Financial Data and Key Metrics Changes - For Q4 2024, net sales were $106.5 million, reflecting a 5% decline compared to Q4 2023, impacted by the sale of the Lubbock facility and strategic volume rationalization [39][42] - Adjusted operating income improved to $2.4 million, a $3.8 million increase from the prior year, while adjusted EBITDA grew to $12.1 million, marking a 21% increase year-over-year [40][41] - For the full year, net sales totaled $464.3 million, a 5% decline compared to 2023, but adjusted operating income rose 65% to $5.1 million, and adjusted EBITDA increased by 12% to $48.3 million [42][44] Business Line Data and Key Metrics Changes - Power Solutions segment reported Q4 net sales of $39.2 million, down from $43.4 million in the prior year, with adjusted EBITDA at $5.6 million [47][48] - Mobile Solutions segment saw Q4 revenue of $67.4 million, a slight decline of over 2%, but adjusted EBITDA increased to $10 million, reflecting improved cost structure and productivity [50][51] - For the full year, Mobile Solutions revenue decreased to $283.9 million, primarily due to strategic exits from unprofitable business, but adjusted EBITDA grew to $35.6 million, up more than 19% [52][53] Market Data and Key Metrics Changes - The company is experiencing strong demand in the electrical grid market, driven by infrastructure investments and the need for upgrades due to EV adoption [111] - The medical components segment aims to grow to $50 million organically, currently at $20 million, with a $25 million pipeline [75][76] Company Strategy and Development Direction - The company has initiated a five-year transformation plan focusing on sales growth, cost reduction, and balance sheet improvement, with a goal of achieving $65 million in new business wins annually [9][14] - The strategy includes optimizing operational footprint, reducing costs by 3% annually, and leveraging existing assets to enhance profitability [18][19] - The company is also focusing on reshoring initiatives, with 70 new business win programs launching in 2025 [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the volatility in global markets and the potential impact of tariffs but remains committed to the transformation plan [59][60] - The outlook for 2025 projects net sales between $450 million and $480 million, with adjusted EBITDA ranging from $53 million to $63 million [58] Other Important Information - The company has closed two underperforming plants and is in the process of closing another, with a focus on improving operational performance and customer relationships [29][32] - The company has successfully reduced past due backlogs, leading to improved customer ratings and new business wins [118][121] Q&A Session Summary Question: Update on the turnaround of the Group of Seven plant - Management highlighted improvements in capacity and customer relationships, with expectations to increase EBITDA margins to 10% [66][69] Question: Insights on medical and electrical components businesses - The medical segment is on track to reach $50 million, with a focus on securing new business wins [75][76] Question: Impact of Class 8 truck orders and tariffs - Management clarified that their business is not significantly tied to Class 8 trucks, focusing instead on work trucks [86][89] Question: Long-term gross margin goal - Management indicated that achieving a 20% gross margin will require onboarding accretive business and optimizing operational structures [94][99] Question: Revenue trends in Power Solutions - Management expects an up year in Power Solutions, driven by strong demand in the electrical grid market [110][112] Question: On-time delivery metrics - Management noted significant reductions in past due backlogs, which have improved customer ratings and facilitated new business wins [117][121] Question: Breakdown of JV products staying in China versus exports - Management confirmed that parts produced in their JV are increasingly being exported to markets outside the US [124][126] Question: New business wins and gross margin targets - New business wins are being written above the 20% gross margin target, with a focus on selective opportunities [132][136]
NN(NNBR) - 2024 Q4 - Earnings Call Transcript