April 16, 2025, **NN, Inc.** entered into a new **$128.0 million** senior secured Term Loan Facility, consisting of a **$118.0 million** funded term loan and **$10.0 million** in delayed draw commitments, maturing on April 16, 2030. Proceeds were used to repay the previous 2021 Term Loan Facility[63](index=63&type=chunk) - The Term Loans currently bear interest at Adjusted Term SOFR plus **9.25%** (subject to a **2.00% floor**) or Base Rate plus **8.25%**. A portion of interest can be paid in-kind (PIK Election) before April 16, 2027, with an applicable margin increase of **0.50%**. At June 30, 2025, the rate was **14.18%**[64](index=64&type=chunk)[66](index=66&type=chunk) - The company was in compliance with the financial covenants of the Term Loan Facility and ABL Facility as of June 30, 2025[69](index=69&type=chunk)[77](index=77&type=chunk) - In 2024 and 2025, **NN, Inc.** completed sale-leaseback transactions for properties and equipment, generating **$21.2 million** and **$10.6 million** in proceeds, respectively. These are recognized as financing obligations with weighted average effective interest rates of **9.500%** for properties and **9.170%** for equipment[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 9. Preferred Stock](index=18&type=section&id=Note%209.%20Preferred%20Stock) This note describes the terms, classification, and carrying value of the company's Series D Perpetual Preferred Stock - The Series D Perpetual Preferred Stock, issued in March 2021, has an initial **liquidation preference of $1,000 per share** and earns cash dividends at **10.0% per year**, or **12.0%** in-kind if not paid in cash. Rates increase by **2.5%** annually starting March 22, 2026[82](index=82&type=chunk) - The Series D Preferred Stock is classified as mezzanine equity due to potential redemption upon a change of control. Its **carrying value** was **$102.5 million** as of June 30, 2025, including **$55.8 million** of accumulated unpaid and deemed dividends[83](index=83&type=chunk)[85](index=85&type=chunk) Changes in Series D Preferred Stock Carrying Value (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2024 | $93,497 | | Accrual of in-kind dividends | $6,199 | | Amortization | $2,822 | | Balance as of June 30, 2025 | $102,518 | [Note 10. Leases](index=19&type=section&id=Note%2010.%20Leases) This note provides supplemental cash flow information and balances related to the company's operating and finance leases Supplemental Cash Flow Information Related to Leases (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :----------------------------------------- | :---- | :---- | | Operating cash flows used in operating leases | $4,315 | $4,731 | | Operating cash flows used in finance leases | $256 | $162 | | Financing cash flows used in finance leases | $1,960 | $1,105 | | Right-of-use assets obtained in exchange for new operating lease liabilities | — | $692 | | Right-of-use assets obtained in exchange for new finance lease liabilities | $276 | $645 | - **Sublease income** remained consistent at **$1.9 million** for both the six months ended June 30, 2025 and 2024[88](index=88&type=chunk) Finance Lease-Related Assets and Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Finance lease assets | $17,174 | $16,579 | | Finance lease current liabilities | $3,671 | $3,565 | | Finance lease non-current liabilities | $4,133 | $5,469 | | Total finance lease liabilities | $7,804 | $9,034 | [Note 11. Commitments and Contingencies](index=19&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) This note outlines the company's legal proceedings, tax matters, and other contingent liabilities - The company is involved in a Brazil ICMS tax matter, disputing tax credits claimed on intermediary materials. While anticipating a favorable resolution, the **cumulative potential liability** for remaining open lawsuits is estimated to be less than **$2.0 million**, inclusive of interest and penalties[91](index=91&type=chunk)[92](index=92&type=chunk) - **NN, Inc.** expects indemnification from former Autocam shareholders for any losses related to the Brazil ICMS tax matter, mitigating material impact on financial results[93](index=93&type=chunk) - Other legal proceedings are considered ordinary and routine, and management believes they will not have a material adverse effect on the company's business, financial condition, results of operations, or cash flows[94](index=94&type=chunk) [Note 12. Income Taxes](index=20&type=section&id=Note%2012.%20Income%20Taxes) This note details the company's effective tax rates and factors influencing income tax expense or benefit Effective Tax Rates | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Effective Tax Rate | (8.1)% | 4.7% | (12.0)% | (1.5)% | - The **effective tax rate** for the three and six months ended June 30, 2025, was unfavorably impacted by tax accruals on non-permanently reinvested unremitted foreign earnings and limitations on tax benefits for losses in certain jurisdictions[95](index=95&type=chunk) - The company is assessing the impact of the newly signed H.R.1, the One Big Beautiful Bill Act (OBBBA), on its consolidated financial statements, with effects to be reflected in the period of enactment and future periods[96](index=96&type=chunk) [Note 13. Net Loss Per Common Share](index=20&type=section&id=Note%2013.