Q3 2023 NN Inc Earnings Call
[music].
Good morning, and welcome to the NN and Inc. Third quarter 2023 earnings call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question. Please press Star then one.
To withdraw your question. Please press Star then two.
Please also note this event is being recorded.
I would now like to turn the conference over to Alex Steinberg. Please go ahead.
Thank you Chad good morning.
Everyone. Thank you for joining us I'm, Alex Steinberg Investor Relations contacts per annum, Inc, and I'd like to thank you for attending todays business update.
The evening, we issued a press release announcing our financial results for the third quarter ended September 30th 2023 as well as the 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 an N P. R at Alpha Dash I our dotcom.
Our presenters on the call. This morning will be Harold Bevis, President and Chief Executive Officer, and Mike Sculpture, Senior Vice President and Chief Financial 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 factors section in the company's annual report on Form 10-K for the fiscal year ended December 31, 2022, and when filed the company's quarterly report on Form 10-Q for that.
Three months ended September 30th 2023.
The same language applies to comments made on today's call I'll put in the Q&A session as well as the live webcast.
Presentation today will contain forward looking statements regarding sales margins inflation supply chain constraints foreign exchange rates cash flow tax rate acquisitions synergies cashing cost savings future operating results performance of our worldwide markets the impacts of the coronavirus or COVID-19.
And the Russian Ukrainian conflict on the company's financial condition and other topics. These statements should be used to caution and are subject to various risks and uncertainties many of which are outside of the company's control depressed.
The presentation also includes certain non-GAAP measures as defined by SEC rules, a reconciliation of such non-GAAP measures is contained in the table in the final section of the press release and the subtle presentation supplemental presentation. Please turn to slide three and I'll turn the call over to our CEO Harold Beavis.
Thank you Alex and good morning, everyone.
I'd like to start off by saying that our enhanced management team made excellent progress against our transformation strategy that we presented and spoke with you about last quarter and the work is clear and strong in our operating results. This period.
So added two highly experienced professionals and 10, French our new C O L. When David Harrison, our new chief of procurement.
<unk> strengthened our leadership team, we're happy to have him on board and I have personally had the opportunity to work with both of them in the past as.
As we successfully executed prior business transformations.
I'm very confident in their ability to help support in its transformation efforts and I firmly believe that we are well aligned strategically to achieve our goals and deliver improved returns for shareholders.
Shareholders and stakeholders.
Our results in the period are highlighted by our expanded profitability and cash flow performance with 23% growth in adjusted EBITDA year over year and strong free cash flow generation of $11 3 million.
Sales for the quarter were $124 4 million, which we translated into a $14 5 million of adjusted EBIT da.
On the commercial front, we've accelerated our focus on new business and have $137 million a year to date of New award, which marks solid momentum and a significant step up from where we were just three months ago.
Focused on expanding in both legacy businesses and new markets, where it makes sense for us to be participating in competing based on our capabilities and ability to create value.
And we have a new focused effort to increase quality and quantity of prospecting and generating leads.
We're pleased to report 11 3 million of positive free cash flow in the quarter.
Our free cash flow positive across the trailing 12 month period, and we're actually running ahead of our previously stated free cash flow targets, which Mike will discuss later in the call.
We're proud of our cash performance in the quarter as it became an immediate focus as we establish our transformation plans.
This focus on cash flows has become an organizational mantra and we feel we can continue this growth over the long term as we been particularly proactive with our global procurement led by David Harrison and we've been more selective and thoughtful with inventory management.
Along with these actions we've been aggressive with other transformational initiatives for the long term.
With an emphasis on value improvement.
And globally, we refocused our our growth strategy and recently announced our reentry into the medical market, which we see as a high profile near term opportunity.
We've also implemented a total cost productivity program across our operations with the goal of offsetting the companies.
Inflation and achieving net cost reduction.
All of our global facilities are participating in the program.
More than 100 individual projects with project tracking and monitoring at the plant level.
We believe these initiatives will help us win new business globally and.
And we will support many of our cost management goals to deliver improved profitability and margin expansion and improve our cost competitiveness.
Before turning to the next slide I would like to briefly touch on the UAW strikes.
