• Revenue: $113.6 million for the third quarter, a decline of $10.8 million year-over-year.
• Pro Forma Revenue: Down 0.5% or $600,000, excluding adjustments.
• Operating Loss: $3.8 million, an increase of $1.1 million compared to the prior year.
• Adjusted EBITDA: $11.6 million, compared to $14.6 million in the prior year period.
• Power Solutions Revenue: $42.9 million, compared to $45.5 million in the prior year.
• Mobile Solutions Revenue: $70.7 million, down from $74.4 million in the prior year.
• China Operations Sales Growth: 19% year-over-year in the Mobile Solutions segment.
• Leverage Ratio: Declined from 3.9 times in Q2 2023 to just under 3 times in Q3 2024.

• Warning! GuruFocus has detected 4 Warning Signs with NNBR.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NN Inc (NASDAQ:NNBR) is on track to achieve a 10% adjusted EBITDA for its North American mobile business by 2025, indicating improved profitability.
• The company is experiencing record sales and profits in China, with a 19% increase in capacity compared to the previous year.
• NN Inc (NASDAQ:NNBR) has secured over $100 million in new business wins over the past 21 months, demonstrating strong growth potential.
• The company has made significant progress in reducing its leverage, with a decline from 3.9 times in Q2 2023 to just under three times in Q3 2024.
• NN Inc (NASDAQ:NNBR) is successfully transitioning its legacy auto business to a more balanced production between North America and China, which is expected to enhance profitability.

Negative Points

• NN Inc (NASDAQ:NNBR) is facing slowness in the North American auto market, leading to plant closures and cost reductions.
• The company's operating loss for the third quarter was $3.8 million, an increase of $1.1 million compared to the prior year.
• Gross margins in the third quarter were below expectations and lower than the previous year, primarily due to unfavorable mix issues.
• The company is still in the process of refinancing its ABL and term loan, which has not yet been consummated, potentially impacting financial flexibility.
• NN Inc (NASDAQ:NNBR) is dealing with underperforming plants, with only 40% progress made towards making these plants profitable.

Q & A Highlights

Q: Gross margins in the third quarter were below expectations and last year's quarter. Is this due to mix or other factors? A: Harold Bevis, President & CEO: The lower gross margins were generally due to mix issues, particularly in power solutions, which have since corrected.

Q: Can you provide more detail on the increase in revenues in the residential, commercial, and electrical target markets? A: Christopher H. Bohnert, Senior Vice President and CFO: The growth is driven by strong demand in the general industrial market, particularly in grid and electrical components, with structural components supporting long-term demand.

Q: What progress has been made on the medical segment's annual revenue run rate and dedicated capacity? A: Tim French, COO & Senior Vice President: The first dedicated capacity line is operational by mid-November, with the second by the end of the month, allowing us to initiate production before year-end.

Q: How are current cost reduction efforts progressing towards achieving a 10% EBITDA margin in North American Mobile? A: Tim French, COO & Senior Vice President: We are on track for early 2025, focusing on efficiency improvements and plant closures, with significant progress already made.

Q: How is NN Inc managing to grow in China despite macroeconomic slowdowns? A: Harold Bevis, President & CEO: Growth is supported by government incentives and China's position as a leading vehicle exporter, with NN Inc benefiting from increased production capacity for both domestic and export markets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.