%20Net%20Loss%20Per%20Common%20Share) This note presents the calculation of basic and diluted net loss per common share, including antidilutive securities Basic and Diluted Net Loss Per Common Share | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net loss | $(8,102) | $(2,203) | $(14,787) | $(14,740) | | Adjustment for preferred stock dividends | $(4,614) | $(3,843) | $(9,021) | $(7,513) | | Numerator for basic and diluted net loss per common share | $(12,716) | $(6,046) | $(23,808) | $(22,253) | | Shares used to calculate basic and diluted net loss per share | 49,433 | 48,839 | 49,255 | 48,281 | | Basic and diluted net loss per common share | $(0.26) | $(0.12) | $(0.48) | $(0.46) | Antidilutive Securities Excluded from EPS Calculation (in thousands) | Security Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Stock options | 134 | 207 | 151 | 232 | | Warrants | 1,500 | 1,500 | 1,500 | 1,500 | | Performance share units | 820 | 820 | 820 | 783 | | Total antidilutive securities | 2,454 | 2,527 | 2,471 | 2,515 | [Note 14. Share-Based Compensation](index=21&type=section&id=Note%2014.%20Share-Based%20Compensation) This note details the share-based compensation expense recognized and information on restricted stock and performance share units Share-Based Compensation Expense (in thousands) | Award Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Restricted stock | $470 | $532 | $1,020 | $1,119 | | Performance share units | $331 | $158 | $620 | $417 | | Total | $801 | $690 | $1,640 | $1,536 | - During the six months ended June 30, 2025, **664,000 restricted stock shares** were granted, vesting pro-rata over three years for employees and one year for non-executive directors. The **total grant date fair value** of vested restricted stock was **$1.9 million**[106](index=106&type=chunk) - **231,000 Performance Share Units (PSUs)** were granted to executive officers during the six months ended June 30, 2025, vesting based on relative total shareholder return against a specified index over a three-year performance period ending December 31, 2027[108](index=108&type=chunk) [Note 15. Accumulated Other Comprehensive Income](index=22&type=section&id=Note%2015.%20Accumulated%20Other%20Comprehensive%20Income) This note provides a breakdown of the components of accumulated other comprehensive income or loss Components of Accumulated Other Comprehensive Income (Loss) (in thousands) | Metric | Balance as of March 31, 2025 | Other comprehensive income (loss) before reclassifications | Net other comprehensive income (loss) | Balance as of June 30, 2025 | | :-------------------------- | :--------------------------- | :--------------------------------------------------------- | :------------------------------------ | :-------------------------- | | Foreign Currency Translation | $(45,042) | $4,454 | $4,454 | $(40,588) | | Interest rate swap | — | — | — | — | | Total | $(45,042) | $4,454 | $4,454 | $(40,588) | - **Accumulated other comprehensive loss** improved from **$(48,167) thousand** at December 31, 2024, to **$(40,588) thousand** at June 30, 2025, primarily due to foreign currency translation gains[111](index=111&type=chunk) [Note 16. Fair Value Measurements](index=22&type=section&id=Note%2016.%20Fair%20Value%20Measurements) This note describes the fair value hierarchy and measurements for the company's financial instruments and derivatives - Certain features of preferred stock and long-term debt are bifurcated and accounted for as embedded derivatives[113](index=113&type=chunk) - As of June 30, 2025, **1.5 million** of the 2023 Warrants (exercisable at **$0.01 per share**) remain outstanding. All 2021 Warrants were exercised in Q1 2024, resulting in **1,896,000 common shares** issued. 2019 Warrants (exercisable at **$11.03 per share**) for **1.5 million shares** remain outstanding[114](index=114&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) Changes in Embedded Derivatives Liability (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2024 | $5,192 | | Change in fair value | $(2,036) | | Balance as of June 30, 2025 | $3,156 | - The **fair value** of the 2023 and 2021 Warrants is determined using Level 1 observable market prices, while the 2019 Warrants use a Level 3 valuation model with unobservable inputs[120](index=120&type=chunk)[121](index=121&type=chunk) - The 2021 Interest Rate Swap, terminated in Q1 2023, generated an interest benefit of **$0.4 million** and **$0.9 million** for the three and six months ended June 30, 2024, respectively, recognized as a reduction to interest expense[122](index=122&type=chunk)[123](index=123&type=chunk) - The **fair value** of the company's debt was **$166.1 million** (**carrying amount $159.6 million**) as of June 30, 2025, and **$147.8 million** (**carrying amount $148.6 million**) as of December 31, 2024, calculated using Level 3 inputs[124](index=124&type=chunk) [Note 17. Plant Optimization Activities](index=24&type=section&id=Note%2017.%20Plant%20Optimization%20Activities) This note details the costs and expected benefits associated with the company's facility closures and restructuring efforts - **NN, Inc.