Business transformation continues; delivering record-setting new business wins in 2023 and significantly improved free cash flow performance
Company provides sales, adjusted EBITDA, and free cash flow outlook for 2024
CHARLOTTE, N.C., March 11, 2024 (GLOBE NEWSWIRE) — NN, Inc. (NASDAQ:NNBR), a global diversified industrial company that engineers and manufactures high-precision components and assemblies, today reported its financial results for the fourth quarter ended December 31, 2023.
Financial and Strategic Highlights
Displayed strong execution against the Company’s multi-year transformation plan, driving positive inflection in financial and operating results in the second half of the year;
Delivered company record for new business awards of $62.6 million in 2023;
Launched multiple long-term strategic initiatives to drive increased sales, increased profits, enhanced cash flows, and increased shareholder value;
Generated positive free cash flow in 2023 with enhanced organization-wide focus driving step change in cash flow performance in the second half of the year;
Fourth quarter net sales of $112.5 million, down 4.6% versus prior year;
Fourth quarter operating loss of $7.9 million, improved by $3.1 million versus prior year;
Fourth quarter adjusted EBITDA of $10.0 million up 28% versus prior year; and
Fourth quarter free cash flow of $1.3 million, down $5.1 million versus prior year.
“Our fourth quarter results capped off a transformative year for NN Inc., a year in which we realigned our commercial and operational strategies to deliver improved returns and to better position the company for both short-term and long-term success,” said Harold Bevis, President and Chief Executive Officer. “In 2023, we launched a multi-year transformation and our revamped leadership team’s aggressive redirected approach is already making a clear impact on our financial and operational results, as evidenced by the strengthening of our margins, improved free cash flow performance, and accelerating sales growth. Additionally, we reset the bar on customer performance and already we are performing better with our customers. This is a tried and true path to future business expansion. We are really proud of our global team and our JV business as we are working as one team to reestablish leadership positions in multiple areas.”
Bevis continued, “For the full year, we delivered approximately $12 million in free cash flow, which is an increase of more than $21 million year-over-year. Notably, we were able to achieve improved operating income and fairly flat adjusted EBITDA with a strong second half performance with the new game plan. Specific to the fourth quarter, we were also pleased with our big new business award performance. We are already in development and ramp up mode on many of these awards and are making technical advancements in many areas. This momentum has carried right into 2024, as our financial results showed step-change improvement in the second half of the year. We remain focused on both leveraging our core capabilities and adding to our leadership edge to win new business across our diverse portfolio and believe we can add between $55 million to $70 million of new business wins this year.”
Bevis concluded, “Our organization-wide commitment to our transformation into a profitable, growing company is working and gaining momentum, and we are expecting 2024 to continue to demonstrate progress reflected by improved results on new business wins, profitability, free cash flow, and customer service. Our capital efficient model and low-risk strategy to structurally improve our operations will prove critical in lowering risk for our company. These efforts will ultimately help optimize our balance sheet. While we are encouraged by the early success across our transformation efforts, our improvements are just beginning. We remain committed to advancing and expanding our progress as we move forward. Our decisive actions are taking hold and I would like to thank all our NN team globally, whose dedication and hard work are driving our transformation.”
Fourth Quarter GAAP Results
Net sales were $112.5 million, a decrease of 4.6% from the fourth quarter of 2022, which was primarily due to reduced volume, partially offset by higher customer pricing and favorable foreign exchange effects.
Loss from operations was $7.9 million compared to a loss from operations of $11.0 million in the fourth quarter of 2022. The decrease in loss from operations was primarily driven by facility closures and labor cost savings.
Income from operations for Power Solutions was $2.8 million compared to loss from operations of $0.8 million for the same period in 2022. Loss from operations for Mobile Solutions was $5.7 million compared to loss from operations of $5.4 million for the same period in 2022.
Net loss was $20.5 million compared to net loss of $12.0 million for the same period in 2022. The increase in net loss is primarily due to warrant valuation due to stock price increase as well as increased interest expense.
Fourth Quarter Adjusted Results
Adjusted loss from operations for the fourth quarter of 2023 was $1.4 million compared to adjusted loss from operations of $3.3 million for the same period in 2022. Adjusted EBITDA was $10.0 million, or 8.9% of sales, compared to $7.8 million, or 6.6% of sales, for the same period in 2022. Adjusted net loss was $4.9 million, or $0.10 per diluted share, compared to adjusted net loss of $5.8 million, or $0.12 per diluted share, for the same period in 2022.
Free cash flow was a generation of cash of $1.3 million compared to a generation of cash of $6.4 million for the same period in 2022.
