Q4 2023 NN Inc Earnings Call

Operator: Good day, and welcome to the NN Inc. fourth quarter 2023 earnings conference call. All participants will be in listen-only mode.

Good day.

Welcome to the <unk>.

Fourth quarter 2023 earnings conference call.

All participants will be in listen only mode.

Operator: 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 on your telephone keypad. To withdraw your question, please press star then 2.

Should you need assistance. Please signal 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 you May press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

Operator: Please note, today's event is being recorded. I would now like to turn the conference over to Stephen Poe with Alpha IR Group. Please go ahead, sir.

Please note today's event is being recorded.

I would now like to turn the conference over to Steven Pro with the Alpha IR Group. Please go ahead Sir.

Stephen Poe: Thank you, operator. Good morning, everyone. And thanks for joining us. I'm Stephen Poe, Investor Relations Contact for NN Inc., and I'd like to thank you for attending today's business update. Last evening, we issued a press release announcing our financial results for the fourth quarter and full year ended December 31, 2023, 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 or the supplemental presentation, they may contact Alpha IR Group at nnbr@alpha-ir.com.

Thank you operator, good morning, everyone and thanks for joining us I'm, Stephen Powell Investor Relations contact for Ann Inc, and I'd like to thank you for attending todays business update last evening, we issued a press release announcing our financial results for the fourth quarter and full year ended December 31, 2023, as well as the supplemental presentation, which has been posted on the <unk>.

Stir 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 MBR at Alpha Dash IR Dot com.

Stephen Poe: Our presenters on the call this morning will be Harold Bevis, President and Chief Executive Officer, and Mike Felcher, Senior Vice President and Chief Financial Officer. Tim French, our Senior Vice President and Chief Operating Officer, will also join us for the Q&A portion of the call. 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, the risk factors section in the company's annual report form 10-K for the fiscal year ended December 31, 2023. The same language applies to comments made on today's conference call, including the Q&A session, as well as the live webcast.

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, Tim French our senior Vice President and Chief Operating Officer will also join us for the Q&A portion of the call.

Please turn to slide two where you'll find our forward looking statements 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 one filed the risk factors section in the company's annual report Form 10-K for the fiscal year ended December 31 2023.

The same language applies to comments made on today's conference call, including the Q&A session as well as a live webcast.

Stephen Poe: 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, cash and 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 on 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 certain non-GAAP measures as defined by SEC rules.

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 cash and cost savings to future operating results performance of our worldwide markets general economic conditions and economic conditions.

The industrial sector, the impacts of the pandemic and other public health crises and military complex on 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 kind of base control.

Presentation also includes certain 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.

Stephen Poe: The reconciliation of such non-GAAP measures is contained in the tables in the final section of the press release in the supplemental presentation. Please turn to slide three, and I will now turn the call over to our CEO, Harold. Thank you, Stephen. And good morning, everyone.

Please turn to slide three and I will now turn the call over to our CEO Harold beat Us.

Thank you Stephen and good morning, everyone.

Harold C. Bevis: Before reviewing our results for the quarter and full year, I'd like to thank and recognize all of our NN team members globally for their ongoing commitment to delivering on our business transformation strategy. Our collective efforts were evident in our 2023 results, as a renewed culture of winning new business, increased accountability, and strong focus on operational excellence yielded quick improvements in our EBITDA, free cash flow, and new business results. Our momentum is clearly building, and we're proud of how hard our associates have embraced the necessary changes that NN needs to make. Look at slide three in your deck.

Before reviewing our results for the quarter and full year I'd like to thank and recognize all of our N N team members globally for their.

Our ongoing commitment to delivering on our business transformation strategy our.

Our collective efforts were evident in our 2023 results as it renewed culture of winning new business increased accountability and strong focus on operational excellence have yielded quick improvements in our EBITDA free cash flow of new business results.

Momentum is clearly building and we're proud of how hard our associates have embraced the necessary changes that and it needs to make.

Looking at slide three in your deck.

Harold C. Bevis: Our results were largely in line with our expectations. Net sales were $113 million and $489 million for the fourth quarter and full year, respectively. These results were down slightly compared to the prior year, due in part to the closing of some underperforming facilities earlier in 2023, as well as our strategic decision to exit certain unprofitable business areas. Those decisions allowed us to deliver strong adjusted EBITDA results, delivering $10 million for the quarter and $43 million for the full year. The EBITDA performance helped drive free cash flow of $12 million in 2023, which was up $21 million year over year. As we have stated since the launch of our transformation plan, we have reset the thinking on cash flow generation, and that imperative is now ingrained in the company.

Our results were largely in line with our expectations.

Net sales were $113 million and 489 million for the fourth quarter and full year, respectively. These results were down slightly compared to the prior year due in part to the closing of some underperforming facilities earlier in 2023.

As well as our strategic decision to exit certain unprofitable business areas.

Those decisions allowed us to deliver strong adjusted EBITDA results, delivering 10 million for the quarter and $43 million for the full year.

The EBITDA performance helped drive free cash flow of $12 million in 2023, which was up $21 million year over year.

As we have stated since the launch of our transformation plan, we reset the thinking on cash flow generation and that imperative is now ingrained in the company.

Harold C. Bevis: While we're seeing immediate improvements in our EBITDA and free cash flow performance, it's important to note that our top-line expansion efforts to win more business are on track, but take a little more time to fully flow into the reported results, and we continue to address and fix underperforming areas of the company globally while simultaneously executing refresh and refocus growth initiatives. Our expanded growth program includes the launch of two internal startup programs. We call them Connect and Protect and NN Medical, both of which are headed up by new leadership that brings extensive experience and capabilities.

While we're seeing immediate improvements in our EBITDA and free cash flow performance. It's important to note that our topline expansion efforts to win more business are on track.

Take a little more time to fully flow into the reported results.

And we continue to address and fix underperforming areas of the company globally, while simultaneously executing refresh and refocus growth initiatives are.

Our expanded growth program includes the launch of two internal startup programs, we call them connect and protect and in medical.

Both of which are headed up by new leadership that bring extension extensive experience and capabilities.

Harold C. Bevis: Our Connect and Protect program is already generating solid new business wins that will contribute to our revenue growth in the coming year and helps us balance our vehicle platform participation across powertrain types. Given that our newly relaunched NN Medical Division is being built from the ground up and from a dead start, our traction and growth through this program is likely to be more evident in our 2025 top-line result. But all in all, we were able to deliver approximately $63 million in new awards in 2023, which was up over 50% compared to the prior year.

And that can protect program is already generating solid new business wins that will contribute to our revenue growth in the coming year and helps us balance our vehicle platform participation across powertrain types.

Given that our newly relaunched in medical Division is being built from the ground up and from a from a dead start our traction and grow through this program is likely to be more evident in a 2025 topline results.

But all in we were able.

To deliver approximately $63 million in New awards in 2023, which was up over 50% compared to the prior year.

Harold C. Bevis: Our momentum is building here, and we have organized to prospect, quote, and win at certain hit rates. Please turn to slide four. I'd like to provide an update on our transfer formation plan, which we unveiled roughly halfway through last year. As a reminder, our goals have been focused on strengthening our leadership team, overall accountability, fixing unprofitable areas, expanding our margins, driving consistent annual free cash flow, and winning a bid. We're only a few months into this plan, really, and in the first phase. We are having early success, and we believe that there is significantly more value to drive as we look forward. Let's talk, let's talk for a quick update.