** substantially completed facility closures and organizational changes by June 30, 2025, including ceasing production at Mobile Solutions plants in Juarez, Mexico, and Dowagiac, Michigan, to reduce costs and improve efficiency[126](index=126&type=chunk)[127](index=127&type=chunk) - **Estimated total charges** for plant optimization are **$13.6 million**, with cumulative costs of **$13.4 million** recognized as of June 30, 2025. **Annual benefits** of approximately **$5.4 million** are expected once fully implemented[127](index=127&type=chunk) Summary of Plant Optimization Costs Incurred and Accrued (in thousands) | Category | Balance as of December 31, 2024 | Restructuring costs (6M 2025) | Amounts paid (6M 2025) | Balance as of June 30, 2025 | | :------------------------------------- | :------------------------------ | :---------------------------- | :--------------------- | :-------------------------- | | Severance and employee related | $2,686 | $380 | $(2,195) | $871 | | Impairment of property and equipment | — | — | — | — | | Costs associated with exit or disposal activities | — | $401 | $(401) | — | | Total | $2,686 | $781 | $(2,596) | $871 | - A Voluntary Early Retirement Program (ERIP) resulted in **$0.4 million** recognized during the six months ended June 30, 2025, with an **estimated total cost of $1.6 million**[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on NN, Inc.'s financial performance, condition, and liquidity [Forward-Looking Statements](index=25&type=section&id=Forward-Looking%20Statements) This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements subject to risks and uncertainties, including general economic conditions, impacts of pandemics, tariffs, competitive influences, raw material costs, geopolitical instability, inflation, supply chain disruptions, dependence on major customers, and debt restrictions[132](index=132&type=chunk) [Overview](index=25&type=section&id=Overview) This section provides a high-level description of NN, Inc.'s business as a diversified industrial company - **NN, Inc.** is a diversified industrial company specializing in advanced engineering and materials science to design and manufacture high-precision components and assemblies for various global end markets[134](index=134&type=chunk) [Factors That May Influence Results of Operations](index=25&type=section&id=Factors%20That%20May%20Influence%20Results%20of%20Operations) This section discusses macroeconomic, geopolitical, and operational factors impacting the company's financial results - Macroeconomic and geopolitical events, including global trade negotiations, tariffs, inflationary cost pressures on raw materials, elevated interest rates, supply chain disruptions, and military conflicts, continue to influence the company's results[136](index=136&type=chunk) - The company is undertaking footprint optimization by closing two manufacturing facilities (Juarez, Mexico, and Dowagiac, Michigan) due to volume rationalization to reduce costs and improve operational efficiency, with further consolidation actions possible[138](index=138&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section analyzes the company's consolidated and segment-level financial performance over comparative periods [Three Months Ended June 30, 2025 compared to the Three Months Ended June 30, 2024](index=26&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares the company's financial results for the three months ended June 30, 2025 and 2024 Consolidated Results (Three Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | $ Change | % Change | | :-------------------- | :-------- | :-------- | :-------- | :------- | | Net sales | $107,921 | $122,992 | $(15,071) | (12.3)% | | Cost of sales | $89,699 | $101,257 | $(11,558) | (11.4)% | | SG&A expense | $12,095 | $13,511 | $(1,416) | (10.5)% | | Depreciation & amortization | $8,918 | $11,761 | $(2,843) | (24.2)% | | Loss from operations | $(1,464) | $(2,147) | $683 | 31.8% | | Interest expense | $5,657 | $5,873 | $(216) | (3.7)% | | Loss on extinguishment of debt | $3,007 | — | $3,007 | N/A | | Other income, net | $(619) | $(3,461) | $2,842 | (82.1)% | | Net loss | $(8,102) | $(2,203) | $(5,899) | 267.8% | - **Net sales** decreased by **$15.1 million** (**12.3%**) due to rationalization of underperforming businesses/plants, the sale of Lubbock operations, lower volumes, and unfavorable foreign exchange effects, partially offset by new business launches and higher precious metals pass-through pricing[139](index=139&type=chunk) - **Depreciation and amortization** decreased by **$2.8 million** due to historical purchase accounting step-up basis becoming fully depreciated in the second half of 2024[141](index=141&type=chunk) - A **$3.0 million loss on extinguishment of debt** was recognized due to the termination of the 2021 Term Loan Facility[143](index=143&type=chunk) - Mobile Solutions **net sales** decreased by **$9.5 million** (**13.0%**), while Power Solutions **net sales** decreased by **$5.5 million** (**11.0%**). Mobile Solutions' **loss from operations** decreased by **$0.5 million**, and Power Solutions' **income from operations** increased by **$0.5 million**[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) [Six Months Ended June 30, 2025 compared to the Six Months Ended June 30, 2024](index=28&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares the company's financial results for the six months ended June 30, 2025 and 2024 Consolidated Results (Six Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | $ Change | % Change | | :-------------------- | :-------- | :-------- | :-------- | :------- | | Net sales | $213,609 | $244,190 | $(30,581) | (12.5)% | | Cost of sales | $181,345 | $202,343 | $(20,998) | (10.4)% | | SG&A expense | $23,265 | $26,859 | $(3,594) | (13.4)% | | Depreciation & amortization | $17,692 | $24,308 | $(6,616) | (27.2)% | | Loss from operations | $(6,253) | $(6,930) | $677 | 9.8% | | Interest expense | $10,851 | $11,239 | $(388) | (3.5)% | | Loss on extinguishment of debt | $3,007 | — | $3,007 | N/A | | Other expense (income), net | $(2,788) | $692 | $(3,480) | (502.9)% | | Net loss | $(14,787) | $(14,740) | $(47) | 0.3% | - **Net sales** decreased by **$30.6 million** (**12.5%**) due to rationalized business/plants, sale of Lubbock operations, lower volumes, and unfavorable foreign exchange effects (**$3.5 