Power Solutions
Net sales for the fourth quarter of 2023 were $43.3 million compared to $50.0 million in the fourth quarter of 2022, a decrease of 13.4% or $6.7 million. The decrease in sales was primarily due to lower volume with certain customers. Adjusted income from operations was $5.8 million compared to adjusted income from operations of $4.5 million in the fourth quarter of 2022. The increase in adjusted income from operations was primarily due to cost savings associated with facility closures and labor, partially offset by lower volume.
Mobile Solutions
Net sales for the fourth quarter of 2023 were $69.2 million compared to $68.0 million in the fourth quarter of 2022, an increase of 1.8% or $1.2 million. The increase in sales was due to pricing and favorable foreign exchange, partially offset by lower volume. Adjusted loss from operations was $2.3 million compared to adjusted loss from operations of $3.7 million in the fourth quarter of 2022. The decrease in adjusted loss from operations was due to cost savings and operational improvements, partially offset by lower volume and foreign exchange.
Full Year Results
Net sales decreased $9.5 million, or 1.9%, to $489.3 million compared to $498.7 million for 2022, primarily due to reduced volume, including the impact from the closure of the Taunton and Irvine facilities, lower customer settlements, and unfavorable foreign exchange, partially offset by pricing.
GAAP operating loss increased to $21.8 million compared to $21.1 million in 2022. Income from operations for 2023 in Power Solutions was $11.1 million and loss from operations for Mobile Solutions was $11.7 million.
On an adjusted basis, income from operations for 2023 was $3.1 million compared to adjusted income from operations of $1.9 million in 2022. Adjusted EBITDA for 2023 was $43.1 million, or 8.8% of sales, versus $43.9 million, or 8.8% of sales, for the same period in 2022. Free cash flow was a generation of $11.7 million compared to a use of cash of $9.8 million in 2022.
Power Solutions
Net sales for 2023 were $185.9 million compared to $205.2 million in 2022, a decrease of 9.4% or $19.3 million. The decrease in sales was primarily due to lower volumes, including the impact from the closure of the Taunton and Irvine facilities, partially offset by pricing. Adjusted income from operations for 2023 was $23.9 million compared to $20.1 million in 2022. The increase in adjusted operating income was primarily due to facility closure savings and a legal settlement reached during the first quarter of 2022, partially offset by lower volume.
Mobile Solutions
Net sales for 2023 were $303.3 million compared to $293.5 million in 2022, an increase of 3.3% or $9.8 million. The increase in sales was primarily due to higher customer pricing, partially offset by lower volume, and lower customer settlements. Adjusted loss from operations for 2023 was $1.3 million compared to $2.7 million of adjusted operating income in 2022. Adjusted operating income decreased due to lower sales volume, lower customer settlements and unfavorable foreign exchange effects, partially offset by cost savings and operating performance.
2024 Outlook
Assuming a steady end-market demand outlook with the exception of the North America commercial vehicle market, the Company has provided a ranged outlook for the full year 2024 as follows:
Revenue in the range of $485 million to $510 million;
Adjusted EBITDA in the range of $47 million to $55 million;
Free cash flow in the range of $10 million to $15 million;
New business wins in the range of $55 million to $70 million; and
Net leverage below 3.0x.
Michael Felcher, Senior Vice President and Chief Financial Officer, commented, “Our transformation strategy is working, and our 2024 Outlook reflects improved profitability and consistent free cash flow generation in a stable and consistent demand environment. We are also focused on improving our leverage and other actions to position us to be ready to refinance in a favorable market environment.”
Conference Call
NN will discuss its results during its quarterly investor conference call on March 12, 2024, at 9:00 a.m. ET. The call and supplemental presentation may be accessed via NN’s website, www.nninc.com. The conference call can also be accessed by dialing 1-877-255-4315 or 1-412-317-6579. For those who are unavailable to listen to the live broadcast, a replay will be available shortly after the call until March 12, 2025.
NN discloses in this press release the non-GAAP financial measures of adjusted income (loss) from operations, adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per diluted common share, and free cash flow. Each of these non-GAAP financial measures provides supplementary information about the impacts of restructuring and integration expense, acquisition and transition expenses, foreign exchange impacts on inter-company loans, amortization of intangibles and deferred financing costs, and other non-operating impacts on our business.
The financial tables found later in this press release include a reconciliation of adjusted income (loss) from operations, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per diluted share, free cash flow to the U.S. GAAP financial measures of income (loss) from operations, net income (loss), net income (loss) per diluted common share, and cash provided (used) by operating activities.
About NN, Inc.
NN, Inc., a global diversified industrial company, combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for a variety of markets on a global basis. Headquartered in Charlotte, North Carolina, NN has facilities in North America, Europe, South America, and Asia. For more information about the company and its products, please visit www.nninc.com.
