NN, Inc.

Welcome to the NN Inc. Second Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. I would now like to turn the call over to your host, Stephen Poe, Investor Relations. You may begin, sir.

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, 2025, as well as a supplemental presentation, which has been posted on the Investor Relations section of our website. If anyone needs to copy the press release of the supplemental presentation, you may contact alphaIR group at nnbr at -ir.com. Joining us from NN management today are Harold Bevis, President and Chief Executive Officer, Chris Bonner, Senior Vice President and Chief Financial Officer, and Tim French, our 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 in the risk factor section in the company's quarterly report on form 10Q, where the fiscal quarter ended June 30, 2025. Same language applies to comments made on today's conference call, including the Q&A session, as well as the live webcast. Our presentations 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, feature operating results, performance of our worldwide markets, general economic conditions and economic conditions in the industrial sector, including the potential impacts and ramifications of tariffs, the impacts of pandemics and other public health crises and military conflicts on the company's financial condition, among 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, which may cause actual results to be materially different from such forward-looking statements. The presentation also includes certain non-GAP measures as defined by SEC rules. The reconciliation of such non-GAP measures is contained in the tables in the final section of the process release and the supplemental presentation. Please turn to slide three, and I'd like to turn the call over to our CEO, Harold Leavis.

Thank you, Stephen, and good morning, everyone. I wanted to just start off with an overview of the quarter. We had a pretty solid quarter. Our sales were right at 107.9 million. That's adjusted for the sale of Flumbik last year. Our adjusted EVGA came in at 13.2, which was .2% of sales. Our adjusted operating income came in at $4.9 million, and our adjusted net income was $0.02 per diluted share. On the right-hand side of this slide, if you're looking at the deck with me on page three, what drove that performance? First was our improved gross margins. We got really close to 20%, 19.5 adjusted gross margins. We gained a lot of new business for future periods, $32.7 million -to-date, which put us on pace for our annual goal this year of 65 million. On the portfolio side, we had 39% of our sales was in automotive and 61% non-automotive. So that's a strategic goal of ours is to balance our portfolio. And on the balance sheet side, we did previously announce that we refinanced our term loan and we're now focused fully on reducing the cost of our term loan as well as refinancing our preferred stock. So overall, it was a quarter that was in line with our expectations. Just a few more comments on the key metrics if you'll turn the page, if you're following along to page four. On the net sales side, the automotive industry is obviously going through some turmoil globally. And our year over year deviation was mainly with one large tier one customer in Europe, which caused most of our sales shortfall, over 100% actually. But to offset it, we have launched over 70 new programs -to-date and have more to go. And we have a slide on that to show you here in a minute. And on the gross margin side, how are we doing that? We're really putting in place a one team, sourd approach and sharing people across plants and across functions. And we continue to have really good operating performance on time and complete with minimal quality problems. So that really lets us run the plant in an efficient manner. And Tim's gonna talk about that a little bit further. We do have a program in place to increase our operating income and we're on track with it and turned in almost $5 million in the quarter. Adjusted EBITDA, we continue to increase and we've increased here over the last two years and year to date. And it's really driven by a focus of our sales portfolio, rationalizing undesirable business and going for more TAM of good business and continuous cost outs. Our EBITDA margins, adjusted EBITDA margins as a percentage of sales were almost, they were up 100 basis points over prior year. We're on track for our five year goal. Working capital has been sticky for us. We've been getting our unit volumes down, but our balances are being impacted by metal price escalation, gold, silver, steel, aluminum, copper, all of our metals were up. And that's primarily what we buy. We buy metals and make products from those metals. And so we have higher balances that have kept the numbers kind of sticky, even though we've become more efficient. As a percentage of sales, we've decreased it to 20% and we have plans to further reduce it. And we're on track for guidance with new business ones and have some stretch goals inside also in a couple areas. On the next page, I just wanted to talk about our markets for a minute. We serve five primary markets. The passenger vehicle market is 39% of our revenue, as I mentioned. Overall, globally, light vehicle production is flat, but there's moving parts in the countries and amongst the OEs. And a decent amount of cloudiness or uncertainty with the tariffs, vehicle affordability, high interest rates, fading electric vehicle incentives and the emergence of China as the global exporter of choice. Most analysts in the industry predict a continuation of a flat market in the second half. The Trump administration also has announced proposals to end a 16-year focus on fuel efficiencies and subsidizing EVs. And what that has caused to happen in the industries that this industry is, that ICE, Internal Combustion Engine has resurged in prominence. And many of the OEs and tier ones have kicked off next generation programs to keep up with the Joneses. So the idea that ICE was gonna fade into the sunset is now being rebalanced amongst the power train choices. And that rebalancing is good for NN. And our outlook is consistent with the analysts' outlooks for our industry. Second biggest market is United States GDP link businesses. We make components to go into smoke detectors, fire alarms, industrial lasers, that kind of thing. And it's really tied to GDP. There was a weak first half that was impacted by trade uncertainty. There has been a rebound in the second quarter. Analysts are unclear what the full impact of the tariffs are gonna do to the economy. Generally speaking, it's not positive though. It's a muting of demand. Our base business is GDP linked. And we are supplementing our base business performance with our new business program to be able to offset or add to whatever the base business does. Third market is electrical grid and distribution. Really, it's been impacted modestly by what's been happening in the United States. We primarily serve that market in the United States. But if you look at some of the public filers, they're doing okay in this arena because data centers are surging and strong for everyone, including us. So we're benefiting from that. Our fourth market is commercial vehicles. On highway and off highway, the North American industry is down near today and expected to be sequentially down a little bit more in the second half and into the first half of next year. Freight capacities are beginning to balance. And again, the US EPA has announced proposals to stop commercial truck greenhouse gas reduction efforts. Our commercial vehicle business is actually up. In this down market and it's because we're very focused on fuel efficiency and those are the engines that are going into the vehicles that are being bought. And then medical equipment, surgical tools, the market we re-entered about a year and a half ago that the base market is growing in our participation and it really is much, much higher than market growth because we're trying to build back positions for metal parts and have recently added more talent to do that. So overall, our markets are okay. There's uncertainty in the global vehicle market, but we're in China and participating in the China resurgence while other markets are suffering a little bit. So overall, I'd just like you to have a takeaway here that our markets are going through some changes, but overall are doing okay. On the next page, I'm gonna turn it over to Tim to talk about for just a minute.