million**), partially offset by new business launches and higher precious metals pass-through pricing[151](index=151&type=chunk) - Other expense (income), net, favorably changed by **$3.5 million**, primarily due to noncash derivative mark-to-market gains and favorable foreign exchange effects[156](index=156&type=chunk) - Share of **net income from joint venture** increased by **$0.2 million** due to higher sales and increased margin, despite higher fixed costs, depreciation, and interest expense[159](index=159&type=chunk) - Mobile Solutions **net sales** decreased by **$20.3 million** (**13.9%**), with **loss from operations** remaining unchanged. Power Solutions **net sales** decreased by **$10.2 million** (**10.4%**), and **income from operations** decreased by **$0.5 million**[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) [Changes in Financial Condition from December 31, 2024 to June 30, 2025](index=29&type=section&id=Changes%20in%20Financial%20Condition%20from%20December%2031%2C%202024%20to%20June%2030%2C%202025) This section analyzes changes in the company's balance sheet, cash flows, and liquidity position - **Total assets** increased by **$3.9 million**, driven by increases in accounts receivable, property, plant and equipment, and **investment in a joint venture**, partially offset by decreased **intangible assets**[163](index=163&type=chunk) - **Total liabilities** increased by **$9.8 million**, primarily due to increases in accounts payable, other current liabilities, and long-term debt, partially offset by a decrease in accrued salaries, wages, and benefits[164](index=164&type=chunk) - **Working capital** decreased by **$0.8 million**, mainly due to increased accounts receivable and decreased accrued salaries, wages, and benefits, partially offset by increases in accounts payable and other current liabilities[165](index=165&type=chunk) - **Cash used in operations** increased to **$4.0 million** (from **$0.6 million** in prior year) due to lower gross margin and increased **working capital**. **Cash used in investing activities** decreased by **$1.6 million** due to lower capital expenditures. **Cash provided by financing activities** remained stable at **$1.6 million**[166](index=166&type=chunk)[167](index=167&type=chunk) - The company manages liquidity through credit facilities, sale-leaseback transactions, **working capital** management, accounts receivable sales programs, and expects a **$12.6 million tax refund** from the IRS in 2025[168](index=168&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) [Seasonality and Fluctuation in Quarterly Results](index=31&type=section&id=Seasonality%20and%20Fluctuation%20in%20Quarterly%20Results) This section discusses the impact of seasonal trends and other factors on the company's quarterly financial performance - While certain businesses experience seasonal trends (e.g., weaker European sales in summer, stronger OEM sales around new product launches), the company as a whole is not materially impacted by seasonality[177](index=177&type=chunk) [Critical Accounting Estimates](index=31&type=section&id=Critical%20Accounting%20Estimates) This section confirms no material changes to the company's significant accounting policies or critical estimates - There have been no material changes to the company's significant accounting policies or **critical accounting estimates** during the six months ended June 30, 2025[178](index=178&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to interest rate and foreign currency risks and their management [Interest Rate Risk](index=31&type=section&id=Interest%20Rate%20Risk) This section details the company's exposure to interest rate fluctuations on its variable-rate debt - The company is exposed to **interest rate risk** due to its variable rate debt, which constitutes a majority of its outstanding indebtedness. A **one-percent increase in one-month SOFR** would result in a **$1.2 million net increase in annualized interest expense** on the Term Loan Facility[180](index=180&type=chunk)[181](index=181&type=chunk) [Foreign Currency Risk](index=31&type=section&id=Foreign%20Currency%20Risk) This section describes the company's exposure to foreign currency exchange rate fluctuations from international operations - **NN, Inc.** faces **foreign currency risk** from operating cash flows, customer invoicing, and intercompany loans denominated in various foreign currencies. The company did not hold any foreign currency derivatives as of June 30, 2025[182](index=182&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and reports on internal control over financial reporting [Disclosure Controls and Procedures](index=31&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures - The Chief Executive Officer and Chief Financial Officer concluded that **NN, Inc.'s disclosure controls and procedures** were effective as of June 30, 2025[183](index=183&type=chunk) [Changes in Internal Control Over Financial Reporting](index=31&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes in the company's internal control over financial reporting - No changes in **internal control over financial reporting** occurred during the fiscal quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's **internal control over financial reporting**[184](index=184&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal and risk factors [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) This section references disclosures regarding the company's legal proceedings, including the Brazil ICMS tax matter - Legal proceedings, including the Brazil ICMS tax matter, are