As you know we've seen a few positive developments with recent bargaining agreements with all three automakers and now the union is moving forward with ratification processes.
To stay ahead of this situation, we've taken proactive actions to reduce our risk.
But we see this as a small timing issue.
May be a few million dollars of work slipped from the fourth quarter of this year into the first quarter of next year, but again, we believe we're prepared for multiple scenarios. Most importantly, we don't see this we don't see a situation today, where any work is lost.
Please turn to slide four.
On the last call, we highlighted our transformation plan with a focus on increasing our organizational commitment to accelerate sales growth profit and drive free cash flow.
I'm proud to say, we've already made early but meaningful progress on all three of our commitments and have been steadily progressing along with our five goals first the team.
We are committed to strengthening our team and have done so with the additions of Tim and David as I've mentioned previously we.
We have the right people in place within our respective divisions to lead our transformation efforts.
Committed to winning short term and long term and modify our team as we go along and it's that type of formats.
Ken.
Our second priority is focused on exiting unprofitable work, specifically, a few legacy contracts that deliver negative value.
This process is underway and will continue to see incremental success as we exit those commitments in a prudent manner.
We also have pinpointed seven manufacturing facilities that need improving that.
Let me be clear that this is about improving performance and improving the quality of the work we take on and we're taking aggressive actions to improve performance. As previously stated we see a path to improving our profitability by greater than $10 million on an annual basis. Following our work, but we have only just begun.
Number three our third goal is focused on bringing more organizational rigor to cost.
Cost reduction and optimization have been a priority for us from the beginning.
And we have already seen some early successes with our initiatives specifically in procurement we've.
We've eliminated numerous other non value added costs across the organization streamlined where appropriate and as I noted earlier, we recently launched a new total cost productivity program, which we're rolling out across our global footprint.
We have a lot more work to do here in our culture, we need to continue to shape, but we've made great strides in five short months already.
Number four our cost cutting efforts are also in line with our fourth goal of generating positive free cash flow.
We're currently cash flow positive on a trailing 12 months and we have a global culture. That's now more intently focused on driving a more profitable business for the future.
Number five and most importantly, our fifth goal is focused on accelerating our new business wins.
We've been working with our sales team to get more aggressive in their pursuit and we've managed to create more wins by leveraging our existing capabilities.
Almost doubling our new business wins sequentially.
We feel there's significant room for improvement as we enter new markets, but we've also we're also focused on utilizing our open capacity in existing markets to expand in areas, where we already have a presence in the market understand the value we bring.
So to summarize we've only had a few months to both develop and start to execute our transformation strategy and as you can see we've made very solid progress against the east each objective in the quarter with significant opportunity to continue enhancing the business incrementally as we move forward.
As depicted in the graph, we feel were only partially done with the transformation and we're looking forward to progressing further along all of these initiatives before we talk again in early 2024.
For the rest of my prepared remarks, I'd like to focus in on our commercial programs in the work. We're doing there is support both near term and long term growth.
Growth is the lifeblood of any small business like ours and many of our lead times can be protracted. So this is a critical area for us. Please.
Please turn to slide five where we have provided a brief snapshot of our new business wins.
We have built upon the initial momentum from the previous quarter and drove strong results with year to date, new business wins of 37 million.
Meaningful meaningfully from the $19 million in new business wins, we achieved through the first half of the year.
We have now won over 60, new programs across multiple industries and have a new pipeline with a focus on existing utilizing existing capacity in places.
Where we have know how in targeted markets.
And it is representative of our commitment to move and grow faster.
This will help drive immediate wins in new and existing opportunities.
We've also expanded the sales team to better leverage our expertise into new targeted markets.
Areas, where we are pursuing.
Include connector E M. I N E M F shielding electric power steering system components and braking system components.
As announced previously we're also reentering the medical market as we feel we can immediately utilize our current operations and capabilities and translate those into quick profitable wins.
While new business wins are a solid indicator of our early progress the best parameter.
For our successful commercial effort is reflected in our quotes for new business, which have materially increased in overall quantity, while also increasing in size.
Our expanded pipeline of quotes.
Aborted by our realigned sales team that's going to help support the trajectory of our new business wins and converting into consistent topline growth.
