NN, Inc.

Welcome to the NN Inc. Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Danahy. Please go ahead.

Thank you, Operator. Good morning, everyone, and thanks for joining us. I'm Mike Danahy, Director of Investor Relations and Financial Planning. I'd like to thank you for attending today's business update. Our presenters this morning will be President and Chief Executive Officer Warren Beltman and Mike Felcher, Senior Vice President and Chief Financial Officer. Yesterday afternoon, we issued a press release announcing our financial results for the second quarter ended June 30th, 2021, as well as a supplemental presentation, which have been posted on the investor relations section of our website. If anyone needs a copy of the press release or the supplemental presentation, you may also contact Lambert and Company at 315-529-2348. Before we begin, I'd ask that you take note of the cautionary language regarding forward-looking statements contained in today's press release supplemental presentation, and in the risk factor section in the company's annual report on Form 10-K for the fiscal year ended December 31st, 2020, and when filed, the company's quarterly report on Form 10-Q for the three months ended June 30th, 2021. The same language applies to comments made on today's conference call, including the Q&A session as well as the live broadcast. Our presentation today may contain forward-looking statements regarding sales, margins, foreign exchange rates, cash flow, tax rates, acquisitions, synergies, cash and cost savings, future operating results, performance of our worldwide markets, the impacts of the coronavirus COVID-19 pandemic on the company's financial condition, and other topics. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company's control. The presentation also includes certain non-GAAP measures as defined by SEC rules. A reconciliation of such non-GAAP measures is contained in the tables in the final sections of the press release and in the supplemental presentation. Reviewing the agenda for today's call, Warren will provide a business update from the quarter, then Mike Felcher will provide a detailed update of the financial results before turning the call back over to Warren to discuss our segment results and markets as well as the outlook for the remainder of 2021. At the conclusion of the prepared remarks, there will be a Q&A session. At this time, I will turn the call over to Warren Beltman, President and CEO.

Thanks, Mike, and good morning, everyone. Before we get started today, I want to take a moment to welcome Mike Felcher for his first quarterly earnings call as our new Chief Financial Officer. Mike has been a valuable member of our finance team, working closely with Tom DeBile to enhance our overall accounting and financial reporting functions, which has made this recent transition smooth and seamless. I have great confidence in Mike's ability and look forward to him participating in our investor outreach in the coming years. Now, if you would turn to page five, we will review some of the highlights for the second quarter. The second quarter marked a continuation of the recovery in our global markets from the depths of the pandemic in the second quarter last year. We generated strong revenue growth across both mobile solutions and power solutions as demand continued to rebound. This strong sales performance was essential in our ability to drive higher margins and improve financial results in the quarter. The strong rebound in automotive continued during the quarter despite the ongoing supply chain challenges which particularly benefited our mobile solutions business, which grew an impressive 80% year over year. While we had strong growth across our business segments compared to the second quarter of 2020, I'll note that we faced increasing supply chain challenges within the quarter, which not only affected our customers' operations, but our own operations as well. This was evident in the 2.9% sequential decrease in revenues compared to the first quarter. We continue to be flexible in our operations and responsive to the needs of our customers in light of the current market conditions as we work together to ensure we have adequate supply to maintain productions and meet the needs of our customers. The actions we took over the past year to improve operating efficiencies and reduce overhead and administrative expenses generated another quarter of solid results in both GAAP and adjusted financial results. During the quarter, our SG&A expenses declined to 11% of sales, which is a significant improvement from the prior year second quarter and pre-COVID periods where sales were not adversely impacted by the pandemic. Additionally, we reinstated a number of employee benefit programs at the beginning of the year. We have maintained the streamlined cost structure that will benefit our operations over the long term. As we previously communicated, our first quarter refinancing has provided a stable financial platform with prudent leverage levels and sufficient liquidity. Our new capital structure has alleviated customer concerns regarding our financial stability that existed previously and provides us the ability to pursue investments for organic growth and tuck-in acquisitions that will complement our strategic goals. Subsequent to quarter end, We entered into a cost-effective three-year variable-to-fix interest rate swap to hedge our interest expense on $60 million of our debt. We did this to reduce our exposure to higher interest rates, and when factoring in our fixed-rate preferred stock, achieve what we believe is the right variable versus fixed-rate exposure. We also maintained our focus on working capital by increasing turns for the fourth consecutive quarter, which we expect to enable improved free cash flow over the longer term. While we saw a use of cash in our free cash flow in the second quarter, this amount included $9.2 million in payments related to the sale of life sciences. Turning to page six, we have summarized some of the other key highlights for the quarter. As I mentioned, our business continued its strong rebound from the significant impact of the COVID-19 pandemic, as we once again posted solid year-over-year growth in the quarter. Sales for the quarter were 123.2 million, up 56.8% from a year ago. The improvement in sales volume, coupled with the operational improvements we have implemented, resulted in gains in operating income and EPS. Reported operating loss improved significantly to 1.6 million versus a loss from operations of 11.2 million one year ago. Non-GAAP adjusted EBITDA was 13.4 million, or 10.9% of sales, up from 4.9 million a year ago when adjusted EBITDA was 6.2% of sales. GAAP EPS from continuing operations was a loss of 17 cents per share versus a 49 cent per share loss from a year ago. The improvement in our results was driven mainly by the improved gross profit generated from incremental sales volumes along with reductions in SG&A and interest expense, partially offset by the reinstatement of employee compensation, benefit programs, and other costs previously discussed. Our adjusted net income from continuing operations was $0 per share versus a loss of $0.24 per share in the prior year. Now I'd like to turn it over to Mike Felcher so he can provide a more in-depth review of our financial performance for the quarter.