detailed in Note 11 of the Condensed Consolidated Financial Statements[186](index=186&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section updates the company's risk factors, emphasizing the impact of changes in U.S. administrative policy - No material changes to **risk factors** were disclosed, except for an emphasis on the adverse effects of changes in U.S. administrative policy, including tariffs and trade restrictions, especially from countries like Mexico and China[187](index=187&type=chunk) - Uncertainty regarding tariffs and potential trade wars could lead to decreased consumer spending, lower **net sales**, and reduced **operating cash flows**, materially impacting financial statements[188](index=188&type=chunk)[189](index=189&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's purchases of equity securities related to employee share-based awards Issuer Purchases of Equity Securities (Quarter Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | April 1, 2025 to April 30, 2025 | 32,959 | $2.19 | | May 1, 2025 to May 31, 2025 | 131,100 | $1.90 | | June 1, 2025 to June 30, 2025 | 10,981 | $1.95 | | Total | 175,040 | $1.96 | - Shares were withheld to pay for tax obligations upon the vesting of share-based awards granted under the Incentive Plans, which allow for such withholding without specifying a maximum number of shares[191](index=191&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults on senior securities during the reporting period - There were no defaults upon senior securities[192](index=192&type=chunk) [Item 4. Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable to **NN, Inc.**[194](index=194&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) This section confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or executive officers - No directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[195](index=195&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, credit agreements, certifications, and XBRL interactive data files - Exhibits include Restated Certificate of Incorporation, Amended and Restated By-Laws, Term Loan Credit Agreement, First Amendment to Revolving Credit and Security Agreement, Certifications of Principal Executive and Financial Officers, and XBRL Interactive Data Files[196](index=196&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) This section provides the official signatures and dates for the filing of the report - The report was signed on August 6, 2025, by Harold C. Bevis, President, Chief Executive Officer and Director, and Christopher H. Bohnert, Senior Vice President and Chief Financial Officer[198](index=198&type=chunk)

Company Announcement - NN, Inc. will release its second quarter 2025 financial results on August 6, 2025, after market close [1] - A conference call to discuss the results will take place on August 7, 2025, at 9:00 a.m. E.T. [1] - Participants are required to register five to ten minutes prior to the call [1] Webcast Information - The conference call will be webcast live through the NN, Inc. Investor Relations website [2] - Registration for the webcast is available on the company's Investor Relations section [2] - A replay of the call will be accessible on the website until August 8, 2026 [2] Company Overview - NN, Inc. is a global diversified industrial company specializing in high-precision components and assemblies [3] - The company combines advanced engineering and production capabilities with materials science expertise [3] - NN, Inc. is headquartered in Charlotte, North Carolina, with facilities across North America, Europe, South America, and Asia [3]

Core Insights - NN, Inc. has appointed Timothy Erro as the new Vice President and Chief Commercial Officer to lead its global commercial team [1][3] - The company is expanding its new business program due to early successes, with a commitment to increase its overall new business objectives [2][4] Business Performance - NN has achieved approximately $160 million in new business wins since launching its initiative in 2023, primarily in traditional markets and emerging success in electrical and medical end markets [4] - The new business pipeline is robust, exceeding $700 million across all products and targeted growth areas [4] Strategic Goals - The company aims to increase targets and pace for new wins, particularly in electrical and medical markets, and set higher annual award goals [4] - NN plans to strategically expand its product offerings and solutions [4] Leadership Background - Timothy Erro brings over 30 years of experience in electrical and electronic products, having led successful global programs in previous roles [3][6] - Prior to joining NN, Erro held significant positions at Commercial Vehicle Group, Inc., Aptiv, Leoni Wiring Systems, General Motors, and United Technologies Automotive [6] Market Focus - NN is focusing on various markets including on-road commercial vehicles, aerospace and defense platforms, automotive, and medical products [5][6]