Overall, our team is aligned and we're prioritizing and moving faster and faster. We are seeing early signs of success with our strategy and we look forward to making more progress with new business.
We're also looking hard at our existing open quotes and we're calling some of the pipeline as I've mentioned in the chart here.
And our goal is to have it more focused that that has a higher probability of winning.
To showcase our early successes with new business I want to highlight one recent went on slide six.
We have a very strong expertise in complicated multi station progressive dye stamping.
Generally hard for competitors to replicate this often provides us with a distinct competitive advantage and key in certain key markets.
Recently, we leveraged our know how and with this differentiation to develop a set of new products and produced six unique connector shields and other related components used to prevent electromagnetic interference from high voltage currents onto a sensitive vehicle electronics. This product set has been gaining momentum it's a new prada.
Line for us.
And we're seeing immediate returns on this initial investment with significant room to expand the business with our current customers and other customers in the harvest and connector market.
As a result, we've recently ordered new prototyping testing and production equipment to further expand our offering here. This will lead and then into other shielding markets for sensitive electronic equipment as well.
Before I turn the call over to Mike.
Please turn to page seven.
Where I'll discuss.
Our current active proposal momentum.
We've been aggressively quoting our open capacity and have refocused and Upsized, our new business win program globally. We're doing this by shifting our focus onto highly probable business and towards better and new business.
This has shown immediate results over the last five months. It is clear on the chart on the slide.
Excluding diverse industries, we have grown our active proposals in all market segments, notably E V hybrid programs, an important space for us to continue expanding our presence globally.
And we have seen a growth of 43% sequentially and 60% year over year.
Notably this is yet to include medical where were we are boldly reentering the market upon the expiration of our prior noncompete.
We are proud of the business, we've won to date and we're confident in our pipeline and ability to take market share.
We see opportunities in the medical market in current segments, we serve and our focus on being bigger and moving faster is already showing great results in key targeted markets.
With that I'll now turn it over to Mike, who will walk us through our financials Mike.
Thank you Harold and good morning, everyone I'll start on slide eight.
Net sales for the quarter of $124 4 million was slightly down compared to the prior year period.
While we captured an additional $6 million of price versus last year. This benefit was more than offset by the impact of lower volume and to a lesser extent by foreign currency.
Also the current year results include a favorable customer settlement of $1 1 million.
From a profitability standpoint, our operating loss of $2 7 million was greater compared to the $2 1 million operating loss in last year's third quarter.
That said adjusted operating income for the third quarter was $3 6 million.
<unk> adjusted operating income of $2 5 million from the prior year, an increase of $1 1 million.
It's Harold highlighted adjusted EBITDA of $14 5 million was significantly above last year's $11 8 million.
We are seeing the impacts of cost reductions and facility closures and headcount reductions flow to flow through to our adjusted EBITDA.
Totaling approximately $4 million of benefit in the quarter versus the prior year.
We progress further through the year, we expect to continue to benefit from cost discipline as we aggressively address underperforming areas of the business and we continue to expect roughly $10 million in annual adjusted EBITDA improvement once all our actions are completed.
Turning to slide nine builds in our mobile solutions group increased three 7% versus the prior year period, improving by $2 8 million.
The increase was primarily driven by improved pricing the aforementioned customer settlement and foreign exchange effects, which were slightly offset by lower volumes.
Mobile solutions adjusted EBITDA of $9 5 million was an increase of $1 5 million from $8 million in the third quarter of 2022.
Stronger year over year, adjusted EBITA was driven in part by the customer a customer settlement.
Previously discussed as well as capturing the benefits of right sizing indirect labor support.
Demand for our mobile solutions and markets is expected to be steady in the fourth quarter, but we anticipate some weakness with the lingering impact of the UAW strikes and the impacts of a carry at the OEM level.
That said, we are focused globally and our new business wins performance has remained strong in China, where we're seeing growth as we enter into more non fuel applications on electric platforms.
We also anticipate anticipate continued operational improvement.
Turning to slide 10 power solution segment sales decreased 11% year over year, primarily driven by decreased auto component sales due to two key customers losing market share.
Further the segment's top line performance was impacted by general industrial component sales being lower due to lower capital spending across the market in response to rising interest rates.
