NN, Inc.

Good morning and welcome to the NNinc third quarter 2023 earnings call. All participants will be in a 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. To ask a question, please press star then one. To withdraw your question, please press star then two. Please also note this event is being recorded. I would now like to turn the conference over to Alex Steinberg. Please go ahead.

Thank you, Chad. Good morning, everyone. Thank you for joining us. I'm Alex Steinberg, investor relations contact for NN Inc. And I'd like to thank you for attending today's business update. Last evening, we issued a press release announcing our financial results for the third quarter and in September 30th, 2023, as well as a supplemental presentation, which has 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 Alpha IR Group at nnbr at alpha-ir.com. Our presenters on the call this morning will be Harold Beavis, President and Chief Executive Officer, and Mike Felcher, Senior Vice President and Chief Financial Officer. Please turn to slide two, where you'll find our forward-looking statements and disclosure information. 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 factors section in the company's annual report on Form 10-K for the fiscal year ended December 31, 2022, and when filed, the company's quarterly report on Form 10-Q for the three months ended September 30, 2023. 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, inflation, supply chain constraints, 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 Russian Ukrainian conflict 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 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 table in the final section of the press release and the supplemental presentation. Please turn to slide three, and I'll turn the call over to our CEO, Harold Beavis.

Thank you, Alec, and good morning, everyone. I'd like to start off by saying that our enhanced management team made excellent progress against our transformation strategy that we presented and spoke with you about last quarter, and the work is clear and strong in our operating results this period. We also added two highly experienced professionals in Tim French, our new COO, and David Harrison, our new Chief of Procurement, to further strengthen our leadership team. We are happy to have them on board, and I've personally had the opportunity to work with both of them in the past as we successfully executed prior business transformations. I'm very confident in their ability to help support NN's transformation efforts, and I firmly believe that we are well aligned strategically to achieve our goals and deliver improved returns for NN shareholders and stakeholders. Our results in the period are highlighted by our expanded profitability and cash flow performance, with 23% growth in adjusted EBITDA year over year, and strong free cash flow generation of $11.3 million. Sales for the quarter were $124.4 million, which we translated into $14.5 million of adjusted EBITDA. On the commercial front, we've accelerated our focus on new business and have won $37 million year to date of new awards, which marks solid momentum and a significant step up from where we were just three months ago. We're focused on expanding in both legacy businesses and new markets where it makes sense for us to be participating and competing based on our capabilities and ability to create value. And we have a new focused effort to increase quality and quantity of prospecting and generating leads. We're pleased to report $11.3 million of positive free cash flow in the quarter. We're free cash flow positive across the trailing 12-month period, and we're actually running ahead of our previously stated free cash flow targets. which Mike will discuss later in the call. We're proud of our cash performance in the quarter as this became an immediate focus as we established our transformation plans. This focus on cash flows has become an organizational mantra and we feel we can continue this growth over the long term as we've been particularly proactive with our global procurement led by David Harrison and we've been more selective and thoughtful with inventory management. Along with these actions, we've been aggressive with other transformational initiatives for the long term with an emphasis on value improvement. Globally, we refocused our growth strategy and recently announced our reentry into the medical market, which we see as a high-profile near-term opportunity. We've also implemented a total cost productivity program across our operations with the goal of offsetting the company's expected inflation and achieving net cost reduction. All of our global facilities are participating in the program, including more than 100 individual projects with project tracking and monitoring at the plant level. We believe these initiatives will help us win new business globally and will support many of our cost management goals to deliver improved profitability, margin expansion, and improve our cost competitiveness. Before turning to the next slide, I would like to briefly touch on the UAW strikes. As you know, we've seen a few positive developments with recent bargaining agreements with all three automakers, and now the union is moving forward with ratification processes. To stay ahead of this situation, we've taken proactive actions to reduce our risk, but we see this as a small timing issue. We may see a few million of work slip from the fourth quarter this year into the first quarter of next year, but again, we believe we're prepared for multiple scenarios. Most importantly, We don't see a situation today where any work is lost. Please turn to slide four. On the last call, we highlighted our transformation plan with a focus on increasing our organizational commitment to accelerate sales growth, profits, and drive free cash flow. I'm proud to say we've already made early but meaningful progress on all three of our commitments and have been steadily progressing along with our five goals. First, the team. We are committed to strengthening our team and have done so with the additions of Tim and David, as I mentioned previously. We have the right people in place within our respective divisions to lead our transformation efforts. We're committed to winning short-term and long-term, and we'll modify our team as we go along and assess our performance. Second, our second priority is focused on exiting unprofitable work, specifically a few legacy contracts that deliver negative value. This process is underway and we'll continue to see incremental success as we exit those commitments in a prudent manner. We also have pinpointed seven manufacturing facilities that need improving. Let me be clear that this is about improving performance and