Summary of NN Inc. Conference Call Company Overview - **Company Name**: NN Inc. (NNBR) - **Industry**: Precision component manufacturing, focusing on automotive, industrial, and medical applications - **Key Products**: Machined and stamped parts, custom metal parts for automotive and industrial applications, medical components Core Points and Arguments 1. **Transformation and Growth**: NN Inc. is undergoing a significant repositioning and transformation program, with an experienced management team that has successfully executed transformations in the past. The company has delivered seven consecutive quarters of results and is launching new programs worth over $50 million at peak annual sales, with $30 million expected this year [5][4][6]. 2. **Market Conditions**: The core markets are primarily in North America, with about 70% of volume coming from the U.S. The company initially planned for a 3% growth in the base business but is currently experiencing a 3% decline due to external factors, including changes in the presidential administration and supply chain issues. However, a rebound is anticipated [6][7][8]. 3. **Automotive Sector Focus**: Approximately 48% of NN's business is tied to the automotive sector, which is undergoing significant innovation. The company is well-positioned to benefit from this trend, with a large existing pipeline of opportunities valued at around $750 million [8][9]. 4. **Global Manufacturing Footprint**: NN operates 24 facilities across six countries, with a significant presence in North America (65% of revenue) and a joint venture in China. The company is strategically positioned to service customers regionally [10][14][15]. 5. **Financial Performance**: For the year, NN expects net sales in the range of $430 million to $460 million, with adjusted EBITDA projected between $53 million and $63 million. The company is also focused on rationalizing costs and improving EBITDA margins [28][29][30]. 6. **New Business Development**: NN has secured $160 million in new business wins over the past two years, with a strong pipeline of approximately 700 programs. The company is launching 20 new programs this year and has already won an additional 57 programs [12][22][20]. 7. **Medical Segment Growth**: The medical segment has seen growth from sub-$15 million to over $15 million, with new wins expected to launch this year. The company is focusing on orthopedics and robotic surgery equipment [45][47][50]. 8. **Tariff Impact**: NN's business model is not directly impacted by tariffs, as materials are sourced and sold within the same region. However, the uncertainty caused by tariffs has led to a slight decline in revenue, which is expected to rebound [33][34][35]. Additional Important Insights 1. **Capacity Utilization**: The company is currently operating at around 50% capacity utilization, with significant room for growth in various regions [41][43]. 2. **Cash Flow and Debt Management**: NN is on track to improve free cash flow and reduce net debt throughout the year, with expectations of receiving approximately $12.5 million from the CARES Act [30][51][52]. 3. **Strategic Focus**: The management emphasizes a strategic approach to new business development, focusing on complex and high-value products that align with the company's capabilities [22][24][36]. This summary encapsulates the key points discussed during the conference call, highlighting NN Inc.'s current position, market dynamics, and future outlook.

Financial Performance & Outlook - NN achieved net sales of $449 million and an adjusted EBITDA of $48 million, resulting in an adjusted EBITDA margin of 10.6%[9] - The company's 2025 outlook includes net sales between $430 million and $460 million, and adjusted EBITDA between $53 million and $63 million[35] - NN China's sales are $75 million with >20% EBITDA margins, while NN's China JV sales are ~$125 million with >25% EBITDA margins[34] Business Segments & Strategy - Auto sector accounts for 48% of NN's FY2024 net sales, while Industrial, Electrical, and Other sectors account for 25%, 17%, and 10% respectively[11] - NN has secured ~$160 million in new business wins in the first 2 years, with $25.6 million YTD as of May 2025[12] - The company is targeting $65 million in new wins per year as part of its new wins program[31] - NN's prospecting pipeline is approaching 2x the company's size, indicating significant potential for new wins[7] Global Operations - NN has a global manufacturing platform with 24 facilities in 6 countries and a 49% ownership in a China Joint Venture machining plant with more than $120 million in sales annually[12] - Approximately 65% of NN's revenue comes from North America, 10% from South America, 10% from Europe, and 15% from Asia[14] - NN's China operations have won >$50 million in new business and are on track to double in size[34] Growth Initiatives - NN is targeting organic sales growth to $600 million, or $650 million with M&A, by 2028[38] - The company plans to launch 120 programs in 2025 with $55 million in peak annual sales value[38] - NN is pursuing a sales growth & pivot program with a $740+ million overall pipeline[31]

Core Viewpoint - NN, Inc. will present at the Noble Capital Markets Emerging Growth Equity Conference on June 5, 2025, highlighting its position as a global diversified industrial company specializing in high-precision components and assemblies [1][2]. Group 1: Presentation Details - The presentation is scheduled to begin at 3:30 p.m. ET on June 5, 2025, and will be accessible via a webcast for registered investors [2]. - Registrants will receive a link to the live event upon registration, and additional materials will be available on the company's investor section of its website [2]. Group 2: Management Engagement - Executive management will conduct one-on-one and group meetings with investors and analysts who have registered for the conference, providing further engagement opportunities [3]. Group 3: Company Overview - NN, Inc. is headquartered in Charlotte, North Carolina, and operates globally with facilities in North America, Europe, South America, and Asia, focusing on advanced engineering and materials science to manufacture high-precision components [4].