Aerospace and defense sales were lower as well following the closures of Irvine, California in Taunton, Massachusetts facility.
Despite lower sales our facility closures right sizing indirect labor support and a retroactive material cost recovery from a supplier drove adjusted EBITDA of $8 3 million, which compared favorably to $7 1 million in the prior year.
I'd like to.
To congratulate the team here at <unk>.
Delivering a 17% increase in adjusted EBITDA on a topline decline of 11% was quite an accomplishment and it shows a strong commitment to the initiatives Harold outlined in our transformation strategy.
Looking ahead, we expect demand levels in the fourth quarter to remain consistent relative to what we have observed year to date with the UAW strike is impacting the fourth quarter slightly.
Potentially pushing out some demand into the first quarter of next year.
Demand signals, a strengthening for electrification and grid products and we have a focused effort to enter the global shielding market.
Now please turn to slide 11.
As Harold highlighted we are encouraged by our free cash flow generation in the period with trailing 12 month free cash flow of $17 million.
Working capital turns improved in the third quarter to five three turns from four eight in the previous quarter, marking the fourth consecutive period that we've improved upon those key efficiency metrics.
Consistently remaining free cash flow positive that's been one of the key goals, we have set with the team and going forward. It will remain an area of ongoing focus as we execute through our transformation.
Now turning to slide 12, you can see a snapshot of our balance sheet and liquidity metrics.
Net debt at the end of the third quarter was $137 7 million versus $147 9 million in the second quarter of 2023.
Our net debt to adjusted EBITDA ratio stood at 337 times at the end of the third quarter compared to 387 times at the end of the.
First quarter second quarter of 2023, cutting a full half turn from our leverage metrics sequentially.
We expect to continue to bring down our leverage ratio through cash generation improved profitability and reducing our debt and we remain on track to reduce our leverage to below three times in 2024, while maintaining proactive capital investments to fund our growth.
Our focus on free cash flow generation that doesn't kill it in part around our Capex strategy, which has an increased emphasis now on growth opportunities are.
Our capex spend in the third quarter was $4 1 million compared to $4 3 million in the prior year.
Please turn to slide 13 for our full year outlook consistent with many of our customers in pairs.
On our expectations for the remainder of the year, we are narrowing our range outlook for revenues and adjusted EBITDA, while raising our free cash flow expectation are.
Our outlook now reflects net sales in the range of $47 million to $497 million roughly flat to prior year adjusted.
Adjusted EBITDA in the range of $40 million to $44 million roughly flat to prior year.
And free cash flow in the range of $10 million to $14 million a significant improvement over last year's results.
Our guidance reflects overall stable demand become softness in Q4 due to the UAW strike impact and normal seasonality.
We are turning the corner in many aspects of the business and we're seeing immediate results.
Set out clear pathways for meaningful long term improvements to our result, and those efforts are incurred encouragingly already taking effect.
Our cost reduction activities and aggressive actions towards addressing unprofitable business.
Combined with more diligent inventory and working capital management are reflected in our profitability and free cash flow.
And we have seen increased results following our newly improved commercial strategy.
We feel our team has aligned operationally and commercially and we're looking forward to sharing this journey with all of you I will now turn the call back to operator for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And the first question will be from Rob Brown from Lake Street Capital markets. Please go ahead.
Hi, good morning, and congratulations on the early progress.
Thank you.
Got.
I guess first question is kind of on the the operating kind of improvements you're you said you're kind of in the early innings of that.
What's sort of the timing of getting through those is that a two year period here or a sense of kind of stuff.
The view on what's remaining here.
There's a couple of things that are underway.
We have we.
We have the problem plants, if you will but once the plants, we have seven plants that are in.
In aggregate together.
Losing around little greater than $10 million as we put in the deck here and then we have the overall program.
Our total cost productivity, which impacts all all plants.
Including the ones that make money. So that's underway. That's over 100 projects every plant is participating and then the seven and so that we have annual goals there and the seven plant that lose money we have.
Our game plan to cease that in 24, so we're not ready to say numbers, yet combined between us too.
Right.
It's a it's something that we're going to do over the next year.
We have firm plans in place, we're just not ready to say, we're not ready to say much about 24 yet.