improving the quality of the work we take on, and we're taking aggressive actions to improve performance. As previously stated, we see a path to improving our profitability by greater than $10 million on an annual basis following our work, but we have only just begun. Number three, our third goal is focused on bringing more organizational rigor to cost. Cost reduction and optimization have been a priority for us from the beginning, and we have already seen some early successes with our initiatives, specifically in procurement. We've eliminated numerous other non-value-added costs across the organization, streamlined where appropriate, and as I noted earlier, we recently launched a new total cost productivity program which we're rolling out across our global footprint. We have a lot more work to do here and a culture we need to continue to shape, but we've made great strides in five short months already. Number four, our cost-cutting efforts are also in line with our fourth goal of generating positive free cash flow. We're currently cash flow positive on the trailing 12 months, and we have a global culture that's now more intently focused on driving a more profitable business for the future. And number five, and most importantly, our fifth goal is focused on accelerating our new business wins. We've been working with our sales team to get more aggressive in their pursuits, and we've managed to create more wins by leveraging our existing capabilities, almost doubling our new business wins sequentially. We feel there's significant room for improvement as we enter new markets, but we're also focused on utilizing our open capacity in existing markets to expand in areas where we already have a presence and the market understands the value we bring. So to summarize, we've only had a few months to both develop and start to execute our transformation strategy. And as you can see, we've made very solid progress against each objective in the quarter, a significant opportunity to continue enhancing the business incrementally as we move forward. As depicted in the graph, we feel we're only partially done with the transformation, and we're looking forward to progressing further along all these initiatives before we talk again in early 2024. For the rest of my prepared remarks, I'd like to focus in on our commercial programs and the work we're doing there to support both near-term and long-term growth. Growth is the lifeblood of any small business like ours, and many of our lead times can be protracted, so this is a critical area for us. Please turn to slide five, where we have provided a brief snapshot of our new business wins. We have built upon the initial momentum from the previous quarter and drove strong results, with year-to-date new business wins of 37 million, up meaningfully from the 19 million in new business wins we achieved through the first half of the year. We have now won over 60 new programs across multiple industries and have a new pipeline with a focus on utilizing existing capacity in places where we have know-how and targeted markets, and it's representative of our commitment to move and grow faster. This will help drive immediate wins in new and existing opportunities. We've also expanded the sales team to better leverage our expertise into new targeted markets, areas where we are pursuing include connector, EMI, and EMF shielding, electric power steering system components, and braking system components. As announced previously, we're also reentering the medical market as we feel we can immediately utilize our current operations and capabilities and translate those into quick, profitable wins. While new business wins are a solid indicator of our early progress, the best parameter for our successful commercial efforts is reflected in the quotes for new business, which have materially increased in overall quantity while also increasing in size. Our expanded pipeline of quotes supported by a realigned sales team is going to help support the trajectory of our new business wins in converting into consistent top line growth. Overall, our team is aligned and we're prioritizing and moving faster. We are seeing early signs of success with our strategy and we look forward to making more progress with new business. We're also looking hard at our existing open quotes, and we're culling some of the pipeline, as I've mentioned in the chart here. And our goal is to have a more focused set that has a higher probability of winning. To showcase our early successes with new business, I want to highlight one recent win on slide six. We have a very strong expertise in complicated multi-station progressive die stamping that's generally hard for competitors to replicate. This often provides us with a distinct competitive advantage in certain key markets. And recently, we've leveraged our know-how with this differentiation to develop a set of new products and produce six unique connector shields and other related components used to prevent electromagnetic interference from high voltage currents onto sensitive vehicle electronics. This product set has been gaining momentum. It's a new product line for us, and we're seeing immediate returns on this initial investment with significant room to expand the business with our current customers and other customers in the harness and connector markets. As a result, we've recently ordered new prototyping, testing, and production equipment to further expand our offering here. This will lead NN into other shielding markets for sensitive electronic equipment as well. Before I turn the call over to Mike, please turn to page seven where I'll discuss our current active proposal momentum. We've been aggressively closing our open capacity and have refocused and upsized our new business wind program globally. We're doing this by shifting our focus onto highly probable business and towards better and new business. This has shown immediate results over the last five months that is clear on the chart on this slide. Excluding diverse industries, we have grown our active proposals in all market segments, and notably EV hybrid programs, an important space for us to continue expanding our presence globally. And we have seen a growth of 43% sequentially and 60% year over year. Notably, this is yet to include medical, where we are boldly reentering the market upon the expiration of our prior non-compete. We are proud of the business we've won to date, and we're confident in our pipeline and ability to take market share. We see opportunities in the medical market and current segments we serve, and our focus on being bigger and moving faster has already shown great results in key targeted markets. With that, I'll now turn it over to Mike, who will walk us through our financials. Mike?