NN, Inc.

Hello and welcome to the NN Inc. Fourth Quarter 2024 Earnings Conference Call. All participants are 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. Please note, this event is being recorded. I would now like to turn the conference over to Stephen Poe, 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 fourth quarter and full year ended December 31, 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 of the supplemental presentation, you may contact Alpha IR Group at NNVR.com. Our presenters on the call this morning will be Harold Beavis, President and Chief Executive Officer, Chris Bonner, Senior Vice President and Chief Financial Officer, and Tim French, Senior Vice President and Chief Operating 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 when filed in the risk factor section in the company's annual report on Form 10-K for the fiscal year ended December 31, 2024. 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 and divestitures, synergies, casting 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 in 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. A reconciliation of such non-GAAP measures is contained in the tables in the final section of the press release and the supplemental presentation. Please turn to slide three, and I will now turn the call over to our CEO, Harold Nevis.

Thank you, Stephen, and good morning, everyone. As mentioned, myself, Tim French, and Chris will be giving an update and have a Q&A session at the end. Let's go ahead and get started. If you could turn to page four. on business update. I'd like to give you a few highlights. NN's first year of transformation produced significant and immediate results, including a new five-year business plan, new top leadership team, which is 80% in place, a new business development program, which has now produced, as of last night, approximately $150 million in new business awards. We enacted a fix it or close it program at seven plans that were underperforming, and we began a refresh of our capital structure with a new ABL in December of 24 and a term loan refinancing process, which is underway now. And Chris will give a fulsome update on that later. As we look to the full year of 2025, we expect advancement on all fronts, including growth, cost outs, and cash generation. barring any significant tariff impacts. And we're going to talk about tariffs as they're a timely thing. We have 70 new business wind programs launching this year. Our cash capex is expected to be at our normal levels. And we will continue to selectively add a few new people to further help drive our new business development areas, particularly in stamped products, medical products, and electrical products. And we will continue to optimize our operational footprint and headcount. Lastly, a word about tariffs. It's the goal of the Trump administration to encourage reshoring of volumes, profits, and jobs for companies like NN. But as it's playing out in the papers and all of us know just from common sense, the US manufacturing supply chains are global, complicated, capital intensive, and slow moving for important reasons like consumer safety and project paybacks. For instance, it takes several years and several billion dollars to build a car factory and then another year for vehicle testing. So these changes take some time and the timelines are generally outside the duration of a presidential administration. And already the big three are getting exemptions. Most parts suppliers like us believe that this will be short-lived with minimal long-term impacts. But I am going to give you an update that we've had positive impact so far. Turning to the next page on page five, I'd like to just give you a little bit more details on our five-year plan and reiterate them. We haven't changed them. First, sales growth. Sales growth is very important. And in the industries we serve, sales don't fall naturally in your lap. You have to target properly, offer innovative solutions, hustle, and win. And the components of our top-line program are based on winning $65 million a year of new business and ending $25 million a year. It's an assumption. We don't have a firm outlook. People do not give indications that far out of when they intend to end programs. But it backtests to be a number that's conservative for us. And we have a matrix of targets underneath that and individual accountability. A big goal is to minimize CapEx and to leverage the installed base of equipment, buildings, and land that we have, and we've been doing that. And this program's working. We've been on track now for six quarters in a row and headed into our seventh quarter. We've already won $150 million of business, as I mentioned, which is definitely a big number for us. We've had to get some operational guidelines in place to launch that many programs at once. Anyone who's been a plant manager or been in plants, that's a lot of work to do, and we're launching 50 programs right now in the first quarter. The second major component of our five-year plan is aggressive cost reduction. Overall, we want to reduce our cost 3% a year, condense our plant footprint, combine our operating teams into a shared team, implement continuous improvement programs at every plant, continue our Kaizen and Six Sigma programs, which are working very well. And this component of our plan is working well also. Third component is to refresh and correct our balance sheet. We expect to generate free cash flow and invest $12 to $15 million in CapEx per year ex-China. We've kind of sliced China off and have China funding itself and sending money back to us each quarter, and it's working fine, and I'll give a China update in a bit. Again, we want to leverage our installed base of equipment, lands and building that we have, and it's very sufficient to achieve our goals. Our end goal is to have all our plants be free cash flow, generative, self-sustaining, and bear their fair share of our overhead burden. And where we are today and progress we've made, We're happy with it. We have a new ABL in place and a term loan process underway that Chris will give an update on. And a big deal is to correct our diluted plants, which are being fixed or closed, and Tim will give an update on that. All of it is geared at getting our EBITDA margins up, and we're tracking to that, and we're going to give you an update on the fourth quarter of last year and on the full year and our outlook for this year. We've closed two plants. We're in the process of closing two plants and we have one underway at this point in time. So overall, we're happy with our first full year and our five-year plan and we're recommitting to it. If you turn to page six, this is a format we've been using to track our transformation plan. And this year will be another formative year for us. Through the first six quarters of us being here, We think we're around 60% complete. This is judgment of where we think we are. And our new leadership team is about 80% complete, as I mentioned. We still need a couple people in a couple of the new areas that we're trying to grow more quickly in, primarily non-automotive. And the fixing of our unprofitable parts for our business is around 60% complete. You can see on the graphic here on page six, what our EBITDA has been doing at those plants that were underperforming, and all of them are planning on making money this year in 2025, which is a remarkable turnaround in a short amount of time from mid-2023 until this year's outlook. So we're pleased with it. We had to shed a little bit of business, which Chris will bridge for you. So the goal is to drive up our gross margins, and we have been doing that. We have a long-term goal of 20%, so we have more work to do. On our balance sheet, we started working on that last year. We previously reported that we had to part ways with our banker. Chris and I pretty much took this on our own, and we did the ABL, and now we're underway with the term loan. We're also underway with putting China on their own, and that's all tracking very well. The last piece is growing sales year over year to win enough business so that we have a natural growing company. And we're starting to get tailwinds now. We have some of the business that we've won is now launching and going into our run rate. So overall, we believe that our transformation is on track. On the next page, we got a request to kind of go into a little bit more detail about the plants that were underperforming. and what have we done and what's in front of us. And I'd like Tim French, our Chief Operating Officer, who's led that initiative, start to finish. I'd like Tim to give an update to the group, please. Tim?