Okay. Okay fair enough that's a good could I wonder what you you've given us.
On the switching side of the market environment.
You know you mentioned evs fairly active in terms of coating are you still seeing strong kind of demand there.
You know how is that market.
And into the next.
Period here, Yeah, where our markets are growing so we're we're definitely in growth markets and.
With a hole on the power side of our business, which is tied into.
Electricity and wed in electrical products, there's a there's just a general natural.
Low single digit kind of base demand improvement and then on the vehicle side on the mobile side, its a very flourishing environment for innovation.
With all the we are focused upon vehicle control vehicle automation.
Michigan reduction in greenhouse gas reduction so.
Whether it's an internal combustion engine platform or a hybrid or electrical and theres a lot of innovation and so innovation at the at the carmaker vehicle maker level.
It was down to us and that we see more opportunities to quote on so it's a it's a robust environment for us on for the whole company and on both sides of our company and of course a medical.
Medical has been growing all along here.
We've just been in the tool part of it if you look at the <unk>.
Title page of our deck here today, you'll see in the upper right of a tool that we make.
That's a spinal tool for inserting a rod antal spine. So we've been in the tool business.
All along but we've had a noncompete with the sale of our life Sciences business three years ago, almost exactly I'm, a reentering that so that is a naturally growing market as well so.
Where we have robust opportunity environment that we're participating in.
Okay.
Okay, Great and then and then on the reentry into the medical.
Area.
How how you sort of see that playing out I know you're early into it but what's the sales cycle. There how do you know what.
What sort of areas are you looking at first maybe how long to revenue ramps in that in that area.
For us we're gonna be able to short circuit. Some of this because we know the business already and we still have facility approvals and equipment approvals and people know the business. So.
I think it would be a very lengthy entry for someone that didn't know the business already or who are who wasn't already in it. So.
Bye.
Given that we were in the in the tool business still through this whole period, where an approved supplier.
And a lot of participants in the industry. So.
Generally it's it's a little difficult to become an approved supplier you have to go through a validation process. So phase one for us as they go into accounts, where I already where we are already approved and expand what we're selling.
And to the <unk>.
<unk> pieces, the machine pieces drill bits.
Bone plates.
And other items that we had to accident and stay out of when we sold a life sciences business. So.
For US phase one has to go on we're already approved and expand the products that we make and then number two is to expand into other customers. So we're able to immediately get into we're already quoting.
Quoting business side of a very high level its not in our pipeline yet because we're not through the cycle, but we.
We immediately hired a vice president of sales in North America, and we're looking for a vice president of sales.
In Europe, and we're looking for a leader of sales in China also so we're we're entering it globally.
Okay. Thank you for all the color I'll turn it over.
Welcome. Thank you.
Thank you and once again, if you'd like to ask a question. Please press Star then one.
Okay.
Ladies and gentlemen, this concludes our question and answer session I will now turn the conference back over to Harold Bevis for any closing remarks.
Yeah, I'm looking at excuse me, but I'm looking at the details here on our screen and I think we have one more question.
Yeah, just as I was concluding a it looks like we have Tom Kurt to join US from Zacks investment research. So Tom Curb. Please go ahead with your question.
Good morning, guys, sorry about that my Star one wasn't working.
A couple of quick ones on the transformation plan in terms of the seven plants are losing 10 million just back to that is that would that be just operational improvement or would that include shutdowns, possibly or everything.
We're not gonna have to shut down its mainly the result of bad contracts.
So I I saw this movie before at my last company not correcting.
Customer contracts going through Covid, and the disruption that happened in supply chain.
And that that's number one so its pricing and cost.
We don't foresee plant closures right now not against it but don't don't foresee it so for US we believe that we can fix all seven plants.
Right, where they sit today like.
Like everything there's some are harder than other we have we have one plant that really it's a hard one it we're still going through 10, French or chief operating officer is very focused on this with the with the teams, but we built I think that our footprint is pretty good I like it and so.
We liked to fix it where it is in and fill it up with new <unk>.
New business, though we have our our growth program is tethered to the plants, where they set and we're quoting the capacity where it is so we have.
Have a base case to fix every plant right where it is.
Okay sounds good one.
