NN(US:NNBR)2024-08-11 12:35Financial Data and Key Metrics - Net sales for Q2 2024 were $123 million, down 1.8% YoY due to unfavorable FX impacts and rationalization of low-margin business [12][13] - Adjusted EBITDA grew 28% YoY to $13.4 million, with a margin of 10.9%, up 250 basis points YoY [12][14] - Trailing 12-month adjusted EBITDA reached $49.2 million, up 29% YoY [12] - GAAP net loss per share improved to $0.12 from $0.38 YoY, while adjusted net loss per share was $0.02 [16] Business Line Performance - Power Solutions: Sales increased 4.3% YoY to $50.2 million, driven by pricing actions and inflation pass-throughs Adjusted EBITDA grew 46% YoY to $9.5 million, with margins improving from 13.5% to 18.8% [17][18] - Mobile Solutions: Sales declined 5.6% YoY to $72.9 million due to exiting unprofitable business and FX impacts Adjusted EBITDA increased to $8.2 million, up $0.7 million YoY [19][20] - Medical Business: Current revenue is $17 million, with a new target of $100 million in revenue, up from the initial $50 million goal [25][26] Market Performance - Global Automotive: Flat to modest growth expected, with demand rebalancing across BEV, hybrid, and ICE drivetrains [9] - General Industrial: Forecasted to grow 3%, with steady demand [9] - Power Grid and Electrical Control: Modest global growth expected, with steady demand in circuit breaker products [9] - Commercial Vehicles: Forecasted decline, but minimal impact due to exposure to unique applications [9] - Medical Market: Orthopedic sales expected to grow 3-4% YoY through 2026 [10] Strategic Direction and Industry Competition - The company is executing a transformation plan focused on operational improvements, cost reductions, and strategic growth in high-margin markets like medical, electrical, and high-end automotive [6][7] - NN is targeting new product development and innovation, particularly in medical, electrical, and automotive markets [7] - The company is expanding its medical business, with a focus on precision manufacturing and capacity expansion [25][26] Management Commentary on Operating Environment and Future Outlook - Management reaffirmed full-year 2024 guidance: net sales of $465-485 million, adjusted EBITDA of $47-51 million, free cash flow of $8-12 million, and new business wins of $55-70 million [28] - The company expects to benefit from healthy industrial, electrical, and medical end markets, despite variability in the global automotive market [8][9] - NN is focused on refinancing its debt to lower the cost of capital and support future growth [23] Other Key Information - The company has secured $34.3 million in new business awards year-to-date, with a pipeline of over $600 million [7] - NN has added new leadership, including a new CFO and General Counsel, to support its transformation and growth [11] - The company is investing in new equipment and capacity to support its medical business, with plans to expand capabilities and meet growing demand [26][27] Q&A Session Summary Question: Progress on fixing underperforming plants - Nine out of seven underperforming plants are now profitable, with all performing better than the prior year [31] - Revenue from these plants is expected to be slightly less than $100 million due to shedding unprofitable business [32] Question: Strength of the China joint venture - The JV is performing well, driven by a strong hybrid vehicle market and cost-out programs [33] - The outlook for the JV remains positive, with continued strength expected through 2024 [34] Question: Strategic refinancing details - The company expects to secure lower interest rates than the current 14% PIK rate, with a focus on reducing the cost of capital and potentially paying down preferred debt [35][36] Question: Pricing actions and impact - Pricing actions were minimal, with some contractual price reductions in the Mobile Solutions segment and inflation pass-throughs in the Power Solutions segment [41][42] Question: Medical business growth and CapEx needs - The company plans to invest in new equipment and capacity to support its medical business, with a goal of reaching $100 million in revenue over the next 2.5-3 years [45][46][49] Question: Progress on reducing legacy loss contracts - The company has made significant progress in reducing legacy loss contracts, with most underperforming business now at or near breakeven [50][51]