Our momentum is building here and we are organized to prospect quote.

When a certain hit rates and continue at this rate.

Let's turn to slide four.

I'd like to provide an update on our transfer formation plan, which we unveiled roughly halfway through last year.

As a reminder, our goals had been focused on strengthening our leadership team overall accountability fixing unprofitable areas expanding our margins driving consistent annual free cash flow and winning new business.

We're only a few months into this plan really and in the first phase.

We're having early success and we believe that there are significantly more value to drive as we look forward.

Let's talk let's talk real quick update.

Harold C. Bevis: We've made some early additions and changes to the leadership team and the second level of leadership, and we have more to go. We've already changed out about 20% of our plant managers and have added multiple experts in both operational and commercial areas. As we continue to progress and perform at higher levels and reset our goals higher, we will continue to upgrade our team. This is ongoing and inevitable.

We've made some early additions and changes to the leadership team and then the second level of leadership and we have more to go we've already changed out about 20% of our plant managers and have added multiple experts in both operational and commercial areas as we continue to progress and perform at higher levels and reset our goals higher we will.

To upgrade our team this is ongoing and inevitable.

Harold C. Bevis: Second, NN remains committed to isolating and fixing the unprofitable parts of the company. As previously mentioned, we have approximately $100 million of business that loses $10 plus million of EBITDA. It's centered in seven plants but touches a lot of customers, many of which are customers and other moneymakers. So this is complicated to fix and requires customer notifications and engagement.

And then remains committed to isolating and fixing the unprofitable parts of the company.

As previously mentioned, we have approximately $100 million of business there.

It loses a 10 plus million of EBITDA is centered in seven plants, but touches a lot of customers many of which are our customers and other money, making plants. So this is complicated to fix and requires customer notifications and engagement.

Harold C. Bevis: This initiative is fully underway at all plants and is a pillar of our 2024 EVA-DA Improvement Goals. Third, we are intently focused on cost productivity and improving our overall margin profile in our healthy plants as well. Cost reduction and optimization is a top priority for our teams, and I'm proud to say that we delivered cost savings in 2023 with a targeted program that has now been expanded going into 2024.

This initiative is fully underway at all plants and is a pillar of our 2024 EBITDA improvement goals.

Third we are intently focused on cost productivity and improving our overall margin profile in our healthy plants as well cost reduction and optimization is a top priority for our teams and I'm proud to say that we delivered cost savings in 2023 with targeted program.

Has now been expanded going into 2024.

Harold C. Bevis: While we are proud of the cost savings we delivered in the early days of the transformation, there are lots of opportunities. We continue to identify cost reduction opportunities as we go along across the organization and drive margins higher this year. Next, our team is very committed to free cash flow generation in the business. We will deliver free cash flow in 2024 again. Our transformation program helped generate significant improvements in the back half of 2023, and we expect this to continue through 2024 and into 2025, which supports our stated goal of debt reduction and a future refinancing of our outstanding debt. Mike will cover this in greater detail when he speaks.

While we're proud of the cost savings we delivered in the early days of the transformation, there's lots of opportunities here.

Continue to identify cost reduction opportunities as we go along across the organization and drive margins higher this year.

Our team is very committed to free cash flow generation in the business.

We will deliver free cash flow in 2024 again, our transformation program helped generate significant improvements in the back half of 'twenty three and we expect this to continue through 2024 and into 2025, which supports our stated goal of debt reduction and our future refinancing of our outstanding debt.

Mike will cover this in greater detail when he speaks.

Harold C. Bevis: And lastly, new business winds are becoming core to our culture at NN, and accelerating the growth of these winds is key to our transformation plan. We won a record level of new business awards in 23 for $63 million, as I mentioned. And this positive momentum is continuing into 2024.

And lastly, new business wins are becoming core to our culture and in and accelerating the growth of these wins is key to our transformation plan.

We won a record level of new business Awards, and 23 at $63 million as I mentioned and this positive momentum is continuing into 2024.

Harold C. Bevis: We're growing with both new and existing customers. Our sales team is growing also and expanding its commercial reach. And we have multiple initiatives in place, as I spoke. So, in summary, we're in the early stages of a transformation.

We're growing with both new and existing customers. Our sales team is growing also and expanding its commercial reach and we have multiple initiatives in place as I spoken.

So in summary, we're in the early stages of a transformation.

Harold C. Bevis: And while we're proud of the progress that we made in the second half of 23, we feel that we're just really at the beginning of value creation here, and we're looking forward to progressing further along these initiatives and reporting to you as we deliver results. Please turn to page 5. We'd like to speak a little bit more about the new business and give you a couple highlights. We delivered record annual new business wins, as we mentioned, on a multitude of product platforms, particularly in the second half, as we ramped up and focused more acutely on winning new business. We won business from 60 programs across new and existing customers, and our new wins exhibit a healthy balance across multiple end markets, which are highlighted on this slide. Additionally, and more importantly, profitability on the new winch is accretive to our company average at full production rates. And, although small, we've had our first medical win with a top orthopedic products company, and we're pretty proud of that. Moving to page 6, we showcase one of the new markets that we're entering, electrical connectors and electrical shielding.

And while we're proud of the progress that we've made in the second half of 'twenty three we feel that we're just really at the beginning of value creation here and we're looking forward to progressing further along these initiatives and reporting to you as we deliver results.

Please turn to page five.

I would like to speak a little bit more about the new business.

Give you a couple of highlights.

We delivered record annual new business wins, as we mentioned on a multitude of product platforms, particularly in the second half as we ramped up and focus more acutely on to winning new business.

We've won business from 60 programs across new and existing customers and our new wins exhibit a healthy balance across multiple end markets, which are highlighted on this slide.

Additionally, and more importantly profitability on the new ones is accretive to our company average at full production rates.

Although small we've had our first medical win with a top orthopedic products company and we're pretty proud of that.

Moving to page six we showcased one of the new markets that we're entering electrical connectors and electrical shielding.

Harold C. Bevis: We've participated in this market historically to a very limited degree, but we believe it represents a great future opportunity given our skill sets and our operating assets. This is a market we're very well positioned to grow. We have very strong expertise in precision-engineered metal products, and especially multi-station progressive die design, plating, and deep knowledge of electrical components, and these are competitive advantages which differentiate us, and when coupled with a skilled and knowledgeable sales force, are leading to some early victories.

We've participated in this market historically to a very limited degree but.

But we believe it represents a great forward opportunity given our skill sets and our operating assets.

This is a market, we're very well positioned to grow.

We have a very strong expertise in precision engineered metal products, and especially multi station progressive dye design.

Plating and deep knowledge of electrical components, and these are competitive advantages with IFF, which differentiate us and when coupled with our skilled and knowledgeable sales force is leading to some early victories here.

Harold C. Bevis: And as we look to 2024, we're using the same approach to reenter the medical products market by adding knowledgeable leaders to take advantage of our existing capacity and targeting specific new customers. Our early conversations with potential customers are exciting and eye-opening, and And we are entering this market in a patient manner so that we build a solid business foundation and deliver great operational results as we go along growing. And over the long term, we thoroughly expect this to become a market leadership business for us. And it will help us support strong and consistent long-term growth. With that, I'd like to turn the call over to Mike, if you flip to page 7, where Mike will walk us through the financials. Thanks, Harold. Good morning, everyone.

And as we looked at 2024, we're using the same approach to reenter the medical products market by adding knowledgeable leaders take advantage of our existing capacity and targeting specific new customers. Our early conversations with potential customers are exciting and eye opening.

