NN, Inc.

Good day and welcome to the NN Inc. Second Quarter 2024 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. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Stephen Poe with Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and thanks for joining us. I'm Stephen Poe with NN Inc.' 's Investor Relations team, and I'd like to thank you for attending today's earnings call and business update. Last evening, we issued a press release announcing our financial results for the second quarter ended June 30, 2024, 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 Chris Bonner, Senior Vice President and Chief Financial Officer. Tim French, our Senior Vice President and Chief Operating Officer, will also join us for the Q&A portion of the call. 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 when filed in the risk factors section in the company's quarterly report 10-Q for the fiscal quarter ended June 30, 2024. The same language applies to comments made on today's conference call, including the Q&A session, as well as 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 and divestitures, synergies, cash and cost savings, future operating results, performance of our worldwide markets, general economic conditions and economic conditions in the industrial sector, the impacts of pandemics and other public health crises and military conflicts 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 non-GAAP measures as defined by SEC rules. Reconciliation of such non-GAAP measures is contained in the tables in the final section of the press release in the supplemental presentation. Please turn to slide three, and I will now turn the call over to our CEO, Harold Beavis.

Thank you, Stephen. Good morning, everyone, for calling in. I am going to be speaking and referring to the presentation that's on our website. And if you could turn to slide four in the earnings presentation, I'd appreciate it. NN delivered strong second quarter results driven by the continued execution of our transformation plan, which is on track. We are increasing the scope and magnitude of our goals across our operational footprint and have advanced an aggressive cultural reset centered around customer service and our leading quality. These efforts to structurally improve our business performance are evident in our quarterly results and help deliver our fourth consecutive quarter of year-over-year adjusted EBITDA growth. Our operational advancements are aiding our business development efforts as well, as we have seen significantly increased customer satisfaction as evidenced by improved customer scorecards and feedback. To that end, we continue to add targeted growth capacity, have revitalized several key customer relationships, established new partnerships in several markets, and have won $34.3 million in new business awards year-to-date through June. We expect our new business pipeline of over $600 million to grow as we continue to execute. As part of our commercial growth strategy, we're also getting more aggressive in the areas of new product development and product innovation, with particular emphasis applied within our medical, electrical, and high-end automotive markets. We're currently bidding on R&D projects with key targeted accounts, which in turn strengthening our knowledge of leading-edge competitiveness. Specific to the medical market, our NN medical team is building out dedicated capacity and developing advanced industrial and mechanical capabilities to service the fast-growing pipeline of opportunities. We will touch more on this encouraging development later in the call. For the full year 2024, we continue to expect to deliver bottom-line growth along with continued momentum and growth in new business wins. The success across the first year of our transformation has not only bolstered our financial results, but it has helped position the company for a refinancing of our obligations, which will help reduce our cost of capital, support stronger earnings and cash flow performance, and accelerate future strategic growth. And Chris will cover this in more detail. Given our solid progress and successful execution thus far today, we are reaffirming our guidance for net sales, adjusted EBITDA, free cash flow, and new business wins, which we issued in our July press release as part of the sale of our non-core plastics plant. Aside from our continued operational and financial execution, our financial outlook is supported by exposure to healthy and growing industrial, electrical, and medical end markets where our capabilities and quality are very valued. The global automotive market backdrop is slightly more variable with several puts and takes governing demand in the short term, particularly across domestic EVs. But we believe our diversified positioning across the powertrain spectrum is a comparative advantage. Please turn to slide five in the presentation, where we've provided a summary and current outlook for our primary end markets. Global passenger vehicle, which has constituted roughly 40% of our trailing revenue, is expected to show flat to modest growth. And the market is undergoing a broader demand rebalancing across BEV, hybrid, and ICE drivetrain types. NN's new business wind program reflects an alignment with these evolving trends. Our general industrial markets are forecasted to grow by about 3%, and we're seeing steady demand in these areas. Power grid and electricity control markets are expected to display modest growth globally, and NN's business in electrical distribution and control is seeing a balancing of demand across those markets. Our smart meter business remains healthy and continues to show solid growth, and demand in circuit breaker products is steady. Commercial vehicle markets face a forecasted decline this year, but NN anticipates minimal impact supported by exposure to unique applications where demand profiles outstripped that of the broader market. And finally, the market forecast in our small but growing medical business anticipates orthopedic sales to grow three to 4% year over year through 2026. Our organic growth in this recently relaunched business is accelerating and we're adding new capacity to support our new business wins, giving NN the confidence to expand beyond our original goals and now set our targets to grow the business to 100 million. Before turning to our second quarter financial results, I'd like to highlight two key recent additions to our leadership team on slide six. Excuse me. First, I'm excited to welcome our new Chief Financial Officer, Chris Bonner, to the team. Chris and I have worked together in the past and his deep experience as a dynamic and operational CFO will be an accelerator for our company's transformation. Welcome Chris. We're also very pleased to welcome Jamie Steppen, our new general counsel to the team. Jamie joins us with close to 20 years of experience in the legal field and brings a strong background working with both public and private companies, including automotive suppliers. She will be a tremendous and complimentary asset to our team as we look to grow our business globally. Please turn to the next slide, slide seven. NN delivered solid second quarter results with net sales of 123 million and adjusted EBITDA of 13.4 million. Year-over-year net sales volumes were down slightly, driven by unfavorable FX impacts in addition to a deliberate rationalization of certain dilutive volumes at underperforming plants. Encouragingly, this targeted and strategic volume rationalization is being largely offset by sales growth at our stronger, more profitable plants. Despite a modestly lower revenue base, our adjusted EBITDA grew by 28% year over year, reflecting the impacts of our transformation work. This marks our fourth consecutive quarter of year-over-year growth in adjusted EBITDA, and our trailing 12-month adjusted EBITDA results are now 49.2 million, which is up almost 29% compared to the same figure at the same time last year. Our adjusted EBITDA margin of 10.9% is up significantly as well compared to last year, as the turnaround of travel plans and broader operating cost reductions continue to improve our bottom line. As a result of our transformation, we have longer term targets to grow our EBITDA margin rates to the 13 to 14% range. And these results show that we're on our way to delivering that. To sum it up, our business transformation is on track and our recent actions will help accelerate our pace of growth and plant level performance across the organization. I thank all our talented employees for their commitment and effort in making this success possible. our improved performance is generated through their hard work. And with that, I'd like to turn it over to Chris to walk through our financial performance in a more detailed manner.