The comments in the presentation was on the industrial side, where there's lower capital market spending due to increasing interest rates.
What does that mean does that mean, they're financing capital spending through borrowing or are you just saying that interest rates are taken away from free cash flow.
Can you repeat that one more time.
The one of the comments was.
I think I quoted general industrial components sales or we'll do a lower capital spending.
An increasing rate environment.
What does that mean exactly.
Well I can just tell you what we're doing we're going to.
You touched on a couple of things there, where we are going to spend the same amount of capital that we have been.
We're more aggressively using or more aggressively quoting the existing capacity that we have where it's dead.
But in cases, where we're pursuing growth prospects that require capital.
We're being careful.
Two.
Balance our portfolio between mobile and.
Power.
And we're also being careful to balance our.
Our vehicle portfolio across the powertrains of of combustion engine hybrid.
And <unk>.
Electrical for the specifics here, Mike I'll turn it over to you.
Tom I think the comment is.
Driven by the same cautious behavior on our customer parts, but that Harold is talking about on our part in terms of.
<unk> reduced.
Capital investment in new programs, which is translating to some near term softness for us.
Just given the uncertain interest rate environment and higher interest rate costs that we're seeing.
Alright, okay.
Couple of more quick ones a professional memory on free cash flow uses are you allowed to use it besides anything besides debt pay down.
Share buybacks or dividends.
We are there there are restrictions under our credit agreement, but there is a excess cash flow calculation that could come into play depending on our our cash generation that that could require a pay down on the term loan and then Theres also restrictions on things, we can do from a capital standpoint.
Based on leverage ratios and other <unk>.
Considerations, but.
As long as we satisfy those requirements, we have the flexibility to expand our free cash flow.
But.
Okay.
Quick ones in the UAW strike just had a few millions slip into the first quarter from the fourth quarter develops let's say all the profits correct.
Well the volume of peg margin with it so.
I just I think this is my third strike I've gone through and in each case. It was primarily a timing issue because there were still demand for the vehicles and so then the vehicle makers had to get caught up so put it all I can little kink in the supply chain.
So we're gonna be going through that.
So there's nothing formally changed in our supply chains, yet at any of our signal from here Adi's signal.
And the UAW has gone to ratification processes and it varies by.
By OE, but.
It's possible that we have some volume move from Q4.
For Q1, but it's not a big number but it'll take margin lift that of course.
And just to be able to wherever that might move in and that we we don't see that it is yeah. We're just saying it's a risk.
Okay last quick one do you guys have any operations or sales or business in the middle East region or Israel region.
We do not we do.
Not well it's.
It's a terrible thing that's happening there, but where we're not impacted our company is not impacted by it.
Okay. That's all I have for do they thanks.
Thanks, Tom Thank you.
And the next question will be from Barry Haimes from Sage asset management. Please go ahead.
Hi, Thanks, so much for taking my question I had one quick question.
Can you hear me.
Yes.
Okay, Great I had one quick question on the.
Unprofitable or very low profitable contracts could you talk about how many of those there are and what sort of duration there is.
I'm Harkening back parallel to your.
Private pay.
Previous situations, where some of those trucks.
Contracts lasted for a while before you get out of them. So I would love to get some color around you know what kind of duration, we're looking at thanks.
Yeah very good question.
And you're correct that the contracts have a notification period.
It crosses you yeah, how many how many customers.
Does it involve good grief I had I don't know that but it's.
Our estimate is that it's between 10 and 20.
And.
We also have a situation where my predecessor.
Did notify a few of the big ones before I got here so their notification varian has begun.
And as I stated earlier on one of the questions I think it was to Rob.
We're acting upon all of them were actively engaged on all of these matters right now and.
And our goal is to make significant improvement during 'twenty four.
No.
I don't believe there's a contract that would push us into 'twenty five but.
We have to use our judgment because a lot of these situations are with customers that where we make money in one place and lose money in one and you have to kind of negotiate the whole deal. So they require.
A negotiated outcome, but we have a base plan underway right now that that's within our control.
And we will deliver significant improvement to our current run rate said differently. The currently the results where we reported.
Have a big loss within them you know so we're trying to rectify that.