And large and we're entering this market in a patient manner. So that we built a solid business foundation and deliver great operational results as we go along growing.

And over the long term, we thoroughly expect us to be to become a market leadership business for us and it will help us support strong and consistent long term world.

With that I'd like to turn the call over to Mike If you could flip to page seven where Mike will walk us through the financials Mike.

Thanks, Harold and good morning, everyone I'll start on slide seven where we will detail our results for the fourth quarter.

Michael C. Felcher: I'll start on slide seven, where we will detail our results for the fourth quarter. Net sales for the quarter of $112.5 million were down 4.6% compared to last year's fourth quarter. While our discipline on pricing helped drive an additional $5 million benefit to the top line versus last year's fourth quarter, this pricing strength was more than offset by the impact of lower sales volume, driven in part by $3 million associated with the closure of our Tonten and Irvine facilities. Looking to profitability, our operating loss of $7.9 million improved by $3.1 million compared to the $11 million operating loss in last year's fourth quarter. On an adjusted basis, our fourth-quarter operating loss was $1.4 million, which also improved compared to the adjusted operating loss of $3.3 million seen in the prior year.

Net sales for the quarter of $112 5 million were down four 6% compared to last year's fourth quarter.

While our discipline on pricing helped drive an additional 5 million benefit to the top line versus last year's fourth quarter. This pricing strength was more than offset by the impact of lower sales volume.

Driven in part by $3 million associated with the closure of our Taunton in Irvine facilities.

Looking to profitability are up operating loss of $7 9 million improved by $3 1 million.

So the $11 million operating loss in last year's fourth quarter.

On an adjusted basis.

Fourth quarter operating loss was $1 4 million.

Which also improved compared to the adjusted operating loss of $3 3 million seen in the prior year.

As Harold referenced earlier adjusted EBITDA results of $10 million grew by $2 2 million or 28% versus last year's $7 8 million result.

Michael C. Felcher: As Harold referenced earlier, adjusted epidural results of 10 million grew by 2.2 million, or 28%, versus last year's 7.8 million results. Our profitability results reflect the impact of the early transformative initiatives we've applied to our operations, including targeted cost reductions and better operational planning. These efforts allowed us to improve profitability despite lower volume. Our cost savings efforts contributed approximately $3 million of benefit in the quarter, and the closures of the Bataan and Irvine facilities contributed approximately $2 million of benefit.

Our profitability results reflect the impact of the early transformative initiatives, we've applied to our operations.

Including targeted cost reductions and better operational planning.

These efforts allowed us to improve profitability despite lower volume.

Our cost savings efforts contributed approximately $3 million of benefit in the quarter and the closures of baton in Irvine facilities contributed approximately $2 million of benefit.

We also had favorable overhead absorption of about $1 million compared to the prior year.

Our consolidated adjusted EBITDA margin results expanded by 230 basis points to eight 9% versus last year's fourth quarter.

Michael C. Felcher: We also had favorable overhead absorption of $1 million compared to the prior year. Our consolidated adjusted EBITDA margin results expanded by 230 basis points to 8.9% versus last year's fourth quarter. Turning to slide eight, I'll summarize our full year 2023 financial performance. For the full year, net sales were $489.3 million, a number that declined marginally relative to the full year, the six million impact from the previously mentioned facility closures, and a one million negative impact from foreign currency translation. Additionally, while both periods included favorable customer settlements, the impact was $2 million lower on a comparative basis. These negative impacts were partially offset by our continued efforts to drive pricing to recover inflation, representing approximately $31 million for the full year. Our gap operating loss for 2023 totaled $21.8 million, which marked a marginal increase in net loss of $0.7 million.

Turning to slide eight I'll summarize our full year 2023.

Financial performance.

For the full year net sales were $489 3 million number that declined marginally relative to full year 'twenty.

The 6 million impact from the previously mentioned facility closures and a 1 million negative impact from foreign currency translation.

Additionally, while both periods included favorable customer settlements.

The impact was $2 million lower on a comparative basis.

Negative impacts were partially offset by our continued efforts to drive pricing to recover inflation, representing approximately $31 million for the full year.

Our GAAP operating loss for 2023 totaled $21 8 million, which marked a marginal increase in net loss of zero point $7 million.

Michael C. Felcher: On an adjusted basis, our full-year operating income results of $3.1 million grew by $1.2 million versus the $1.9 million of adjusted operating income in the prior year. Full-year adjusted EBITDA results of $43.1 million are down $0.8 million compared to the $43.9 million of adjusted EBITDA generated in full year 2022. Our adjusted EBITDA results were driven largely by the same items that impacted our net sales performance with lower overall net sales volumes and the impact of lower customer settlements in 2023. However, these headwinds were largely offset by the positive impacts of the facility closures and a benefit of approximately $5 million attributable to cost-out actions and improved operating performance, further supported by favorable overhead absorption of approximately $2 million. These efforts led to adjusted EBITDA margins that were flat to the prior year at 8.8% of revenue.

Adjusted basis, our full year operating income results of $3 1 million grew by $1 $2 million versus the $1 9 million of adjusted operating income in the prior year.

Full year adjusted EBITDA results of $43 1 million.

<unk> 0.8 million compared to the $43 9 million of adjusted EBITDA generated in full year 2022 or.

Our adjusted EBITDA results were driven largely by the same items that impacted our net sales performance with.

Lower overall net sales volumes and the impact of lower customer settlements in 2023.

These headwinds were largely offset by the positive impacts of the facility closures and a benefit of approximately $5 million attributable to cost out actions and improved operating performance further supported by favorable overhead absorption of approximately $2 million. Please.

These efforts led to adjusted EBITDA margins that were flat to the prior year at eight 8% of revenue.

As we move into 2024, our focus on attacking any and all underperforming areas of the business. We will continue to anchor our priorities as part of a multiyear transformation effort.

In particular, we expect to see a more pronounced pull through of the impacts from our operational improvement initiatives and.

Michael C. Felcher: As we move into 2024, our focus on attacking any and all underperforming areas of the business will continue to anchor our priorities as part of a multi-year transformation effort. In particular, we expect to see a more pronounced pull-through of the impacts from our operational improvement initiatives and total cost productivity programs, with those results accreting more thoroughly to our profitability figures, as many of these only began benefiting us in the third and fourth quarters of 2023. As we have stated in the past, we remain committed to capturing an additional $10 million in adjusted EBITDA improvement once all our actions are completed. Turning to slide nine, sales in our mobile solutions segment, which covers our machine products business, increased by 1.8% versus the prior year fourth quarter, improving by 1.2 million to 69.2 million for the period. The increase was primarily driven by improved pricing and foreign currency translation, partially offset by the impact of lower sales.

Total cost productivity programs, where those results are creating more thoroughly to our profitability figures as many of these only began burning benefiting us in the third and fourth quarters of 2023.

As we have stated in the past we remain committed to capturing an additional $10 million and adjusted EBITDA improvement once all our actions are completed.

Turning to slide nine sales in our mobile solutions segment, which covers our machine products business increased one 8% versus the prior year fourth quarter.

Improving by $1 2 million to $69 2 million for the period.

The increase was primarily driven by improved pricing and foreign currency translation, partially offset by the impact of lower sales volume.

Profitability in the mobile solutions segment grew versus last year's fourth quarter as the segment's adjusted EBITDA results of $7 1 million increased by $1 7 million compared to the $5 4 million in the fourth quarter of 2022.

