NN, Inc.

Good day, and welcome to the NN Incorporated Fourth Quarter and Full Year 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jeff Troika. Please go ahead.

Thank you, Jason. Good morning, everyone, and thanks for joining us. I'm Jeff Pryka, investor relations contact for NN Inc., and I'd like to thank you for attending today's business update. Yesterday afternoon, we issued a press release announcing our financial results for the fourth quarter and full year ended December 31st, 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 contact Lambert at 315-529-2348. Our presenters on the call this morning will be Warren Beltman, President and Chief Executive Officer, and Mike Felcher, Senior Vice President and Chief Financial Officer. Before we begin, I'd ask you to take note of the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation, and in the risk factors section of the company's annual report on Form 10-K for the fiscal year ended December 31, 2020, and when filed, the company's annual report on Form 10-K for the fiscal year ended December 31, 2021. The same language applies to comments made on today's conference call, including the Q&A session, as well as the live webcast. Our presentation today will contain forward-looking statements regarding sales, margins, input cost inflation, supply chain constraints, the impact of the automotive semiconductor chip shortage, 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 or COVID-19 pandemic, and the Russia-Ukrainian conflict on the company's financial conditions and other topics. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside of 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 section of the press release and the supplemental presentation. Reviewing the agenda for today's call, Warren will provide a business update from the fourth quarter and full year. Then Mike 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 2022 fiscal year. There will be a Q&A session following the conclusion of the prepared remarks. At this time, I will turn the call over to Warren Beltman, President and CEO. Warren?

Thanks, Jeff, and good morning, everyone. If you would turn to page 5, we will review some of the highlights and accomplishments of our team over the past year and touch on recent events that have occurred at the start of 2022. Let's start with our strategic objectives of growing the business around ICE independent applications, including electric vehicles and the expansion of the electric grid. Our first objective was to substantially expand the number of opportunities that we were pursuing. On that front, we were successful. During 2021, our pipeline for the mobile solutions group increased 22% year over year, while power solutions pipeline increased 161%. The mix of our pipeline also continues to shift towards applications consistent with our strategic objectives. As indicated here and graphically on the next page, NN's overall pipeline is approximately 80% concentrated on applications independent of the gasoline internal combustion engine. Likewise, our 2021 new business wins, which totaled over 50 million, only 13% were on ICE-dependent applications. As we have discussed previously, our power solution sales team was restructured during 2021. and we further strengthened the NN sales team with the January 2022 appointment of Andrew Wall as our chief commercial officer. Andrew brings strong leadership and 20 years of experience with extensive sales, marketing, and operations background in the power and industrial solutions space to NN. With these actions, I believe our sales teams are well positioned to capitalize on growth opportunities and our targeted growth areas of electric vehicles and the expansion and modernization of the electrical grid. Regarding 2021, we started the year with rapidly rebounding markets and demand returning to more normalized levels following the impact of COVID during 2020. The favorability resulted in solid year over year growth in revenues and profitability during the first half of 2021. As we entered the second half of the year, we saw an increase in supply chain challenges affecting our business and that of our customers. Most notable was the semiconductor chip shortage that significantly impacted the automotive industry during the third and the fourth quarters, causing production disruptions at our customers, which rippled through the supply chain. We increased safety stock levels on critical material and tooling and finished good components in an effort to protect our ability to supply our customers. While these efforts used cash to increase inventory, we utilized customer programs to improve receivable terms and an attractive cost to mitigate the overall working capital impact. To combat the inflation pressures mounting in the second half of 2021, We have negotiated or enacted price increases to recover or mitigate material and labor inflation. Further, we have improved our position on recovering future material price increases by negotiating 100% material price pass-through with the majority of our customers. We balance the short-term impacts of timing between cost increases and pricing recovery with the long-term partnership we have with our customers to reach the right solution for each of us. Subsequent to year-end, we took action to improve our operating margins and cash flow as we announced the closure of our Taunton, Massachusetts facility. This action will have the impact of reducing costs through the rationalization of our AD&M manufacturing footprint. While 2021 presented several challenges with inflation and the extremely contagious Omicron COVID variant disrupting our production facilities and disruptions to the global supply chain, The dedication and hard work of our employees allowed us to meet and deliver against customer expectations and position us to generate strong financial performance in the future. With effective management of working capital, we were able to generate $11.6 million of free cash flow before payments of $14.2 million related to the sale of life sciences, CARES Act FICA deferral repayments, litigation costs, and severance. During the first quarter of 2021, we successfully completed our $265 million refinancing, which strengthened our balance sheet and provided us with long-term financial stability to reach our 2025 growth objective. The refinancing included a $150 million term note, $65 million in preferred equity, and a $50 million ABL, which reduced our borrowing costs, from approximately 15% down to approximately 12%. Recently, we also proactively amended leverage ratio requirements of our term loan agreement to maintain adequate flexibility given the uncertain and challenging macroeconomic climate. Also, during the first half of 2021, we enhanced our board with the appointment of three directors whose expertise aligns with our strategic growth focus areas. The addition of these board members has provided valuable insights into some of the key megatrends in the auto and electrical industries that are influencing our overall business today. We also strengthened our executive leadership team by adding two new members during the year. Mike Felcher was promoted from chief accounting officer to CFO of And as I mentioned previously, Andrew Wall joined us in January as our chief commercial officer, a new executive position to help NN achieve its growth objectives. Lastly, we are enhancing our proactive communications and investor outreach in 2022. We are planning to host a virtual investor day in May, which will feature a range of presentations and Q&A sessions from our leadership team, and highlight our strategic vision in the many ways we differentiate ourselves from our customers. We will be launching a new website in the second quarter that will better reflect who we are as a company. We are also fully engaged in the development of our first corporate sustainability report and plan to make environmental, social, and governance key topics of focus in our external communications. As we flip to page six, You can see the graphics showing our pipeline and new business wins that I previously discussed. We are excited about our electric vehicle pipeline expanding over eight times in the past year. You will note that we are still accepting business awards for gasoline ice independent, excuse me, gasoline ice dependent applications. Typically, those programs will utilize existing capacity in our business thus requiring lower levels of CapEx, or are being priced to generate higher than normal return on invested capital. 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. Mike?