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NN INC (NNBR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered pro forma stability but headline declines: net sales $105.7M (-12.8% YoY; -1.3% YoY pro forma), adjusted EBITDA $10.6M (10.0% margin), and adjusted EPS $(0.03) .
  • Against S&P Global consensus, revenue missed ($105.7M vs $109.7M*) while Primary EPS modestly beat ($(0.03) vs $(0.0367)*)—a small upside on EPS, offset by top-line softness due to rationalization, the Lubbock divestiture, lower volumes, and FX .
  • Management lowered FY 2025 net sales guidance to $430–$460M (from $450–$480M) on macro/GDP uncertainty, reaffirmed adjusted EBITDA $53–$63M, and initiated free cash flow guidance of $14–$16M (including CARES Act refund) .
  • Near-term catalysts: 120 program launches worth $55M peak annual sales ramping through 2H’25 and the completed refinancing (ABL + term loan) extending maturities to 2030 to support transformation and FCF improvement .

What Went Well and What Went Wrong

  • What Went Well

    • New business momentum: $16.4M wins in Q1; 120 programs worth $55M (peak annual sales) launching in 2025 to bolster 2H revenue and structurally improve mix. “We now have 120 programs that we've won ramping up this year worth $55 million in annualized sales” .
    • Cost actions tracking: ~$15M 2025 cost reduction program progressing; adjusted operating income improved to $2.0M from $(0.7)M YoY; adjusted EBITDA margin rose to 10.0% (vs 9.3% YoY) .
    • Balance sheet flexibility: successful two-step refinancing—$65M ABL and $118M term loan, both to 2030—supports pivot and FCF, with FCF guidance initiated at $14–$16M .

  • What Went Wrong

    • Headline revenue decline: net sales fell 12.8% YoY to $105.7M, missing consensus and driven by rationalization, the Lubbock sale, lower volumes, and FX; pro forma revenue was down 1.3% .
    • Lowered net sales guidance: FY 2025 net sales cut to $430–$460M on U.S. macro/GDP uncertainty; management expects EBITDA toward the lower half of range absent stronger base volumes .
    • Segment pressures: Power Solutions profitability impacted by unfavorable mix and precious metal pass-through (compressing margin rates), and Mobile Solutions revenue reduced by Juarez closure and lower auto volumes .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$113.6 $106.5 $105.7
GAAP EPS ($USD)$(0.13) $(0.51) $(0.23)
Adjusted EPS ($USD)$(0.05) $(0.02) $(0.03)
Adjusted EBITDA ($USD Millions)$11.6 $12.1 $10.6
Adjusted EBITDA Margin (%)10.2% 11.3% 10.0%

Actual vs S&P Global consensus (Q1 2025):

MetricConsensusActualSurprise
Revenue ($USD Millions)$109.7*$105.7 Miss: $(4.0)
Primary EPS ($USD)$(0.0367)*$(0.03) Beat: $0.0067
Values retrieved from S&P Global.*

Segment breakdown (Q1 2025 vs Q1 2024):

SegmentNet Sales Q1 2024 ($M)Net Sales Q1 2025 ($M)Adjusted Op Income Q1 2024 ($M)Adjusted Op Income Q1 2025 ($M)
Power Solutions$48.2 $43.5 $6.8 $5.5
Mobile Solutions$73.1 $62.2 $(1.2) $1.6

Key operating metrics (Q1 2025):

KPIQ1 2025
Adjusted Gross Margin (%)16.9%
Adjusted Operating Income ($M)$2.0
Working Capital ($M)$84.8
Working Capital (% of TTM Sales)19.1%
New Business Wins ($M)$16.4
Cash Capex ($M)$3.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)FY 2025$450–$480 $430–$460 Lowered
Adjusted EBITDA ($USD Millions)FY 2025$53–$63 $53–$63 Maintained (lower-half bias)
New Business Wins ($USD Millions)FY 2025$60–$70 $60–$70 Maintained
Free Cash Flow ($USD Millions)FY 2025N/A$14–$16 (incl. CARES Act) Initiated
5-Year Adjusted EBITDA Margin TargetLong-term12–13% 13–14% Raised