Thats improved quarterly adjusted EBITA was driven in part by a positive shift in our overall sales mix across our machine parts products as well as the observed benefits of stronger operating performance at multiple facilities.

Michael C. Felcher: Profitability in the mobile solution segment grew versus last year's fourth quarter as the segment's adjusted EBITDA results of $7.1 million increased by $1.7 million compared to $5.4 million in the fourth quarter of 2022. This improved quarterly adjusted EBITDA was driven in part by a positive shift in our overall sales mix across our machine parts products, as well as the observed benefits of stronger operating performance at multiple facilities and our cost and productivity program. Looking back on the year, we were able to perform in line with our original expectations against our plans to generate and deliver new business wins, which gives us a strong platform to build upon as we enter 2024. Additionally, we're pleased by the traction we're seeing from our China-based operations, as this area within our mobile solutions business has demonstrated solid momentum and new business wins. We are capturing attractive growth as we enter into more non-fuel applications on electric platforms, helping the China business perform ahead of our original plan.

Our cost and productivity programs.

Looking back on the year, we were able to perform in line with our original expectation against our plans to generate and deliver new business wins, which gives us a strong platform to build upon as we enter 2024.

Additionally, we're pleased by the traction we're seeing from our China based operations as this area within our mobile solutions business has demonstrated solid momentum and new business wins.

We are capturing attractive growth as we enter into more non fuel applications on electric platforms, helping the China business performed ahead of our original planning.

Regarding our efforts within the business to grow and deliver new business wins, which set of attractive growth targets for the business.

Once we are very capable of achieving.

Our efforts will ultimately be supported by the stronger and improved global sales team that we have.

Been able to expand and enhance over the recent months.

They're supplemented by the addition of new digital sales and lead generation tools, including our recently launched SCO and targeted marketing efforts.

We expect to continue seeing the benefits of our efforts to improve overall operating productivity and structurally improve our costs as we progress through 2024 in conjunction with our multiyear improvement plan.

Michael C. Felcher: Regarding our efforts within the business to grow and deliver new business wins, we've set attractive growth targets for the business, ones we believe we are very capable of achieving. Our efforts will ultimately be supported by the stronger and improved global sales team that we have been able to expand and enhance over the recent months, further supplemented by the addition of new digital sales and lead generation tools, including our recently launched SEO and targeted marketing app. We expect to continue seeing the benefits of our efforts to improve overall operating productivity. Thank you very much, turning to slide 10, in the power solution segment where we engineer and manufacture stamp products. Quarterly sales decreased 13.4% year-over-year to $43.3 million, down $6.7 million from the $50 million of sales in last year's fourth quarter.

Turning to slide 10, and the power solutions segment, where we engineer and manufacture stand products quarter.

Quarterly sales decreased 13, 4% year over year to $43 3 million down $6 7 million from $50 million of sales in last year's fourth quarter.

This was driven by the impact of the previously mentioned facility closures lower sales of automotive components sales due to customer inventory levels.

<unk> in the heavy truck and general industrial markets.

Despite the lower sales volume the positive impacts from facility closures and cost reduction actions have driven solid results as seen through our improved adjusted EBITA, our quarterly adjusted EBITDA of $6 6 million improved by $1 million compared with $5 6 million delivered in last year's fourth quarter.

Michael C. Felcher: This was driven by the impact of the previously mentioned facility closures, lower sales of automotive component sales due to customer inventory levels, and softness in the heavy truck and general industrial market. Despite the lower sales volume, the positive impacts from facility closures and cost-reduction have driven solid results, as seen through our improved adjusted EBITDA. Our quarterly adjusted EBITDA of $6.6 million improved by $1 million compared to the $5.6 million delivered in last year's fourth quarter. We believe it is a testament to our refocused efforts and commitment to our strategic transformation plans, both operationally and commercially, that the business delivered higher adjusted EBITDA and expanded margin rates by 400 basis points year over year, despite the 13% headwind in our top line.

We believe it is a testament to our refocused efforts.

Commitment to our strategic transformation plans, both operationally and commercially about the business delivered higher adjusted EBITDA.

An expanded margin rates by 400 basis points year over year, despite the 13% headwind to our top line.

As we begin to layer on stronger sales figures from new business wins, we expect to continue expanding our profitability as we capture improved fixed cost absorption through operating leverage combined with our commitment to our cost and productivity programs are Harold walked through earlier on the call.

Our Q4 results showed an improvement in average daily sales rates versus the third quarter.

That metric has continued to strengthen thus far into the first quarter of 2024.

One particular element of our sales growth that we will do that will drive improved power solution segment volume.

Going forward as the program, we announced in December called connect and protect.

Michael C. Felcher: As we begin to layer in stronger sales figures from new business wins, we expect to continue expanding our profitability as we capture improved fixed cost absorption through operating leverage, combined with the commitment to our cost and productivity programs that Harold walked through earlier in the call. Our Q4 results showed an improvement in average daily sales rates versus the third quarter, and that metric has continued to strengthen thus far into the first quarter of 2024. One particular element of our sales growth that will drive improved power solutions segment volume going forward is the program we announced in December called Connect and Protect, where we are advancing our core capabilities and stamp products to get more heavily involved in the connectors and shields market, which we believe carries a significant opportunity for growth.

Where we are advancing our core capabilities and stand products to get more heavily involved in the connectors and shields market, which we believe carries a significant opportunity for growth.

Demand indicators are improving in electrification and grid product verticals in this effort to get more deeply involved and drive stronger capture of market share.

The shielding and connector space, it's going to be a solid contribution to the business going forward.

Now turning to slide 11, you can see a summary of our free cash flow and leverage as well as the steps, we're taking to optimize our balance sheet.

As Harold highlighted we continue to be encouraged by our free cash flow and we were able to generate $1 million in the fourth quarter, bringing full year 2023 free cash flow generation of $11 7 million.

While our fourth quarter free cash flow was lower than the fourth quarter of last year, we've seen a dramatic improvement on a trailing 12 month basis throughout the year with full year free cash flow improving by over $21 million driven.

Michael C. Felcher: Demand indicators are improving, and electrification and grid product verticals, and this effort to get more deeply involved and drive stronger capture of market share in the shielding and connector space is going to be a solid contribution to the business going forward. Now turning to slide 11, you can see a summary of our free cash flow and leverage, as well as the steps we're taking to optimize our balance sheet. As Harold highlighted, we continue to be encouraged by our free cash flow, and we were able to generate $1 million in the fourth quarter, bringing full year 2023 free cash flow generation to $11.7 million. While our fourth-quarter free cash flow was lower than the fourth-quarter of last year, we've seen a dramatic improvement on a trailing 12-month basis throughout the year, with full-year free cash flow improving by over 21 million, driven in part by a significant improvement in working capital.

Driven in part by a significant improvement in working capital.

While we expect continued improvement in working capital turns we expect future free cash flow generation to be more driven by the profitability initiatives. We have previously outlined.

Looking ahead, we expect to deliver similar similar level of full year free cash flow performance as we've done in 2023.

This free cash flow generation serves another strategic function and that is to help further advance our progress towards balance sheet improvement with.

We plan to use excess cash generated by our business results to pay down debt balances our term loan in particular.

While positioning the company for anticipate and anticipated refinancing transaction when market conditions are favorable.