Financial Data and Key Metrics Changes - The company reported flat sequential sales and flat year-over-year sales on a pro forma basis, attributed to a successful new business program despite a softening base business [6][7] - Adjusted gross margins were 16.9%, with a target to reach 19% to 20% over five years [14] - Adjusted EBITDA for the quarter was $10,600,000, with a full-year guidance range of $53,000,000 to $63,000,000 [15][48] - Working capital was $84,800,000, down $4,600,000 year-over-year, representing 19.1% of trailing twelve-month sales [16][36] Business Line Data and Key Metrics Changes - In the Power Solutions segment, net sales were $43,500,000, down from $48,200,000, primarily due to the impact of the Lubbock facility and unfavorable foreign exchange [42] - The Mobile Solutions segment reported net sales of $62,200,000, down from $73,100,000, impacted by rationalized business and lower automotive volumes [45] Market Data and Key Metrics Changes - The automotive market is experiencing a shift towards hybrid vehicles, which is beneficial for the company as it allows for the use of existing assets [57][58] - The company is seeing increased activity in tariff-related RFQs, particularly in reshoring opportunities from Canada and China [53][56] Company Strategy and Development Direction - The company is focusing on a profitable immediate growth strategy (PIGS) to ramp up new business, with 120 programs worth $55,000,000 in annualized sales expected to ramp up this year [8][10] - A significant transformation plan is underway, with 70% completion, focusing on enhancing leadership and addressing underperforming areas [17][18] Management's Comments on Operating Environment and Future Outlook - Management noted that business uncertainty has increased, leading to lighter sales than planned, particularly in global automotive [6][9] - The company is optimistic about both 2025 and long-term goals, with a focus on cost reduction and operational efficiency [12][49] Other Important Information - The company is initiating free cash flow guidance in the range of $14,000,000 to $16,000,000 for the year, reflecting improved margin capture and anticipated proceeds from the CARES Act [48] Q&A Session Summary Question: Can you provide more detail on tariff-related RFQs? - Management indicated that there is significant activity in reshoring opportunities from Canada and China, with a mix of new capital and reuse of existing capital [53][56] Question: How is the automotive market affecting new business opportunities? - The shift towards hybrid vehicles is seen as beneficial, allowing the company to utilize existing assets while also entering new markets for EV components [57][58] Question: Can you elaborate on the $55,000,000 in new business wins? - The timing for these wins is expected to be weighted towards the second half of the year, with a ramp-up period of three to six months for immediate programs [65][66] Question: What about the $15,000,000 cost savings target? - The cost savings are expected to be evenly distributed throughout the year, with some back-end loading [70] Question: Are there any more plant closures expected? - There are two additional plants under evaluation for potential closure, but no firm plans have been established yet [72]

Financial Data and Key Metrics Changes - The company reported net sales of $105.7 million for Q1 2025, a decline of $15.5 million compared to the previous year [42] - Adjusted gross margins were 16.9%, with adjusted EBITDA at $10.6 million, down from $11.3 million year-over-year [15][42] - Adjusted operating income was $2 million, an increase of $2.7 million quarter-on-quarter [15][43] Business Line Data and Key Metrics Changes - In the Power Solutions segment, net sales were $43.5 million, down $4.7 million from the prior year, primarily due to the impact of the Lubbock facility [43] - The Mobile Solutions segment reported net sales of $62.2 million, a decrease of $10.9 million year-over-year, driven by lower automotive volumes and unfavorable foreign exchange impacts [46] Market Data and Key Metrics Changes - The company noted that global automotive sales, which account for about 40% of total sales, experienced a downturn, leading to flat sequential and year-over-year sales [7][8] - The company is seeing a shift in the automotive market towards hybrids, which is beneficial for leveraging existing assets [58] Company Strategy and Development Direction - The company is focusing on a "Profitable Immediate Growth Strategy" (PIGS) to ramp up new business, with 120 programs expected to generate $55 million in annualized sales [9][10] - A significant transformation plan is underway, with 70% completion, aimed at enhancing leadership and addressing underperforming areas [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's outlook for 2025, despite current market uncertainties, and reiterated guidance for EBITDA and new business awards [10][49] - The company is initiating free cash flow guidance of $14 million to $16 million for the year, reflecting improved margin capture and cost reduction efforts [49] Other Important Information - The company has a working capital of $84.8 million, down from the previous year, and aims to further reduce it by $5 million over the next two quarters [16][37] - The company is actively pursuing new business opportunities in the medical sector, with a $40 million pipeline [30] Q&A Session Summary Question: Can you provide more detail on tariff-related RFQs? - Management noted increased activity in reshoring opportunities from Canada and China, primarily in the automotive sector, with a mix of new and existing capital required [54][55] Question: How is the automotive market affecting new business opportunities? - The shift towards hybrids is seen as beneficial, allowing the company to utilize legacy assets effectively while also entering new markets for EV components [58][59] Question: Can you elaborate on the $55 million in new business wins? - The new business is expected to ramp up over the next three to six months, with a significant portion impacting the second half of the year [66][67] Question: What is the status of the $15 million cost savings target? - The cost savings are expected to be evenly distributed throughout the year, with some back-end loading [71] Question: Are there plans for further plant closures? - There are two additional plants under evaluation for potential closure, but no firm plans have been established yet [73] Question: Does the free cash flow guidance include the CARES Act refund? - Yes, the guidance includes approximately $12.3 million from the CARES Act [78]