They got the double win for US Barry would be it will be when I don't want to do we get rid of that problem, but we refill the capacity with profitable business. So it's good capacity.
And we intend to use it and new business pursuits.
Great. Thanks, so much and congrats on all the progress so far.
Thank you Barry.
And our next question is from Peter Sidoti from Sidoti and company. Please go ahead.
Hey, two quick questions, what's the economic assumptions you are making for the next 12 to 18 months.
Just for the general economy.
Okay.
So.
Thank you for joining Peter I know you're busy man.
Sure.
Our outlook for vehicle production for our new vehicle outlook.
You, probably know them very well the commercial vehicle outlook for slightly less.
Heavy duty trucks, but.
Stable.
Medium duty work trucks on.
On the passenger vehicle side, it's going to be heavily dependent on rate, but we adopt third party outlooks on vehicles, which is a steady outlook for us.
Overall globally it varies by market in China.
Thankfully, we're tethered to the electric vehicle government mandates that are underway and so we're benefiting from that both in new business and existing business.
In Europe, we have a smaller business.
And it's steady and in Brazil.
Where do you have a nice business there and several big.
Big always that we're partnered with it with that.
The product the platform vehicle platforms were on our growth platforms and in North America.
It's where our sport as a company.
Where where we're going with the market evolution were not placing a bet on the type of vehicle powertrain. So we're balancing our portfolio between a combustion engine hybrid and electric so that no matter, who the end customer choice and.
We have an ability to win there and so what.
That's a big thing that the transformation plan is doing is balancing.
Our Ford Raskin, So we're being very careful to tether ourself to growth platforms overall vehicle.
As you know.
Right now theres not a lot of firm.
Firm outlooks, but we're basically assuming in North America, a stable number of vehicles made.
Okay and my other question is.
You've been you've played this game before.
As it relates to turn around how does this one right to the ones you've worked in the past.
And what's the timing in terms of when do you think you'll get to you know what do you mean are you wait.
How much what's the timing on finishing what do you want to get too.
Yeah. Good question, Peter we're right at the front end very front end.
And.
This particular company had.
A lot of.
Operational opportunity to improve on on flat sales so.
The results, we just turned in as Mike mentioned had had a.
What was it $4 million in the quarter, Mike versus prior year of cost out correct Yep.
So big number and we're still we're still going after that number and on top of it.
Company was rolling with money, losing situations.
And so.
The juice, if you will on the existing business as it is it is bigger than normal bigger than normal. So there's a there's a larger opportunity than normal to grow profit without hitting a home run if you will in the sales arena.
On the sales side, its a little harder than normal norm then my prior.
Prior company, Peter because we weren't aligned properly that's very fixable and work and we're doing that right now hiring people swapping out people. So.
Degree of difficulty.
As in the prior company, where I led the turnaround there and what you know of it's I'd say.
Slightly easier got here slightly easier we have a great team.
We have great products.
We're really good at what we do we make sub micron level machine parts and stamp parks.
In other words at the nano nanometer level Submicron, so not very amazing people can do that we're vertically integrated.
Or digging in on this medical thing so.
I believe that are weaker.
We have strong profit potential here.
Stronger than the last company I like that because they were not vertical mainly an assembler were vertical and what we do and so we control our own destiny as a manufacturer so I think that our profit.
Ah can benefit from that.
And given that we had so much opportunity.
If you will not optimized for when I came in the door was not optimized operationally not and so we turn France has done this before.
David Harrison has I have and the team here we've rallied together.
And you can see one quarter it made a big difference so we're committed to.
Keeping on with that and adding to it new wins and so.
I believe it's very doable, Peter and it's not going to take forever.
But we'll have to report results as we go.
Okay. Thank you very much sir.
Thank you Peter.
And ladies and gentlemen, this does conclude our question and answer session I would like to turn the conference back over to Harold Bevis for any closing remarks.
I appreciate it and thank you to the investors on the phone and thank you for.
Being patient with N N in and investing in our company, we very much believe in the words that we spoke on behalf of the team today, and we look forward to delivering against our plans and exceeding your expectation.
With that we'll conclude our call for today, Chad and thank you Sir The conference has now concluded. Thank you for attending today's presentation. You may now disconnect take care.
Right.
[music].