Michael C. Felcher: While we expect continued improvement and working capital terms, we expect future free cash flow generation to be more driven by the profitability initiatives we have previously outlined. Looking ahead, we expect to deliver a similar level of full-year free cash flow performance as we did in 2023. This free cash flow generation serves another strategic function, and that is to help further advance our progress towards balance sheet improvement.

Our strategy to deliver consistent positive free cash flow will be a vital tool in helping reshape our balance sheet and achieving a lower overall cost of capital.

Our growth strategy will be supported by lower leverage improved liquidity and a lower cost of capital.

In line with our balance sheet optimization and cost of capital improvement plan last week, we announced we have entered into a sale leaseback transaction for three of our operating facilities.

Transaction will not impact our EBITDA and the net proceeds will be used to repay a portion of the outstanding balance of our term term loan.

Michael C. Felcher: We plan to use excess cash generated by our business results to pay down debt balances, our term loan in particular, while positioning the company for anticipated refinancing transactions when market conditions are favorable. Our strategy to deliver consistent, positive free cash flow will be a vital tool in helping reshape our balance sheet and achieve a lower overall cost of capital. Our growth strategy will be supported by lower leverage, improved liquidity, and a lower cost of capital. In line with our balance sheet optimization and cost of capital improvement plan, last week, we announced we had entered into a sale-leaseback transaction for three of our operating facilities. The transaction will not impact EBITDA, and the net proceeds will be used to repay a portion of the outstanding balance of our term loan.

Turning to the balance sheet, our net debt at the.

End of the year was $138 million versus $137 7 million at the end of the third quarter and $147 9 million in Q2 2023, when we launched our transformation.

Net debt to adjusted EBITDA ratio stood at three two times under the year compared to 337 times.

At the end of the third quarter of 2023.

Looking ahead to 2024.

We will continue to bring down our leverage profile through debt pay down to free cash flow generation and margin expansion, we expect to bring our leverage to below three times during 2024.

Doing so while still making the necessary capital investments into the business to ensure we are maintaining our outlook for expected performance, our net capital spending outlook in the fourth quarter was $4 2 million compared to $4 1 million in the third quarter of 2023.

Michael C. Felcher: Turning to the balance sheet, our net debt at the end of the year was $138 million versus $137.7 million at the end of the third quarter and $147.9 million in Q2 2023 when we launched our transformation. Our net debt-to-adjusted EBITDA ratio stood at 3.2 times at the end of the year, compared to 3.37 times at the end of the third quarter of 2023.

Now I'd like to cover our full year 2020 for outlook on slide 12.

Full year 2024, we are projecting net sales in the range of $485 million to $510 million up slightly at the midpoint.

Adjusted EBITDA in the range of 47% to $55 million up over 18% at the midpoint free.

Michael C. Felcher: Looking ahead to 2024, we will continue to bring down our leverage profile through debt pay-down, free cash flow generation, and margin expansion. We expect to bring our leverage below three times during 2024, and we will do so while still making the necessary capital investments into the business to ensure we are maintaining our assets for expected performance. Our net capital spending outlay for the fourth quarter was $4.2 million compared to $4.1 million in the third quarter of 2023.

Free cash flow in the range of $10 million to $15 million up slightly at the mid point compared to the significantly improved free cash flow generation, we delivered in 2023.

We're also pleased to provide an expected range for new business wins in 2024, which is $55 million to $70 million.

Finally, as we remain focused on continued improvements in leverage we expect to lower our net leverage to less than three times during 2024.

Several factors, both internal and external helped inform our full year guidance ranges.

Notably our guidance reflects steady end market demand. Despite some observed weakness in the North America commercial vehicle market relative to 2023.

Michael C. Felcher: Now I'd like to cover our full year 2024 outlook on slide 12. For the full year 2024, we are projecting net sales in the range of 485 to 510 million, up slightly at the midpoint, adjusted EBITDA in the range of 47 to 55 million, up over 18% at the midpoint, and free cash flow in the range of $10 to $15 million, up slightly at the midpoint compared to the significantly improved free cash flow generation we delivered in 2023. We're also pleased to provide an expected range for new business wins in 2024, which is 55 to 70 million. Finally, as we remain focused on continued improvements in leverage, we expect to lower our net leverage to less than three times in 2024. Several factors, both internal and external, helped inform our full-year guidance ranges.

Specific to <unk>, we expect to continue executing our aggressive growth program, ultimately driving free cash flow and profitability across several new marketing customer platforms.

In closing we are confident in our business transformation plan, which was launched earlier this year and that's driven early improvements in our results we.

We have the right strategy in place platform and capabilities to execute and accelerate growth in MAU.

Importantly, a great team, who helped drive positive change every day.

I look forward to sharing our successes with you in the coming quarters I will now turn the call back to the operator for questions.

Thank you if you would like to ask a question. Please press Star then one on your telephone keypad.

That's a good question has already been addressed to ensure your question. Please press Star then two.

Michael C. Felcher: Notably, our guidance reflects steady end market demand despite some observed weakness in the North America commercial vehicle market relative to 2023. Specific to NN, we expect to continue executing our aggressive growth program, ultimately driving free cash flow and profitability across several new market and customer platforms. In closing, we are confident in our business transformation plan, which was launched earlier this year and has driven early improvements in our results. We have the right strategy in place, platform, and capabilities to execute and accelerate growth, and, most importantly, a great team who help drive positive change every day. I look forward to sharing our successes with you in the coming quarters. I will now turn the call back to the operator for questions. Thank you. If you would like to ask a question, please press star then 1 on your telethon keypad. If your question has already been addressed and you'd like to withdraw your question, please press star then 2.

Once again, ladies and gentlemen, that's star then one on if you have a question.

We will pause for just a moment to assemble our roster.

And our first question today comes from Rob Brown with Lake Street Capital markets. Please go ahead.

Hi, good morning, congratulations on a good good morning, Rob.

Thank you.

Hi, first question is on the outlook and kind of the.

I guess, the automotive environment I, just wanted to clarify I understand your your assumptions on the on the sales outlook are you assuming kind of overall steady steady end market, but seeing some north American.

Headwinds or do you have to factor in some of the headwinds here in the guidance.

We are looking in some of our to two big markets really are are the Americas, North America, South America, and China specifically.

So China outlook for.

Passenger vehicle production is flat.

With an indigenous consumption of vehicles being added to what a strong export market as you know Rob that's all over the news about China's dealing with exporting their vehicles.

Robert Duncan Brown: Once again, ladies and gentlemen, that's farther than one if you have a question. And we will pause for just a moment to assemble our roster. And our first question today comes from Rob Brown with Lake Street Capital Markets. Please go ahead.

We're benefiting from that.

That's an in country supplier.

And then in the Americas, South America North America.

Harold C. Bevis: Good morning. Congratulations on a good quarter. Thank you. My first question is on the outlook and kind of, I guess, the automotive environment. I just wanted to clarify or understand your assumptions on the sales outlook. Are you assuming kind of a steady end market but seeing some North American headwinds, or do you factor in some of the headwinds here? We are looking, and so our two big markets really are the Americas, North America, South America, and China specifically. So China's outlook for passenger vehicle production is flat with the indigenous consumption of vehicles being added to with a strong export market.

We're assuming.

Flat to low single digit increase in the platforms that we're on so.

If we look specifically at our platform.

<unk> to the market and it's flattish to slightly up.

Okay, great. Thank you.

Uh huh.

And then on the new business activity, you've gotten the strength there I just wanted to get a little more color on the drivers are you are you.