Financial Data and Key Metrics Changes - The company reported net sales of $105.7 million for Q1 2025, a decline of $15.5 million compared to the same period last year [43] - Adjusted gross margins were 16.9%, with adjusted EBITDA at $10.6 million, down from $11.3 million year-over-year [15][44] - Adjusted operating income was $2 million, an increase of $2.7 million quarter-on-quarter [16][44] - Working capital was $84.8 million, down $4.6 million year-on-year, representing 19.1% of trailing twelve-month sales [17][38] Business Line Data and Key Metrics Changes - In the Power Solutions segment, net sales were $43.5 million, down from $48.2 million, primarily due to the impact of the Lubbock facility and unfavorable foreign exchange [44] - The Mobile Solutions segment reported net sales of $62.2 million, down from $73.1 million, affected by rationalized business and lower automotive volumes [46] - Adjusted EBITDA in the Mobile Solutions segment was $8.1 million, down $500,000 from the previous year [48] Market Data and Key Metrics Changes - The company noted a flat sequential sales performance and flat year-over-year sales on a pro forma basis, attributed to a successful new business program [6][14] - The automotive market is experiencing a shift towards hybrid vehicles, which is seen as beneficial for the company as it allows for a larger available market [60] Company Strategy and Development Direction - The company is focusing on a "Profitable Immediate Growth Strategy" (PIGS) to ramp up immediate business, with 120 programs worth $55 million in annualized sales [7][8] - A significant transformation plan is underway, with approximately 70% completion, aimed at enhancing leadership and addressing underperforming areas [19][21] - The company is optimistic about both 2025 and long-term goals, with a focus on leveraging existing capacity while selectively adding new assets [12][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased business uncertainty and lighter sales in Q1, particularly in the global automotive sector [5] - The company reaffirmed its guidance for adjusted EBITDA in the range of $53 million to $63 million for the full year of 2025, despite current economic uncertainties [50] - Free cash flow guidance was initiated at $14 million to $16 million for the year, reflecting cost reduction actions and improved margin capture [51] Other Important Information - The company has a robust pipeline of new business opportunities, with $740 million in potential projects, indicating strong future growth prospects [29] - The operational team has achieved a 16.1% reduction in total headcount since Q2 2023, contributing to improved adjusted EBITDA per salaried headcount [35][36] Q&A Session Summary Question: Can you provide more detail on tariff-related RFQs? - Management noted increased activity in reshoring opportunities from Canada and China, primarily in the automotive sector, with a mix of new capital and reuse of existing capital [56][59] Question: How is the automotive market changing your new business opportunities? - The shift towards hybrid vehicles is seen as beneficial, allowing the company to utilize legacy assets while entering new markets for EV components [60][61] Question: Can you elaborate on the $55 million in new business wins and the $740 million pipeline? - Immediate ramp-up programs typically have a 3 to 6 month lag before impacting revenue, with a significant portion expected in the second half of the year [66][68] Question: Is the $15 million cost savings expected to be evenly distributed throughout the year? - Most of the cost savings are expected to be evenly distributed, with some back-end loading [72] Question: Are there any more plant closures expected? - There are two additional plants under evaluation for potential closure, but no firm plans have been established yet [73] Question: Does the free cash flow guidance include the CARES Act refund? - Yes, the free cash flow guidance includes approximately $12.4 million from the CARES Act [79]

Financial Performance & Guidance - NN's Q1 2025 net sales were $105.7 million, flat year-over-year on a pro forma basis, but down $15.5 million as reported[14, 40] - Adjusted EBITDA for Q1 2025 was $10.6 million, with an adjusted EBITDA margin of 10.0%, reconfirming FY 2025 guidance of $53-$63 million[14] - The company is lowering its 2025 net sales guidance to $430-$460 million due to GDP uncertainties, but reiterating adjusted EBITDA guidance of $53-$63 million and new business awards guidance of $60-$70 million[12] - NN initiates 2025 guidance for free cash flow at $14 to $16 million[12] Business Transformation & New Business - NN is launching 120 new programs in 2025, expected to add approximately $55 million in peak annual sales[11] - The company's new business program has secured $160 million of new business from January 2023 to May YTD 2025[16, 18, 21] - NN Europe achieved $6.7 million in new wins in Q1 2025, with an estimated total program value of over $50 million[25] - The company's working capital has been reduced by 20%, or $21.6 million, over the last two years, from $106.4 million in Q1 2023 to $84.8 million in Q1 2025[37, 38] Cost Reduction & Operational Efficiency - NN has reduced its global staff by 16%, or 525 people, over two years, with further reductions planned for 2025[29, 33] - The company is implementing a $6.5 million payroll reduction plan in 2025[33] - NN is advancing its organic transition into non-auto areas by leveraging $340 million of installed assets and investing $10-$14 million additional cash capex per year[12]