Earnings Call Themes & Trends

TopicQ3 2024 (prior-2)Q4 2024 (prior-1)Q1 2025 (current)Trend
Tariffs/macroRefinancing “in process”; transformation pacing; tariff commentary limited Entering 2025 with uncertainty; aiming for low half of ranges Tariff impacts “immaterial” so far; lowered net sales guide on US GDP uncertainty Macro pressure; tariff risk manageable
New business wins$15M in Q3; pipeline strength; focus on stamping/medical $73M wins in 2024; >70 SOPs slated for 2025 $16.4M Q1 wins; 120 launches in 2025 (peak $55M); pipeline ~$740M Accelerating; immediate 2H ramp
Footprint/cost-outDowagiac closure; cost reduction programs “Group of 7” turnaround, 2025 cost actions ~$15M 2025 cost reduction; One Team SG&A; headcount down 16% over ~2 years Margin uplift continuing
Regional trendsChina growth +19% YoY China +15.6% Q4; +20.6% FY China +12.5% Q1; EU turnaround programs; EU-to-China resourcing bids China steady; EU improving
Product performance/mixPrecious metals pass-through impacts margins in PS Adjusted margin run-rate improvement PS margin rate compressed by higher precious metals pass-through; MS adds medical/industrial capacity Mix effects; margin % optics
Capital structurePlanning refinance Term loan refinance “in process” ABL ($65M) + Term Loan ($118M) refinanced to 2030 Improved flexibility

Management Commentary

  • CEO: “We now have 120 programs that we've won ramping up this year worth $55 million in annualized sales… it bolsters our outlook and gives us confidence to reconfirm our guidance” .
  • CEO: “2025 will mark a significant turning point in NN’s free cash flow performance, and we are initiating full-year 2025 guidance of $14 to $16 million” .
  • CFO: “We are maintaining our full-year 2025 guidance range for adjusted EBITDA… we expect… to push our adjusted EBITDA guidance towards the lower half… net sales in the range of $430 million to $460 million” .
  • COO: Headcount rightsizing (approx. 16% reduction) improved adjusted EBITDA per salaried head by 25% YoY; continued working capital reduction to 16–17% of sales target .

Q&A Highlights

  • Tariff-related RFQs: Two streams—reshoring to U.S. and EU-to-China resourcing—primarily automotive; capacity available, but capital needs for portions; NN selective given capital and returns .
  • EV/hybrid/ICE balance: Hybrid momentum increases NN’s addressable market for legacy machining/stamping; EV entry via shielding/connectors; leveraging existing assets .
  • Ramp timing and cost savings phasing: Immediate ramp programs typically 3–6 months to revenue; about half impacts 2H’25; $15M cost savings largely even through the year .
  • Footprint actions: Two remaining plants under evaluation for potential consolidation; no firm decisions yet .
  • FCF guidance: Includes CARES Act refund of ~$12.3–$12.4M; FCF is net of capex .

Estimates Context

  • Revenue missed consensus (Actual $105.7M vs $109.7M*), reflecting rationalization, divestiture, volume softness, and FX; EPS slightly beat (Actual $(0.03) vs $(0.0367)*) .
  • Company reports adjusted EBITDA $10.6M, 10.0% margin ; note S&P “EBITDA” methodology may differ from company’s adjusted EBITDA, which can create variance when comparing “actuals” across sources.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • 2H’25 setup: 120 program launches ($55M peak annual sales) provide tangible catalysts for incremental revenue layering and margin mix improvement in 2H .
  • Margin trajectory: Cost-out and footprint actions (One Team SG&A; rightsizing) continue to lift adjusted margins; 5-year adjusted EBITDA margin target raised to 13–14% .
  • Guidance reset: Net sales range cut to $430–$460M on macro visibility; adjusted EBITDA unchanged at $53–$63M with lower-half bias; focus turns to operational execution to offset base softness .
  • Balance sheet flexibility: ABL and term loan maturities extended to 2030, improving liquidity to support pivot and targeted capex in medical/electrical/industrial .
  • Segment lens: Power Solutions’ margin rate optics pressured by precious metals pass-through; Mobile Solutions pivoting capacity toward medical/industrial, improving adjusted profitability YoY .
  • Working capital discipline: Reduced to $84.8M (19.1% of TTM sales) with a plan to reach 16–17%, underpinning FCF guidance initiation .
  • Risk monitor: U.S. macro/GDP uncertainty and global auto volume remain swing factors; tariff impacts currently “immaterial,” but resourcing dynamics (EU→China, reshoring) could alter mix and capex pacing .
Notes:
- All company-reported figures (revenue, EPS, adjusted EBITDA/margins, segments, guidance) cite NN’s Q1 2025 8-K/press release and earnings call.
- Values marked with * are retrieved from S&P Global.