You sort of engaging more is it sales efforts or are you are you seeing some some competitive sort of.

Weakness they were taking advantage of some understanding of the new business traction youre getting.

Yes, it's a good point.

Harold C. Bevis: And as you know, Rob, that's all over the news about China dealing with exporting their vehicles. We're benefiting from that, as an in-country supplier, and then in the Americas, South America, North America. We're assuming a flat to single-digit increase in the platforms that we're on, so we look specifically at our platform exposure to the market, and it's flattish to slightly up. Thank you. And then on the new business activity, you've got strength there. I just wanted to get a little more color on the drivers.

And we highlighted on page five kind of the categories, where we're winning are steering is by far the biggest.

Power steering and its platform independent.

There's a little bit higher content on the vehicles, but generally.

Generally speaking where I'm steering systems that are platform independent, it's a very high tolerance machine parts.

We have the same competitors, there's been no decrease in competitive intensity per se.

Harold C. Bevis: Are you sort of engaging more? Is it sales efforts? Or are you seeing some competitive sort of weakness that you're taking advantage of?

But theres a lot of innovation going on in vehicles.

As everyone jockeying for the same levels of autonomy in vehicle safety and features and it's leading to a lot of improvements which lead to a precise vehicle control.

Harold C. Bevis: Just some understanding of the new business track. Yep, that's a good point. And we highlighted on page five the categories where we're winning. Steering's by far the biggest. Electric Power Steering, and it's platform independent.

Which leads to expand additional looks for us I would say that where in a target rich environment and.

And we're focused on competing and winning.

Harold C. Bevis: There's a little bit higher content on the BEV vehicles, but generally speaking, we're on steering systems that are platform-independent. It's a very high-tolerance machine part. We have the same competitors. There's been no decrease in competitive intensity per se. But there's a lot of innovation going on in vehicles as everyone's jockeying for the same level of autonomy and vehicle safety and features, and it's leading to a lot of improvements which lead to precise vehicle control, which leads to an additional look for us. I would say that we're in a target-rich environment. And we're focused on competing and winning like never before. The big thing that we did is we changed the way that we were quoting. We changed our quoting process, and Tim French, who's on the phone here also.

Like never before the Big thing that we did is we changed the way that we were quoting we changed our quoting process.

And Tim French who's on the phone here also.

We both noted that we had quite a bit of existing open capacity already within the company.

And we were quoting it in the same mineral which we're quoting.

We didn't have and would need to buy new equipment for etc.

We bifurcate that.

<unk> expanded our thinking to really.

At a much higher level try to fill up open capacity and it gave that I gave the sales force a little more competitiveness if you will.

We.

Mike also mentioned that we are using contemporary tools, which accompany wasn't using.

Zoom menthol.

Lead generation tools, which are known and we have a Google AD campaign out there for lead generation, which we werent doing Google ads or search engine optimization or keyboard management.

Harold C. Bevis: We both noted that we had quite a bit of existing open capacity already within the company, and we were quoting it in the same manner in which we were quoting capacity we didn't have and would need to buy new equipment for, etc. So we bifurcated that and expanded our thinking to really, at a much higher level, try to fill up open capacity.

So we're seeing we're getting higher leads we have a focused sales effort.

And we have good targets.

And electrification arena the electric grid phenomenon.

Harold C. Bevis: And it gave the sales force a little more competitiveness, if you will. Mike also mentioned that we are using contemporary tools which the company wasn't using, Zoom Info. Lead Generation Tools, which are known, and we have a Google ad campaign out there for lead generation, which we weren't doing Google ads or search engine optimization or keyword management.

On the same side on our electrical businesses is giving more looks for us.

I'm kind of leading that part of it Tim Tam was on the phone is leading the fixing of the.

The seven plants that are getting healthy right now as.

As well as in.

The cost reduction efforts across the board and when you have a better cost position that lets you would be more competitive so.

Harold C. Bevis: So we're seeing we're getting higher leads. We have a focused sales effort, and we have good targets. In the electrification arena, the electric grid phenomenon is on the same side as our electrical businesses are giving more looks for us. I'm kind of leading that part of it; Tim, who's on the phone, is leading the fixing of the seven plants that are getting healthy right now, as well as the cost reduction efforts across the board. And when you have a better cost position, it lets you be more competitive, so it kind of goes together.

It kind of goes together.

So I would say, it's tactical improvements Rob.

Target and how we quote.

Our revised.

Thinking on how we think about existing capacity versus capacity, we don't have a combined effort of even more competitive and being able to win at a higher rate. So.

That's the game plan is still we're winning right now in the quarter and we're on track with our comments that we're making here. So it's knock on wood still gaining momentum.

Okay excellent.

Overview.

And then lastly on the on the medical segment could tell me what.

Harold C. Bevis: So I would say it's tactical improvements, Rob. Target, and how we quote a revised thinking on how we think about existing capacity versus capacity we don't have in a combined effort to be more competitive and be able to win at a higher rate. That's the game plan, it's still, you know, we're winning right now in the quarter, and, you know, we're on track with our comments that we're making here, so it's, knock on wood, still gaining momentum. Okay, excellent. That was a great overview.

You want a program there and good progress.

How do you see that business developing over time I think you said it was a 2025.

Sort of timeframe would that really kicks in but maybe just help understand the steps that the pet segment.

Yep.

It's a good question it's been it's one that you know it's.

Shielding and connector one we were in it to a minor degree as I mentioned in our legacy business and now we're basically upsizing something what was there in the case of the new medical.

Harold C. Bevis: And then lastly, on the medical segment, you want to program there in good progress. How do you see that business developing over time? I think you said there's a 2025 sort of timeframe where that really kicks in, but maybe just help understand the steps that that segment takes to do that. It's a good question.

Non tool market is a startup and so we had to horror.

Commercial leader Willy Beach, who came from competition, we had to hire in engineering quote leader.

Harold C. Bevis: It's been, um, it's one that, you know, the shielding and connector one. We were in it to a minor degree, as I mentioned in our legacy business. And now we're basically upsizing something that was there in the case of the new medical, non-tool market. It's a startup, and so we had to hire a commercial leader, Willie Beach, who came from competition. We had to hire an engineering, quote, and leader. Tim Dunham, who came from a competitor.

Tim Donahue, who came from a competitor we had to hire a medical plant manager Brian.

Brian Barton, who came and operationally.

So we had to generate a team from scratch.

And then we got to focus in on what customers, where we're going to go call on and what products were going to sell them and what plants were going to make them in.

We have medical certifications at four plants right now or we're expanding it to eight.

And when we're getting into RF skus were being careful to note.

Harold C. Bevis: We had to hire a medical plant manager, Brian Barton, who came in operationally. So we had to generate a team from scratch, and then we had to focus on what customers we were going to call on and what products we'd sell them, and what plants we'd make them in. We have medical certifications at four plants right now, and we're expanding it to eight. And when we're getting into our RFQs, we're being careful to note. They say it has seven processes, seven manufacturing processes, on the five where we are competitive and the two where we're not competitive, and then gathering this and having pattern recognition about what we want to do about it and what equipment we might want to consider buying. We have some initial thoughts. We know that we need to buy what's called a gun drill, which are deep-boring, high-tolerance drills.

Say it has seven processes seven manufacturing processes on.

On the five where we are competitive in the two where we're not competitive and then gathering this and having pattern recognition about what we want to do about it and what equipment, we want might want to consider buying we have some initial thoughts.