Except for specific historical information, many of the matters discussed in this press release may express or imply projections of revenues or expenditures, statements of plans and objectives or future operations or statements of future economic performance. These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to NN, Inc. (the “Company”) based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. Forward-looking statements involve a number of risks and uncertainties that are outside of management’s control and that may cause actual results to be materially different from such forward-looking statements. Such factors include, among others, general economic conditions and economic conditions in the industrial sector; the impacts of pandemics, epidemics, disease outbreaks and other public health crises, on our financial condition, business operations and liquidity; competitive influences; risks that current customers will commence or increase captive production; risks of capacity underutilization; quality issues; material changes in the costs and availability of raw materials; economic, social, political and geopolitical instability, military conflict, currency fluctuation, and other risks of doing business outside of the United States; inflationary pressures and changes in the cost or availability of materials, supply chain shortages and disruptions, the availability of labor and labor disruptions along the supply chain; our dependence on certain major customers, some of whom are not parties to long-term agreements (and/or are terminable on short notice); the impact of acquisitions and divestitures, as well as expansion of end markets and product offerings; our ability to hire or retain key personnel; the level of our indebtedness; the restrictions contained in our debt agreements; our ability to obtain financing at favorable rates, if at all, and to refinance existing debt as it matures; new laws and governmental regulations; the impact of climate change on our operations; and cyber liability or potential liability for breaches of our or our service providers’ information technology systems or business operations disruptions. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s filings made with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date of this press release, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. The Company qualifies all forward-looking statements by these cautionary statements.
With respect to any non-GAAP financial measures included in the following document, the accompanying information required by SEC Regulation G can be found in the back of this document or in the “Investors” section of the Company’s web site, www.nninc.com, under the heading “News & Events” and subheading “Presentations.”
Investor & Media Contacts:
Joe Caminiti or Stephen Poe, Investors
Tim Peters, Media
NNBR@alpha-ir.com
312-445-2870
Financial Tables Follow
NN, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
(in thousands, except per share data)
2023
2022
2023
2022
Net sales
$
112,533
$
118,012
$
489,270
$
498,738
Cost of sales (exclusive of depreciation and amortization shown separately below)
98,527
104,605
419,175
421,105
Selling, general, and administrative expense
11,603
11,182
47,436
49,635
Depreciation and amortization
11,477
13,269
46,120
47,231
Other operating expense (income), net
(1,131
)
(3
)
(1,657
)
1,859
Loss from operations
(7,943
)
(11,041
)
(21,804
)
(21,092
)
Interest expense
5,653
4,368
21,137
15,041
Other expense (income), net
8,760
(845
)
10,730
(5,064
)
Loss before provision for income taxes and share of net income from joint venture
(22,356
)
(14,564
)
(53,671
)
(31,069
)
Provision for income taxes
(904
)
(107
)
(2,285
)
(1,621
)
Share of net income from joint venture
2,719
2,657
5,806
6,592
Net loss
$
(20,541
)
$
(12,014
)
$
(50,150
)
$
(26,098
)
Other comprehensive income (loss):
Foreign currency transaction gain (loss)
5,016
5,387
1,410
(8,156
)
Interest rate swap:
Change in fair value, net of tax
—
894
(230
)
3,358
Reclassification adjustments included in net loss, net of tax
(449
)
(369
)
(1,815
)
(420
)
Other comprehensive income (loss)
$
4,567
$
5,912
$
(635
)
$
(5,218
)
Comprehensive loss
$
(15,974
)
$
(6,102
)
$
(50,785
)
$
(31,316
)
Basic and diluted net loss per share
$
(0.50
)
$
(0.33
)
$
(1.35
)
$
(0.83
)
Shares used to calculate basic and diluted net loss per share
47,709
44,708
46,738
44,680
NN, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share data)
December 31,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents
$
21,903
$
12,808
Accounts receivable, net
65,545
74,129
Inventories
71,563
80,682
Income tax receivable
11,885
12,164
Prepaid assets
2,464
2,794
Other current assets
9,194
9,123
Total current assets
182,554
191,700
Property, plant and equipment, net
185,812
197,637
Operating lease right-of-use assets
43,357
46,713
Intangible assets, net
58,724
72,891
Investment in joint venture
32,701
31,802
Deferred tax assets
734
102
Other non-current assets
7,003
5,282
Total assets
$
510,885
$
546,127
Liabilities, Preferred Stock, and Stockholders’ Equity
Current liabilities:
Accounts payable
$
45,480
$
45,871
Accrued salaries, wages and benefits
15,464
11,671
Income tax payable
524
926
Short-term debt and current maturities of long-term debt
3,910
3,321
Current portion of operating lease liabilities
5,735
5,294
Other current liabilities
10,506
11,723
Total current liabilities
81,619
78,806
Deferred tax liabilities
4,988
5,596
Long-term debt, net of current maturities
149,369
149,389
Operating lease liabilities, net of current portion
47,281
51,411
Other non-current liabilities
24,827
9,960