We know that we need to buy what's called gun drills.

Put your deep boring high high tolerance drills.

We didn't need those so much in the automotive business, if you will but it's a item.

In the medical Arena, and then on stamp and products.

About getting certifications and our expanded product line. So we have a weekly meeting.

Where.

We're going logically, we're not trying to rush out and waste money or waste time, so it's a or b.

Harold C. Bevis: We didn't need those so much in the automotive business, if you will, but it's an item in the medical arena and then on the stamp products. It's about getting certifications and an expanded product line. So we have a weekly meeting. We are going logically.

Building trying to build up to a $50 million business.

And that's what we've all embraced our our goals around and we have a we have an initial five year plan to get there. So.

We're not we don't think it's going to add too much to this year, Rob in 'twenty four.

Harold C. Bevis: We're not trying to rush out and waste money or waste time. So we're trying to build up to a $50 million business. That's what we've all embraced our goals around, and we have an initial five-year plan to get there. We don't think it's going to add too much to this year, Rob, in 24, unless something happens that we're not expecting, but we are beginning to win business, and you have to go through all the customer certifications, so it's a little bit longer lead time, and so I think that in our results, Thank you. I'll turn it over to you.

Unless we that's something happens that we're not expecting but.

We are we are beginning to win business and you have to go through all the customer certifications, so it's a little bit longer.

Lead time, and so I think that in our results. So it will start showing up in 'twenty five.

Okay, great. Thank you I'll turn it over.

Thank you Rob Thank you.

Next question today comes from John <unk> with Sidoti <unk> Company. Please go ahead.

Robert Duncan Brown: Thank you, Rob. Thank you. And our next question today comes from John Franzrup with Sidoti & Company. Please go ahead.

Good morning, everyone and thanks for taking the questions.

I'd like to start off on the.

Sales guidance for 2024, how.

John Franzrep: Good morning, everyone, and thanks for taking the questions. I'd like to start on the sales guidance for 2024, Harold. Can you talk a little bit about how much embedded in that outlook is repriced existing contracts and how much is in that outlook of assumed exit of existing contracts? Yep, um So on pricing for this year, we have about the same amount of activity on price up activities versus, you know, requested price down. So the net price right now in this outlook is minimal, up or down.

Can you talk a little bit of how much embedded in that outlook.

Is repriced.

<unk> contracts and how much is it not in the outlook of assumed exited of existing contracts.

Yep.

So on pricing for this year, we have about the same amount of activity on price up activities versus.

Requested price down so net price right now in this outlook is minimal up or down.

Harold C. Bevis: With regard to exiting business, we do have some of that here. So we have the seven plants, which I've nicknamed the group of seven that are going through negotiations right now, and we've already come to terms with a certain piece of business that was a negative contribution margin that we're going to walk away from. It's not, you know, right now, John. I'd say the outlook is it's, you know, five to 10 million sales losses from that. So it's not massive. It's not a massive reason.

With regards to exiting business, we do have some of that in here. So.

We have the the seven plants, which which I've nicknamed the group of 7%.

That are going through negotiations right now and we've already come to terms with <unk>.

A certain piece of business that was negative contribution margin that we're going to walk away from so.

It's not right now John I'd say the outlook is it's $5 million to $10 million of sales losses from that so it's not massive it's not a massive reason.

Harold C. Bevis: And so, really, we're being conservative and have adopted third-party outlooks on our end markets. And I think you probably know the commercial vehicle market in North America has a negative outlook for 24. And we participate in that market. It's about 10% of our business, so we're assuming a decline there. So, those are your pieces, not much on the price, 5 to 10 million dollars, a hit on volume that we'll walk away from as part of fixing the seventh plant, and a slight hit on commercial vehicles and a slight lift primarily from ramping up new business. Since you brought it up on the commercial vehicle side, have you seen that decline yet or are you assuming that's a second half? kind of reality. We haven't seen it yet.

And so really we're being conservative and adopt at third party outlets on our end markets and I think you probably know the commercial vehicle market in North America has a negative outlook for 'twenty four.

And we participate in that market, it's about 10% of our business. So we're assuming a decline there.

So those are your pizza is not much on the price $5 million to $10 million.

On.

Volume that we'll walk away from us as part of fixing the seven plants.

And a.

A slight hit in commercial vehicles, and a slight lift primarily from ramping in new business.

Since you brought it up on the commercial vehicle side have you seen that decline yet or you're assuming that the second half kind of.

Reality.

We haven't seen it yet we haven't seen it yet genre, we believe it's going to be in the second half.

Harold C. Bevis: We haven't seen it yet, John. We believe it's going to be in the second half, and I still track the ACT and FTR data, like you probably do also, and, you know, the build rates in the first half are still there. We're primarily serving into the engine market, into the engine market for those vehicles, John. They're not a big supply chain. You don't build ahead of those. Those are pretty much made to order, so.

I still track the a C T and FTR data.

Like you probably do also.

The build rates in the first half are still there.

Were primarily serving into the engine market into the engine market for those vehicles John So.

They're not a big supply chain you don't build ahead those are pretty much made to order so.

Harold C. Bevis: First half, we're not seeing much activity yet. And the question on new business wins, you know, you've got to, a good number last year, looking at a nice, nice number this year, 55 to 70. Have you got a sense of, as you readdress the pricing environment, how the contribution margins are starting to change, and the new business wins from what you used to record, what a company used to record, you know, two years ago or so? Mike, you might be able to help me out on that one. I would, I'm just going to say right now, John, we're spending money a little bit on ramping up these programs. So, one of our largest ones that we won is in the prototype mode. And I don't want to say we're on the hairy edge of technology, but we're pushing the boundaries of technology expansion here and capability expansion.

First half, we're not seeing much activity yet.

And a question on the new business wins.

Got it.

A good number last year and looking at nice nice number this year, 55% to 70 have you got a sense of as you readdress the price environment had a contribution margins starting to change and the new business wins from what you used to record the company's record too.

Two years ago or so.

Mike you might be able to help me out on that one I would I'm just going to say right now John we're spending money and little bit on ramping up these programs. So.

One of our largest ones that we won.

<unk> is in a prototype mode.

And I don't want to say, we're in the hairy edge of technology, but we're pushing the technology expansion here and capability expansion.

Harold C. Bevis: We're kind of breaking even, I would say, initially, on these new business wins. We haven't set up budgets for them, so Tim's expensing the startup costs and the plant results as we go along. And that's why, in my comment, I said they were accretive at full run rate, because we know right now.

We're kind of breaking even I would say initially.

On these these new business wins, we haven't set up budgets for it so tim's expensing the startup costs in the plant results as we go along and that's why in my comment I said Theyre accretive at full run rate because we know right now.

Harold C. Bevis: We review every plant every week, and so we know some of these ramp-ups are costing us a little money. But the run rates that we do, we look at them when we do the CER, the capital request associated with the WINS, and as a group, they're creative. I'm going to say it's 3-5 points better. It's not a miracle, it's just a few points better.

We review our op every plant every week and so we know some of these ramp ups are costing us a little money.

But.

The run rate that we do we look at it when we do the C E or the capital requests.

Associated with the wins and and as a group they are accretive.

I'm going to say.

It's three to five points better John.

It's not a miracle it it's just a few points better.

Tim French: All right, fair enough. And just one last question. You mentioned in your prepared remarks that you replaced roughly... 40% of your plant managers. I'm curious how much of those were promoted internally and how much of those were brought in externally, and any kind of initial feedback about plant management. Yeah. Tim, are you able to speak? Yes, sir. For the majority of them, they are internal promotions. We have brought in two from the outside, one specifically that's running the medical facility, but for the most part, they are coming from internal.

Okay.

Alright fair enough and just one last question you mentioned in your prepared remarks that you replaced roughly.

40% of your.

Managers.

Im curious how much of those were promoted internally and how many how much of those were both externally and.

Any kind of initial feedback I'm talking to the plant managers.

Yes on that.

Tim are you able to speak.

Yes, Sir.

So the majority of them. They are internal promotions, we have brought in to from the outside one specifically that's running the medical.

Facility, but for the most part they are coming from internal promotions.

Tim French: Any initial thoughts? Additional thoughts regarding the group? Thank you. Thank you. Thank you. Tim, you might want to say the big plan that you're putting in place for metrics, safety, quality, and on time. Well, exactly. Our big focus with the transformation plan is implementing strategic KPIs within the facilities and driving the accountability down to the lowest level possible within the facilities.

Any initial thoughts.

Yeah.

So thoughts regarding the group.

Correct.

Tim you might want to have this data the big plan that you're putting in place on all metrics and safety and quality and on time.

<unk>.

Big focus with the transformation plan is implementing strategic kpis within the facilities and driving the accountability down to the lowest level possible within our facilities and plant managers that we've selected.

Tim French: And the plant managers that we've selected are very in tune with the capabilities of the facilities and, so far, are adopting the new KPIs very well. Very good outlook so far. That's what we did. Okay. All right. That's kind of what I was looking for.

Are very in tune with the capabilities of the facilities and.

So far are adopting and adapting to the new kpis very well.

Very good outlook so far.

John Franzrep: Thank you, gentlemen. Thank you, John. Thank you. And ladies and gentlemen, as a reminder, if you would like to ask a question, please first start with one at this time. Our next question today comes from Joe Gomes with Noble Capital. Please go ahead. Good morning.

Okay Alright.

Alright, that's kind of I was looking for thank you gentlemen, appreciate it.

Thank you John.

Thank you.

Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one at this time.

Our next question today comes from Joe Gomes with Noble capital. Please go ahead.

Good morning, Thanks for taking the question.

Joe Gomes: Thanks for taking the question. You bet, Joe, just announced the sale-leaseback of three facilities, and I was wondering if those three facilities are those in the group of seven. If so, what is the lease arrangement for those facilities, the length of the lease?

You bet Joe.

So.

<unk> just announced the sale leaseback of three facilities and I was wondering if those three facilities are those in the group of seven.

If so kind of what is the lease arrangement for those facilities the length of the leases.

Michael C. Felcher: Yeah, you want to take that, Mike? Yeah, the three facilities are not in the group of seven. And we expect the least term will be an initial term of 20 years.

Yeah, you want to take that Mike.

Yes.

The three facilities are not in a group of seven and we expect the lease term will be an initial term of 20 years. So theres no.

Michael C. Felcher: So there's no plan to change the operations at those facilities that we're doing the transaction on. Great, thanks for taking that. Appreciate it. Thank you, Joe. Thank you. And our next question today comes from Tom Kerr at Zacks Investment Research. Please go ahead.

Plans have changed.

Operations at those facilities that were doing that transaction.

Great Thanks for taking that.

I appreciate that.

Thank you Joe.

Thank you and our next question today comes from Tom Curran Zacks investment Research. Please go ahead.

Thomas Kerr: Good morning, guys. A couple quick questions. Back on the sale-leaseback issue, are there more opportunities for that, or is that kind of a one-and-done deal? We've looked at both real estate and equipment.

Good morning, guys couple of quick questions.

Back on the sale leaseback issue is there are there more opportunities for that or was that kind of a one and done deal.

Okay.

Looked at both real estate and equipment.

Michael C. Felcher: You know, I think on the real estate side, that's probably what we're going to do in the near term, although we will continue to evaluate it over time. And then on the equipment side, that's something that we're also looking at. So there are more opportunities for us to use Lisa to pay down debt or finance capital.

I think on the real estate side.

That's probably what we're going to do in the near term, although we will continue to evaluate it.

Overtime.

And then on the equipment side, that's something that we're also looking.

Looking out so there is potential more opportunity for us to use leasing.

To pay down debt or finance capital.

Harold C. Bevis: Okay, back on the 60 program awards mentioned, roughly 60, is that a concentrated customer base for those awards, or is it a large number of customers? It's a large number of customers, but we had a couple big wins, Tom. So, just those data points, we have big wins with specific customers. So there were two big customers in there. And one was an existing customer, and one was a new customer, and one was, um, electrical stamped parts for shielding. We announced that in the fourth quarter. And one was for diesel engines, high-end, off-road, heavy equipment engines, next generation. Two big customers and quite different products.

Okay.

Back on the 60 program Awards mentioned roughly 60 is that concentrated customer base in those awards or is it a large number of customers.

It's a large number of customers, but there we had a couple of big wins Tom.

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Just those data points, we had big wins with specific customers. So there was.

There were two big customers in there.

And one was an existing customer and one was a new customer and one was.

Electrical stamped parts.

For shielding, we announced that in the fourth quarter and one was for.

Diesel engines.

Hi, and off road heavy equipment engines next generation so.

Harold C. Bevis: Got it, okay. A couple more quick ones on the, can you refresh my memory on the Taunton and Irvine closures, the timing of that? In other words, how much does that carry into 2024 in terms of volume hits? Is it first and second quarter or not? Can you give me any color on that? Yeah, Taunton was closed for the most part in Q1 of 23, and Irvine ran into Q2. They were both effectively close by mid-year.

Two big customers and different quite different.

Products.

Got it Okay. A couple more quick ones on the acute refresh my memory on the partner in Irvine closures the timing of that in other words, how much does that carry into 2024 in terms of volume hits us at first and second quarter or.

Can you give me any color on that.

Yeah, Todd was closed for the most part in Q1 of 23 in Irvine ran into Q2 they were both.

Effectively closed.

Michael C. Felcher: Okay, so still a little bit of volume here from that in the first half, okay. Correct. And we have some premium pricing at Irvine associated with the ramp down. So yeah, there'll be a little bit of sequential volume pressure and stuff.

By mid year.

Okay, so a little bit of volume from that in the first half.

Correct, and we have some premium pricing Irvine associated with the ramp down.

So yeah, there'll be a little bit of sequential volume pressure and stuff.

Michael C. Felcher: Great. Okay, that's all I have for now. Thanks. Thank you, Tom. Thank you. Thank you. And ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for any closing remarks. Yeah, thank you for spending time with us today and speaking about NN's performance, its transformation plans, and our value-added focus areas. We're a committed global team, and we're pretty excited about 2024 and going forward, and we look forward to speaking with you again.

Great. Okay. That's all I have for now thanks.

Thank you Tom. Thank you. Thank you and ladies and gentlemen. This concludes our question and answer session I would like to turn the conference back over to the management team for any closing remarks.

Yeah. Thank you for spending time with us today in speaking about enhanced performance as transformation plans and our value, adding focus areas. We're committed global team and we're pretty excited about 2024 and going forward and we look forward to speaking with you again.

Harold C. Bevis: Everyone, have a great day. Thank you. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Everyone have a great day. Thank you.

Thank you.

Today's conference call. We thank you all for attending today's presentation.

Now disconnect your lines and have a wonderful day.

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Operator: ...